Electricity rates are increasing nationwide, with California experiencing a significant surge. Average residential rates in California rose 47 percent from 2019 to 2023, now double the national average.
Experts attribute these hikes to higher utility spending on wildfire safety, infrastructure, and clean energy programs. Another trend is the growing gap between investor-owned utilities and public providers. In California, investor-owned utilities like Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E) saw rates rise 48 to 67 percent, outpacing public utilities like Los Angeles Department of Water and Power (LADWP) and Sacramento Municipal Utility District.
Frustration with investor-owned utilities has prompted communities to consider municipal takeovers. Although recent buyout initiatives in Maine and San Diego failed, Ann Arbor, Michigan, is developing its own utility to complement its private provider.
In California, calls for public buyouts persist. Ventura County is considering replacing Southern California Edison with a municipal utility, citing outages and poor communication. The California Public Utilities Commission (CPUC) is evaluating what it would cost San Francisco to take over part of PG&E’s grid.
“Public power is more affordable,” said John Cote, spokesperson for the San Francisco Public Utilities Commission, which would run PG&E’s grid if acquired. Ruthie Lazenby, co-author of a June Pritzker report, notes profit motives in investor-owned utilities lead to overspending.
Both public and private utilities charge for electricity and grid maintenance. Public utilities use municipal bonds for funding, while investor-owned utilities rely on higher-interest borrowing and pay taxes on profits, which public utilities do not.
From 2019 to 2023, California’s private utilities increased spending due to wildfire mitigation. Costs rose by $27 billion, impacting customer bills significantly. Meanwhile, public utilities have less intensive wildfire plans and don’t contribute to the state’s wildfire fund.
SCE rates are affected by state mandates like wildfire mitigation, renewable energy, and the solar cost shift, which represent nearly 30 percent of typical IOU bills compared to 21 percent for POUs. The solar cost shift accounts for 12 to 19 percent of non-solar customer bills.
Both utility models aim for 60 percent renewable energy by 2030 and 100 percent carbon-free by 2045. An October report by Denise Grab compared SCE and LADWP, showing LADWP increasingly invests in clean energy.
The rate gap between SCE and LADWP is closing, with LADWP rates rising due to increased capital spending for climate goals, potentially doubling by 2030. SCE implemented a 13 percent rate increase last month.
While municipal utilities generally have lower rates, they also face legal challenges like Proposition 26, which affects spending on new initiatives. LADWP manages transition costs through previous investments and long-term debt, according to Riana Basuel, LADWP spokesperson.
Public buyouts are complex and costly, often involving legal battles. A report from The Brattle Group notes most municipalization efforts in the past 25 years failed due to costs. A UCLA report suggests improving IOU accountability through public ownership of infrastructure, regulatory oversight, and reduced rates of return.
Original Story at insideclimatenews.org