Skip to main content

Electric Bill Inflation in California: Why Solar is the Answer

January 18, 2024 Oran Arms

California, already among the most expensive states for utility energy pricing, is experiencing abnormally high grid infrastructure costs. The byproduct of these unexpected costs is extreme and unprecedented utility power rate increases, impacting residents and businesses alike. There is no end to these rate hikes in sight, as the impact of climate change continues to wreak havoc on the grid.

PG&E Rings in the New Year with a 13% Rate Hike

On January 1st, Pacific Gas and Electric Company (PG&E) surpassed San Diego Gas & Electric (SDGE) as California’s most expensive power provider with the implementation of a 13% rate hike for its customers. PG&E, which services approximately 15 million people in a 70,000 square mile area covering most of northern and central California, first proposed the rate increase in 2021, citing higher than expected wildfire mitigation costs. According to its 2023-2025 Wildfire Mitigation Plan, the utility company spent $9.3 billion more than regulators authorized on vegetation management costs during a three-year period from 2020-2022. Adding insult to injury, PG&E has filed a separate rate hike request with the Public Utilities Commission (CPUC) to cover 2023 storm damage expenses. If approved, the filing would represent an additional 4.5% increase in average customer bills, going into effect in March. When combined with a jaw-dropping average monthly price increase of 22.3% for PG&E customers from the beginning to the end of 2023, recent price increases have placed an extreme strain on California homeowners and businesses.

California Energy Prices Outpace Inflation

Even before the devastating California wildfires of 2020-2021, energy customers in the Golden State have seen their bill prices increase aggressively. Electric rates for California’s big three investor-owned utilities (PG&E, SCE, SDGE) are among the highest in the country, with a blended average energy price of >$0.25/kWh. EnergyToolbase, an industry leading software platform for renewable energy project modelling, analyzed 10 years of historical energy price trends in California and published the results in a whitepaper entitled “Electric Bill Inflation in California – a 10-year Lookback Study at Electric Cost Inflation in California’s Big Three IOU Territories.” The study found that from 2014 to 2023, utility electric bills in California rose by roughly 70%, roughly 2.5 times higher than the 28% cumulative Consumer Price Index inflation rate during the same period. The average annual price increase for commercial & industrial customers in PG&E, SCE and SDGE service territories during the 10-year study period was 5.9%, 4.8% and 8.6%, respectively.

electric bill inflation
Average year-over-year (2014-2023) electricity price change for C&I users by utility in CA. Source: “Electric Bill Inflation in California” – EnergyToolbase Whitepaper.

Solar is the Solution

Considering the exorbitant utility energy costs, it’s no wonder that California is the #1 state in the US for total solar installation capacity by both nameplate capacity and percentage of national solar generation. Despite last year’s transition from NEM 2.0 to a Net-Billing Tariff, the economics of onsite solar for C&I users in California remain attractive given the breakneck rate of utility price escalation. Given that the recent utility price hikes have largely been put in place to recoup unexpected costs from climate disasters in the state, solar is a two-sided sword in the fight against climate change and ever-increasing operating costs. When paired with a Battery Energy Storage System (BESS), solar photovoltaic arrays can also effectively increase resiliency for businesses, as well as strategically reduce costly peak demand and time-of-use energy rates.

Ready to re-evaluate onsite solar and storage as a long-term energy hedge? Did your company miss the NEM 2.0 application window and abandon its onsite renewable energy project? There is no time like the present to shield your business from recent utility rate hikes while simultaneously reducing Scope 2 emissions. Empower Energies’ team of renewable developers is experienced in evaluating onsite solar + storage opportunities in California’s complex landscape and can provide your business with a comprehensive analysis to enable a quick go/no-go decision. Contact an Empower energy advisor here to learn more.