California Summer Electricity Rates: A Steep Increase for Businesses

As summer begins in California, businesses must brace themselves for the highest electricity bills in the state's history.

After the Time Of Use (TOU) changes in 2019, businesses have experienced dramatic increases in their electricity costs, especially during on-peak periods between 4-9pm, with some rates rising by more than 300%.

For a majority of utility customers in California the average commercial retail price of electricity has increased on average by about 3.5% per year from 2001 to 2020. However, recent years have seen much higher than average increases. After global events in 2020 such as the coronavirus pandemic, rates through 2023 have risen significantly, with some customers experiencing annual increases as high as 23%​.

Looking at the state’s major utility providers, San Diego Gas and Electric (SDGE) rates for commercial, industrial, and agricultural customers are increasing the quickest, with rates jumping by 68% from June 2019 through January 2023​.

Southern California Edison (SCE) is also on a high rate trajectory. Over just three years, a commercial manufacturer under SCE's plan would have seen 56% higher electricity bills​.

Pacific Gas and Electric (PGE), the largest utility in the nation, has also seen rising rates, with the cost of electricity for a commercial agricultural facility under its plan increasing by 38% in just three years​.

Several factors contribute to these rising costs. One significant factor is the aging transmission and distribution infrastructure of the state's electrical grid, which is in need of expensive upgrades and expansion. Revenue requirements for these investor-owned utilities have put pressure on rates and infrastructure costs, potentially slowing the overall effort to modernize the grid.

As we look ahead, businesses can expect their electricity costs to continue to rise past 2023 and into the future, driven by many factors such as inflation, increased demand, increased supply costs, clean energy/sustainability goals, and the need to upgrade and expand transmission and distribution systems.

In response to these increasing costs, many commercial, agricultural, and industrial businesses are considering sustainable solutions such as commercial solar, energy storage, and other solutions to reduce their energy costs and become more energy independent. Those already equipped are at an advantage, actively generating their own electricity to curb the burden of rates repeatedly rising.