Join Next 10 for a webinar with authors Severin Borenstein, Meredith Fowlie, and James Sallee of the Energy Institute at the UC Berkeley Haas School of Business to discuss the key findings of our new report, “Paying for Electricity in California: How Residential Rate Design Impacts Equity and Electrification,” and the implications for policy.

California’s current strategy of recovering a myriad of fixed costs in electricity usage rates must change as the state uses more renewable electricity to power buildings and vehicles on the path to carbon neutrality. The new study—a follow-up to the 2021 study, Designing Electricity Rates for An Equitable Energy Transition—takes a detailed look at the utility bills of more than 11 million California households served by the state’s three largest investor-owned utilities (IOUs). The report found that utilities in California are covering many costs beyond the direct cost of supplying electricity through higher electricity prices. These additions to the price of each kilowatt-hour, effectively a tax on grid electricity, pay for the costs of climate change mitigation, wildfire adaptation, legacy infrastructure, and subsidies for new technology R&D, energy efficiency investments, low-income customers, and rooftop solar, among other fixed costs and policy expenses. These additional costs account for half to two-thirds of the electricity rates paid and impact the ability to meet the state’s climate and clean energy goals.

Compounding concerns over these high costs is the inequity of their distribution: because electricity bills account for a larger share of income among lower-income households, this invisible electricity tax is regressive. Additionally, a growing number of households are reducing their grid electricity consumption by adopting rooftop solar systems, and these households tend to be wealthier.