Below are the monthly updates from the most current May 2021 fuel price data (GasBuddy.com) and March 2021 electricity and natural gas price data (US Energy Information Administration).
The average annual residential electric bill in California as of March surpassed the average for the rest of the US for the first time. Passing this milepost is key on at least two counts.
First, the current policy framework driving up electricity costs was put in place largely on the contention that while rates would likely increase some, rates didn’t really matter. In defending SB 100 (Chapter 312, Statutes of 2018) requiring the state to shift to 100% zero-emissions electricity by 2045, proponents in fact claimed that somewhat higher rates were not a cause of concern, because “. . . There is a difference between rates and retail. When it comes to utility bills for residential customers, we are actually the fourth lowest in the United States . . .” The fact that in the course of a decade California went from among the lowest to the 21st highest illustrates again the lack of hard economic analysis in the development of the state’s climate strategies, and more critically in the evaluation of the various measures as they have been rolled out.
Moreover, this contention was never really that correct. While higher-income households have been able to afford to live in the milder climate coastal areas and experience the economic benefits of lower utility costs, the lower income interior regions have always had to use more energy for heating and cooling. The most recent data from the Energy Commission indicates that household electricity use ranges up to 76% higher in the interior regions compared to the milder climate coastal areas, and substantially higher when compared against the lowest use county (San Francisco). The lower-income interior regions consequently have faced a much higher disparate cost effect from the rapidly rising energy rates in the state.
Second, costs matter whether reflected in rates or in total billings especially when the rates have risen so much—64.1% higher for residential, 77.5% higher for commercial, and 128.0% higher for industrial since the beginning of the state’s climate change program.
State policy has rightly been concerned about wage and income divides in our economy. The May Budget Revise emphasizes this point by casting many of the proposals as essential to attaining “an equitable recovery.” But state actions have only looked at one side of the equation.
In the period just prior to the pandemic, wages and incomes were rising as the economy grew close to full employment, and they were doing so in particular at faster rates for lower wage (1st Quintile), non-white, and Pacific Census Division (which includes California) workers as shown in the following charts from the Atlanta Fed’s Wage Tracker.
But rather than being able to move ahead economically, lower-income households in this state instead saw that wage progress relentlessly eroded by rises in the cost of energy and other core costs of living, in particular housing.
The cost of energy is not a discrete issue. Energy costs are a key component of the full monthly cost of housing. They affect the costs of commuting and consequently the choices available for housing and for jobs. And they work their way into higher prices for every other good and service on which households depend for basic needs. Several of these interactions are explored in detail on the Center’s Affordability Index website.
True adherence to equitable recovery and in the longer term, a more equitable economy means looking at both sides of the household budget—what they are earning and what those earnings are able to buy. Simply pretending that new regulations will be affordable skips over the analysis required to address these issues, both in the context of an individual regulation and the full range of regulatory costs imposed by the agencies each year. The energy regulations were passed on the premise that they would be affordable because the proponents said they would be. As it is turning out, they are not and they are continuing to add to the high cost barriers to being able to live, work, and progress economically in this state.