March 28, 2024

Understanding California's Electricity Rate Surge

Harnessing Solar and Energy Storage Solutions to Combat Rising Utility Rates

Utility bills are climbing higher than ever, causing concerns for residents and businesses alike.

The state’s average residential electric bill is $187, almost 30 percent higher than the U.S. average. California has one of the nation's highest residential and commercial electricity rates.

The California Public Utilities Commission (CPUC) continues to approve rate hikes for the state’s big three investor-owned utilities (IOUs) — Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) — despite customers often paying much more than the state’s average price per kilowatt-hour (kWh).

However, amidst these challenges, solar and energy storage systems (ESS) offer promising solutions to mitigate the impact and secure a more sustainable energy future.

Why are utility rates rising?

Software company Energy Toolbase recently conducted a study to analyze electric bill cost inflation from the state’s big three IOUs from 2014 to 2023.

The study determined that bills escalated at a Compound Annual Growth Rate (CAGR) of 3.9 percent to 7.4 percent over the 10-year study period.

Most notably, the study highlighted that over the last three years (2020-2023), residential rates increased by 83 percent, and commercial rates increased by 75 percent when averaging the results of all three IOU territories.

The study identified different factors as the root reason for rising electricity rates, such as changes in demand, infrastructure investments, and regulatory/policy changes.

Increased Demand for Electricity

As the state pursues its ambitious decarbonization strategy, industry electrification could strain the state’s grid.

In its 2022 Scoping Plan, the California Air Resources Board (CARB) estimated a 76 percent increase in electrical demand by 2045, the state’s goal to be carbon neutral.

At the home level, transitions to electric vehicles increase electrical needs for charging purposes. Natural gas appliances are being replaced with electric ones, and some new home constructions are even banning them.

On a larger scale, the closure of fossil fuel power plants and the Diablo Canyon Power Plant (DCPP) will require renewable technologies to replace them.

As these new technologies come online, transmission infrastructure and distribution substations require upgrades to withstand the flux in electrical demand.

Infrastructure Maintenance and Upgrades

California’s IOUs and other utility companies said that maintaining and upgrading the grid’s infrastructure was a part of the recent rate hikes.

Customers are left paying for these costs as the companies bake them into the power usage rates.

PG&E’s recently approved rate proposal by the CPUC cited the new revenue to fund the utility’s plan to put powerlines underground in high-fire-risk areas.

As a result, the utility’s customers saw an 11-13 percent increase in their bills when the rate hike went live in January 2024.

Policy and Regulatory Changes

Last year, state lawmakers passed Assembly Bill 205 (AB205), a controversial plan that would allow utilities to include a fixed-rate billing system based on a household’s income.

Customers could see their monthly utility bills broken down by their fixed and power use rates. If the fixed rates are approved, the IOU shave said the rate per kWh could be significantly reduced.

This idea would split infrastructure and actual power costs with the intention of distributing the costs of maintaining the grid fairly.

State lawmakers are taking steps to reverse AB205 and introduced Assembly Bill 1999 to repeal income-based fixed fees.

The CPUC faces a July 1 deadline for a final decision on AB205.

Sustainable Solutions with Green Convergence

As California marches toward a greener future, electricity rates continue to trend upward. Adopting renewable technologies such as solar and ESS could mitigate your utility bills and sometimes lock in a lower rate for years to come.

trusted contractor like Green Convergence, with a proven track record and industry expertise, can incorporate various energy solutions for your home or commercial/industrial facility.

Our financial experts utilize federal and state-backed incentives and rebates to keep installation costs low while navigating policy changes.

The in-house design team can craft optimized solutions for your needs, while the installation team’s quality workmanship ensures the system’s health and longevity.

Contact one of our experts to learn how renewable energy solutions can drastically reduce electricity.


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