Two pieces of legislation have been introduced in Sacramento that their authors say will help reduce rising utility bills across California and rein in profits collected by investor-owned utilities, such as PG&E and San Diego Gas & Electric.
A provision in Senate Bill 332 by Sen. Aisha Wahab, D-Fremont, would cap rate increases on residential customers to no more than the rate of inflation, in alignment with the Consumer Price Index.
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And Assembly Bill 745 by Assemblymember Jacqui Irwin, D-Thousand Oaks, aims to reduce the costs of infrastructure projects that get passed onto ratepayers. The bill would require approving spending to expand and upgrade existing transmission line projects go through the California Public Utilities Commission, known as the CPUC for short.
AB 745 cites a recent report from the commission that 64.8% ($4.4 billion) of investments by California’s big utilities on transmission projects between 2020 and 2022 were “self-approved.” That refers to the fact there is currently no existing requirement that such projects undergo a formal review by the CPUC, the California Independent System Operator or any third party.
“This is a loophole that’s being taken advantage of more and more,” Irwin said. “The self-approved projects don’t have any review for appropriateness or cost and for ratepayers, so it means they are most likely paying more on every bill (to pay) for these projects.”
Soaring utility bills have become a burden for many customers across the state to shoulder.
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According to the CPUC’s most recent annual report analyzing rate increases, the average per kilowatt-hour price for electricity has roughly doubled since 2013 for all three of the big investor-owned utilities in California — SDG&E, Pacific Gas & Electric and Southern California Edison.
The report went on to predict that electric rates will rise 5.6% to 10.8% annually through 2027, well over the rate of inflation.
“I believe that Californians have spoken loud and clear; they are tired of paying these excessive rates,” Wahab said. “We want to give ratepayers a break.”
But Gary Ackerman, a utilities and energy consultant with more than four decades of experience in power issues, is skeptical.
“Capping residential electricity rates may seem like a good idea, as it gives the impression of holding utilities accountable to consumers,” Ackerman said in an email to the Union-Tribune. “However, in practice, it is unworkable because many of the factors driving rate increases are beyond a utility’s control — including fuel costs, interest rates, state mandates and wildfire mitigation efforts.”
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Ackerman said suppressing residential rates would shift the burden to commercial customers, which would drive up the utility bills of small and large businesses and stifle economic growth.
“A more practical approach would be to cap each utility’s total revenue requirement, while excluding external cost drivers beyond management’s control,” Ackerman said. “This would maintain financial stability while ensuring fairness across all customer classes.
Officials at SDG&E did not specifically comment on Wahab’s or Irwin’s bills but said the utility “understands affordability is a top concern for our customers.”
“We continue to work with policymakers on legislation to address affordability,” SDG&E spokesman Anthony Wagner said. “At the same time, we remain focused on reducing operational costs to help control the rise of electricity prices and stabilize bills while still delivering the exceptional service our customers expect.”
In addition to tying rate increases to inflation, SB 332 also includes seven other provisions that include reducing what customers pay into the state’s multibillion-dollar Wildfire Fund while increasing what utilities put into the fund, and making compensation of utility executives contingent on safety metrics.
“Again and again, we are seeing billions of dollars in profits” from utilities, Wahab said.
Pacific Gas & Electric, the largest investor-owned utility in California, released its annual earnings report last week and reported a profit of $2.48 billion for 2024.
Sempra, the parent company of SDG&E, will announce its 2024 numbers next week. In 2023, SDG&E turned in its most profitable year ever, making $936 million according to figures filed with the U.S. Securities and Exchange Commission.
Reports from multiple state agencies have looked at some of the reasons why California electricity rates are so high.
Last month, the independent Legislative Analyst’s Office said key factors include “significant and increasing wildfire-related costs, the state’s ambitious greenhouse gas (GHG) reduction programs and policies,” and differences among the service territories and the “operational structures” of SDG&E, PG&E and Edison.
SDG&E, for example, has spent $6 billion on wildfire prevention programs since three deadly fires ripped through San Diego County in 2007.
Plus, the Legislature has passed a slew climate-related measures in recent years, such as Senate Bill 100 mandating the state derive 100% of its electricity from carbon-free sources by 2045 and Senate Bill 350 that authorizes the CPUC to implement a variety of ratepayer-funded programs to boost the adoption of zero-emission vehicles, such as installing charging stations.
