February 5, 2024

Rate Hike Implications for Industrial Facilities in California

California’s energy sector landscape has been defined by fluctuating rates, pioneering renewable energy development, environmental pressures, natural disasters, and a number of other factors, placing the state in the spotlight during many conversations about utilities and power generation. As one of the largest and most populous states in the country, California’s energy market is characterized by its unique challenges and innovations. In particular, power demand and rate increases have become a focal point for residents, businesses, and industries alike. An array of factors including renewable energy initiatives, regulatory policies, disaster mitigation, and the ever-evolving demands of a diverse economy contribute to the complexities of increasing energy rates across the state’s three main utilities. 

Spotlight on Significant Increases for California’s Investor Owned Utilities

Rate increases have hit all customer classes, with some very dramatic spikes impacting industrial facilities. Many large industrial customers fall into a rate class that has seen an incredible 32% increase over just the last year, with customers seeing bills tens and even hundreds of thousands of dollars more expensive than in 2022 and 2023. 

Summary Example

Industrial facilities in California pay some of the highest rates in the country. A large industrial facility in the PG&E territory that uses approximately 8,000,000kwh annually saw an increase of over $650,000 from 1/2023 to 1/2024 with the rate hikes that occurred during the year. Commercial properties, warehouses, data centers, and logistics facilities are among some of the largest consumers of energy to have seen significant increases as well.

Additional increases are also anticipated across all customer classes and the trend is evident across all customer types. The California Public Utilities Commission recently approved a proposal for PG&E’s General Rate Case, resulting in bill increases of 13% for residential ratepayers, effective January 1, 2024. Rate increases were pitched and approved to fund a number of initiatives designed to improve power quality and reliability for ratepayers. The plan cites inflation and highlights undergrounding electric lines, wildfire risk management and mitigation and capacity upgrades for the electric distribution system. 

Residential and commercial customers have seen a series of recent rate increases over recent years. In Southern California, both SCE and SDG&E are proposing comparable rate increases, inevitably meaning higher costs for residential and commercial properties. The proposals cite inflation, grid modernization, disaster mitigation, and natural gas prices as the reasoning behind the increases.

A 10-year study by Energy Toolbase looked at the cumulative rate increases of the three main California IOUs – Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric. Ratepayers have been absorbing significant increases across all customer classes in the last decade. 

source – Energy Toolbase

Rate Hike Implications 

Energy rate increases can have significant implications for commercial businesses, impacting their operational costs and bottom line. When energy rates rise – especially demand changes – businesses often experience an increase in their utility bills, leading to higher overhead expenses. The added cost pressure may compel businesses to reconsider their budget allocations, potentially affecting investments, expansion plans, or employee-related expenditures. Industries operating across California with high energy consumption, such as large-scale manufacturing or data centers, may face more substantial financial challenges. Additionally, policy and regulatory requirements can force businesses to take action or risk incurring greater costs or fines. 

Renewables and Infrastructure Upgrades 

Rate hikes have resounding implications across all customer types and have a ripple effect across all ratepayers and utility operations as a whole. With these increases comes the expectation of infrastructure upgrades and better power quality, but is the cost justified? For many, it may simply be too exorbitant to absorb and continue on business as usual. 

Thankfully, there are incredible opportunities for California’s commercial and industrial businesses to take their energy future into their own hands. Instead of waiting for grid upgrades or accepting rate increases, onsite renewable generation and facility infrastructure upgrades can reduce costs, provide energy security and resiliency in the face of disasters or outages, and achieve environmental and carbon goals. Appropriate onsite infrastructure upgrades can also enable fleet electrification for transportation and logistics entities without causing capacity issues for the grid or waiting for future upgrades to go into service. 

Are you feeling the pressure of rate increases, capacity constraints, or wondering how to start the process of integrating renewables or preparing for fleet electrification? Look no further than GridMarket. We can help you identify the best solutions for your facility and fleet that will save the most money and contribute to carbon targets.

Have questions about clean energy at your facility? We have the answers!

Download our free FAQ page here to see how you can use the GridMarket platform to save money on the operating expenses at your facility. 

The information provided in this blog post is intended for general informational purposes only. It is not intended to be a substitute for professional advice or specific recommendations. The utility rates discussed may vary based on location, regulations, and individual circumstances.

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