At the start of every year, SDG&E and other utilities across California are required to update energy pricing to reflect the costs of providing clean, safe and reliable service to customers. Updated rates for both electric and gas services went into effect Jan. 1, 2022. Multiple factors impact electricity and natural gas rates – everything ranging from commodity fuel prices to legislative mandates to the price of carbon credits required to offset greenhouse gas emissions.
There is no ideal time to increase rates, especially now with inflation driving up the cost of goods and services across the board and putting more financial strain on working families. We constantly look for ways to make our operations more efficient and use a suite of tools to buy energy at the best possible prices for our customers. Even so, surging natural gas prices – along with the ongoing need to strengthen safety, reliability and sustainability and provide public benefit programs – are creating challenges.
Below is a breakdown of some of the key factors driving up rates.
- Electric generation costs. Natural gas is used in power plants to generate electricity. When natural gas prices rise, as they have been for a number of months, it has a ripple effect on power generation costs.
- Growth of public benefit programs: Utilities in California are charged with implementing a variety of public benefit programs that are paid for through surcharges added to utility bills. These programs include energy efficiency incentives and bill discount programs for low-income households. With the pandemic creating widespread financial hardships, enrollment in customer assistance programs such as CARE has increased. In addition, a new mandate requires SDG&E to increase the public purpose program surcharge to support the School Energy Efficiency Stimulus Program authorized under Assembly Bill 841. The program is dedicated to improving ventilation and energy efficiency in California schools at the scale required to safely operate during the COVID-19 pandemic.
- Wildfire Mitigation Costs: SDG&E continues to invest in projects and programs to reduce the risk of wildfires, strengthen community resiliency, and harden the electric grid by replacing wood poles with steel poles, undergrounding power lines and other measures.
- Safety and reliability upgrades: To meet our customers’ expectations for clean, safe and reliable service, SDG&E regularly inspects its equipment to identify items in need of repair and works hard to make repairs before the equipment fails and causes power outages. In addition, SDG&E is a leader in adopting smart grid technologies that improve operational efficiency, safety and flexibility. SDG&E has received the ReliabilityOne® Award for ‘Outstanding Reliability Performance’ among utilities in the West for 16 straight years. And it was recently honored with the National Award for Best Electric Reliability in America.
Natural Gas Rates
- Natural gas market conditions: Due to a variety of reasons including supply chain disruption caused by the pandemic and bad weather, the commodity cost for natural gas has been surging, as noted in this San Diego Union-Tribune article.
- The cost of greenhouse gas emission credits: Under California’s cap and trade program – a key element of the state’s strategy to reduce greenhouse gas emissions – natural gas utilities are required to pay for carbon credits for their small-usage customers to offset the GHG emissions associated with the fuel. Carbon prices are projected to be significantly higher in 2022.
- Annual cost adjustments to serve customers: Infrastructure, labor, materials and other operational costs have increased.
- Public benefit program costs: Like electric customers, natural gas customers must pay the public purpose program surcharge, which funds low-income and energy efficiency programs. That includes the new School Energy Efficiency Stimulus Program authorized under Assembly Bill 841, to improve ventilation and energy efficiency in California schools at the scale required to safely operate during the COVID-19 pandemic.
Help for Customers
Anyone who is struggling to pay their bill is encouraged to use the MyAccount web portal to make payment arrangements and visit sdge.com/assistance to learn more about their options and assistance programs. To learn how to save on energy bills this winter, visit sdge.com/winter.