September 19, 2023

The Reason Why California Electricity Bills Are So High And Solutions

Average California electricity bills by utility and housing type

Each California utility charges different rates based on their unique mix of energy sources and the total cost to serve their customers. That means people in some places pay much more per kWh than others. SDG&E customers pay higher rates than customers of SCE, even though the utilities serve areas that are neighbors in some places.

There is also a huge difference in how much energy people use depending on the kind of home they live in.

Average electricity bills for single-family detached homes

Genability, a utility rate database that provides data for our solar savings calculator, shows that the residents in a single-family detached home in California use an average of 10,500 kWh per year. That’s 875 kWh per month, which is enough usage to cause customers of some utilities to pay a slightly higher price per kWh, based on the fact that they use more energy than the average customer.

Here’s a breakdown of the differences for each utility:

Table 1. Average monthly bill for single-family detached homes in California:

How do those average bills look, other than making everyone in the state want to move to Sacramento or Los Angeles? You can see from the above tables that SDG&E customers are paying a TON of money for electricity, but everyone in California is still paying over the national average of $0.15/kWh.

Average electricity bills for apartments

People who live in apartment buildings with more than five units use an average of just 5,000 kWh per year—less than half of the single-family home number.

That makes sense. Apartments are more efficient because they’re typically smaller and often share walls, ceilings, and floors with other units, meaning their heating and cooling needs are much less. Apartment dwellers also benefit from the tiered rate plans used by most California utilities—if you use less, your average cost per kWh is lower.

Here’s a look at average monthly bills for apartments:

Table 2. Average monthly bill for single-family apartments in California:

Similar to single family homes, the average bills for apartments served by municipal utilities in Sacramento and Los Angeles are lower, while customers of the big investor-owned utilities pay more.

Changes in the cost of electricity over time

The average rate of increase in electricity prices in the United States over the past 25 years has been around 2% per year. Unfortunately, most California residents have experienced much quicker growth in the prices they pay for power. In just the past ten years, the average growth rate across all California utilities was more than 7.7% per year.

Here’s a table showing the average growth rates over the past ten years for customers of the five big California utilities we’re covering:

The reasons for these high rates of increase are numerous. Two of the most important are major upticks in the cost of natural gas used by power plants and rising costs associated with the upkeep of the electric grid. The cost to run the grid has skyrocketed as utilities strengthen their infrastructure to prevent or repair damage from wind storms and wildfires. Sadly, some California utilities have been allowed to pass the costs of those wildfires onto ratepayers.

What will happen to the cost of electricity in the future?

As we mentioned above, electricity costs in the United States have tended to increase around 2% per year over the long term, and California’s electricity costs have increased by much more than that in recent years. Does that mean California utilities will slow their requests for rate increases, and things will even out? Not likely.

In their current rate cases, PG&E and SDG&E both propose increases in the double digits over the coming few years. Estimates show that rates may increase between 32% and 50% for some California residents between 2022 and 2026. That could mean average monthly bills of close to $500 for homeowners by the second half of the decade.

How to reduce your California electricity bill

So what can be done to counteract the effects of high electricity bills? There are a few proven strategies that work in California:

  • Invest in energy efficiency
  • Sign up for reduced rates based on your income
  • Switch to a Time of Use rate plan and shift energy usage to off-peak times
  • Get solar panels installed and start saving money as soon as they’re fully interconnected

Here’s some information about each of those strategies:

Energy efficiency

It might not be surprising to hear that the first suggestion when it comes to energy savings is simply using less energy. By purchasing energy-efficient appliances and devices, you can reduce your monthly energy bills by a lot. Increase the amount of insulation in your walls, floors, and attic; replace any light bulbs that fail with new LED bulbs; switch to a smart thermostat that can automatically control HVAC appliances; and choose a heat pump water heater.

The Inflation Reduction Act (IRA) provides funding for replacing old, inefficient appliances with new ones, with rebates of 50% to 100% of the cost (based on income) as well as tax credits. Many of the programs funded by the IRA have yet to be developed by state governments, so keep an eye on Rewiring America for more information.

Income-qualified savings programs

There are currently two main income-based programs that help Californians lower their utility bills: California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance Program (FERA). These programs are available to customers of PG&E, SCE, SDG&E, SoCalGas, Alpine Nat'l Gas, Bear Valley Elect, PacifiCorp, Liberty Utilities, Southwest Gas, and West Coast Gas.

The CARE program offers discounts of between 20 and 35% off electricity and gas bills for families whose income is less than 200% of the Federal Poverty Guidelines. FERA covers those whose incomes slightly exceed CARE requirements, offering 18% discounts on electricity bills to families whose incomes are between 200% and 250% of the same guidelines.

Helpfully, the CPUC offers a web page with more information about the programs and their income limits based on family size and links to each of the companies’ own sites about their programs.

People served by LADWP can sign up for the Low Income Home Energy Assistance Program (LIHEAP), with similar income limits. SMUD offers its own program called the Energy Assistance Program Rate (EAPR). If you’re not covered by any of the programs mentioned above, check with your utility provider to see what they offer.

Time of Use rate plans

All of the utilities listed in the tables above offer Time of Use rate plans, under which electricity is more expensive when there is high demand on the grid (such as the evening hours when people return home from work to use appliances and air conditioning) and less expensive when demand falls (usually overnight and midday).

We won’t get into all the complexities of these plans here, but we will provide one more comparison table. The table below shows the possible savings from shifting all the 875 kWh monthly usage for a single-family detached house to off-peak times. This isn’t representative of what the actual savings on a TOU plan might be, but it does serve as a good way to compare each company’s plan.

The examples above show that it’s not necessarily a huge benefit to switching to a TOU plan for LADWP or PG&E customers, but SCE and SDG&E customers can save a good deal of money. These plans tend to work best for people willing to wait to use big appliances like clothes dryers and dishwashers after 9 PM or set electric vehicles to charge overnight.

Note: SMUD does not appear in the above table because it only offers TOU rates to its residential customers. There have been indications that all California utilities will switch to mandatory TOU rates at some point in the future. If you go solar in California today, you are required to sign up for a TOU rate.

Getting solar panels installed

Speaking of going solar in California, it’s the very best way to reduce your energy costs (we might be a little biased but we swear it’s true). Unfortunately, this only works if you own your home, but in California, it really works.

Solar panels in California are an excellent investment in your future, paying back their cost in just five to six years and providing decades of renewable energy afterward. Going solar not only saves you money today, but it also protects you against the kinds of huge increases in electricity costs that we discussed above.

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