Politicians love to chase easy answers. Alas, when it comes to California’s rising electric rates, there aren’t any.

If limiting rate increases were simple, elected officials would have done it by now. But electric bills keep climbing. From 2019 through 2023, residential rates rose between 48% and 67% for Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric customers, according to the state Legislative Analyst’s Office.

Gov. Gavin Newsom has tried to address the affordability crisis, albeit sporadically and halfheartedly.

In the final weeks of last summer’s legislative session, Newsom was reportedly working on a creative proposal to reduce energy bills by cutting utility profit margins on infrastructure projects such as power lines. But he gave up after facing opposition from the utility companies, as well as unions representing utility workers.

Instead, Newsom pivoted to a less ambitious plan to offer utility customers a one-time bill savings, estimated at about $30, by slashing clean energy programs funded by electric ratepayers. That plan failed to garner enough votes in the Legislature amid opposition from environmental groups.

Newsom and lawmakers have promised to make affordable electricity a top priority in 2025. If they really want to help, they need to show courage and take some political risks. Here are three bold ideas.

1. Just spend more money

A satellite image over Paradise, Calif., during the 2018 Camp fire, the deadliest blaze in the state’s history.

As my column last week explained, the biggest factor driving up electric rates is the billions of dollars that Edison, PG&E and SDG&E spend each year to reduce the risk of wildfire ignitions. That money, which is ultimately charged to customers, pays for initiatives such as trimming trees around power lines.

Those wildfire prevention efforts are more important than ever as global warming fuels larger, more destructive blazes. But lawmakers have hesitated to pay for more prevention work through the state budget. It’s been easier for them to let Edison, PG&E and SDG&E ratepayers bear the burden, instead of shifting costs to all taxpayers.

That inequitable dynamic needs to end. Utility bills disproportionately burden lower-income families.

It’s not just wildfire prevention costs driving up electric rates. Carla Peterman, PG&E’s executive vice president of corporate affairs, told me one-third of PG&E customer bills actually go toward policy programs approved by state officials, such as more efficient air conditioners in schools and solar panels on affordable housing.

Those are important clean energy initiatives. But it would make a lot more sense for all Californians to fund them, especially considering the state’s progressive income tax system, in which higher earners pay more.

“We do this in other industries all the time,” Peterman noted. “Food assistance support doesn’t come as a charge on your grocery bill. We support those programs through taxpayers.”

Newsom’s initial budget proposal for 2025-26 amounted to $322 billion. I find it hard to believe the governor and Legislature couldn’t scrounge up a few billion more for fire prevention, and a bit more for clean energy programs, especially a few months after Los Angeles County was devastated by the Eaton and Palisades fires.

And if lawmakers feel compelled to cut climate spending elsewhere to make it possible?

California’s biggest pot of money for climate and clean energy programs is the Greenhouse Gas Reduction Fund, which generates about $4 billion annually by charging polluting companies for their heat-trapping emissions.

Right now, state law requires that 25% of the funds, about $1 billion each year, go toward the long-delayed bullet train from L.A. to San Francisco. By comparison, less than $300 million is set aside automatically for Cal Fire.

Some experts question whether that disparity makes sense — especially with the high-speed rail project facing a projected $100-billion funding shortfall, and the Trump administration threatening to cut federal funding.

“There starts to be a question of whether it ever gets finished,” said Julia Stein, an environmental law professor at UCLA. “Is this something we still want to be sinking a significant amount of funds into?”

Don’t get me wrong: As an Angeleno with family and friends in the Bay Area, I badly want to see the bullet train completed. And considering all the political capital Newsom has poured into high-speed rail — in part due to its staunch labor union backing — California almost certainly isn’t giving up on the project entirely.

But this is what I meant about courage. The hard truth is, important stuff costs money. There’s no way around it. Maybe high-speed rail isn’t the answer, but lawmakers can’t just magically make electric rates go down.

They can, however, force utility shareholders to help.

2. Scrutinize utility profits

A Pacific Gas & Electric worker on the job in San Francisco in 2019.

(Jeff Chiu / Associated Press)

As electric rates have grown, so have utility profits. PG&E posted a record profit of just under $2.5 billion last year. Edison and SDG&E didn’t manage records, but they still pulled in $1.62 billion and $891 million, respectively.

Investor-owned utilities don’t make a profit on electricity sales; they charge customers only what they paid to buy or generate the power. But they do make money charging a guaranteed profit on infrastructure investments such as building power lines, or burying lines to prevent wildfire ignitions.

Last week, all three of the state’s major investor-owned utilities submitted filings to Newsom’s appointees at the Public Utilities Commission, asking the commission to increase their “returns on equity” — basically, shareholder profit margins. PG&E asked to increase its profit margin from 10.28% to 11.3%. Edison is seeking to grow returns from 10.33% to 11.75%. SDG&E wants to increase profits from 10.23% to 11.25%.

As far as economist Mark Ellis is concerned, those requests are absurd. Already, he said, utility shareholders are allowed to make way too much money off Californians.

“Every dollar of shareholder capital you put in turns into $2, $2.30 in stock market value,” he told me.

Ellis has had an inside look at utility industry finances. He spent 15 years working for SDG&E parent firm Sempra Energy, including tenures as the company’s chief economist and later chief of corporate strategy.

Investor-owned utilities need to turn a profit, or investors will direct their money elsewhere — preventing utilities from supplying reliable electricity. But in a recent report for the American Economic Liberties Project, Ellis argued that regulators in California and across the country have allowed utilities to earn far more than necessary.

He blamed corruption, saying the utility industry has captured its regulators.

“There’s this whole parallel world of utility regulation that’s totally co-opted by the utilities,” Ellis said.

Utility executives, unsurprisingly, disagree.

Peterman, for instance, said PG&E must keep growing earnings to woo investors, or it won’t be able to raise tens of billions of dollars to expand its grid to accommodate electric cars and other clean energy technologies.

“We’re doing a lot of great things in California, but we have a very aggressive schedule,” she said.

California utilities also face extreme financial risk from wildfires, which are hard to guard against completely and can create billions of dollars in liabilities. Especially with Edison facing dozens of lawsuits related to the Eaton fire, which may have been sparked by one if its electric lines, utilities say doing anything that could scare off investors or spook credit-rating agencies could lead to higher rates, by raising the cost of borrowing money.

Even PG&E has been affected by the financial fallout from the Eaton fire, the company says.

“The January wildfires, even though they were not in our service area, have increased PG&E’s debt borrowing cost by over $500 million over the life of new loans we will pursue this year,” Peterman told lawmakers this month.

So maybe lawmakers shouldn’t take a meat cleaver to utility profits. Still, a sharp scalpel would be nice.

3. Embrace hard choices

The State Capitol in Sacramento, seen in December.

(Allen J. Schaben / Los Angeles Times)

AB 1167 from Assemblymember Marc Berman (D-Menlo Park) offers a good starting point for lawmakers looking to address utility profits. The bill would make it harder for utilities to charge customers for advertising campaigns and other political activities that should be funded by shareholders — an area where PG&E has faced criticism.

A similar bill failed to pass last year amid opposition from the utilities.

“The people of California deserve better than to have their money used against them, to pay for utility lobbying,” said Mark Toney, executive director of the Utility Reform Network, in a news release supporting the bill.

The Utility Reform Network, an Oakland-based consumer watchdog group, also supports SB 330 from Sen. Steve Padilla (S-San Diego), which aims to lower the cost of expanding the power grid by testing out public financing for new electric lines — instead of utility shareholder financing, with its guaranteed profit margins.

Utility executives, to their credit, sound open to the concept. But other proposals to limit electric rates — such as requiring utilities to pay for certain grid investments through securitization, which Newsom had hoped to achieve last summer — have faced stiff opposition from utilities, because they would cut into shareholder profits.

My advice for lawmakers wary of going up against the utilities, and the powerful labor unions representing their employees: Embrace hard choices. Get comfortable with the reality that there are trade-offs everywhere.

Take fire prevention. As I wrote last week, we shouldn’t just be asking how to pay for it; we should ask what we’re paying for. Burying power lines is the more surefire way to avoid ignitions, but it’s also the most expensive.

Fortunately, it’s not the only option. UC Berkeley energy professor Duncan Callaway recently presented research to state lawmakers showing that “fast-trip” technology, which shuts off power lines almost instantaneously when it detects the potential for ignition events, has reduced ignitions more than 80% in PG&E territory.

“These fast-trip settings, due to their cost-effectiveness, have completely changed the calculus,” Callaway said.

What they haven’t changed is the need for politicians to tackle thorny questions.

It wasn’t long ago that California utilities regularly shut off power to millions of people during dangerous wildfire conditions, to limit the risk of ignitions. Those Public Safety Power Shutoffs have become less common as utilities have invested billions in wildfire prevention — with the side effect of higher electric rates.

Fast-trips shut off power far more surgically. But some people still lose power — a dangerous thing itself if you have to go without air conditioning during a heat wave, or if you use an electrically powered medical device.

Does that mean politicians should order utilities to bury more power lines, even if it results in higher utility bills? More broadly, what’s the right balance between reliable electricity and reasonable electric rates?

Those are the types of questions courageous politicians should be embracing. And while they’re at it, they should keep equity front of mind. Michael Wara, an energy and climate scholar at Stanford University, suggested that not everyone deserves the same level of public support for the same level of reliable electricity.

“Why should a low-income single mom in Bakersfield pay for the cost of someone to have a high-fire risk vacation home in Tahoe with high electric reliability?” he asked.

Great question.

This is the latest edition of Boiling Point, a newsletter about climate change and the environment in the American West. Sign up here to get it in your inbox. And listen to our Boiling Point podcast here.

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