Wildfire and climate programs are driving up California electricity bills, says state analyst

Ari Plachta, The Sacramento Bee on Jan 8, 2025

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SACRAMENTO, Calif. — Wildfire prevention and climate programs have drastically raised Californians’ monthly electricity bills, potentially forcing state leaders to balance ambitious carbon emissions goals with affordability concerns, the state analyst said.

The report released Tuesday by the non-partisan Legislative Analyst’s Office comes as state legislative leaders vow to tackle cost of living issues including high energy costs.

Lawmakers “may be faced with a frank decision about how to balance the state’s ambitious greenhouse gas reduction goals — and all of the associated benefits — against the inevitable costs that will result for ratepayers,” the report found.

California’s efforts to combat climate change with renewable energy have seen success, but have also driven up electricity costs for customers. Because major grid investments are needed to meet growing demand as more stringent targets approach, it wrote, this financial burden could increase significantly.

Monthly electricity bills in California have risen by nearly 50% since 2019, the report said, and the gap between the rest of the nation has grown to 30 cents per kilowatt-hour. The state’s electricity rates are second only to Hawaii.

The primary reason for electricity cost increases in recent years, it reported, are wildfire suppression efforts and renewable energy programs. But it pointed to stark differences in rates between regional public utilities and the major investor-owned utilities.

Most of California is served by the state’s three major investor-owned utilities (Pacific Gas and Electric Co., Southern California Edison and San Diego Gas & Electric), or IOUs.

These private companies overseen by corporate boards, have fiduciary responsibility to their shareholder owners and charge the highest rates in the state.

Public utilities such as the Sacramento Municipal Utility District and the Los Angeles Department of Water and Power provide roughly one quarter of electricity statewide.

PG&E’s average residential rate rose to a record $0.397 per kilowatt-hour last year, but the utility said its customers are likely to see steadier monthly bills this year.

Meanwhile SMUD’s rate is roughly $0.245 per kilowatt-hour, depending on seasonal and other factors.

Californians with solar panels and those who qualify for CARE, a major low-income program at IOUs, pay as much as 35% less than the average IOU customer.

‘Out of control’

As lawmakers return to Sacramento to start the year’s legislative session, several have highlighted their intention to address energy affordability.

“The affordability crisis in California is out of control,” said freshman Sen. Susette Martinez Valladares, R-Valencia, in a written statement reacting to the report.

“Families in this state pay nearly double in utility bills over those in any other state, pay more for each gallon of gasoline than in any other state, and struggle to find insurance for their homes that cost more than in any other state.”

Falling short of making recommendations, the report raised questions about whether climate policies should continue to be funded by electricity rates. Doing so, it wrote, leaves customers shouldering much of the financial burden of transitioning to renewable energy.

Options raised in the report include drawing on other state revenues and making rates more equitable by using fixed costs. In May, the Public Utilities Commission required major utilities to implement a controversial fixed charge on customers’ bills.

Gov. Gavin Newsom considered introducing a bill last year that would have used the tool but backed out after utility opposition. Several other measures, including a bill to end use of ratepayer money for political spending, also died after opposition from PG&E last session.

Mark Toney, executive director of The Utility Reform Network, said the report underscores the ability of smaller publicly owned utilities to stay on course to meet climate goals while keeping rates low.

“The IOUs have basically been issued a credit card with no limits and a guarantee that someone else is going to pay the balance,” he said. “I’m hoping legislators will look at this report and ask what can we do to set limits on annual overspending.”

He pointed to several policy options for lawmakers, including placing limits on shareholder returns, creating public financing options, restricting the use of less-regulated accounts, or using a financial tool called securitization to make rates more affordable.

“The utilities were able to kill almost everything they didn’t like last year,” Toney said. “At some point elected officials just have to stand up and say this time we’re going to put ratepayers in front of Wall Street investors.”

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