California Electricity Rates Rank Among Nation’s Highest as Report Calls for Rate and Regulatory Changes
California electricity customers face some of the highest electricity prices in the United States, second only to Hawai‘i, according to a new policy report that warns rising rates are straining household budgets, discouraging industrial activity, and threatening public support for the state’s clean energy transition.
The report finds that residential and commercial electricity rates in California are roughly double the national average, while industrial rates paid by manufacturers, agricultural producers, and construction firms are more than two-and-a-half times higher than the U.S. average. The analysis attributes the disparity to a combination of wildfire-related costs, rate design that shifts expenses onto a shrinking customer base, utility profit incentives tied to capital investment, and declining electricity consumption that spreads fixed costs across fewer kilowatt-hours.
Those factors have produced what the report characterizes as an electricity affordability crisis. One in five California households is behind on energy bills, according to the analysis, while electricity-intensive industries are increasingly cautious about operating or expanding in the state. The report concludes that affordability has become the top energy-related concern for residents, raising risks for long-term political support of California’s climate and clean energy policies.
The report frames its recommendations as an effort to slow rate growth while preserving emissions-reduction commitments and equity protections. It focuses on changes to rate design, utility regulation, and targeted bill relief.
Rate Redesign
One of the central recommendations is to increase California’s newly adopted income-graduated fixed charge on electricity bills. The report argues that higher fixed charges would allow utilities to reduce per-kilowatt-hour rates, ease bill volatility in hot climate zones with high cooling demand, and distribute system costs more evenly across income groups. It also calls on the Legislature to require a structured feasibility study to evaluate shifting certain policy and system costs away from ratepayer bills and onto alternative funding sources, including the state General Fund, the Greenhouse Gas Reduction Fund, or available federal grants.
Regulatory Reform
On regulation, the report calls for changes to improve cost discipline and oversight. It recommends mandating timely completion of utility General Rate Cases before test years begin and integrating cost-intensive proceedings—such as wildfire mitigation plans and cost-of-capital reviews—directly into those cases to reduce duplicative filings and delays. The report also proposes assigning the State Treasurer’s Office a formal role in providing independent analysis during cost-of-capital proceedings, with the goal of ensuring utility profit levels better reflect current financial conditions. In addition, it urges an evaluation of whether the California Public Utilities Commission has sufficient staffing and expertise to provide rigorous oversight of utility spending.
Equity and Access
The report also outlines several equity-focused measures. It recommends redirecting California Climate Credits toward low-income households and customers in hot climate zones during peak summer months, when electricity bills are highest. It further calls for allowing rooftop solar customers to recover their investments before reducing Net Energy Metering benefits, while placing clearer limits on program duration and cost impacts to address long-standing concerns about cost shifts. Additional recommendations include expanding bill assistance for households just above existing CARE and FERA eligibility thresholds and simplifying access to clean energy innovation grants to reduce barriers for academic and private-sector research.
The report situates its recommendations within the context of Governor Gavin Newsom’s 2024 executive order directing state agencies to identify cost-saving opportunities across the electricity system. It concludes that slowing electricity rate growth is essential if California is to maintain its climate leadership while protecting households and businesses from rising energy costs.
Specific Recommendations
Increase the income-graduated fixed charge to reduce rates and spread costs more equitably.
Require a feasibility study and criteria-based framework for shifting some costs to non-ratepayer funding sources.
Mandate timely completion of General Rate Cases before the test year begins.
Task the State Treasurer’s Office with providing independent analysis for Cost of Capital proceedings.
Integrate cost-related proceedings (e.g., wildfire, cost of capital) into the General Rate Case and streamline filings.
Direct the State Auditor to evaluate California Public Utilities Commission staffing levels and expertise.
Balance fairness for home solar investors with the need to reduce the Net Energy Metering cost shift by capping program duration and benefits.
Redirect California Climate Credits to CARE/FERA and hot climate zone customers during summer months.
Expand support for low-middle income households above the CARE threshold.
Simplify and accelerate clean energy grant processes.