SACRAMENTO — A new analysis from NRDC (Natural Resources Defense Council) examines Pacific Gas & Electric’s (PG&E) electricity rates and identifies reforms that could benefit customers of all of California’s investor-owned utilities and encourage them to invest in clean electric powered appliances and cars.
The report finds that shifting $1 billion in costs currently included in residential bills to the state budget or other sources of funding could quickly reduce residential rates by 10% (approximately $0.04 per kWh). Utility fixed charges could also lower usage rates 20% (about $0.08 per kWh). The analysis also identifies longer-term solutions, including public transmission ownership and enhanced utility oversight.
“PG&E’s electricity rates have soared 40% since 2018 after adjusting for inflation,” said Mohit Chhabra, Senior Analyst at NRDC. “This affordability challenge demands immediate attention. Our report identifies reforms that can substantially lower rates and improve affordability for Californians. Affordable electricity is also essential to promote electric cars and appliances”
The analysis identifies wildfire safety measures as the primary contributor to PG&E’s dramatic rate increases, accounting for just over half of the increase since 2018. These costs stem from utilities investing heavily in infrastructure hardening and vegetation management to address growing climate-related fire risks.
Misaligned rate design also significantly contributes to higher bills. Currently, PG&E recovers most utility infrastructure and operational costs through per-kilowatt-hour charges rather than monthly fees to cover shared system costs. This approach means customers with higher electricity usage—such as those in hot inland areas requiring more air conditioning—bear a disproportionate share of system-wide costs like wildfire safety improvements. California policymakers could achieve immediate bill reductions by shifting some costs currently recovered through rates to the state budget or alternative funding sources.
Notably, the state’s transition to clean electricity through its Renewable Portfolio Standard is not driving current rate increases—large-scale solar and wind are now among the cheapest sources of electricity.
The report recommends four key solutions to advance affordability in the short and long-term:
- Shifting Climate Adaptation Costs: Moving $1 billion in wildfire safety and other climate resilience costs to the state budget could reduce PG&E’s residential rates by 10%.
- Expanding Fixed Charge Reform: Building on California’s planned income-based fixed charges, an expanded program could reduce usage-based rates by 20% while further advancing affordability for low-income customers.
- Increased Regulatory Oversight: As utilities spend more money to make the grid wildfire resilient and to support electrification, effective utility regulation is more necessary than ever. This starts with setting utility rate of return accurately and requires diligence to make them accountable for their spending.
- Public Infrastructure Ownership: Public ownership of new transmission lines could save ratepayers up to $60 billion over 40 years, though these benefits are small in the near-term.
“High electricity rates are regressive and hit low-income households hard. To rein in these costs and create a more progressive funding system, state leaders must pull more support from the state budget and other sources,” said Merrian Borgeson, Policy Director at NRDC. “We also need to look at pollution fees and closing business tax loopholes to make sure polluters are paying for the climate adaptation costs that are impacting Californians. We can promote affordability and ensure that clean electricity remains a competitive power source for our vehicles and homes – but this requires urgent action from our state leaders.”
NRDC (Natural Resources Defense Council) is an international nonprofit environmental organization with more than 3 million members and online activists. Established in 1970, NRDC uses science, policy, law and people power to confront the climate crisis, protect public health and safeguard nature. NRDC has offices in New York City, Washington, D.C., Los Angeles, San Francisco, Chicago, Beijing and Delhi (an office of NRDC India Pvt. Ltd).
