WSJ / Why Californians Have Some of the Highest Power Bills in the U.S. ............................
WSJ
Aug. 5, 2024
Why Californians Have Some of the Highest Power Bills in the U.S.
Utilities are investing billions to upgrade infrastructure and build out green energy, passing budget-breaking costs to households; trying to keep the chocolate from melting
By Phred Dvorak
BORREGO SPRINGS, Calif. -- California is doing all it can to expand renewable energy production and rebuild its electrical infrastructure after flaws led to a series of devastating wildfires.
The state’s big utilities are spending billions to bury power lines and insulate wires, while at the same time moving quickly away from fossil fuels by building big solar and wind farms and transmission lines to carry the power.
As a result, resident Jessica Simpson Nehrer, who lives in Borrego Springs, near San Diego, has seen her electricity bill for her ranch-style house soar. It hit $1,873.90 in June, far exceeding her $1,200 rent and around double what it was two summers ago.
Grocery store owner Rodger Gucwa tried cutting his power bill by raising the thermostat to 85 degrees -- but found that the chocolate bars melted.
Nationwide, the costs of utility companies’ capital investments are being passed on to customers. Those added fees, combined with higher inflation and a series of heat waves, mean painful bills for many this summer.
California has seen some of the sharpest increases in the country -- electricity prices in the state have nearly doubled during the past decade and are now higher than those of anywhere but Hawaii. The consumer advocate’s office at California’s utilities regulator has called the trajectory “untenable.”
Lawmakers, regulators, utilities and consumer-advocacy groups in the state are battling over how to fix the rising power costs and questioning who should pay for them. Legislators are trying to make the state’s utilities regulator dial back a fixed monthly charge that big utilities will levy on consumers next year. Other politicians have tried to repeal a major cut in rooftop solar subsidies that had made it more affordable for some households to generate their own power.
New refrigerators
Higher prices and less-reliable electricity, as utilities struggle with aging infrastructure, have become problems nationwide. At the same time, demand for energy has shot up as more AI data centers and electric vehicles come online.
Price rises are particularly drastic in California as the state pushes to electrify everything from homes to cars faster than many other parts of the country. Extreme heat and drought have pushed up demand for air conditioning, as well as heightened the risk of wildfires. That adds more pressure to invest in infrastructure, after fires sparked by Pacific Gas & Electric equipment, including a 2018 conflagration that leveled the town of Paradise, created billions of dollars in damage and helped push the utility to seek bankruptcy protection.
In Borrego Springs, a desert town of 3,000, temperatures often top 110 degrees Fahrenheit in summer and air conditioners run non-stop. The town’s primary utility, San Diego Gas & Electric, has raised electric rates 82% in the past 10 years as it poured money into wildfire prevention and expanding and greening the grid.
The town is surrounded by the state’s largest park, a couple of hours’ drive inland from San Diego. Tourism is the main industry, with thousands of snowbirds flocking to Borrego Springs’ resorts and golf communities during the cooler months. During the summer, the tourists leave and a lot of shops, hotels and restaurants close. A hardy population of hospitality workers, retirees and desert enthusiasts stay on.
Gucwa, who owns the Desert Pantry grocery store in a shopping complex called The Mall, is now paying almost as much for power each year as he is for rent. He has been trying to keep electricity costs in check for years, with limited success. He replaced his refrigerators with more efficient models, but any savings on electricity were eaten up by price increases, he said.
Gucwa asked Mall owner Jim Wermers to consider installing solar panels on the roof. Wermers said he is looking into it but isn’t sure the economics work, particularly after the cut in rooftop incentives. He said a solar array he installed a few years ago on the shopping center he owned across the street didn’t reduce electric bills as much as he had hoped.
On a day in June, two of Desert Pantry’s three entrances were closed to save energy, and signs on the freezer reminded customers not to leave the doors open too long. Still, the grocery’s bill from SDG&E has averaged around $8,000 a month for the past year, approaching the $9,500 Gucwa pays in rent.
“You can smash your head and, you know, try to solve the problem or whatever, and it’s not going to be solved,” Gucwa said, sitting at a table in a corner of his stock room that serves as an office.
At one of Borrego Springs’ many mobile-home parks, Scott Jones and others are staying afloat by scrimping on groceries, working multiple jobs and doing whatever they can to reduce electricity use.
“During the summertime [power] is the only thing on my mind,” Jones said, showing off the combination of tints, shades, awnings and styrofoam panels he uses to cover his windows in an attempt to keep the temperature inside down and the AC off.
“I’ll be here in the dark,” Leyla Nunez, Jones’s wife, chimed in. “I’ll send my son over to my mom’s or something like that to try to just keep the costs down.” The power bill, she said, is “like a whole ’nother rent.”
SDG&E “understands affordability is a top concern for California energy customers” and is “maximizing operational efficiency and working with policymakers on ways they can help lower customer bills,” said company spokesman Anthony Wagner. SDG&E has lowered electricity prices this year, partly as a result of one-time refunds for over collections, although it has also submitted a request to regulators for future rate hikes.
Short of batteries
“California is sort of the cutting edge” in terms of rising power rates, said Severin Borenstein, an energy-policy expert and professor at the University of California, Berkeley’s Haas School of Business. “It’s primarily due to what climate change is doing to us, and particularly wildfires. But it’s also due to what California is trying to do to reduce climate change.”
Across the country, fires, hurricanes and other extreme weather associated with rapidly warming temperatures are prompting utilities to take expensive steps to protect electric lines and generators. Utilities are also pouring money into increasing capacity to handle surging demand.
U.S. utilities asked regulators for $18 billion in rate hikes last year, the third straight year of record requests. For the 12 months through May, the price of electricity nationally has risen at nearly double the rate of consumer prices overall.
“To pretend that the world will electrify without spending money is kind of like Alice in Wonderland,” said Ahmad Faruqui, a California-based energy economist who has spent much of his career advising utilities on rate designs.
In addition to producing more with renewables, greening the energy system requires investment in infrastructure to balance the surges and dips of generation that varies with the weather and time of day.
California now has so much electricity during the day in some months because of its growing portfolio of solar power that the grid operator is turning increasing amounts away -- roughly 840,000 megawatt-hours in April alone, enough to power more than 930,000 homes. There aren’t enough batteries to store the excess. Then, not enough power is generated after dark, when it’s needed most, as people come home, turn on their air conditioners and watch TV or do household chores.
Some consumer advocates in California argue that rate increases could be reined in by managing utilities better and increasing the scrutiny of pricey grid-rebuilding plans. They point out that some of the state’s smaller community or city-owned utilities have much lower rates than SDG&E and the other two big, investor-owned utilities, which need to boost returns. In addition to PG&E, the third is Southern California Edison, which serves around 15 million people in southern and central California.
California’s utilities regulator said it is trying to protect lower-income families from electricity costs. It said it cut rooftop solar subsidies because they shifted costs to lower-income households -- since they couldn’t afford to install the solar panels that would help lower their bills, or as renters didn’t have the ability to do so. The regulator is now preparing to add a monthly charge to ratepayers’ bills that will increase with income level.
Both moves have been challenged by some lawmakers and others.
A spokeswoman for the California Public Utilities Commission, the utilities regulator, said it has a policy framework aimed at keeping the cost of the energy transition as low as possible.
The big utilities and their regulator are hoping the high rates themselves will help change consumer behavior by encouraging households to become more energy efficient and reduce their power use when supply is scarce.
Steep outlay for solar
In affluent Marin County just north of San Francisco, Ron Werthmann, a wine marketer, said soaring gas and electric bills at his 1,875-square-foot home “scared” him and his husband into installing solar and batteries recently, despite the steep outlay -- more than $50,000 -- and cut in rooftop incentives. Last year, the couple paid more than $6,700 for utilities, more than double the $3,200 they paid in 2019.
Many low-income households have struggled to afford the bills. California households owed $2.1 billion in unpaid utility bills at the end of 2023, more than four times the amount in 2019. Around 27% of Californians have missed payments on utility bills in the past year, one of the highest percentages in the U.S. Last year, around 215,000 Californians had their power shut off for nonpayment; more than a fifth of those didn’t have their services restored.
Oakland resident Aswad Steel said he was forced to choose between spending on rent or power after he lost his security-guard job last year. He chose rent and fell $900 behind to PG&E, which shut off his utilities in April. Such disconnections can sometimes be grounds for eviction. Steel reached out to local support groups and after three weeks found some that helped pay his bill and get his power back on.
“I can’t afford to get kicked out of my place, because I ain’t got nowhere to go,” he says.
Back in Borrego Springs, Nehrer runs a hair salon near Desert Pantry at The Mall. Like many local businesses, she cuts back hours during the slow summer season, and usually closes the shop and turns off the air conditioning by 4 p.m.
That is when SDG&E starts charging its highest summer rates, since demand for electricity tends to increase at the same time solar generation wanes. Her power bill at the salon was a manageable $381 last August -- still 55% more per kilowatt-hour than she paid the year before. So far this summer, even before August, it’s running $435 a month.
At the Roadrunner Golf and Country Club, a gated community of mobile homes where a lot of retirees live, Daniel Levy refuses to turn his main air conditioner on at all.
The utility sent Nehrer alerts about her home bill.
The 66-year-old retired television and animated-film producer moved to Borrego Springs from Los Angeles five years ago and was floored by his first summer SDG&E bill. At $700, the bill was nearly half his monthly social-security check. He said he knows costs have risen since and that he can’t afford to pay more than a couple of hundred dollars for utilities.
So during the hot months, Levy hunkers down in his bedroom, which is equipped with a ceiling fan and two portable swamp coolersfans that use evaporation to cool the temperature of the air they blow.
One June evening, the temperature outside was 88 degrees at 8 p.m. In Levy’s stylish living room with its wood-paneled walls, glass coffee table and vases filled with dried reeds, the heat was so intense the air felt dense. He said he doesn’t have a thermometer inside -- and doesn’t want to know how hot it is.
“At the beginning it was hard like everything,” Levy said. “If you have to get used to it, you have to get used to it. What else are you going to do?”
Write to Phred Dvorak at phred.dvorak@wsj.com
Copyright © 2024 Dow Jones & Company, Inc.
.
.
. |
