California Energy Price Data for August 2024

In August, California average residential electricity rates (12-month moving average) passed a new milepost, coming in at just more than double the average for the rest of the US. Electricity rates across all three primary end users as well as the cost of fuels remained the highest in the contiguous states.

California’s High Tech industry has often been portrayed as the “good jobs” of the future. These high wage service jobs with few environmental emissions and consequently few impacts have just as often been portrayed as justification that the state’s high level of regulations can be compatible with economic growth. Largely unaffected by those regulations, the growth of tech until recently has masked the full economic effects.

AI is changing this picture. The exponential rise in electricity demand fueled by this shift in tech industry focus is now posing challenges to both energy planning and current net zero goals. But because of the state’s stringent regulations, those challenges are now in true California fashion being exported to the other states.

AThe extent of this trend is analyzed in a new EPRI report assessing the effects of data center electricity demand on the national grid. Using 4 alternative forecasts, data centers are expected to use 4.6% to 9.1% of US electricity generation by 2030, compared to only 4% in 2023. The lower estimate is unlikely, however, as the underlying projection was completed prior to the introduction of ChatGPT and the currently expanding raft of AI applications.

Growth in this demand is expected to be uneven, with data center expansion concentrated only in a few states with more accessible regulatory environments and lower energy costs.

California while generating much of this demand, however, is expected to provide only 6.1% of the required supply. Even at this level, data center demand is expected to grow from 3.70% of state electricity consumption in 2023, to between 4.43% and 8.70% in 2030.

These new energy demands are already having an effect on power plant planning and consequently the trend for greenhouse gas emissions in the other states. As examined in a recent article, utilities are already delaying coal plant retirements in order to meet this new demand:

Source: WSJ

While extending the life of other fossil fuel plants as well:

Source: WSJ

The consequent effect, as with many other of the state’s regulations, is not so much to reduce the emissions and their impacts, but instead shift where they will occur.

The August data again shows California with the highest gasoline prices among the contiguous states, and second highest only when Hawaii and Alaska are added into the equation. But the California price is heavily inflated by state and local taxes and fees, amounting to an additional 41% on top of the underlying product price in the August data.

Netting out these taxes and fees provides a more accurate ranking of the underlying product prices. California still remains high as is to be expected for most products produced in the state’s higher cost environment, but the August product price drops to 5th place among the states.

These calculations were done through the following steps:

• State and local fees are taken from the July 2024 data from Tax Foundation.
• The environmental program costs included in the Energy Commission calculations stem from the Low Carbon Fuel Standard (LCFS) and Cap and Trade. These costs are also included for those states with similar policies. But in spite of frequent California claims that it is a leader on climate change policies, it is often a leader with few followers. Washington is currently the only other state with an existing cap and trade program affecting fuels. Other states under the RGGI agreement have similar policies but apply them only to power plants. Washington currently estimates that its program adds only 1-3% to prices, although other estimates put the cost higher. Washington’s program is also being considered for repeal pursuant to Initiative 2117 on the November ballot.
• LCFS requirements have been adopted by only two other states. Washington expects the additional cost to account for 2 cents a gallon in 2024. Oregon estimated its 2023 costs at 9.8 cents a gallon.
• By comparison, the Energy Commission data shows the costs for both programs averaged 49.4 cents a gallon for both California programs in August.

Source: Center for Climate & Energy Solutions

Source: Rocky Mountain Institute

Average prices ($ per thousand cubic feet; 12-month moving average) for the 12 months ended June 2024 and changes from the previous 12-month period for each end user: