Energy Affordability: How Soaring Rates are Exacerbating Inflation and Harming Residents, Farms and Businesses
Voters are increasingly feeling angst about the economy. Inflation is rising at its fastest rate in a generation, a concerning 6.8 percent last year through November. Rapidly rising prices for energy, gasoline and food are particularly problematic for Californians. Everything is getting more expensive. Supply chain disruptions, worker shortages and pain at the gasoline pump and grocery check-out lines have made inflation an economic and political problem for elected officials.
Californians are in for even more sticker shock due to rapidly rising energy costs this winter and over the next few years. While the rising cost of food, gasoline and other consumer goods is affecting all Californians, the cost of electricity and natural gas from California utilities is far outpacing everything else.
Energy affordability must be a top concern for lawmakers and regulators. California’s electricity rates are nearly triple the national average, and are rising five times faster than the rest of the country. Utility investments to make up for years of wildfire mismanagement and neglect are ensuring California’s already sky high electricity rates go even higher.
- Baseline residential rates have increased more than 59% (SCE), 104% (PG&E), and 126% (SDG&E) since 2009.
- System average rates have increased more than 50% from 2009 and are expected to continue rising at an alarming rate, far outpacing inflation.
- Pending rate cases at the CPUC are seeking as much as a 45% increase over 2022 rates by 2026.
- Residential rates are expected to reach 44¢/kwh (SDG&E), 33¢/kwh (PG&E), and 29¢/kwh (SCE) by 2030.
- Commercial and Industrial rates in California (16.28¢/kwh) are far more than double those found in other neighboring western states such as Arizona (6.67¢/kwh), Nevada (5.74¢/kwh) and Oregon (6.31¢/kwh).
- Soaring agricultural rates are likewise more than double those found in other states, exacerbated by drought and leading to rapidly rising food costs.
- Rapidly rising rates greatly exacerbate California’s highest in the nation poverty rate (15.4%) and worst in the country homelessness crisis.
Make no mistake, out-of-control electricity rates will further hamper what is expected to be a very difficult economic recovery and drive inflation. Restaurants, small businesses and residents have been especially hard hit by the pandemic. Policymakers would be wise to avoid any new mandates that will lead to even higher energy costs and the wrath of increasingly cranky voters back home.
Sources: 2011-2017 CPUC website; 2018-2020 utility filings; Public Advocates Offices, Electric Rate Trends; CPUC, Utility Costs & Affordability of the Grid of the Future; SCE Customer Briefing.