OPINION: Lowering California’s high utility costs takes more than flashy slogans. It needs these reforms

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By Travis Ritchie, Special for CalMatters

This commentary was originally published by CalMatters. Sign up for their newsletters.

As Xavier Becerra and Steve Hilton head into the California general election for governor, each campaign has promised quick fixes for electricity rates that rose faster than anywhere else in the country.

Becerra promised to freeze electricity rates. Hilton proposed breaking up PG&E.

These slogans may work on the campaign trail, but solving California’s electricity crisis won’t be simple. The next governor will have to roll up his sleeves and do the hard, unglamorous work of reining in utility spending.

In a new policy report, the Center for Law, Energy and the Environment at UC Berkeley dug into the drivers of California’s soaring electricity rates — which are nearly double the national average — and laid out what it would take to bring them down.

There are no flashy solutions or easy taglines. Bringing rates under control requires a back-to-basics approach to utility regulation.

Most importantly, California needs to make wildfire spending, the single largest driver of rate increases, more efficient.

In the wake of several catastrophic utility-sparked fires in 2017 and 2018, California regulators authorized its investor-owned utilities — PG&E, Southern California Edison and SDG&E — to collect $27 billion in wildfire-related costs through rate increases. Wildfire costs now account for as much as 19% of an average residential customer’s bill, which translates to an increase of up to $490 a year.

California has pioneered some of the most comprehensive and sophisticated wildfire mitigation plans in the country, but at a steep cost. Now the state can implement solutions to make sure utility customers are paying less for wildfire mitigation without sacrificing safety.

First, state leaders could lower the utility profit margin on capital projects for wildfire mitigation plans. Wildfire prevention projects already reduce utility exposure to costly liability claims. That savings balances out the potential credit impact of lower investor returns on those projects.

Another solution would be to focus more spending by utilities, private stakeholders and state and local governments on reducing property loss in communities threatened by wildfire, and less on minimizing ignitions across thousands of miles of utility equipment lines.

Also state officials could put utilities on a budget and keep them there.

Utilities are supposed to file one rate change request every four years, known as a general rate case. Regulators set a multi-year budget that incentivizes utilities to come in at or under that budget.

However, hundreds of special tracking accounts, covering everything from tree trimming to nuclear decommissioning, allow utilities to spend money on some projects and bill customers after the fact, bypassing the normal budget discipline. What began as a tool for exceptional circumstances has become a routine workaround.

The Legislature and the California Public Utilities Commission could eliminate most of these special tracking accounts and let the utilities profit or suffer depending on how well they stick to the budget set in the general rate case.

California also could use public funds — rather than utility spending that gets passed on to customers — to invest in grid infrastructure, so those costs stay out of rates altogether. Wildfire spending is not the only driver of rate increases. Non-wildfire spending on distribution system costs — such as power lines, poles, transformers and repair crews — doubled between 2016 and 2025, part of a nationwide trend.

Not all of this spending needs to come from utilities. Government funding and public-private partnerships can keep some spending off utility books altogether. Californians would still pay for these investments, but through more cost-effective, transparent and equitable means than electricity bills.

The forces increasing California’s electricity rates are real and will continue. The good news is that California has tools to address electricity affordability and more than a century of public utility regulation insight into strategies to ensure safe and reliable service while charging reasonable rates.

The next governor’s job will require sustained pressure on utility spending, not flashy campaign slogans.

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.