Affordability is the biggest issue facing Californians in 2025. The price of most things — housing, childcare, groceries, etc. — has been increasing statewide, and recently, energy prices have taken center stage in this affordability crisis.
California’s electricity prices are the second highest in the country, beat out only by Hawaii. This is due to a variety of reasons, particularly responding to wildfires, which has cost ratepayers over $27 billion between 2019-2024. Monopoly investor-owned utilities like Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) are passing on the costs of upgrading the grid and paying their way out of bankruptcies that resulted from wildfires ignited by their utility equipment.
According to the California Public Utilities Commission (CPUC), PG&E, SCE, and SDGE have raised customer rates by 110%, 90%, and 82%, respectively, over the last decade. This comes as PG&E has seen record-shattering profits, and it’s not hiding its plans to profit even more in the coming years.
Despite the clear link between wildfire spending, grid upgrades, and booming profits for monopoly utilities, somehow distributed solar is getting the majority of the blame for rising energy costs.
Many stakeholders have aimed their ire at rooftop solar and net metering, but their claims vary wildly depending on who is making the argument and the assumptions underlying their analysis of costs. Instead of addressing the real drivers of unaffordability, these arguments deflect from serious solutions we know can lower rates.
Removing or discouraging solar and energy storage by retroactively changing the terms of contracts signed by nearly 2 million legacy solar customers will not solve California’s affordability challenges. The scapegoating of distributed solar must stop. Households, businesses, and schools investing in solar need policy certainty. Customers who played by the rules, invested their hard-earned money, and committed to contracts deserve to have those agreements respected and should not have the rug pulled out from under them.
This is especially important as we introduce new energy technologies and programs to lower costs and power the economy. Customers need assurance that terms will be honored when they sign a contract onto a program. Setting a precedent that program terms can be changed at any time will undermine current and future initiatives like Virtual Power Plants (VPP) and electrification and efficiency programs that reduce costs and strengthen the grid.
So, what are the solutions to address California’s energy affordability crisis?
Use tax revenue rather than hiking electric bills
California can reduce costs to ratepayers by funding programs through tax revenue rather than hiking customer electric bills. Moving programs out of utility rates and into the general state fund is a more reasonable way of funding important programs and services.
Alternative financing for transmission buildout
New and innovative financing mechanisms and ownership structures may provide ways to reduce the costs of much needed transmission lines that deliver low-cost solar and storage to the homes and businesses that need it. A recent Clean Air Task Force study found that using lower cost capital or allowing third parties to build transmission lines can lower costs.
Thoughtfully disburse climate credits
Currently, California customers receive climate credit on their electric bills twice per year averaging about $50. Instead, we should retool the climate credit to maximize its benefits by providing a higher credit to low-income and disadvantaged community ratepayers. Alternatively, the state can look at geographically disbursing the credit to areas of the state that are paying higher energy costs. This would immediately reduce bills for those who need it most.
Address tax conformity to ensure California can compete for lowest-cost clean energy investments
California’s tax code currently differs from the federal tax code, reducing the benefits of federal tax incentives that lower costs for clean energy projects in the state. This makes California less competitive and encourages clean energy companies to take their investments to other states. The state legislature should pass Senator Padilla’s legislation — SB 302 — to align our tax code to allow for the full value of the newest federal tax credits. Doing so will reduce the cost of clean energy projects and save residential ratepayers money over time.
Encourage battery storage and participation in Virtual Power Plants (VPPs) for rooftop owners
The state should encourage and incentivize solar customers to adopt battery storage, which helps ease stress on the grid and boosts household resilience. In addition, homeowners with solar and storage should be encouraged to join Virtual Power Plant (VPP) programs, which aggregate power from thousands of homes with solar, storage, and other distributed energy resources to support the grid.
Tie utility profits to performance, not guaranteed returns on investment
Utility profits should be based on performance outcomes. Metrics like electrification rates, interconnection timeliness, and improved reliability should determine profits — not how much utilities spend on projects.
This change would better align their incentives with the outcomes California ratepayers want to see: lower costs and a more reliable electric grid.
Utility shareholders profit off the backs of ratepayers. Evaluating this structure should absolutely be on the table to address the affordability crisis in California.
The Golden State can and should remain the national leader in solar while also improving affordability. But state leaders must be willing to address the real issues contributing to higher costs.
Let’s get to work.
