An overlooked reason for rising energy and water bills in California | Opinion
There are several reasons why your water and electricity bills keep rising. Many increases can be blamed on market forces beyond anyone’s control, but what’s being left out of the affordability discussion is how well-intended but unfunded policy decisions — three in particular — risk making cost of living expenses even worse, especially for the state’s not-for-profit utility customers.
Cap-and-Invest
One example is California’s Cap-and-Invest program (formerly Cap and Trade), which enables the trading of carbon credits — called “allowances” — to reduce greenhouse gas emissions. These allowances help not-for-profit utilities keep rates lower, help fund investments in clean energy and support low-income assistance programs.
Last year, California leaders passed a law extending the program through 2045. Unfortunately, the California Air Resources Board (CARB) is proposing to cut these allowances, even though cuts were not required in the new law.
Last year, our elected leaders passed a law extending the program through 2045. CARB originally proposed to cut allowances that would be a $750 million hit, even though cuts weren’t required in the new law. Public utilities have been selling these excess allowances, generating money that funds important programs such as clean energy. Fewer allowances dries up this money source. CARB has now proposed cuts that lessen the impacts, which is a step in the right direction. But for California’s publicly owned electric utilities, the proposal would still have material impacts and increase costs. These utilities don’t have capital to draw from or shares to sell to make up this revenue.
The only options are to reduce clean energy investments or pass these costs on to customers — the very constituents legislators were trying to serve with the new law.
Advanced Clean Fleets
Another example is the Advanced Clean Fleets regulation, which requires all public agencies, including not-for-profit utilities, to transition their fleets to electric vehicles by 2030. It’s a worthy goal, but it will also contribute to rising utility bills because electric models of utility work trucks cost twice as much and there are fewer available.
Public utilities need more flexibility in vehicle choice to keep the lights on and water flowing. Otherwise, they will be forced to spend millions of more dollars on these vehicles. These mandated costs will have to be passed to 10 million Californians who receive service from a not-for-profit electric utility, and 34 million Californians served by public water systems.
Conservation framework
On the side of water, the “Making Conservation a California Way of Life” framework — which was passed in 2024 to help improve water efficiency across the state — contains a host of legally-binding requirements, particularly in the areas of landscaping and efficiency. These requirements are estimated to cost in the tens of billions of dollars through 2040.
According to California’s Legislative Analyst’s Office, the “costs will be borne primarily by suppliers, wastewater agencies and customers.”
Already, according to a recent survey by the Public Policy Institute of California, 55% of respondents said the rising cost of energy utility bills is a major problem. Meanwhile, water utility bills are also increasing faster than the rate of inflation — and that’s before any impacts from these unfunded mandates take effect.
California’s self-inflicted affordability problem is exacerbated by the federal government’s water and energy priorities. Federal permit reviews for clean energy projects have stalled and funding for them has been phased out, revoked or canceled, making it more expensive to build projects, with public utility customers left to bear the cost.
California’s not-for-profit utilities are working hard to reduce their carbon footprints. They share the state’s commitment to ambitious climate and water sustainability goals and are making real progress toward them. They’re also shouting from the rooftops that we must find balance between aggressive policy and economic realities.
California has taken some positive steps to make utility bills more affordable, but those are mostly offset by these new “death by a thousand cuts” attacks on utility system affordability. We must reassess.
Danielle Blacet-Hyden is executive director of the California Municipal Utilities Association, which represents 86 publicly owned electric and gas utilities and water and wastewater agencies that provide water service to 75% of Californians and electric and gas service to 25% of the state.