Let’s get to the bad news first: Your insanely expensive electric bill is unlikely to dive much in the near future, even if the state adopts a slew of  reforms.

But the state’s Little Hoover Commission, California’s good-government watchdog, has laid out a plan to keep them from spiking much further — and to offer relief to inland dwellers whose very lives often depend on summer air conditioning.

Its recommendations would shrink the utilities’ profits and cap benefits for rooftop solar owners and limit how long they get them. Also, the commission would increase fixed charges to keep in step with income.

The Commission also wants the State Treasurer’s Office to independently analyze the financials put forward by the Big Three utilities to justify their proposed profits; and it wants the State Auditor to figure out if the California Public Utilities Commission is truly up to the task of regulating those utilities, in terms of staffing levels and expertise. (The Auditor has already suggested it is a weak regulator.)

“California’s electricity rates are among the highest in the nation and contribute to the broader crisis of affordability facing state residents,” said Pedro Nava, chair of the Little Hoover Commission, in a letter accompanying its new study, “The High Cost of Electricity in California.”

“Approximately one in five households is behind on their energy bill. Affordability has become the state’s top policy concern, and most residents are currently unwilling to pay higher electricity costs to combat climate change….

“There are no simple fixes to the problem of high electricity costs. However, the Commission has been impressed by the commitment and creativity of the many Californians working toward solutions. We believe this report reflects some of the best thinking available, and we respectfully submit it while standing ready to assist as the state works to tackle this shared challenge.”

Batten down the hatches; the electricity wars promise to flare anew.

Twice as high

After Hawai’i, California’s electricity rates are the highest in the country, about twice the national average.

It’s worse for businesses. Industrial rates for manufacturing, construction and agriculture are more than 2.5 times the national average.

“As of May 2025, 2.3 million investor-owned utility customers — over 20% of the households they serve — had unpaid energy bills, owing an average of $788,” the study said. “And rising numbers of power shutoffs have prompted action by lawmakers. This reflects a broader crisis of affordability.”

Why so high? Because a plethora of costs are packed into customers’ bills, and some of these costs are already very high and rising quickly, it said. These include a mix of “wildfire-related” costs, problematic rate design resulting in expensive cost shifts, utility profits on capital investments, and declining consumption that spreads fixed costs across fewer kilowatt-hours.

At the same time, smaller add-ons — such as low-income subsidies and green energy programs — increase bills only slightly.

The consequences? The aforementioned one in five households that are behind on their energy bills. Industries that consume large amounts of electricity are wary about doing business here. And confidence in the value of California’s clean energy goals has waned.

Many of Little Hoover’s recommendations have been tried in one form or another — reducing rooftop solar payments, introducing a meatier fixed charge for high-income households — and were vociferously, passionately blocked.

But are conditions ripe for a do-over?

Revamp solar

California has long bundled the costs of grid upkeep into the price we pay for electricity itself. That means folks who used less and less electricity (read: solar rooftop owners, who have “Net Energy Metering” or NEM) escape paying their “fair share” to keep the system running — a system they use to send excess power to their neighbors and receive electricity after dark.

That means non-solar folks must shoulder more of those fixed costs. “Indeed, the Public Advocates Office calculated that, in 2024, the NEM cost shift added $8.5 billion in extra charges to non-solar customers, although this figure has been debated,” the report said.

Little Hoover gives props to solar — California leads the nation in installed solar capacity, and solar now provides more than half of the state’s total energy during summer months — but it also says things must change.

“The Commission believes that California should seek to find a balance between reductions to … benefits and fairness to those who have invested in home solar systems,” it said. “Thus, legacy …participants should retain their compensation structure until they have recovered their system installation costs plus a reasonable return on their investment. This threshold should be defined based on the installed cost of the system — minus rebates and tax credits — and should account for both self-consumption savings and export earnings.

“Once a system reaches a certain threshold — such as 110 to 120 percent of net cost — export compensation should change to a more sustainable rate design. This approach preserves solar customers’ expectations of a return while ensuring that ratepayers are not excessively burdened.”

The commission also recommended a charge on solar households to offset cost shifts; and that benefits should end when the home is sold.

That is sure to enrage rooftop solar owners, many of whom recently revolted and killed more substantive changes pending before the Public Utilities Commission.

Bigger earner, bigger charge

Another proposal that elicited rebellion was a monthly fixed charge that rose in tandem with household earnings. It also withered at the Public Utilities Commission.

A toe-in-the-water step toward addressing this is the newly-adopted fixed charge — and lower per-kilowatt charges — that customers of Southern California Edison, San Diego Gas & Electric and Pacific Gas & Electric will soon see on their electric bills.

The CPUC settled on a flat $24 monthly charge for most households, and a $12 charge for lower-income customers. That will reduce the cost of power itself by some 15% to 20%, but most customers’ bills are expected to remain about the same.

Little Hoover wants the state to take another stab at charging higher fixed charges to higher earners to “ease burdens in hot climate zones and spread costs more equitably.”

It also urges the Legislature to study moving costs for low-income programs from ratepayer bills to the general fund or some other source.

Reduce utility profits

The Big Three utilities don’t make money selling you electricity — that is pretty much at cost — but they do get a Public Utilities Commission-approved profit on capital expenditures.

That, critics said, provides a perverse incentive for utilities to spend more than they need to on infrastructure.

Those profits usually hover in the 10% range, and Southern CaliforniaEdison recently asked for 11.75%, citing market volatility and heightened financial risk.

Utility profits have stayed high and steady nationwide for the past 40 years, even as the actual cost of raising capital has gone down, the report said. But regulators often approve profit levels exceeding what’s truly needed to attract investment. Scaling back those profits could help reduce bills.

The Treasurer’s Office should be tapped to ensure thorough examination and fairer determinations of utility profit levels, the report said.

The utilities say they’re sympathetic.

“We understand rising costs are challenging for our customers. Southern California Edison continually works to keep our customer bills manageable. We project that, on average, our rates will grow in line with or below inflation through the end of 2028,” spokesman Jeff Monford said.

Other stuff

The California Climate Credits we get twice a year — usually ranging from $56 to $81 on electric bills in April and October — should be directed to low-income and hot climate zone households during months when bills are highest.

General rate cases — where the Public Utilities Commission evaluates the Big Three’s requests for rate increases — shouldn’t drag on for years, as they do now.

Wildfire mitigation also costs should be part of those general rate cases, not considered separately. And officials might want to revisit the law allowing utilities to be sued if their equipment sparks a wildfire, even if they weren’t negligent. That’s a major driver of rate spikes.

Support for low-middle income earners should be beefed up. Access to clean energy innovation grants, to boost pioneering research, should be simplified.

“Achieving significant electricity cost reductions may be possible, though challenging,” the report said. “California faces several state-specific headwinds—extreme wildfire risk, fast rising insurance costs, obligations to costly programs like (rooftop solar), and its commitment to renewable energy—that make lowering electricity rates difficult.

“A different approach is to ‘flatten the curve’ of accelerating costs — setting clear goals for limiting rate increases over time and aligning utility budgets with those targets. While dramatic short-term rate cuts may be unrealistic without major tradeoffs, modest reductions that compound year after year could produce meaningful long-term savings.”

And every little bit helps, right?

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