The Future of Utility Rate Escalation in California
by Lindsey Paulk on Jan 25, 2024
California solar
utility rate escalation
utility rates
Utility rates in California’s Investor-Owned Utilities (IOU) have escalated at a compound annual growth rate of 3.9% to 7.4% over the last ten years. Energy Toolbase recently conducted this study to provide a transparent account of the rate inflation and predict future inflation rates, serving as a guide for how those in solar and storage sales will define utility rate escalation in their proposals. However, past performance is not the sole indicator of future rates. While Energy Toolbase will not make specific predictions on future rates of inflation, it is safe to assume that rates will continue increasing over the next decade in California.
In May 2021, the CPUC published a whitepaper titled “Utility Costs and the Affordability of the Grid of the Future.1” The whitepaper studies historical rate inflation and describes what to consider when predicting future utility costs. The CPUC measured the Bundled System Average Rate (SAR), calculated by dividing the “Bundled customers authorized revenue requirement ($)” by the “Bundled authorized forecasted sales (kWh).” The Bundled System Average Rate differs from our study method, as it is a high-level measure calculating an IOU’s authorized bundled customer revenue requirement assumed to be regained via authorized forecasted sales to bundled customers.
In addition, the CPUC whitepaper includes a 10-year baseline estimate, forecasting consistent growth in the bundled rate (in $/kWh) from 2020 to 2030 for California’s big three IOUs, as indicated below:
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PG&E: $0.240 to $0.329 or about an annual average increase of 3.7 percent
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SCE: $0.217 to $0.293 or about an annual average increase of 3.5 percent
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SDG&E: $0.302 to $0.443 or about an annual average increase of 4.7 percent
The CPUC whitepaper continues, describing that by the year 2030, “bundled residential rates are forecasted to be approximately 12 percent, 10 percent, and 20 percent higher, respectively, than they would have been if 2020 actual rates for each IOU had grown at the rate of inflation.” The 2020 rates are actual rates effective at yearend 2020. In the case that 2020 rates increased according to the rate of inflation, being approximately 1.9% per year, then the rates in 2030 would calculate to the following:
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PG&E: 0.294
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SCE: 0.266
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SDG&E: 0.370
Energy Toolbase and California's Volatile Rates
Electric rates are always subject to change due to various prices, rate structures, and rules, and keeping accurate utility rates within the database is critical to capturing accurate analysis of solar and energy storage projects. Our in-house utility rates team maintains over 100,000 global rates in our rates database that covers over 12,000 utility territories, including the entire United States and 42 international territories. The team reviews and implements any changes to rates that occur in addition to assisting our users in building new custom rate tariffs. Our user interface is an efficient solution for users to manage their charges based on specific filters for a given utility rate. Energy Toolbase is currently the only platform that can build custom rates for users.
Our experts prioritize monitoring utility rates internally, which is one of the core functions of Energy Toolbase that we believe is far too important to outsource. For more information on how retail electric rates have changed in California over the last ten years,download our ‘Electric Bill Inflation in California’ Whitepaper.
