Utility Rates Climbing
Last updated 2/25/2022 at 2:59pm
While it took 10 years for average residential electricity and gas prices in San Diego County to rise by almost 15%, new rates that took effect on Jan. 1 will mean price increases of nearly 8% for electricity and 25% for gas going forward. The 15% average residential rate increase is derived from previous pricing at 27 cents/kilowatt-hour to the new price at 31c/kwh. Of course, the question becomes, "how do Borregan energy bills compare to "average"?"
Because of tiered pricing and customized alternative energy plans for individual households, it will be up to each resident to assess not a rise or fall in their energy bills, but simply how much it has risen and will rise going forward into the spring and summer months, and in the years to come. A paper released in May 2021 by the Public Utilities Commission projected residential energy rates going up nearly 5% per year out to the year 2030.
A report from the San Diego City attorney's office to the mayor notes that a requirement that SDG&E uses "best efforts to minimize service costs had been deleted" from what was advertised in an invitation to bid on energy supplier charges. County residents are now locked into a 10-year contract (franchise agreement).
In a statement on the issue, SDG&E said, "There is no ideal time to increase rates, especially given the inflationary pressures that are raising the costs of other goods and services. At the same time, our customers expect us to deliver clean, safe and reliable energy to them 24/7/365, and to meet that expectation, we must make ongoing safety, reliability and sustainability investments."
SDG&E points to four factors affecting Electric rates and four factors affecting Natural Gas rates. For electric rates, Natural Gas is used to generate electricity, and when gas prices rise, it has a ripple effect on power costs; there has been a growth of Public Benefit Programs (e.g., CARE), providing low-income households with discounts, but also SDG&E is obligated to impose surcharges for supporting requirements for energy efficient schools; Wildfire Mitigation Costs include replacement of wooden poles with steel ones and placing wires underground; and Safety and Reliability upgrades mean frequent inspection and quick repair of equipment prior to their failure, plus adding smart-grid technologies to improve operational efficiency, safety, and flexibility.
For Natural Gas, rate increases are caused by increases (both sudden and steady over time) in the natural gas market, which of late has been surging; Greenhouse Gas Emission Credits are part of the State's Cap and Trade program to reduce greenhouse gas (GHG) emissions, and utilities are required to pay for carbon credits for their small-use customers to offset GHG emissions associated with natural gas (carbon prices are projected to be significantly higher in 2022); Annual Cost Adjustments have increased for infrastructure, labor, materials, and other operational costs; and like for electricity costs, natural gas customers must pay the public purpose surcharge to fund low-income households, energy efficiency programs, plus school safety and energy efficiency considerations during the COVID-19 pandemic.
A quick peek at how the Consumer Price Index has become inflated over the past 12 years tells us pretty much everything we need to know about future costs of everything from energy to consumer goods: In 2010, the CPI was at 218; in 2022 it's 279, a 22% increase overall, with inflation running about 2%/yr during that same period. Currently, the inflation rate, compared with last year, is running at about 7%.
What all this means in terms of a historical reference point for the cost of energy is that if one's energy bill in 2010 was $1,000, it would be 28% higher today. Put another way, a dollar today only buys about 78% of what would buy 12 years ago. The question for individuals then becomes, how has cost of living adjustments (COLA), either by salary increases, stock value increases/dividends less taxes, etc. affected your bottom line? From Numebo, the graphic below shows how our buying power has decreased over the past 12 years.
So, it's clear that energy prices are rising, and will continue to rise throughout the decade, but it's also true that a "greater public good" is being achieved by spreading out the costs amongst a whole lot of SDG&E customers who have come to insist on reliable energy sources on a daily basis.