California Lawmakers Aim to Lower Electricity Bills, but They’ll Face Tough Choices

State lawmakers are rolling out legislation to curb energy prices in California, hoping to ease the pain of residents who are paying the second-highest electricity rates in the nation.

Some of the new proposals take aim at the state’s investor-owned utilities, such as PG&E and Southern California Edison, by seeking to blunt rate increases.

However, state regulators and industry analysts said lawmakers might have to make tough choices to reduce costs for consumers — such as ending energy-saving subsidies for some residents and paying for more utility costs out of the state budget.

Democratic leaders in the Legislature made lowering utility bills a top priority following the November election when broad frustrations with prices fueled Republican gains. But that task has been complicated by climate change: Increases in electricity rates have been driven in large part by utility spending to prevent increasingly intense wildfires and also by the state’s push to decarbonize its energy sector.

“Affordability is really one of the biggest issues for Californians right now and utility bills — we constantly hear complaints about how they just seem to continue to rise,” Assemblymember Jacqui Irwin (D–Thousand Oaks) said.

Assembly Bill 745, written by Irwin, would give the California Public Utilities Commission greater oversight over proposals by utility companies to upgrade transmission lines.

“We think it’s very important that the PUC looks at every one of these projects and [asks] ‘Is the cost appropriate?’” Irwin said.

At an informational hearing of the Senate Energy, Utilities and Communications Committee on Wednesday, CPUC President Alice Reynolds said the effects of a warming planet have made their way onto power bills — most notably with utilities passing along the cost of preventing their equipment from sparking wildfires.

As a result, Reynolds said, “What we’re asking for here is the ratepayers to pay for climate change impacts.”

Sen. Aisha Wahab (D–Hayward) grilled Reynolds and faulted the CPUC for allowing multiple utility price increases in the last year. A report by the Legislative Analyst’s Office (PDF) last month found that average residential electricity rates rose 47% between 2019 and 2023 — far outpacing inflation.

Wahab introduced Senate Bill 332, which would cap utility rate hikes at the Consumer Price Index, a measure of the cost-of-living increase.

“Ratepayers are not a bank,” Wahab said. “I’m deeply disappointed in the fact that ratepayers are being treated like an endless bucket of money because they are not.”

Assembly Bill 286, from Republican Leader James Gallagher (R–East Nicolaus), would place a mandate on the CPUC to lower electricity rates by at least 30%.

Carla Peterman, PG&E’s executive vice president of corporate affairs, told lawmakers that the price increases are simply a result of the utility fulfilling demands from the Legislature to reduce wildfire risk, such as by spending $1.8 billion a year on trimming trees near power lines.

And Reynolds suggested that efforts to limit rate increases could run into legal hurdles because utilities are allowed to make a profit on their infrastructure investments.

“We are governed by the case law that requires us to allow [utilities] to have a reasonable rate of return to attract investment in the system,” Reynolds said.

At the Senate hearing, a panel that included analysts along with advocates for ratepayers, solar panel companies and large commercial energy users pointed lawmakers toward tougher tradeoffs.

Those included limiting subsidies for residents with solar panels, especially longtime solar customers who receive credits from utility companies for the excess energy they don’t use.

Changes to solar benefits have drawn opposition in the past from lawmakers representing suburban neighborhoods where solar adoption is more widespread. Solar advocates at the hearing argued that it would be unfair for the state to punish homeowners who are helping decarbonize the electricity grid after encouraging them to take on costly solar installation.

But the grid costs that solar users save on are being passed along to customers without solar panels — an annual cost shift of $8.5 billion, said Linda Serizawa, director of the state’s Public Advocates Office.

“Rooftop solar is beneficial and it is key to advancing our energy and climate goals,” Serizawa said. “However, because of the way the incentives are designed … [they] are being funded by households without solar.”

Other panelists at the hearing urged lawmakers to use existing state revenue to pay down the cost of electricity bills. The state currently raises billions of dollars every year through its cap-and-trade system, which charges industries for the ability to pollute.

Some of that revenue is returned to utility ratepayers, but far more is spent on building a high-speed rail system and funding affordable housing. And the utility rebate, known as the California Climate Credit, is sent to every customer, regardless of income.

“We have been funding our clean energy goals and our decarbonization transition basically by making electricity more expensive,” said Mohit Chhabra, senior analyst for the Natural Resources Defense Council. “It would be better to use levies on polluting fuels, like revenue from cap-and-trade, to fund the clean energy transition.”

While the cap-and-trade system is not set to expire until 2030, legislators could reauthorize the program this year and debate any changes in how to spend program revenue.

The energy-related bills announced by lawmakers ahead of Friday’s bill-introduction deadline will need to clear the Assembly or Senate — wherever they originated — by June 6.