San Diego Gas and Electric (SDGE) has proposed a significant rate increase in its recent budget proposal to the California Public Utilities Commission (CPUC), which includes a 5.6% percent increase in the cost of electricity and an 18.1% increase in the cost of gas. SDGE plans to spend these new funds on infrastructure improvements ranging from clean energy to reducing wildfire and power outage risk.
These rate hikes come as California faces a general electricity shortage, with the governor’s office warning that millions of Californians could be affected by blackouts in the coming summer driven by a projected 1700-5000 megawatt shortfall in energy production.
Under these new rates, the average SDGE customer could pay an additional $18 per month, or $220 annually. The budget includes the years 2024-2027, although rates are not estimated after 2024 as projected inflation still needs to be factored in to the still-ongoing proposal. The proposed rate increase comes on the heels of a price spike earlier this year as the company opted to pass on the exploding cost of oil and natural gas onto its customers, raising electricity rates by 7.6% in January.
These rate hikes are reflective of rising energy costs across the state. Average gas prices just passed $6 per gallon, and inflation still remains over 8%, the highest level in over 40 years. Currently, more than a quarter of SDGE residential customers are behind on their utility bills, a situation the rate increase could worsen.
“We recognize with all the inflationary pressure with higher gas prices, food and housing, there’s never a good time to ask for a rate increase,” SDGE Vice President Scott Crider conceded as he argued the rate increase is necessary to fund an additional 19% annual budget for critical infrastructure projects. These projects include moving power lines underground to prevent downed lines from causing wildfires, building more batteries and chargers for electric vehicles, and shifting more of the grid to renewable energy sources to advance California’s goal of net carbon neutrality. “We need to keep investing in this grid to make sure it’s reliable, it’s safe and it can meet all these technologies customers are gonna wanna use,” Crider said.
Under present rules, SDGE is not allowed to make any profit from electricity or gas, but they are allowed to profit from infrastructure improvements. Critics of the proposed rate hike, such as Nicole Capretz of San Diego’s Climate Action Campaign, have questioned how much of the proposal is project cost and how much is profit, lambasting SDGE for raising rates while its parent company, Sempra, reported record profits earlier this year. “It doesn’t feel like this is actually reflective of the cost of the electricity or the infrastructure, it feels like this is profiteering,” Capretz said.
SDGE President Bruce Folkmann defended the proposed rates, stating that “Average electric bills at our company are the lowest among California’s electric investor-owned utilities … Given the changes in climate and the growing need for a clean energy future, this will ultimately result in improvements that create long-term benefits now and for future generations.”
The rate increase is still pending approval by the CPUC, which will review the proposal over the next 18 months before deciding to accept, revise or reject it.
Michael Whittaker is a commentator and analyst for The California Review focused on national and California affairs. Whittaker was previously a contributor at both the Stanford Review and the Stanford Daily.