A new report from California's Legislative Analyst's Office (LAO) reveals that electricity rates in the Golden State are climbing more rapidly than inflation, with California now having the second-highest residential electricity costs in the nation, surpassed only by Hawaii.
The analysis identified several key factors driving the steep rate increases, including mounting wildfire-related expenses, ambitious greenhouse gas reduction initiatives, and variations in utility operations across service territories.
UC Davis economics professor James Bushnell notes that the growing adoption of solar power paradoxically contributes to higher rates, as utilities must charge remaining customers more to maintain infrastructure like transformers and power lines. To address this, some utilities are implementing fixed monthly charges - SMUD currently charges about $24, while PG&E plans to introduce a similar fee by 2026.
Mark Toney, executive director of The Utility Reform Network, advocates for stricter controls on rate increases by investor-owned utilities like PG&E, which has already implemented six rate adjustments in 2024. However, PG&E maintains that residential electric bills are currently 4% lower compared to early 2024 levels.
The LAO report also raises concerns that escalating electricity costs could hamper California's climate goals by discouraging residents from transitioning to electric alternatives.
In response, both PG&E and SMUD emphasized their commitment to maintaining affordable rates while building sustainable energy systems. SMUD highlighted its various assistance programs and pledge to keep rate increases at or below inflation, while PG&E outlined efforts to reduce operating costs and secure federal funding to minimize customer impacts.