Why Is Electricity So Expensive in California and Can You Do Anything About It?

California has the highest electricity prices in the country and it continues to rise. The state was among the top 5 states with the highest average electric rates(residential) in 2021. Relying on traditional sources of power despite the growing costs does not just mean higher utility bills for users. It has various other implications for the state as well as the consumers.

Why is Electricity so Expensive in California?

Fuels, power plant costs, transmission and distribution systems, weather conditions, and regulations are all factors that influence the cost of electricity.  The cost involved in generating power is affected by seasonal changes along with the consequential change in demand for electricity. According to the Annual Energy Outlook 2020, the costs involved in generating electricity are the biggest component of the final price of electricity.

According to a study by Haas Business School’s energy institute, PG&E customers in California shell out 80% more per kilowatt-hour than the national average. These are not the only customers paying more than the average. San Diego Gas & Electric customers paid twice while Southern California Edison users paid 45% more than the national average.

California is a large state and also one of the states that face extreme weather conditions. Both these factors contributed towards higher operating costs of the electric system. To add to it, PG&E customers will continue to face inflated bills as the company tries to emerge out of bankruptcy while keeping up with new obligations to ensure a better and more stable grid. All this will have a direct impact on utility bills.

Is there a way to save yourself from the exorbitant electricity bills?

Yes! Increasing dependency on other sources of energy like solar can help in bringing down the costs. While prices went up, the wealthier residents of California were able to depend more on solar with the burden of paying for costly electricity fell on middle- and low-income groups who could not afford the hardware for solar.

Even with access to solar, low and middle-income groups of residents still needed to pay electricity companies as they are the primary source for power. Additionally, non-homeowners and those in multi-family units had various challenges in accessing solar initially. However, with the advent of shared solar and service providers like Ivy that make it easier to eliminate the hassles of distributing solar in multi-family dwellings, there seems to be some relief from the ever-increasing electricity bills.

The increasing price of electricity makes the cost of living in California among the highest in the country. This means that poverty rates are set to grow in the state as affordability for a basic utility like electricity reduces.

While there are several government programs like the Low-Income Home Energy Assistance Program in place to assist residents with high utility bills, these programs are not the final solution. Adopting an approach that brings about equitable costs is much needed. The study conducted by the energy institute at UC Berkeley’s Haas Business School suggests setting fixed costs in accordance with consumers income bracket. Encouraging shared solar services at a larger scale is also much needed. It can benefit all parties involved while helping everyone contribute towards a cleaner and greener environment