‘Everyone is getting squeezed’: California electricity prices now second-highest in U.S.

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North Beach resident Serena Satyasai never thought much about her utility bill, but that was before February when California’s electricity prices rose to become the highest in the contiguous United States, according to the U.S. Energy Information Administration. 

Satyasai’s Pacific Gas and Electric bill jumped by about $100 compared to the same month last year. Like many of PG&E’s 5.5 million customers, she’s having to rescript her monthly budget around these rising costs. 

“Everyone is getting squeezed,” Satyasai said. 

Propelled in large part by PG&E, which hiked residential electricity rates by 20% for about 16 million Californians in January, the state high electricity prices are second only to Hawaii, which is always an expensive outlier because of the costs of shipping oil to the far-flung archipelago.

A pack of New England states have historically had some of the nation’s highest electricity prices (the federal government doesn’t track rates but rather calculates prices using customer counts, sales and revenue data) due to factors like a shortage in natural gas pipeline capacity plus the region’s reliance on costly fossil fuels to generate electricity. 

But California has joined them in the last ten years, leapfrogging with Rhode Island, Connecticut, Massachusetts and New Hampshire to periodically hold the title as the most expensive state for electricity usage in the lower 48. (Even though Californians pay a high amount for each unit of electricity, their total bills tend to be lower than other states in the Northeast and South due to the West Coast’s relatively temperate climate.)

East Coast residents are paying higher prices during cold winter months with Californians paying higher electricity prices for a brief period nearly every summer since 2014, likely when people must cool their homes during heatwaves. 

It is unusual for Californians to pay higher prices than the East Coast in the depth of winter. This year alone, typical Northern and Central California households (which use about 500 kilowatt-hours of electricity each month) will pay over $400 more annually on their PG&E bill.  

PG&E currently charges the most for electricity among California’s three investor-owned utilities with an average residential rate of $0.397 per kilowatt hour. The company’s residential electricity rates have risen more dramatically than the other utilities, jumping 128% over the last decade. 

San Diego Gas and Electric’s average residential electricity rate is $0.383 per kilowatt hour and Southern California Edison’s rate is $0.338. 

California electricity prices are the second highest in the nation as of February, which is unusual for mid-winter. Samantha Laurey/Special to the Chronicle

PG&E has vowed to keep future rate increases between 2% and 4% annually, and said January’s dramatic hike was partly due to the slow pace of state approvals that compressed two years of rate hikes into one. 

PG&E chief executive officer Patti Poppe last week told investors during a quarterly earnings call that the company is taking dramatic steps to increase efficiency and lower costs. In an interview with the Chronicle, Poppe said the focus on lowering operational costs is new for the company and one that she hopes will show up in lower bills in the future. 

“The work we’re doing is really necessary,” Poppe said. 

Robert McCullough, an Oregon-based energy consultant who has studied California’s utility markets, said California’s historically high electricity prices can in part be tied to complicated factors like the state’s deregulation of the energy industry in the 1990s. 

But McCullough blamed January’s sticker shock hitting PG&E customers this year on the company’s deferred maintenance of its aging electric grid.

The company attributes about 85% of January’s rate increase to covering the costs to modernize, upgrade and strengthen its aging electric and natural gas infrastructure at a time when climate change has made the state increasingly vulnerable to storms and wildfires. 

“Pacific Gas and Electric fell behind on its maintenance and even without global warming that would have been a big bill,” McCullough said. 

And PG&E’s rates are set to be eclipsed by San Diego Gas and Electric before the end of 2024. The San Diego utility has temporarily dropped rates to compensate customers after previously  charging too much, according to the Public Advocate’s Office of the California Public Utilities Commission. 

Californians’ utility bills could also be impacted by a controversial proposed monthly fixed charge of about $24. 

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