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October 10, 2024California Rising Electricity Rates – How Businesses Can Combat Increasing Costs
California Rising Electricity Rates
How Businesses Can Combat Increasing Costs
As 2024 progresses, California businesses are facing an unprecedented rise in electricity rates, outpacing inflation and creating significant financial challenges. The California Public Utilities Commission (CPUC) recently reported that commercial electricity rates have been increasing faster than inflation, driven by various factors, including wildfire mitigation costs and the impacts of changes to net metering programs.
Rates are rising across California’s major investor-owned utilities – Southern California Edison (SCE), San Diego Gas & Electric (SDG&E), and Pacific Gas and Electric (PG&E). Learn how businesses like these have found relief through commercial solar and energy storage solutions.
The Current Landscape: Rising Electricity Rates
According to the CPUC’s latest findings in their July 2024 report, commercial electricity rates have been climbing at an alarming rate. In fact, the increase in electricity rates for California businesses has almost doubled over the assumed average annual 2.6% rate of inflation, a trend that is expected to continue in the coming years.
The primary contributors to these rising rates include planned increases to the general rate case (GRC), wildfire mitigation costs – which have become a significant portion of utility revenue requirements and the financial impacts of new NEM programs.
The CPUC’s report forecasts the following rate increases for California’s big-3 IOUs:
- PG&E: 49% through 2027 for an average annual increase of 12.4%
- SCE: 20% through 2026 for an average annual increase of 5.1%
- SDGE: 22% through 2026 for an average annual increase of 5.5%
Utility-Specific Rate Increases
Southern California Edison (SCE)
SCE has experienced a 17% increase in its bundled commercial rates. This rise is primarily attributed to wildfire mitigation efforts and the associated costs that have been passed on to consumers. SCE has been actively working on enhancing grid reliability and safety, which, while crucial, has resulted in significant cost burdens for businesses.
San Diego Gas & Electric (SDG&E)
SDG&E has managed to keep its bundled commercial rates relatively stable, with only a minor decrease of about 1%. However, the utility is not immune to the overall trend of rising costs, particularly as future wildfire mitigation and infrastructure upgrades could potentially drive rates higher in the coming years.
The downward trend in SDG&E’s bundled system average rate between 2023 and 2024 is expected to reverse later in 2024 when rates resulting from its 2024 GRC go into effect.
Pacific Gas & Electric (PG&E)
PG&E has seen the most substantial increase among the three major utilities, with a staggering 78% rise in bundled commercial rates. This sharp increase is largely due to the delayed implementation of PG&E’s 2023 General Rate Case (GRC), which resulted in a significant backlog of costs being rolled into 2024
The Impact on California Businesses
The rising electricity rates present a considerable challenge for California businesses, particularly those with energy-intensive operations. As rates continue to climb, businesses are forced to allocate more of their budgets to cover electricity costs, leaving less room for other critical investments.
Businesses Finding Relief Through Commercial Solar and Energy Storage Solutions
Amid these rising rates, many California businesses have turned to commercial solar and energy storage solutions as a way to mitigate their energy costs. By investing in solar panels and energy storage systems, businesses can generate their own electricity and reduce their reliance on the grid, effectively shielding themselves from future rate increases. Thanks to changes to the ITC, even non-profit organizations can access a direct pay option instead of tax benefits when purchasing a solution.
The financial benefits of solar are further enhanced by state and federal incentives, including the Solar Investment Tax Credit (ITC), which has recently been extended and expanded to provide greater savings for businesses. For example, companies that have already made the switch to solar are seeing significant reductions in their energy bills, allowing them to reinvest the savings into other areas of their operations.
For a deeper understanding of the rising electricity costs in California, businesses can refer to our earlier report from the beginning of 2024, which provided an in-depth analysis of the factors contributing to these increases. This report serves as a valuable resource for businesses looking to navigate the complexities of energy costs and make informed decisions about their energy strategies.
Reduce Your Electricity Costs - Contact Revel Energy Today
As California’s electricity rates continue to rise, outpacing inflation and placing financial strain on businesses, it is crucial for companies to explore alternative solutions like commercial solar and energy storage.
By taking proactive steps now, businesses can protect themselves from future rate hikes, achieve greater energy independence, and contribute to a more sustainable energy future. Contact our expert team today to learn what solutions may be available for your facility.
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Client Testimonial: Kelemen Company
Corporate Business Park in Irvine, CA has created significant electricity cost savings through commercial solar installed across the 5-building business park.
Client Testimonial: Tice Gardner & Fujimoto LLP
See how this CPA firm saved on electricity and gained valuable tax credits through commercial solar that they used to keep cash in the businesses.
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