California has among the highest electricity rates in the nation, second only to Hawaii. The state suffers from an affordability crisis and electricity prices outpace inflation.
According to the California Public Utilities Commission (CPUC), the state’s three largest electric utilities PG&E, SCE and SDGE have raised customer rates by 110%, 90% and 82%, respectively, over the last decade.
CPUC data shows that wildfire response from utilities has cost ratepayers over $27 billion from 2019 to 2024. Through 2035, electricity grid upgrades are expected to cost the state about $26 billion.
At least one-quarter of Californians struggle to pay their electricity bills, yet PG&E posted $2.47 billion in pure profits in 2024.
“Despite the clear link between wildfire spending, grid upgrades, and booming profits for monopoly utilities, somehow distributed solar is getting the majority of the blame for rising energy costs,” said the Solar Energy Industries Association (SEIA).
The CPUC’s Public Advocate Office (PAO) claims that rooftop solar created an $8.5 billion cost shift onto non-solar customers last year, blaming rooftop solar for a more expensive grid. PAO’s analysis characterizes lost revenues for utilities as a cost.
However, independent analysis suggests that rooftop solar, which supports both self-consumption of power generation and exports to the local the local grid, created $1.5 billion in cost savings for non-solar California ratepayers.
California regulators have placed rooftop solar in the crosshairs while supporting the profiteering of investor-owned utilities. The reason is simple: rooftop solar represents competition to what is otherwise a monopoly market.
“Instead of addressing the real drivers of unaffordability, these arguments deflect from serious solutions we know can lower rates,” said SEIA.
SEIA made six recommendations to lower costs and help California get its electricity bills back in order:
1) Fix perverse utility profit structure
The fundamental structure of private utilities in the state has created a perverse inventive to spend inefficiently. The more capital that utilities spend on infrastructure, the more they can get electricity rate increases approved with a guaranteed rate of return. The more rates are increased, the larger the profits.
SEIA argues that utility profits should be based on performance outcomes, not guaranteed rates of return.
“Metrics like electrification rates, interconnection timeliness, and improved reliability should determine profits — not how much utilities spend on projects,” said SEIA. “This change would better align their incentives with the outcomes California ratepayers want to see: lower costs and a more reliable electric grid.”
2) Stop using rate hikes to fund programs
Many of California’s ratepayer programs and incentives have historically been funded by rate increases. It is more common for states to use tax revenues to support programs like CARE, SGIP, and other rebate programs.
“Moving programs out of utility rates and into the general state fund is a more reasonable way of funding important programs and service,” said SEIA.
3) Change transmission financing
SEIA suggests that new financing mechanisms and ownership structures could provide a lower-cost path to upgrading transmission lines. A study from the Clean Air Task Force said that public-private partnership financing could save $3 billion per year.
4) Change climate credit disbursement
Californians currently receive a climate credit on their electricity bills twice per year averaging about $50, said SEIA. SEIA suggested a more thoughtful disbursement of the credit could include providing higher credits to low-income residents or directing the credits to areas in the state that pay the highest electricity rates.
5) Federal tax conformity
California tax code differs from federal tax code, which SEIA said reduces the benefits of federal tax incentives for clean energy projects in the state.
“The state legislature should pass Senator Padilla’s legislation — SB 302 — to align our tax code to allow for the full value of the newest federal tax credits,” said SEIA.
6) Battery storage and VPP
Virtual power plants (VPP) connect rooftop solar, storage, demand response and other distributed technologies in a coordinated operation of the grid. VPP programs typically entail solar and battery storage customers agreeing to enroll their battery to dispatch power when electricity demand peaks and is most expensive.
“The state should encourage and incentivize solar customers to adopt battery storage, which helps ease stress on the grid and boosts household resilience,” said SEIA.
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