California electricity costs are increasing and as California community managers prepare their 2025 budgets, they will probably notice that they probably exceeded their 2024 budgets for electricity!
This article is written so that managers can explain to their board members why electricity costs where higher than expected in 2024, and also to help managers prepare their electricity budgets for 2025!
What Has Happened to Drive Up Electricity Costs In The Last Few Years?
Californians pay more than twice the national average in energy costs, according to recent statistics.
As of July, the average national electricity rate was 17 cents per kilowatthour, while in California, residents are paying 28 cents in Los Angeles, 35 cents in San Francisco, and 46 cents in San Diego, according to the U.S. Bureau of Labor Statistics. Rates at California’s three big utility companies – SCE, PG&E and SDG&E- have risen as much as 110%.
PG&E currently charges the most for electricity among California’s three investor-owned utilities with an average residential rate of $0.397 per kilowatt hour, and California approved a fourth PG&E rate hike in September, 2024!
Southern California Edison customers are not faring much better. The monthly bill for a typical residential customer would approximately increase by an additional $17.49 (10.3 percent) in 2025, $5.14 (2.7 percent) in 2026, $5.11 (2.6 percent) in 2027, and $5.26 (2.7 percent) in 2028.
Over the past five years, electricity prices have soared across the U.S., particularly in California, as extreme weather fueled by climate change has increased energy demand.
In California, the driving force behind rate hikes is utilities recovering the cost of wildfire mitigation, transmission and distribution upgrades and rooftop solar incentives, according to a recent quarterly report by the California Public Utilities Commission’s Public Advocates Office.(Aug 21, 2024)
In 2018, the state legislature passed a bill mandating California to achieve carbon neutrality by 2045. The drive behind this green energy transition is climate change, according to the California Environmental Protection Agency.
Besides reducing electricity use, the state is also pushing to close its nuclear and gas powered plants.
Since 2009, the number of gas-powered plants in California has been reduced to three from nineteen due to various reasons, and the last three were originally set to shut down in 2020, according to the California Energy Commission.
However, the commission approved two to three year extensions, with the latest one granted in August, citing the need for emergency preparedness. By law in California, utilities have to sign 10-year contracts with solar and wind providers, but they cannot sign a 10-year contract with the gas-fired electricity generating companies. So, there are no long term contracts, which leads to stability of supply, which leads to stability of price, which is another key factor in the rising cost of electricity in the state.
The increasing cost of electricity impacts not only residents but commercial, industrial and agricultural customers also. The cost of electricity for common-area lighting and recreation area facilities has increased significantly in recent years also.
What To Expect for Electricity Costs in 2025:
SOUTHERN CALIFORNIA EDISON PROJECTED RATE INCREASES BY CUSTOMER TYPE:
PACIFIC GAS & ELECTRIC COMPANY: PROJECTED INCREASES BY CUSTOMER TYPE:
SAN DIEGO GAS & ELECTRIC PROPOSED RATE INCREASES BY CUSTOMER TYPE:
Most communities have already reduced their electric consumption by installing energy efficient equipment and LED lighting, energy audits, solar installations, brokering or reducing the hours of operation for pools, spas, gyms, etc.
However, there is a better way to reduce your electric costs that does not involve reducing electricity consumption! A utility audit!
Here is the definition of a 3-step utility audit: