And what can be done about it.
Editorial Note: This photo was created by East County Magazine. It was not created by Voice of San Diego.
September 2, 2023 (San Diego) -- No matter which way you slice it, San Diego has the most expensive electricity in the country.
And it’s beginning to draw eyes from across the nation.
Duncan Campbell, who works for a microgrid company based in New York, tweeted out findings from a database he created with energy price information from the U.S. Energy Information Administration.
“SDG&E residential and commercial delivery rates are the absolute highest in the country and have 20-year (compound annual growth rate) well in excess of inflation!” Campbell tweeted Aug. 6.
Campbell went on to explain what he saw happening to the cost of transporting energy in San Diego. It was compelling, apparently. U.S. Rep. Scott Peters, who represents San Diego in the state’s 52nd district, retweeted Campbell adding, “This helped me. Recommend.”
That’s only part of the equation. Over 80 percent of San Diegans pay a public power company for the actual molecules of energy they consume. Those prices are also sky high.
A few basic elements about San Diego make its energy so expensive. San Diego’s electric service area is kind of an island in California, occupying just San Diego County. California’s other investor-owned utilities, Southern California Edison and Pacific Gas and Electric, serve large swaths of the state while SDG&E spreads costs to a smaller population.
Another factor: California solar adoption is highest in San Diego County. People who own rooftop solar generally pay less toward maintaining the energy grid, further reducing the pool from which utilities recoup costs. (How to account for rooftop solar adoption is an ongoing political debate in California’s renewable energy space.)
SDG&E is selling less energy while spending more building and protecting infrastructure to transport it. Ratepayers are also footing the bill for lower-income San Diegans who can’t afford to pay, as well as tearing down a nuclear power plant, burying powerlines underground and fees to leave SDG&E for a public power company.
Still, the cost of the energy itself at SDG&E rose substantially since 2018. The average summer cost of energy jumped by 67 percent and 80 percent in winter between Jan. 1, 2018, and Jan. 1, 2023, according to electric energy commodity costs reported in rate filings. Electricity is substantially cheaper in wintertime, however, currently averaging 12 cents per kilowatt hour in winter versus 30 cents in summer across all times of the day. (SDG&E isn’t permitted to make money off the buying and selling of the energy itself, however.)
Getting Energy to San Diego Is Expensive
SDG&E is familiar with explaining why it costs so much to build and maintain San Diego’s energy grid. The utility spent billions to protect its poles and wires against wildfires since the 2007 fires that ravaged parts of San Diego and blamed in part on SDG&E equipment.
“We’ve invested more than most utilities in the U.S. … to make sure our system is resilient and matches the climate challenges we face,” said Scott Crider, a senior executive at SDG&E.
The state and local renewable energy mandates also spurred spending. While only fractions of a cent are built into rates to construct electric vehicle charging infrastructure, SDG&E boosted its transportation electrification rate over 700 percent between 2017 and 2020, according to a report from the California Public Utilities Commission. And the company also spent more on transmission lines, the biggest poles and wires a utility can build, which function like the interstate highway of the energy grid. Fifteen percent of customers’ billed price per kilowatt hour in 2019 paid for transmission, the CPUC reported.
Plus, building stuff is the way SDG&E and other investor-owned utilities make money in California. SDG&E is allowed to collect just over a 7 percent rate of return on everything it constructs or maintains or upgrades.
But SDG&E executives will be the first to tell you that they’re not totally responsible for San Diego’s high electric costs anymore. Nearly 80 percent of their customers now purchase the actual electricity they consume from a public power company called a community-choice aggregator. There are two serving San Diego County: San Diego Community Power and Community Choice Energy.
Voice of San Diego compared what those two companies offer residents for basic power against other public power companies like them in the state (there are 25). San Diego’s public power offerings are some of the most expensive when compared to public power in Orange County, San Francisco, San Jose, Los Angeles and Ventura.
These companies don’t make a return on their investments like SDG&E. That is, they don’t turn a profit for investors, but they do accrue and bank cash which they’re supposed to re-invest to buy more renewable energy to reach San Diego’s climate goals.
Jen Lebron, a spokeswoman for San Diego Community Power, said one reason their prices are high is that the company is still relatively new to the energy market. The business, run by a board of local elected officials, began providing power to its residential customers in 2021 with the goal of providing cheaper and cleaner energy than its investor-owned competitor.
Part of growing that business, Lebron said, is building cash reserves to earn a better credit rating so it can borrow money cheaper to build its own energy projects.
“Our goal is to make sure that we’re offering the most significant discount we possibly can while also making sure our organization survives for the long run,” said Lebron.
When San Diego Community Power set its electricity prices in January, the board looked at offering a cheaper rate. Instead, the board chose to keep some of that cash in reserves and offer a price three percent lower than SDG&E.
Barbara Boswell, CEO of Clean Energy Alliance, said energy just costs more in San Diego because much of it is imported from other areas.
“When we go to buy energy from suppliers they have to factor in these costs to get it down here to where we take over delivery of it,” Boswell said. “We need more transmission (lines) or maybe more local generation facilities.”
SDG&E says the majority of San Diegans now mostly pay them for building, maintaining and delivering energy over the grid.
So, Voice of San Diego looked at what portion of the average residential electricity price pays for the grid specifically, called transmission and distribution costs. In 2018, grid costs accounted for about 30 percent of the bill. In January, the last time SDG&E set rates, grid costs rose to about 40 percent.
There are a lot of other things San Diegans pay for with their monthly SDG&E bill. For instance, there’s a charge for public purpose programs, which helps subsidize energy bills for poorer Californians, and shutting down the San Onofre nuclear power plant (called the nuclear decommissioning charge). But transmission and distribution make up the bulk of the delivery side of the bill.
Electricity is generally most expensive in summertime because that’s when demand is high – because Californians run air conditioning to beat heat waves that are intensifying with human-caused climate change. In the colder winter months, most Californians are using natural gas-powered heaters to combat weather instead.
SDG&E levels-out spiking summer electric prices by shifting costs onto the winter rates. That’s called the total rate adjustment component or TRAC as it’s listed on rate filings. The company said it began ramping-up the use of TRAC to provide more bill stability between summer and winter – closing the gap between the summer and winter electric prices.
What About Public Power?
Public power in San Diego is mostly costlier than other areas of the state served by a community choice aggregator. San Diego Community Power and Clean Energy Alliance offer a summer rate that’s, on average across all times of day, about 25 cents per kilowatt-hour. Clean Power San Francisco, for instance, is about 16 cents per kilowatt-hour. The public power offering in San Jose is around 20 cents per kilowatt hour. In Marin County, it’s about 17 cents.
Boswell, the CEO of Clean Energy Alliance, said the energy grid is what’s driving up costs.
“Lots of factors are out of our control,” Boswell said. “But what we can do is control load during peak times when costs are higher.”
What she means is helping customers use less energy especially when it’s in high demand, when people come home from work, around 4 p.m. to 9 p.m. every day.
A caveat, though, is more energy conservation means less energy sold. Over the past seven years, SDG&E has seen a continuous decline in energy demand, Crider said.
“As we’re spending more to upgrade the (grid) system to get to 100 percent renewable energy, sales are decreasing at the same time,” said Crider.
That’s starting to change. New demand from electrifying vehicles and buildings are already producing an uptick in sales, Crider said.
“We’ve finally turned a corner,” said Crider. “What’s happening on the grid is what we’ve been predicting.”