California's 'ambitious' policies to reduce greenhouse gases drive surge in electricity costs: report

Electricity prices in California have surged significantly over the past several years, which officials say is partly due to green energy policies being pushed throughout the state.

The Legislative Analyst Office (LAO) released a new report revealing that monthly electricity rates for residential customers in California have increased by an average of nearly 50% since 2019. 

"In general, average residential electricity rates in California have grown faster than inflation in recent years, rising by about 47% over the four-year period from 2019 through 2023, compared to overall growth in prices of about 18%," the report reads.

Some of the main contributing factors to the price hikes have resulted from the state's "ambitious" greenhouse gas (GHG) reduction targets and taxpayer-funded green energy programs, according to LAO.

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The California Renewable Portfolio Standard (RPS) requires that by 2030, 60% of an electricity provider's portfolio must come from renewable energy resources, which the report found has increased electrical costs for ratepayers.

The RPS requirements have reportedly resulted in a 5% increase in overall retail rates for customers using investor-owned utilities (IOUs) — such as PG&E, San Diego Gas & Electric and Southern California Edison.

Californians are also seeing increased energy costs as a result of programs that are using their tax dollars to fund the state's accelerated shift to clean energy, such as funding the building of more charging stations for zero-emissions vehicles.

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The report also noted that while California has reached some near future greenhouse gas emission reduction targets, "the level of reductions needed to reach the subsequent targets is much greater."

One of the subsequent targets referenced in the report was AB 1279, signed by Gov. Gavin Newsom in 2022, which seeks to require that 85% of the state's greenhouse gas emissions are reduced to below 1990 levels by 2045.

As a result, California reportedly has the second-highest energy prices in the country, with Hawaii being the first, LAO found. "On average, residential electricity rates in California are close to double those in the rest of the nation," the report read.

Also noted was that lower-income customers in the state who participate in California Alternate Rates for Energy pay "significantly discounted rates" of about 30% to 35% lower than other residents. 

"The state’s efforts to reduce its GHG emissions have helped establish California as a leader in climate policy and contributed to environmental benefits such as improvements to air quality. However, these efforts have come with costs, some of which have increased electricity rates," the report reads. 

"We think the state’s GHG reduction efforts have contributed notably to the state’s higher electricity rates, but they certainly are not the only factor," LAO wrote. 

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Other factors for the increased costs, identified in the report, include higher wildfire-related costs and trade-offs related to fixed charges for IOUs.