Why Utility Rates Go Up

Utility companies give many reasons for rate increases. In fact, there’s a huge list of fees and taxes they pass on to all ratepayers which is broken down directly on our monthly bill. These fees are used to cover:

  • Power generation
  • Replacement of aging power plants and decommissioning of retired plants
  • Distribution costs (power lines, poles, transformers, etc.)
  • Public assistance programs (general assistance for low-income customers)

There are also other charges tacked on by individual counties or cities based on a percentage of your total charges, and a state fee which is generally a flat rate.

Gas is charged an entirely separate rate and unless your entire home is filled with only electric appliances, nearly everyone uses natural gas for heating or cooking. California and Nevada are the only states that use natural gas as their primary fuel source for electricity generation. It’s interesting to note that natural gas prices hit a record low this year out of the past decade but savings are not generally seen by customers because of regulated prices.

Because of the San Bruno pipeline explosion 2 years ago, our local utility company PG&E has been approved to charge customers a monthly fee beginning January 2013 to help finance long-overdue gas pipeline upgrades. They also pass along mandatory fees associated with repaying state-authorized bonds and the company’s own emergence from bankruptcy in 2001.

Electric costs for each resident or business is based on usage and the utility companies base these rates on a tier system – the higher the tier, the higher the charge. So, in the summertime when your AC is cranking and the fans are blowing, electrical consumption goes way up and you may find yourself bumped up into a higher tier, paying a much higher rate than you’re used to.

This is when solar comes in to save the day! By installing solar panels, you can stay in a lower tier while still using the electricity you need to. The panels produce the necessary electricity so that instead of drawing off of the utility’s grid, you will be using the power that your panels produce. Electricity is generated in the sunny daytime and excess power goes back into the grid (net-metering). Once the panels take a break from producing power at night, you can then draw back some of the excess power you produced earlier. Most solar systems are designed to generate enough power to take a large chunk out of the monthly electric bill, or can even cover the entire thing.

Electric prices are notoriously unstable and in California, rates have been increasing annually roughly at 7%.  While you can’t prevent the utility company from raising their rates, you can certainly take charge of what you want to pay for electricity by protecting yourself with solar.