Below are the monthly updates from the most current August 2020 fuel price data (GasBuddy.com) and June 2020 electricity and natural gas price data (US Energy Information Agency). To view additional data and analysis related to the California economy visit our website at www.centerforjobs.org/ca.
This latest data again shows the relentless rise in energy costs driven by the way California has chosen to address the challenges posed by climate change. In a system defined by regulation and guided less by costs to households and employers, the latest data indicates the total bill continues to grow:
- For the 12 months ended June 2020, California’s higher electricity prices translated into Residential ratepayers paying $6.2 billion more than the average ratepayers elsewhere in the US using the same amount of energy. Commercial & Industrial ratepayers paid $11.4 billion more.
- For the 12 months ended June 2020, California’s higher natural gas prices translated into Residential ratepayers paying $2.6 billion more than the average ratepayers elsewhere in the US using the same amount of energy. Commercial & Industrial ratepayers paid $3.8 billion more.
- Using Department of Tax & Fee Administration taxable fuels data available through May 2020, Californians paid about $16.9 billion more over the year compared to the average gasoline price elsewhere in the US, and another $3.1 billion for diesel.
Combined, these administratively-imposed energy taxes total at least an additional $44 billion a year above the average—more if consumption levels had been closer to the pre-COVID levels in April through June. In a normal year, this energy tax is more than what the state generates from the sales and use tax and just under half of what is raised through the personal income tax. It is the result of ten years of regulations that individually “just add another 25 cents a gallon” or “have costs that are easily absorbable” or other justifications that have failed to consider the full effect in particular on low income households and increasingly middle income ones as well.
Cumulatively, though, the costs of these regulations now add up to $3,700 per household if assessed at the average cost of energy in other states, and far more if compared against the ability of California to provide energy more cost effectively than other states in the past. This amount is equal to at least 5% of median household income for all Californians, 6% for Latinos, and 7% for African-Americans—an increasing diversion of income solely for regulatory costs in the state.
Households pay these costs directly as they fill up their tanks and pay their monthly utility bills. The Center’s Affordability Index shows that in 2018, electricity and natural gas were 7% of the total cost of housing for the average income homeowner and 7% for the average income renter, but grew substantially higher in the generally lower income interior regions such as 11% owner/17% renter in Fresno, 12%/15% in Madera, and 13%/17% in Kern. Households pay again through higher costs for everything else as the burden on businesses is embedded in the cost of goods and services, and as these growing operating costs put pressure on earnings otherwise available for wages and job expansions.
This $44 billion plus a year plus is not the price of a climate change program. It is the cost of the way California has chosen to administer its program.
Using 2000 as the index year to match the current Air Resources Board GHG emissions inventory, the following compares the relative performance of California and the US as a whole over the past two decades. California’s climate program formally began in 2010 with the adoption of the AB 32 early action items. Just before that, however, emissions dropped sharply in the US and in the state during the economic contraction that began in 2008, especially as manufacturing declined and production moved to other states and countries in particular to China. The emissions in many cases were not eliminated; they instead moved to factories elsewhere and in China, to factories reliant on a grid that according to the International Energy Agency (IEA) was 68% coal and only 8% renewables in 2017. Compared to 2010 when the state’s formal program began, that $44 billion plus a year in costs has produced emissions reductions of only 5.4% through 2017. And much of this outcome was the result of favorable weather—in this case snow that allowed hydroelectric sources to replace one fifth of natural gas generation in 2016 compared to the average for 2014-15, a situation that increased in 2017 through 2019.
Although fluctuating more, US emission reductions have tracked somewhat better than California’s throughout this period. US emissions ticked up 3.6% in 2018 as energy-related emissions rose 3.1%. They likely dropped again in 2019 as IEA recently reported that US energy-related emissions again went down 2.9% that year, for a cumulative drop since 2000 that saw “the largest absolute decline by any country over that period.”
Climate change actions both public and private consequently have largely performed the same in California and, if not somewhat better, in the rest of the US. The difference is in the widely disparate costs of that progress. California has focused on its political process to choose the technologies it then backs. The rest of the country instead generally has approached these issues through cost, efficiency, reliability, and strategies that rely more on “all of the above” rather than a politically determined few. In the latest data from US Energy Information Administration, Texas generates nearly twice as much of its in-state electricity from wind and solar as California. Our state only ranks 14th in the share of in-state generation that comes from non-CO2 sources.
Even prior to the current crisis, constantly rising energy costs pushed costs of living that outstripped the ability of lower income households to increase their wages and incomes. Wages and incomes rose, more strongly in recent years, but the costs of living grew even faster and widened the effective income gap within the state.
In the current crisis, the sustained rise in energy costs falls heaviest on the households least able to afford them and will continue raising the hurdles they face in returning to conditions of normal life—regulatory drivers that will forever move the economic goalposts. As the crisis lengthens, these rising costs must also be considered by employers in their individual recovery plans, redirecting resources away from recovering jobs and further raising prices that will delay real recovery overall.