09/25/2018

The Price Californians Will Pay

“California is committed to doing whatever is necessary to meet the existential threat of climate change,” the Governor declared. “California has been doing stuff that the rest of the world is hoping to get to one day.”

That “stuff” is costing Californians dearly. See the nearby chart tracking residential electricity rates since 2011. Plunging natural gas prices—the wholesale price has fallen 28% since 2011—due to the shale drilling boom have curbed electricity rate increases in most states.

But California has moved most aggressively against fossil fuels, and what do you know? Its electric prices have risen the most in the country outside of New England, which suffers from a natural gas shortage due to inadequate pipeline capacity.

Since 2011 California’s electricity rates have surged 30% compared to an 8% increase nationwide and 15% in Washington. Rates in some states like Florida (-3%) and New Jersey (-2%) have fallen modestly. Seven years ago California’s electricity rates were 27% higher than the national average. Today, they are 53% higher.

California’s 100% mandate will require utilities to pay even more for new renewable generation, battery storage and transmission. The state will need about 200 times more energy storage than it currently has to compensate for gas-fired plants. Green cross-subsidies also drive up retail electricity prices. For instance, utilities pay rebates to homeowners with solar panels in addition to compensating them at the retail rate for surplus energy they remit to the grid.

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