Source: U.S. Department of Energy, Energy Information Administration; Bureau of Economic Analysis. U.S. Department of Commerce. Analysis by Beacon Economics
Highlight
- In 2021, the average monthly electricity bills for industrial customers in California were lower than the U.S. average by 32.8 percent. California has consistently maintained its price advantage over the U.S. for the industrial sector, with the gap widening nearly fourfold from 8.7 percent in 2011 to 32.8 percent in 2021. Industrial electricity rates were the slowest growing for both California and the U.S. over that time period—up by 46.6 percent in California and by 5.3 percent in the U.S.
Challenge
- In contrast to its price advantage in the industrial sector, California's average monthly commercial electricity bill has become considerably more expensive relative to the U.S. average during the last decade—from 31.3 percent higher in 2011 to 52.7 percent higher in 2021. This rise can be attributed to a disparity between the growth in the number of customers and the surge in prices during the same period. Moreover, California's once-held advantage of having a lower average residential electricity bill compared to the rest of the United States has vanished in the wake of the pandemic. In 2011, the margin stood at 15.9 percent below the national average, but as of 2021, it has shifted to a 2.2 percent higher figure than the U.S. average. According to EIA, the state's average electricity retail price in 2021 was 77 percent higher than the U.S. average in 2021.177
- California’s already-high electricity rates increased by much more than the rest of the U.S. whole from 2011 to 2021. The increase has been particularly stark in the residential sector, where electricity prices increased by 54.5 percent in California compared to 16.6 percent over that time frame. In just one year—from 2020 to 2021—residential electricity rates in California rose by 11.6 percent compared with 3.9 percent in the rest of the U.S. Both of these are all-time highs in terms of a one year change. The state of California can no longer depend solely on mild weather and energy efficiency measures to mitigate the impact of high utility bills given the large increase in the price of electricity per kilowatt-hour (kWh). In a previous Next 10 report, researchers found that price additions to each kilowatt-hour, effectively a tax on grid electricity, pay for the costs of climate change mitigation and other climate rebates program, are now the main driver of retail electricity price increases.178 More recently, rates have been driven by wildfire-related expenses, insurance, and solar adoption that reduces revenue.
177 Energy Information Administration. State Energy Profiles. November 10, 2022. Accessed on March 20, 2023. Retrieved from: https://www.eia.gov/state/
178 Next 10: Paying for Electricity in California: How Residential Rate Design Impacts Equity and Electrification. September 22, 2022. Accessed June 22, 2023. Available at: https://www.next10.org/publications/electricity-rates-2
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