You’re not alone if it seems like your electricity bill is getting too high.
Californians pay some of the highest electricity rates in the nation. In the last decade households have seen electricity rates almost double even when their budgets are squeezed by inflation and rising temperatures from climate change mean they have to use more energy to cool their homes.
And it will get worse. The country’s greenhouse gas reduction policy encourages citizens to use electric cars and appliances that only increase electricity consumption. Rate hikes have become bigger and more frequent, rising faster than inflation for customers of the big three monopolies whose rates include costs for expensive fire mitigation, network infrastructure projects and disaster-related payments.
In the Pacific Gas & Electric region, electricity bills have risen from $128 per month for the average residential customer in January 2020 to $226 today. Southern California Edison’s bill rose from $114 to $180 per month during the same period. It’s no wonder that 1 in 5 California households (and 1 in 3 low-income customers) default on their bills, averaging nearly $800.
This dramatic increase is alarming and unsustainable. This is a crisis, both for affordability and for climate action.
Much of the recent debate over electric rates has focused on the California Public Utilities Commission’s May 9 decision to change the way electric bills are charged to customers served by investor-owned utilities. It’s a positive step that will help Smooth the road to home and vehicle electrification, but will do nothing to rein in the number of utilities allowed to charge ratepayers.
Lawmakers must tackle rising costs next door to protect stranded Californians and prevent rising electricity rates from undermining the state’s climate goals. Here are four ideas you can use to start the discussion.
Don’t make the customer pay for everything
Most Californians are billed for electricity not for electricity costs but for other purposes including grid operation and maintenance, wildfire mitigation projects (power lines have caused some of the worst in the state) and energy. efficiency program.
If an investor-owned utility is stripped of its responsibility for many costs that are not directly related to the generation and delivery of electricity, it will reduce the amount it can collect from customers and thus lower electricity rates for everyone. One of the ideas proposed in 2022 by Sen. Josh Becker (D-Menlo Park) is to create a state authority to finance low-cost transmission line projects.
Shifting costs away from ratepayers requires tough decisions about which programs to cut, which ones to run and how to fund them. For example, some energy efficiency incentive programs, which are mostly based on conservation, may not be useful in countries that are pushing for electrification.
For important programs such as wildfire mitigation and tariff assistance, it is worth considering whether it would be more appropriate to finance it out of the state’s general fund, through bonds or through state fees collected from polluters through the cap-and-trade program.
Limitation level increases
Although rate increases requested by utility companies are decided by the state Public Utilities Commission, state legislators also changed laws to allow utilities to seek more frequent rate increases outside of the normal three-year rate request process to respond to increased costs from wildfires. and other climate disasters. That’s one reason why the PUC has approved more than ten rate hikes for each of PG&E and Edison starting in 2020.
But a less frequent, more thorough rate hike process that is carefully scrutinized and considered holistically by regulators may be better for customers, by allowing overstretched ratepayers more opportunities to fight the hike and roll back.
Another idea to consider is limiting the percentage of income households can use to pay for utilities. One proposal in New York would cap utility bills in low- and moderate-income households at 6% of income, above which customers are deemed to have a high energy burden.
Ratepayer advocates in California have floated the idea of ​​legislation that would prohibit utilities from raising rates faster than inflation. The ratepayer advocacy group Utility Reform Network has recommended adding the rate cap to the Social Security Administration’s annual Cost of Living Adjustment, which in 2023 is 8.7%.
Eliminate utility spending
Investor-owned utilities are spending heavily to stop the equipment from burning wildfires and to build and upgrade power lines, substations and transformers needed to handle electrified vehicles and buildings. But they have no incentive to save because they can afford to pay their rates while also making a healthy profit. Stronger limits on utility spending could force them to stop treating ratepayers like unlimited credit cards.
There is legislation pending in Sacramento that would encourage utilities to use the fastest and most expensive wildfire mitigation methods, such as insulating cables and managing vegetation, instead of the most expensive options such as underground power lines, and would require some utility overspending. protected by shareholders rather than customers.
Also offsetting rising electricity bills are shareholder returns. The investor-owned utility raised money from customers to generate profits, including the $2.2 billion PG&E reported last year, a 25% increase over the previous year. A lower limit on allowable returns for shareholders would reduce costs for customers.
Consider a public takeover
Customers of publicly owned utilities such as the Los Angeles Department of Water and Power pay lower electricity rates because profit margins are not part of the equation. Gov. Gavin Newsom has threatened to take over troubled PG&E during its latest bankruptcy if it doesn’t become a more responsible utility. In the end, the governor made an oversight deal. But public takeover is still worth exploring to protect California from unaffordable rates.
Also up for discussion should be the reform of the Public Utilities Commission, which critics accuse of being too friendly to utilities and failing to protect consumers. Could the PUC be more responsive if some of its other responsibilities — including trains, autonomous vehicles and internet services — were handed over to other agencies, or if it included voting members not appointed by the governor?
Of course there are many other worthy ideas to deal with electricity rates. Time to start discussing this in earnest, before the affordability crisis turns into a ratepayer revolt.
