LOA Reports that Wildfire and Climate Programs are Increasing Electricity Rates

Increasing wildfire-related costs, greenhouse gas (GHG) reduction programs and policies, and differences in utility operational structures and services territories are increasing California electricity cost, the Legislative Analyst’s Office (LAO) reported. The growth in residential electricity rates in California is projected to continue, potentially impeding the state’s GHG emissions reduction plans.

Key aspects of the LAO report:

Residential electricity rates are high and growing: California’s residential electricity rates are close to double those in the rest of the nation. Rates have been increasing faster than inflation and outpacing growth in other states.

Some key factors for the high rates include:

• significant and increasing wildfire-related costs;

• California’s “ambitious” greenhouse gas (GHG) reduction programs and policies; and

• Differences in utility operational structures and services territories.

Many of these factors are particularly significant for customers of investor-owned utilities (IOUs) as compared to residents served by publicly owned utilities [POUs).

High rates strain residents and impede climate goals: High and increasing electricity rates add cost burdens to ratepayers across the state with particular impact on lower-income residents or residents who live in hotter regions of the state. High electricity rates also discourage households from pursuing electrification through switching out their fossil fuel-powered cars and appliances. This impedes the state’s efforts to meet its ambitious climate goals.

Legislative choices

The LAO concluded that the state legislature will likely soon face difficult decisions about electricity rates and how to balance the goals to both mitigate and adapt to climate change as well as improve the affordability of electricity.