Why 16 Million households in Northern and Central California are about to pay more for electricity

PG&E in Petaluma, CA. (Photo by Justin Sullivan/Getty Images)

With no cap on price increases for California’s utilities, Pacific Gas & Electric will hike rates 13%, which it says is needed for upgrades.

By Mark Kreidler, Capital & Main

This story is produced by the award-winning journalism nonprofit Capital & Main and co-published here with permission.

Millions of Californians are about to get blasted by a staggering increase in their gas and electric bills, a hike that was quietly approved by a state commission a week before the Thanksgiving holiday. But that’s not the worst of it.

Beginning Jan. 1, power giant Pacific Gas & Electric, which serves 16 million Californians, will impose a 13% increase on the average household bill. That comes to $32.50 a month, or nearly $400 extra per year. Low-income households that qualify for PG&E discounts will still be on the hook for an average of $21 more per month, or an extra $250 per year.

Not only that, but ratepayer advocates say those costs won’t stand alone: They’ll occur in concert with regularly scheduled start-of-the-year adjustments in other categories, and on top of a rate hike that took effect in mid-2023.

“It’s the tip of the iceberg,” said Mark Toney, executive director of TURN, the utility reform network that lobbies for affordable and accessible power for Californians. “I think that people will see a $50 per month increase in one year,” or an extra $600 during that time.

And even that is not the worst of it. The worst is this: There is no cap on what a state-sanctioned monopoly like PG&E can seek in rate increases. There is only the hope that the agency charged with regulating it, the Public Utility Commission (PUC), pushes back — but the recent evidence for that is slim.

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To hear the PUC’s commissioners tell it, they held the line in this latest round of hearings. Beset by massive costs to fulfill mandated upgrades after having caused major fires in 2017, 2018, 2019 and 2021, PG&E had originally asked the commission to raise average rates by more than $38 per month but got $32.50.

Further, the commission noted in a news release, PG&E had requested $15.4 billion in revenue. The PUC said it “cut that amount substantially” to $13.5 billion — odd phrasing, considering the pending rate hikes to families and the fact that even the lower revenue figure represents an 11% increase over the previous year.

“I fully understand that ratepayers are dealing with inflation and price increases,” commission member Darcie Houck said just before the PUC approved the household price hike. “I believe all of the commissioners struggle with the choices before us.”

Households will struggle more. Over the past four years, PG&E’s bill increases have dramatically outstripped inflation, according to data compiled by TURN. While the Consumer Price Index showed an 18% jump from January 2020 to September 2023, PG&E’s electric rates went up 51% for most households — and, remarkably, 67% for those enrolled in the company’s CARE program for rate relief, according to the advocacy group’s analysis.

Those rate hikes have squeezed families already beset by other rising costs of living, and in many cases those households are still recovering from pandemic-related financial losses. Now, they’re bracing for a new round of PG&E increases, and there’s no end in sight.

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On their face, these rate hikes are meant to help cover the cost of upgrades to PG&E’s outdated and constantly failing infrastructure, which has been held responsible for multiple fires over the past several years, including the devastating Camp Fire that leveled the town of Paradise in 2018 and claimed 85 lives.

Essentially, PG&E sought and received state approval to hand its customers the bill for mistakes so egregious they led the investor-held company to file in 2019 for bankruptcy protection (its second in 20 years), from which it emerged in 2020.

But even within the scope of safeguarding the utility’s power lines for the future, a goal almost anyone would agree with, there’s wide room for discussion on how to do it — and at what cost.

PG&E will use much of its new revenue to bury, or “underground,” more than 1,200 miles worth of power lines in areas of high fire risk. The cost is enormous. Estimates from PG&E, San Diego Gas & Electric and Southern California Edison, the state’s three largest power companies, run from $1.85 million to $6.1 million per mile to complete the process.

There’s a far less expensive option, TURN’s Toney said. Called “hardening,” it involves insulating existing power lines with fire-protective coating. It can be completed more quickly, and for about $800,000 per mile — and Southern California Edison has already done it successfully.

But PG&E rolled out its powerful lobby and an advertising campaign in favor of the more expensive plan. Under its arrangement with the state, PG&E earns a guaranteed 10.25% rate of return on capital investment, so the costlier plan equals a greater return for the company — and its shareholders.

Despite an administrative law judge’s proposal to underground just 200 miles of lines while using the less expensive hardening process for another 1,800 miles, the five-member PUC, appointed by the governor, ultimately tilted heavily in the direction of the power company. The alternate proposal that passed was written by John Reynolds — one of the PUC members.

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As always, the burden of bearing this cost will fall hardest on lower-income households, even if they qualify for PG&E discounts. Using data collected from the company’s own disconnection reports, TURN found that the percentage of PG&E customers who were four months behind on their bills rose from 3.8% in 2019 to 7.0% last July. “That’s a stunning increase,” Toney said.

“They keep causing disasters, and they keep getting rewarded by state officials,” a Central Valley resident who identified himself as Jose Lopez said by phone during the commission’s November meeting. While the PUC would likely dispute that, it’s clear that PG&E is once again getting most of what it wanted.

Copyright 2023 Capital & Main

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