Flipping on the lights, plugging in a phone or turning on the air conditioner are everyday routines that most Californians rarely think twice about — until the monthly utility bill arrives. Over the past several years, electricity has become one of the fastest-growing household expenses across the state, leaving residents wondering why costs have risen so dramatically as California doubles down on clean energy goals.
It’s tempting to point to a single culprit: Some blame renewable energy, while others point to regulations or inflation. However, a new UC Berkeley Economy & Society Initiative (BESI) report, “To make California more affordable, reform regressive regulations,” suggests the story behind rising electricity bills is much more complicated.
In reality, the monthly utility bill represents not only the cost of keeping the lights on, but also wildfire mitigation investments, rooftop solar incentives and all the public policy decisions that are steadily pushing electricity costs higher.
BESI’s new research is raising broader questions about how the state funds public programs, who ultimately pays for them and whether the current system supports the state’s long-term climate goals. As Californians face rising costs of housing, groceries, insurance and utilities, researchers say addressing electricity prices means reforming how the state pays for public programs.
BESI researcher Samuel Trachtman, who conducted the BESI study, and Berkeley Haas Energy Institute Director Severin Borenstein say many Californians misunderstand what they’re actually paying for when it comes to electricity. Generating electricity is only part of the bill: customers also shoulder the cost of wildfire mitigation, rooftop solar incentives and other public programs through their monthly utility rates.
Wildfires and the growing cost of the electric grid
California’s electricity has never been cheap. But for years, monthly bills remained relatively manageable because the state’s mild climate and longstanding investments in energy efficiency kept electricity use low, Trachtman said.
“Bills really started climbing after 2018 in the aftermath of a series of devastating wildfires,” he said. “Utilities increased spending on wildfire-related costs and passed those costs on to ratepayers.”
Borenstein, who was not involved in the study, said those wildfire-related expenses have become the single largest driver of rising electricity prices. Utilities are paying not only for the damage left behind by past wildfires, but also for the work of preventing the next one. That includes everything from legal settlements to burying power lines and installing equipment designed to reduce wildfire risk.
“The two biggest drivers of that are distribution costs, most of which is increased costs of dealing with wildfires, dealing with past wildfires, dealing with current risks and trying to mitigate future risks,” Borenstein said.
Neither researcher questioned the need to make California’s electric grid more resilient to wildfires. Instead, they argued that the debate should focus on how those investments are financed and whether regulators are doing enough to hold utilities accountable for controlling costs.
How rooftop solar factors in
While wildfires account for much of the increase, they don’t explain everything. Trachtman and Borenstein also point to California’s rooftop solar incentive system as another contributor to higher electricity prices.
Under this policy, homeowners with rooftop solar receive credits for excess electricity they send back to the grid. While the policy has successfully encouraged solar adoption, economists argue that it has also shifted some fixed utility costs onto customers without solar panels.
“The way the solar cost shift works is that a lot of these costs don’t change when one customer consumes 50% more or 50% less electricity,” Borenstein said. “They’re fixed costs.”
The electric grid still has to be maintained whether one household buys a little electricity or a lot. Utilities must still maintain the poles, wires and substations that keep the lights on. So, as more homeowners generate their own electricity, customers without rooftop solar end up paying a larger share of those fixed costs.
Affordability and climate goals
Electricity bills in California aren’t limited to the cost of generating and delivering power. California funds several public programs — including rooftop solar incentives and low-income electricity assistance — through customers’ utility bills rather than through the state’s general fund.
Trachtman said that approach disproportionately affects lower-income households because electricity is an essential expense that consumes a larger share of their income. Borenstein similarly described electricity rates as a regressive way to finance public programs compared with broader tax revenues.
Ironically, these policies also work against the state’s broader climate goals. California hopes to reduce greenhouse gas emissions by encouraging residents to switch to electric vehicles, electric stoves and electric heaters, but expensive electricity weakens that financial incentive.
“We’re basically shooting ourselves in the foot from a climate standpoint when we allow electricity rates to skyrocket like this,” he said.
Looking beyond the monthly bill
For both Berkeley researchers, California’s electricity affordability challenge is ultimately less about the cost of generating electricity and more about how the state chooses to fund public programs.
The cost of generating electricity in California is more or less comparable to the rest of the country, according to Borenstein. However, shifting public policy costs onto electric bills has made electricity increasingly expensive relative to other forms of energy, creating affordability challenges for households while discouraging the transition from fossil fuels to electric appliances and vehicles.
As California works to reduce emissions while making the state more affordable, researchers say policymakers must answer a difficult question: How should California pay for those investments? Investments in wildfire resilience and clean energy remain essential, but deciding how those investments are financed and who should bear the cost is a critical next step.
Rising electricity bills, both researchers argue, are no longer just an energy issue. They have become a window into one of California’s biggest challenges: how to invest in a safer, cleaner future without putting everyday necessities further out of reach.