California: PG&E Electricity Rates Continue to Rise
Share on LinkedIn5 Jun 2024
In 2022, the California-based utility Pacific Gas & Electric (PG&E) received approval from the Public Utilities Commission to increase electric rates four times within the year. The following year, PG&E implemented five rate changes, four of which were increases, culminating in an approximate 8% rise for smaller manufacturers by year’s end compared to the start of the year.
This figure is representative of a full-service customer with an average load of 100 kilowatts (kW) and a 69% load factor. For a larger industrial customer with a load of 1,000 kW, this represents a 9% increase. In 2024, PG&E has already introduced three rate changes, two rate hikes in January and April and a slight decrease in March. The two charts below show the rate movement from January 2023 to the present for two different-sized business customers.
These rate hikes are attributed to various factors, including the state’s commitment to achieving 100% clean retail electricity sales by 2045, which has and will continue to necessitate substantial investment in clean energy technologies and infrastructure improvements. Additionally, PG&E has faced intense scrutiny over its equipment management which has been linked to several wildfires. This has led to important and costly initiatives designed to mitigate the instances of utility equipment contributing to wildfires, such as transferring 1,230 miles of overhead power lines to underground paths.
The company has also identified the anticipated rise in climate-driven hazards as a physical climate risk, necessitating significant upgrades to equipment in areas prone to droughts and rising temperatures. To address these challenges, PG&E aims to recoup $4.7 billion for power line overhead hardening and undergrounding and $9.3 billion in overspending on vegetation management through this year’s rate increases. Among other recovery costs include storm costs, maintaining and upgrading gas pipelines and grid improvements to accommodate an increase in electric vehicles. Consequently, these additional costs are being transferred to the customers, leading to substantial rate increases across PG&E’s customer base. California’s utility rates are already the second highest in the nation (second to Hawaii), with PG&E becoming the state’s most expensive utility.
While prioritizing customer safety and environmental progress is crucial, the frequency of PG&E rate increases remains a concern, prompting questions about the long-term viability and the options available to local businesses.
Much like other utilities, PG&E offers several avenues for businesses to save money and reduce their environmental footprint. Programs such as energy efficiency initiatives provide rebates and financial assistance for the installation or upgrade of equipment aimed at reducing energy consumption. Other opportunities that can help clients include installing renewable generation such as solar or wind (including battery storage), applying for the Direct Access (DA) lottery or Community Choice Aggregation (CCA) programs and participating in Demand Response programs.
Adopting renewable energy generation, such as solar or wind power, along with battery storage, can further decrease reliance on traditional utility systems and provide more control over energy usage. DA and CCAs might not provide savings directly, but they offer more flexibility on energy supply options for customers.
Demand Response programs are designed to encourage customers, typically larger energy-intensive businesses, to reduce load in times when California’s system is experiencing high demands and allow participating customers to receive financial incentives for doing so. Customers can participate in these programs directly through PG&E, a CCA or independent third-party providers.
Lastly, both new and existing PG&E customers with expanding loads have the option to apply for Economic Development discounts. These are temporary discounts that help attract and retain customers to the utility’s service area.
By taking advantage of these various programs and initiatives, local businesses can save money and contribute to a more sustainable and resilient energy future.
For more information contact us online or find your local NUS office.
More: Market Updates, Electricity, California
