Newsom’s last chance to tackle California’s electricity costs

This is California Wire, a weekly newsletter from Jeff St. John on the state’s clean energy transition. Subscribe to get it every Wednesday via Substack.

I’m launching this newsletter at an intriguing moment in California politics. Democratic Gov. Gavin Newsom — who everyone knows is eyeing a run for the White House — has one last chance to show his true colors on energy and climate change. Rising electricity costs are a major issue in California, and Newsom must decide by the end of this month whether to sign a host of bills that could help cut utility rates while also advancing the state’s clean energy transition. What message does he want to send to Californians and the rest of the country?

Earlier this week, I published an assessment of Newsom’s legacy on climate and clean energy so far. Long story short: While he can legitimately brag about some things, he hasn’t been willing to take on utility interests or to challenge the status quo. That’s especially apparent in how he’s sidelined virtual power plants, vetoing and defunding efforts to harness them to rein in skyrocketing electricity rates for customers of the state’s three major utilities.

But a few bills on his desk now could at least start the long slog of reforms that experts say will help make power more affordable.

Most notable is Senate Bill 905. This year’s big affordability reform package from state Sen. Josh Becker (D) would curb utilities’ profits on wildfire-prevention investments and other spending that reduces their risk exposure. It would also expand on provisions from Becker’s reform bill passed last year that require utilities to finance more grid costs through borrowing, which also helps contain the profits they get to collect from customers.

In addition, SB 905 would encourage utilities to measure how efficiently they’re using their existing grids — a precursor to setting up regulations that could steer them toward prioritizing lower-cost solutions over expensive grid upgrades.

One such solution is tapping into virtual power plants — the customer-owned batteries, EV chargers, smart thermostats, and other devices that can provide hundreds of megawatts of power to the grid. Becker’s SB 913 would create new pathways for VPPs to help lessen reliance on aging fossil-gas-fired peaker plants.

But California’s politically powerful investor-owned utilities have vigorously opposed policies that could reduce their regulated profits. That may be why the Newsom administration has largely taken an alternative tack to save money: slashing public services paid for through utility rates. For example, Newsom backed a 2024 bill that would have cut hundreds of millions of dollars in energy-efficiency and solar programs to instead give customers a small one-time rebate.

That bill didn’t pass, but the administration’s nickel-and-diming approach has continued. In final budget negotiations this year, it successfully pushed to claw back nearly $200 million for a program that helps schools retrofit air conditioning, ventilation, and plumbing. The money will now go back to utilities, which could use it to shave pennies off their customers’ bills — or just pocket it, as pointed out by Leah Stokes, a professor of environmental politics at the University of California, Santa Barbara. As Stokes said in a last-minute social media appeal to Newsom, ​“Do you really want your legacy to be taking money away from schoolkids during heat waves?”

My take

Let’s not forget that Newsom has had to manage a number of crises beyond his control, from the bankruptcy of Pacific Gas & Electric in 2019 to rolling blackouts in 2020 and 2022 to the current threat of refineries pulling out of the state. His final months in office may well be consumed in negotiating with lawmakers over how to deal with yet another looming utility wildfire-liability crisis. But these emergencies don’t absolve him from taking bold action in the areas where he does have control — like requiring utilities to enlist the state’s nation-leading fleet of distributed solar, batteries, and electric vehicles as cost-cutting tools. He’s got one last opportunity to do that. Let’s hope he takes it. 

What else I’m watching 

Meanwhile, I’m tracking a few other climate bills awaiting Newsom’s signature or veto: 

• Balcony solar: SB 868, aka the Plug and Play Solar Act from state Sen. Scott Wiener (D), would make California the ninth state to legalize balcony solar systems that plug into regular household outlets without costly and time-consuming utility interconnection reviews. The bill was amended late in the session to include a 2030 sunset date — at the behest of PG&E, according to independent energy journalist Sammy Roth — but supporters hope it will prove popular enough to be reauthorized before that deadline hits.

• Community solar: Assembly Bill 1813 would order the California Public Utilities Commission and the California Energy Commission to take another crack at creating a community solar and battery program. The bill’s author, state Assemblymember Chris Ward (D), has a personal beef on this issue: The CPUC neutered a broadly supported proposal to create a distributed solar-battery program ordered up by another of his bills that was passed in 2022.

• Transmission: One reason we might want more community solar and storage? Utilities are lagging on completing high-voltage transmission grid projects, which is delaying gigawatts of utility-scale clean energy from being built. AB 2493, from Assemblymember Cottie Petrie-Norris (D), would create a new position for a transmission development monitor to track utilities’ progress and trigger corrective action when needed.

• Cutting the cord on gas: AB 2313, from Assemblymember Marc Berman (D), would require investor-owned gas utilities to offer customers whose homes need gas lines replaced the option of receiving money to help them purchase heat pumps, induction stoves, and other all-electric appliances. Think of it as a house-by-house version of the ​“non-pipeline alternatives” programs aimed at reducing investment in a gas delivery network that, under state carbon-cutting mandates, must be retired in the coming decades.

• More affordability, please: These aren’t the only affordability proposals on the table. The Utility Reform Network has a list of bills awaiting Newsom’s signature that offer even wonkier ways to ride herd on utility costs.

Dude, where’s my hydrogen? 

Speaking of pipelines and stranded assets: Environmental groups are suing to stop the Los Angeles Department of Water and Power from converting its Scattergood fossil-gas power plant to also burn hydrogen, saying the municipal utility has failed to consider the air pollution harms that project could cause. But also, where’s it supposed to get the hydrogen? State regulators have rejected SoCalGas’s Angeles Link project, a pie-in-the-sky plan to pipe hydrogen made from solar in the desert to the LA Basin. And the Trump administration has pulled the plug on California’s clean hydrogen hub. If you don’t have hydrogen, you don’t have a hydrogen-burning power plant — no matter how well it might fit into some hypothetical decarbonization roadmap.

By the numbers

As a new report from a who’s who of California energy experts makes clear, there’s no silver bullet to solving an affordability crisis that has been decades in the making and has pulled California’s energy costs so far out of whack with the U.S. average.

Take a look at how the rates charged by California’s big three investor-owned utilities, already higher than the national average since the late 1970s, have really taken off in recent years. (The main cause of this latest spike is wildfire risk, of course — but that’s a problem from hell that’s better dealt with at book length.)

California and U.S. average real electricity rates and California-U.S. differences, 1970–2024

One more thing

It’s not all doom and gloom around here! My wife and I — and of course our constant companion, Lily the corgi — had a lovely Labor Day weekend up in the Sierra foothills. Check out this sunset! (I couldn’t help taking a photo with power lines in the background ;-)