It's Not Your Imagination: Electric Rates for California Commercial Customers Really Are Up 70%!

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There's plenty of news about inflation in the prices of many common purchases – rent, health care, gasoline, eggs but headlines about the rapid escalation of electric utility rates are rare. That's strange, because electricity rates – especially those paid by commercial customers in California – are rising dramatically. Over the past five years, utilities have raised these prices at a pace far above the rate of inflation. There's considerable contradictory information online from different sources about exactly how fast such prices are increasing, so a bit of careful analysis is required.

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In order to calculate the rate of increase in electricity prices as actually paid by any particular group of customers, it's important to know the usage patterns of those customers. As we mentioned in an earlier post, commercial customers in California pay for both energy (kilowatt-hours, or kWh) and for demand (measured in kilowatts or kW, based on their highest usage of the entire month). Although energy charges have been increasing, in many cases demand charges have been increasing even faster.

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A particularly useful tool for electricity usage and pricing analysis is called Genability. The folks who developed and maintain this software know their stuff. This tool allows users to select a typical usage pattern for many different commercial building types (for example, "Stand Alone Retail," as used in this analysis). To calculate the rate of price escalation, Genability maintains many years of history for rates from PG&E, SCE, and SDG&E, that are most commonly paid by such customers. Combining these rates with the selected usage pattern is a simple and effective way to assess what such customers will pay over the 12 months of 2024 compared with just five years ago. Simple - and a bit shocking.

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The price of electricity for these customers has increased by 72% over the past five years!

That's almost triple the rate of inflation over that same period, and it's causing real pain for commercial customers.

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That result is an average, but the results for each utility over the last five years are quite comparable:

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The analysis above assumes no change in usage from year to year – but for many commercial customers, that's not an option. California's regulatory and policy initiatives mean that many commercial customers must swap their heating and water heating systems from gas to electricity over the next several years; such changes can dramatically increase total electricity usage. As electric vehicle charging at commercial facilities grows, even larger increases in electricity usage are expected for many customers.  

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Future posts will explore the factors contributing to this increase, and what California commercial customers can do to control their utility bills today. In the meantime, if you need help understanding and controlling your commercial utility bill (in California or elsewhere), please contact us.  

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