Why California Electricity Bills Are So High and What You Can Do About It

If you’re a Bay Area homeowner, you’ve likely noticed that your electricity bills have never been higher. In 2023, the rising California electric bills averaged $164 a month – more than 22% higher compared to the average residential bill of $134 for homeowners across the U.S.

This is primarily due to significant electricity rate increases that were approved by the California Public Utilities Commission (CPUC) earlier this year. Plus, customers of the three largest utility companies in the state—Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E)—usually pay more than the average price per kWh.

This article will provide you with information on why electricity costs in California are so high, the factors causing those higher prices, and helpful strategies to reduce your electricity bills.

The High Cost of Electricity in California

California utility company rate charges vary based on their unique mix of energy sources as well as the overall costs involved to serve their customers. As a result, residents in some cities pay more per kWh than those in a different city. SDG&E rates are much higher for their customers compared to the SCE rates their customers pay, even though both utility companies provide service to areas that are neighbors in some cases.

Moreover, there’s a big difference in your overall energy usage depending on what kind of home you live in. For example, California homeowners in a single-family detached home use roughly 10,500 kWh annually, which is about 875 kWh per month. This energy usage would cause customers of some utility companies to pay a slightly higher price per kWh simply because they use more energy than the average customer does.

Electricity Rate Changes Over Time

Electricity prices across the nation have seen an average rate increase of around 2% per year over the past 25 years. Most California residents, however, have seen much faster increases in the prices they pay to power their homes. In the last 10 years, California utilities saw an average growth rate of more than 7.7% per year.

There are many reasons for these high rate increases – two major ones are the increased cost of natural gas used by power plants and the rising costs to maintain our electric grid. As our grid continues to age, significant investments are required to modernize it and ensure reliable power delivery.

As utilities also work to strengthen their infrastructures to prevent and repair the damages from past wind storms and wildfires that plagued the state, the cost to run the electrical grid has increased dramatically. Unfortunately, some California utility companies have passed these increased costs onto the ratepayers.

How to Reduce Your California Electricity Bill

Despite the projected rise in electricity costs, there are measures you can take to manage your utility bill expenses. From energy efficiency practices to exploring residential solar power options, here are some ways you can reduce your monthly electricity bill and take control of your energy independence.

Invest in Energy Efficient Appliances

The first step to saving more on your energy bill is to use less energy per month. Purchasing energy-efficient appliances and devices, like those with the ENERGY STAR label, can significantly reduce your monthly energy bills. Enhancing the insulation in your walls, floors, and attic can also help minimize heat transfer. 

When your light bulbs burn out, replace them with energy-efficient LED bulbs. Installing a smart programmable thermostat will also allow you to automate HVAC appliances and optimize your energy consumption. Another wise choice is switching to a heat pump water heater, which is more energy-efficient than traditional water heaters.

To further support energy-efficient choices, the Inflation Reduction Act (IRA) offers funding to help replace old, inefficient appliances. Depending on your income, you may qualify for rebates of 50% to 100% of the cost, along with tax credits.

For more ways to save energy and lower your utility bills costs, check out our post on 15 Energy Saving Strategies for Your Home.

Sign up for Reduced Income-Based Rates

California offers two income-based programs to help residents lower their monthly utility bills: the California Alternate Rates for Energy (CARE) and the Family Electric Rate Assistance Program (FERA)

The CARE program provides discounts that range from 20% to 35% off electricity and gas bills for families with incomes below 200% of the Federal Poverty Guidelines. The FERA program supports families with slightly higher incomes, offering an 18% discount on electricity bills for incomes between 200% and 250% of the same guidelines. The California Public Utilities Commission (CPUC) provides detailed information on both programs.

Switch to a Time of Use Rate Plan and Shift Energy Usage to Off-Peak Times

Many utility companies in California offer Time of Use (TOU) rate plans. Check to see if these rates are available in your area. Under these plans, electricity costs vary based on demand, with peak hours being more expensive (since there’s a high demand on the grid) and off-peak hours that offer lower rates. By shifting your energy usage (like doing laundry or running your dishwasher) to off-peak times, such as overnight or midday, you can take advantage of reduced rates.

Get Solar Panels Installed

If you own your home, going solar in California is an excellent long-term investment to reduce your energy costs. Solar panels offer substantial savings, pay back their initial cost within five to six years and provide renewable energy for decades. By embracing clean, renewable energy like solar power, you’ll not only save money today but also protect yourself from potential future electricity rate increases.

Not sure where to start in your solar panel research? Check out our Beginners Guide to Solar Panels for Your Home.

Take Control of Your Electric Costs

While electricity rates will continue to rise in California, there are ways you can effectively manage these increases. By adopting energy-efficient practices, exploring income-based programs, optimizing your energy usage, and offsetting your electricity bills with solar power, you can take control of your energy costs.

Our Bay Area team understands the electricity rates of each utility company throughout California and has experience in designing and installing the right size home solar system to meet your family’s energy needs. Schedule an online appointment today to learn more.

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