Price of electricity set to rise by 25% for majority of Californians

There were some important changes announced last week that impact the way homeowners in California will be charged for their electricity. The short version is the majority of us will see our bills increase heavily in the coming years (but what’s new?)

The California Public Utilities Commission (CPUC) approved changes put forward by the state’s investor-owned utility companies (Southern California Edison, Pacific Gas & Electric, and San Diego Gas & Electric) to reduce the number of rate tiers from four to two, meaning over the next five years electricity bills for modest to moderate users will increase by about 25%, while those who consume large amounts (roughly, if your bill is over $400 per month) will get a 25% reduction.

Right now, we pay for electricity in four tiers, rising as energy use crosses the threshold into each tier. The first tier doesn't cost very much (about $0.12 per kWh), but it gradually increases until the fourth, which really does cost a lot (up to $0.40 per kWh).

The flattening of these tiers means base price goes up and those who use large amounts get a break. It also undermines efforts to conserve energy for the majority of Californians who are conscious consumers of electricity.

The utility companies argue that the two-tier structure is fairer in general, as modest to moderate currently pay less for electricity than it’s worth, but conservation and consumer groups say this is a disaster for those who count the cost of electricity and the impact on the environment.

And we agree. More than 75% of Californians come out of this worse off, and the other 25%, for the most part, are high users because they have big houses and enough disposable income for it not to matter too greatly.

We talk about this in our energy management seminars that we provide to the teams and groups at faith-based, nonprofit, community organizations and small- and medium-sized businesses, with whom we meet regularly to talk about conservation, solar, and issues of the day. These groups are all concerned about this rate change and want to learn more about what they can do to take back control.

So it seems that this ruling could further accelerate the home solar market in the state and will force homeowners to take control of their own energy generation. We certainly hope so, and the more people driven to choose renewable energy can only be good for California.

Here’s a quick breakdown of the facts from the ruling:

The facts:

The current structure will shrink from four to two tiers over five years.
Modest to moderate users will see an increase of around 25% on their electricity bills. Modest to moderate users make up about 75% of California residents.
High users will see a reduction of about 25%.
It will start to hit investor-owned utility customers, such as SCE, PGE, and SDGE, in as little as 60 days.
The change does not apply to publicly-owned utilities including LADWP
A minimum monthly $10 charge will also come into effect ($5 for subsidized customers) and is still unclear if rooftop solar bill credits can offset this charge.
A “super user” surcharge will penalize those who use more than 400% over the baseline and will be implemented over the next four years.
A time-of-use (TOU) plan will mean that the amount consumers pay will depend on the time of day of use, although this will be on an opt-out basis.