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PG&E (Pacific Gas and Electric Company) has a long history of rate increases, influenced by a variety of factors including infrastructure investments, wildfire mitigation efforts, and regulatory decisions. Over the past two decades, PG&E’s electricity rates have more than tripled. From 2000 to 2020, the average residential electricity rate vastly outpaced inflation. Between 2009 and 2019 alone, residential rates increased by 31%, compared to a 19% increase in the consumer price index.
Utility Rates Continue to Rise
Since 2020 residential electricity rates have increased by over 49%. Specific rate hikes include an 8% increase in January 2022, followed by another 8.9% in March of the same year. This pattern continued with gas rates also seeing an 11% rise in early 2022.
A significant driver of recent rate increases has been the cost of wildfire mitigation. PG&E has been investing heavily in infrastructure improvements, such as undergrounding power lines, to reduce wildfire risk. These investments, necessary due to PG&E’s role in several major wildfires, are costly and contribute to higher rates.
Looking ahead, PG&E has proposed annual rate increases of 3-4% from 2024 to 2026. These increases are intended to cover ongoing infrastructure improvements and other operational costs. How these will be affected by CPUCs decision to move all Utilities to a flat rate is yet to be seen.
Many Households finding Bill Increases Challenging
The rising rates have been particularly burdensome for low-income households. Many customers have seen substantial increases in their monthly bills, with some reporting their bills doubling or tripling within a short period. Programs such as the California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance (FERA) aim to mitigate the impact on low-income customers by providing discounts.
Some Homeowners Turning to Solar Power as Possible Solution
As Pacific Gas and Electric Company continues to implement rate increases, many consumers are finding their electricity bills becoming overwhelmingly burdensome. One practical solution to mitigate these rising costs is the installation of solar panels. Solar energy offers a viable means to reduce dependency on grid electricity, thus lowering monthly expenses in the long term. However, while the benefits are substantial, potential adopters must approach this investment with a realistic understanding of the costs and considerations involved.
The initial outlay for solar panel installation can be significant, encompassing the cost of panels, inverters, installation labor, and possible roof modifications. On average, a residential solar system can cost between $15,000 and $25,000 before any tax incentives. Fortunately, federal and state tax credits can substantially offset these costs. For instance, the federal Investment Tax Credit (ITC) allows homeowners to deduct 26% of the installation cost from their federal taxes, which will decrease to 22% in subsequent years unless extended by Congress.
Solar Especially Financially Savvy In California
California’s high electricity rates—among the highest in the nation—make the payback period on panels relatively short. California’s abundant sunshine enhances the efficiency and output of solar systems, bringing the average payback period on a system down to 5-7 years. After the system has paid itself off, the rest of the panel’s lifespan (30-40 years) will continue to generate income for the home. Moreover, California’s net metering policies allow homeowners to sell excess electricity back to the grid, further enhancing the financial benefits. In the context of PG&E’s rate increases, panels are, in almost every case in the state, a financially beneficial move.
PG&E’s rate increases reflect a combination of rising operational costs, significant investments in safety and infrastructure, and the financial burdens associated with wildfire liabilities. These factors collectively drive the need for higher rates to ensure the utility can maintain and improve its services while meeting regulatory requirements. While it’s clear to most of us that we want PG&E to meet regulatory standards, that doesn’t mean you have to personally fund the venture. If you live in the State of California and have felt the pinch of increased electricity costs, it’s worth it to see if solar can bring the cost down, or even eliminate it altogether.
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