Residential electricity rates in California, the second highest in the country, after Hawaii, are also growing faster than inflation, the report said.
“There's quite a lot of variation across utilities within the state specifically, the three large industrial utilities tend to charge quite a bit more than the publicly owned utilities in the state,” LAO Principal Fiscal and Policy Analyst Helen Kerstein said.
Three-quarters of the state is covered by those large, investor-owned utilities. That includes Pacific Gas and Electric, which raised rates for the sixth time in a year. The most recent rate change went into effect Jan. 1.
The rest of California is mostly covered by publicly owned utilities.
Kerstein said that even though it’s hard to precisely quantify the reasons why California’s rates are so high, they broadly include costs related to wildfires and the state’s ambitious climate goals.
She said the state has had success in reaching some of those goals through higher rates, but they can also hold California back from making a bigger impact.
“I think historically, there was some feeling that if electricity rates are high, that encourages conservation, so that's good,” she said. “And that's true, but on the flip side, it’ll discourage people from moving to electrification, from buying that electric vehicle, from switching to that electric heat pump.”
The report said high rates also put a large strain on customers who live in hotter climates or earn lower incomes, though there are programs to defray costs. Low-income and solar customers generally pay lower rates.
Rates can also look really different for residents across the state, even neighbors. That’s because investor-owned utilities have much higher rates than public ones.
“If you're in Sacramento versus if you're in Davis, you could have rates that are really quite substantially lower in Sacramento than those that are not very far away,” Kerstein said.
In Sacramento, that’s because residents get electricity through the Sacramento Municipal Utility District, a public utility.