In recent years, electricity rates have risen significantly across California, affecting us all. It’s key to understanding the underlying causes behind these changes and exploring effective strategies for managing electricity usage and costs together.
What’s Causing the Increase?
California’s commitment to reducing carbon emissions by 2045 (PDF) involves transitioning the state’s energy usage from fossil fuels to renewable sources such as solar, wind, and hydroelectric power. While this shift is crucial for reducing pollution and tackling climate change, it needs new but costly upgrades.
The primary driver of rising electricity costs in California is wildfire mitigation. In response to devastating wildfires in recent years, utility companies have invested heavily in measures to prevent and manage wildfires, including vegetation management, equipment upgrades, and Public Safety Power Shutoffs (PSPS). These measures are necessary to protect communities and reduce the risk of future fires.
Much of our electrical infrastructure is also outdated and requires upgrades or replacements to meet current safety and efficiency standards. These grid improvements—which include integrating renewable energy sources and enhancing the structural resilience of the power system—are crucial for ensuring reliable and efficient electricity delivery.
Additionally, state regulations aimed at promoting clean energy and emissions often increase the cost of utility operations. For example, mandates to increase the share of renewable energy in the electricity mix require new investments in solar, wind, and hydroelectric infrastructure.
Economic and external factors play significant roles as well. Rising interest rates increase the cost of borrowing for utility companies, which can lead to higher costs for infrastructure projects and other investments. At the same time, fuel prices, the increased demand for energy, global supply shortages, and geopolitics also impact electricity rates and increase costs.
Time-of-Use (TOU) Rates
As part of a statewide initiative to use more renewable power, all eligible residential electric utility customers were transitioned to a new Time-of-Use (TOU) rate plan by June 2022. Instead of paying a flat rate, TOU rates are charged when you use energy and can vary significantly throughout the day and year.
During peak hours (4-9 pm), electricity demand surges as many people return home from work or school and start using appliances. Electricity rates are typically the highest during this time of day to encourage reduced usage and help manage the grid more efficiently. Using major appliances outside of these hours can lead to cost savings.
There are also seasonal variations: During summer afternoons, the demand for electricity in California is generally higher due to air conditioning usage, which can lead to higher costs. On the other hand, winter afternoons might offer lower rates due to reduced overall demand. During the summer season (June-September), PG&E’s Time-of-Use (TOU) rates are 17 percent higher during peak times compared to off-peak times. During the winter season (October-May), PG&E’s TOU rates are 6 percent higher during peak times than off-peak times.
PG&E offers two TOU plans: TOU-C (peak hours 4-9 pm daily) and TOU-D (peak hours 5-8 pm non-holiday weekdays only). Although it may seem at face value that TOU-D is the better plan because the peak hours are shorter, the structure of the plan is designed specifically for high-usage customers. TOU-C is PG&E’s standard plan and is designed for average or low electricity usage households. Credit: Solar.com
Saving Energy at Home
Making small changes to how you use your household appliances can add up to big savings over time:
- Cooking: An electric stove can consume between 2-4 kWh each time you use it. Frequent cooking or oven use at high temperatures can substantially increase your electricity consumption. Fortunately, induction stoves are roughly 10 percent more efficient than electric stoves.
- Laundry: Washing machines use approximately 0.3-1.5 kWh per load, with the amount varying based on the model and the cycle chosen. Opting for colder washes or efficient cycles can help reduce usage.
- Heat pumps: Heat pumps are an efficient way to heat and cool your home. They use electricity to transfer heat rather than to generate it, which can make them more effective than traditional electric heaters or air conditioners. A typical heat pump might use 1,500-2,500 kWh annually, depending on the size of your home and the efficiency of the system. This usage can vary significantly based on factors such as climate, home insulation, and how often the system is used.
New Fixed Charges Approved By the CPUC
Recently, the California Public Utilities Commission (CPUC) approved new fixed charges for electricity rates that will impact customers of major utility companies, including PG&E. Set to take effect in 2026, these charges are designed to help stabilize electricity bills and support the state’s energy transition efforts. For PG&E customers, this means a shift in how electricity costs are calculated, potentially leading to more predictable monthly bills.
The introduction of fixed charges aims to address the financial challenges associated with the renewable energy transition and necessary infrastructure upgrades. These changes have sparked significant discussion and coverage in the news, reflecting the importance and impact on California residents.
For more information, check out the CPUC’s official press release and fact sheet (PDF).
Cover image credit: Miguel Á. Padriñán via Pexels
