Residential customers of California’s three largest investor-owned utilities (IOUs) are being charged as much as two to three times more for electricity than it actually costs to produce and distribute, an inequality that impacts low- and moderate-income people the most.
That was one of the findings of Designing Electricity Rates for an Equitable Energy Transition, a new report from Next 10 and the Energy Institute at the UC Berkeley Haas School of Business. The report findings were slated to be presented at a hearing before state utility regulators on Feb. 24.
The report cited Pacific Gas & Electric as charging rates 80% higher than the national average.
Data from the report revealed that the state’s three largest IOUs—Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric—charge residential electricity customers much higher prices than are paid in most of the country.
It cited Pacific Gas & Electric for charging rates 80% higher than the national average.
Compounding concerns is the inequity of how the higher costs are distributed. The report said that as wealthier households adopt rooftop solar, the remaining fixed costs are distributed by IOUs across a smaller volume of kilowatt-hours delivered. This, in turn, raises the costs still higher for remaining, generally lower-income customers.
The report outlined potential changes in how utility fixed costs, as well as environmental and low-income program costs, are recovered. It recommended raising revenue from sales or income taxes as a more progressive approach than the current system. It said such a shift would help ensure that higher-income households pay a higher share of the costs.
Wildfire mitigation over the next two years is expected to add still more to the cost of electricity in the Golden State.
Such an income-based fixed charge would be based on three criteria, the report said: 1) setting prices as close to cost as possible, 2) recovering the full system cost, and 3) and distributing the burden of cost recovery fairly.
The report also warned that California electricity rates are projected to rise due to wildfire-related costs. Earlier in February, the state’s IOUs unveiled a plan to spend $15 billion over the next two years to prevent wildfire ignitions. The researchers found that while wildfire prevention programs are likely to be a major near-term price driver, “a significant lack of transparent data” exists on the total costs and how they will be passed on.
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