Experts tell California Public Utility Commission to brace for higher electricity rates
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Los Angeles Daily News
California’s push for green energy could be undermined and poorer households could shoulder a disproportionate share of growing electricity costs if the state fails to adapt to the changing energy landscape, according to experts testifying before the California Public Utilities Commission on Wednesday, Feb. 24.
In a daylong virtual hearing on future electricity costs, energy professionals explained that the rates charged by private electric companies are expected rise faster than inflation over the next decade, as wildfire prevention measures and new infrastructure jack up expenses.
Currently, the typical electric bill in California is well below the national average for those charged by private utilities. But that’s largely because the state has the fourth lowest per capita use of utility-generated energy, thanks to energy efficiency and conservation, and because of the rising number of consumers who generate their own electricity with solar panels.
The rates themselves are well above average and projected to increase steadily. That could discourage residents from embracing electric cars and appliances, and leave low-income residents paying more than their share of fixed electricity costs.
But easing the drive for clean energy is not considered an option.
“We can’t afford to do nothing. Climate change is upon us,” said Assemblyman Chris Holden, a Pasadena Democrat who is chairman of the Assembly Utilities and Energy Committee.
“We must figure out how to get our costs under control while pursuing our ambitious goals.”
Fixed costs — including transmission maintenance, fire prevention efforts, and investment in new infrastructure — are projected to become a growing portion of electric bills. That means bills could increase even if overall energy use drops.
In 2019, Edison had the 42nd highest rate of 200 private electricity companies surveyed nationwide, and SDG&E had the 17th highest, according to new commission report on future costs. But thanks to low energy use, Edison’s bills ranked 122nd while SDG&E’s ranked 142nd.
But in addition to inflation, Edison’s residential rates are forecast to increase 10% by 2030 and SDG&E’s by 20%, according to the report.
Shouldering the burden
Disastrous power outages in Texas this month and rolling blackouts in California last summer were brought up several times by hearing participants, who emphasized the need for continued improvements to the electrical grid despite the costs involved.
“We must prepare the grid for more frequent and severe climate events,” said commission President Marybel Batjer.
At the same time, speakers acknowledged the state’s commitment to weening itself off the fossil fuels driving climate change.
Because wealthier people are more likely to pay the upfront costs of solar panels and energy-stingy heat pumps — and, as a result, save on monthly bills — lower-income ratepayers are left to pick up a larger share of fixed costs.
Already, nearly 9 million customers are in arrears on electric bills, according to the commission data. And low-income people pay three times the portion of their income on energy as others, said Mad Stano of the Greenlining Institute, an economic justice advocacy group.
“We will not be able to decarbonize the grid if low-income people are required to pay for it,” Stano said.
“Wealthier customers can afford to pay more,” Stano said later. “A controversial statement, I know.”
While there are discount programs for those who make less than 200% of the federal poverty level, lower income people who don’t qualify for the program are particularly burdened. It was also noted that people of color are disproportionately affected by increased electric bills.
“For those just over the federal poverty limits, these rising electric rates are going to hit the hardest,” Batjer said.
Beside being unlikely to buy solar panels, heat pumps and energy efficient electric appliances, low-income residents are also less likely to pay the higher upfront costs of electric cars, according to testimony.
Search for equity
In a panel discussion on cost control, representatives of the state’s three major utilities discussed efforts they’re taking to offset increasing rates. Among them, PG&E said it is pursuing other revenue streams, including selling its San Francisco headquarters, leasing out space on electric towers to a cell company and looking at selling excess energy.
Edison said it is exploring self-insurance for wildfires, which it said could save hundreds of millions. And SDG&E noted it is cutting costs in a number of ways, including using drones and artificial intelligence to monitor transmission and distribution networks, a chore previously performed by people.
But a recurring theme throughout the afternoon was how costs might be shifted away from low-income customers. Fixed costs that have nothing to do with amount of energy consumed account for 66% to 77% percent of bills, said Severin Borenstein, director of UC Berkeley’s Energy Institute and a professor of business administration and public policy.
“The way we’re collecting this is the most regressive tax you can imagine,” he said.
His suggestion was to adjust the fixed costs to residential customers based on income. Betony Jones of NextGen Policy offered a variation of that, suggesting that households making less than $100,000 be insulated from cost increases and other households pick up the difference.
Jennifer Dowdell of the Utility Reform Network breached the idea of the state taking ownership of certain electricity assets, such as storage batteries. And Michael Wara, director of the Climate and Energy Policy Program at Stanford University, raised the possibility of customers in high-risk wildfire areas paying more.
Wara also offered some perspective on electricity as part of a California household’s budget.
“Everybody who pays a mortgage or pays rent knows the real crisis is housing affordability,” Wara said. “If we solve the housing crisis, there’s a lot more money for energy.”
