By Angela Lipanovich, Esq. and Jenny Folkesson, PhD.
August 5, 2026
Californians are paying the second-highest residential electrical energy charges within the Nation, and a well-liked rationalization — that rooftop photo voltaic prospects are shifting prices onto everybody else — has it backwards.1 Bundled common charges in PG&E’s service territory rose from roughly $0.24 per kWh in 2018 to $0.37 per kWh in 2024 in actual USD — a rise of about 52% in six years after accounting for inflation.2 That trajectory is actual, painful, and price fixing. However the information present that the principal drivers are wildfire-related capital spending, an getting old long-distance transmission system, electrical fee design flaws, and approved utility returns3 — not the roughly 18 GW of customer-owned photo voltaic that Californians have put in because the early 2000s.4
This text explains how information and the legislation converge on two findings that result in a single conclusion. First, the most important, fastest-growing elements of Californians’ electrical payments are utility capital prices — wildfire hardening, transmission enlargement, and grid infrastructure — pushed by forces unrelated to rooftop photo voltaic, and which distributed photo voltaic measurably helps to constrain by lowering peak transmission load and deferring infrastructure funding. Second, California’s rate-making framework — constructed for a one-way grid that not exists — neither credit the system advantages that buyer owned photo voltaic delivers nor allocates prices and advantages pretty throughout ratepayer courses. Modernizing fee design, by unbundling the restoration of mounted grid infrastructure prices from the variable worth of power era, is the structural repair. Collectively, these findings level to 1 conclusion: probably the most real looking path to affordability as electrification, EV charging, and data-center masses develop is to revisit our method to fee design and to assist many extra Californians — particularly renters, small companies, and dense city neighborhoods — personal their very own solar-energy provides.
What’s Truly Driving the Charge Will increase
PG&E, California’s largest investor-owned utility (IOU), charged residential prospects a median of $0.39 per kWh in June 2025.5 When economists, similar to these at U.C. Berkeley’s Power Institute at Haas, dissect the standard California residential fee, solely about 12–15 cents per kWh displays the aggressive marginal price of producing and delivering electrical energy.6 The remaining 25 cents or extra covers mounted cost-recovery for capital tasks, public-purpose applications, securitized wildfire claims, and approved return on the utility’s investments.7 The California Public Advocates Workplace attributes roughly 21% of the speed — about $0.08 per kWh — to wildfire-related capital and working prices, making them the only largest driver of latest fee will increase.8
PG&E’s 2020 and 2023 Normal Charge Case selections, along with individually recovered wildfire-cost memorandum accounts, authorize billions of {dollars} yearly for vegetation administration, system hardening, public security energy shutoffs, and undergrounding.9 PG&E’s 10,000-Mile Undergrounding Program alone has been projected at prices starting from roughly $3 million per mile to just about $6 million per mile, relying on terrain, urbanization, and contractor pricing.10
California’s legal responsibility framework intensifies that stress. Beneath inverse condemnation as utilized to IOUs, an electrical utility might be held strictly responsible for wildfire harm tied to its gear even the place no negligence is discovered.11 Utilities have rationally responded by deploying as a lot capital because the CPUC will authorize.
Approved capital earns a regulated return on fairness, which as of the date of this report, is between 10.23% and 10.33% for the three California IOUs, and above the nationwide common.12 That return is paid on a fee base that has grown by greater than 50% since 2018, however that far outpaces load development, which has been primarily flat over the identical interval. Out of this dynamic has emerged the cost-shift declare: that web power metering (NEM), California’s program of invoice credit for power photo voltaic prospects’ exports to the grid, quantities to a subsidy operating from lower-income, non-solar households to wealthier photo voltaic homeowners. It’s the most repeated argument in opposition to photo voltaic possession rights within the state. Nevertheless, the parable fails beneath scrutiny.
A Nearer Take a look at the Photo voltaic Value-Shift Fantasy
The “price shift argument” compares the retail credit score that NEM prospects obtain for exported power with a modeled “prevented price” the utility would in any other case pay.13 The “price shift” that comparability purports to measure is basically a mirage produced by California’s fee design itself — a design that picks and chooses tips on how to load ratepayers with prices they need to not bear and fails to acknowledge the advantages that distributed photo voltaic supplies.
The usual avoided-cost calculation is structurally biased in opposition to photo voltaic in 3 ways analysts have repeatedly documented:
(a) The Prevented-Value Calculator (ACC) that drives the California Public Utility Fee’s (CPUC’s) NEM cost-effectiveness evaluation excludes documented advantages of distributed era — prevented line losses, deferred transmission and distribution upgrades, locational capability worth throughout net-peak hours, and resilience advantages throughout Public Security Energy Shutoff (PSPS) occasions.14
(b) Rooftop photo voltaic reduces the identical wildfire-related transmission build-out that drives a lot of the fee improve mentioned above.15
(c) The calculation is delicate to which 12 months’s gasoline worth, capacity-value methodology, and low cost fee the analyst chooses.16
A deeper downside is that the purported “price shift” occurring doesn’t measure a switch in any respect. The Pure Sources Protection Council’s (NRDC’s) Powering Change report reveals that the dynamic behind California’s rising electrical charges just isn’t photo voltaic prospects receiving a profit at another person’s expense. It’s the mechanics of how utilities recuperate their prices. NRDC’s evaluation claims that at present’s non-solar residential charges are roughly $0.07 per kWh increased than they’d be with out NEM, which is round 16% of California’s complete residential IOU retail fee at present; additional, they state that $0.05 per kWh of that improve has occurred since 2018.17
Critically, NRDC characterizes that determine not as a cost from non-solar to photo voltaic prospects, however as a rate-design assemble: the consequence of behind-the-meter photo voltaic lowering IOU power gross sales. It displays the restoration of rising mounted prices on flat or reducing demand by rising charges, not a direct cost from one ratepayer to a different.
That distinction issues. A “subsidy,” in bizarre utilization, is “a profit given by the federal government, or a public or non-public group, to an individual, enterprise, or trade” requiring a direct, intentional switch. What happens with photo voltaic is a free-market consequence: utilities lose anticipated income when their prospects generate a few of their very own electrical energy and promote the power on the open grid. The compensation these prospects obtain for that photo voltaic power is not any extra a “subsidy” extracted from the utility than the earnings a house owner earns promoting greens from a yard backyard at a farmers’ market is a “subsidy” extracted from the grocery store whose produce gross sales they displace. In each circumstances, the producer is paid for a great they grew or generated.
The comparability can also be rigged by mismatched timeframes. The price-shift determine is cumulative — the alleged share of the present residential invoice accrued throughout each NEM buyer who has interconnected since 1997. The wildfire determine usually paired in opposition to it’s a latest slice. Setting one in opposition to the opposite is like evaluating the odometer studying of your automotive to the journey meter from this morning’s drive. Each are in miles. Neither tells you what the opposite does.
In contrast on a constant foundation — latest in opposition to latest, or all-time in opposition to all-time — wildfire dominates by a large margin.18 And the trajectories diverge from there. NEM 3.0, in impact since April 2023, sharply diminished export compensation for brand new entrants, structurally constraining NEM’s contribution to future fee development. Wildfire spending has no such constraints.
Wildfire-related prices are the only largest driver of California’s residential fee will increase. By any affordable accounting, wildfire-related restoration is materially bigger than NEM’s share of the residential invoice, and the hole is widening as undergrounding capital, insurance coverage premiums, and Wildfire Fund obligations proceed to rise.19 The CPUC’s 2023 SB 695 report confirms that wildfire-related prices — mitigation, insurance coverage, and legal responsibility — are the first statewide driver of fee will increase over the previous decade. Photo voltaic prospects, by lowering peak transmission load, are serving to to mitigate the very wildfire-hardening build-out that drives these prices upward.20
Lastly, the cost-shift framing has a deeper downside than its arithmetic: it presumes there’s a web price to apportion within the first place. As soon as the offsetting advantages of distributed photo voltaic are credited, that premise collapses. A 2024 evaluation discovered that present photo voltaic prospects collectively diminished prices for all California ratepayers by roughly $1.5 billion in a single 12 months — by way of diminished peak grid demand, deferred transmission funding, and decrease wholesale power procurement.21
And looking out in direction of the long run, grid-optimization modeling predicts {that a} distributed clean-energy system will likely be $88 billion cheaper to construct and function than a centralized different as a result of Distributed Power Sources (DERs) scale back the infrastructure that the long-distance transmission system exists to hold.22
The Historic – and Persevering with – Value Shift
The phrase “price shift” has a for much longer historical past in U.S. electrical ratemaking than the current rooftop-solar debate. As Sharon Beder summarizes in Energy Play, publicly owned utilities traditionally charged residential and business prospects related charges to industrial prospects, whereas IOUs charged residential and business prospects materially extra to maintain industrial charges aggressive with the public-power neighbor subsequent door.23
In 1994, IOU residential prospects paid 31% extra per kWh than publicly-owned residential prospects, whereas IOU industrial charges had been the identical as public-power industrial charges. The structural sample: IOUs have been shifting ratepayer prices amongst different ratepayer courses lengthy earlier than rooftop photo voltaic.
Two additional items of that historic sample are seen in present-day California. First, possession of the IOUs is concentrated amongst institutional traders, layered in a number of tiers of holding firms, and held by out-of-state hedge-fund stakeholders whose approved return on fairness is in the end recovered from California ratepayers. Govt compensation at California’s largest investor-owned utilities (IOUs) is itself a price of service that ratepayers in the end pay. Most of it, base wage and money incentives, is recovered as an working expense within the utility’s income requirement, not by way of the approved return on fairness. Regulatory filings for fiscal 12 months 2024 (reported in 2025) place IOU CEO pay among the many highest within the nation. Sempra, the mother or father of SDG&E and SoCalGas, paid CEO Jeffrey Martin $21.5 million, rating him the third highest-paid utility government within the nation.24 PG&E paid CEO Patricia Poppe $15.8 million with $1.4 million in base wage plus $11.7 million in inventory awards and different compensation. Edison Worldwide, mother or father of Southern California Edison, paid CEO Pedro Pizarro $13.8 million.25 The pattern has continued: an April 2026 report reveals utility CEO pay rose 16% in 2025, with Poppe at $19.8 million and Pizarro at $16.5 million.26
Second, each greenback of fee base financed at a return is a greenback of income requirement that non-solar and photo voltaic prospects alike pay to capital. In that actual and quantifiable sense, all retail prospects — together with non-solar prospects — are constantly “subsidizing” investor returns by billions of {dollars} per 12 months.
True Competitors Means Buyer Possession
California’s 1996–2001 restructuring experiment is usually cited as proof that “deregulation” failed. However that experiment didn’t let households or small companies personal their very own electrical energy provide. It merely substituted competitors amongst giant turbines for competitors amongst utilities, whereas leaving the shopper in the identical passive function.27
Real competitors for the shopper means letting the shopper personal the technique of manufacturing when doing so is technically and economically possible. Regulating concentrated, capital-intensive era and transmission property is acceptable; proscribing a person family, college, farm, or warehouse from producing and storing its personal clear electrical energy just isn’t.
The price foundation behind this conclusion is structural. Self-generated photo voltaic electrical energy is priced to the shopper on the gear price and financed at consumer-loan charges, with out a licensed return on capital, holding-company overhead, or government compensation restoration.
Every kilowatt-hour bought from an IOU, in contrast, contains the utility’s approved return on fee base, company overhead, and the share of fixed-cost restoration recognized within the previous part. The financial savings aren’t theoretical.
The mechanisms to supply these financial savings aren’t novel — they’re already in operation, at various scales, in California and in different jurisdictions: quick monitor allowing, neighborhood photo voltaic applications, digital web metering for multifamily housing, public-sector rooftop applications serving faculties and warehouses, and successor tariffs that protect cost-effective payback intervals for photo voltaic installations.
Scaling these mechanisms is itself probably the most direct fairness response, extending photo voltaic’s financial and resilience advantages to renters, multifamily residents, faculties, small companies, and dense city neighborhoods which have traditionally been locked out of photo voltaic possession.
Conclusion
California’s electrical energy fee improve downside is actual, and so is the seek for somebody to carry accountable. However the information level unambiguously towards failed utility fee structuring and IOU capital spending — pushed by wildfire legal responsibility, approved returns, and a long-distance transmission system that customer-sited era really relieves — because the dominant causes.
California’s photo voltaic prospects aren’t the supply of the affordability disaster; the distributed photo voltaic trade is probably the most quickly deployable, customer-aligned piece of the affordability answer. Stronger insurance policies and laws are wanted to untap the power to develop photo voltaic possession alternatives, particularly for renters, multifamily households, small companies, and traditionally excluded communities.
A structural answer is rate-design reform. If California unbundled the mounted prices of grid infrastructure from the variable price of power era — relatively than recovering each by way of a single volumetric per-kWh cost — infrastructure prices allotted to ratepayers would decline over time, as a result of distributed sources scale back the very build-out these prices recuperate, and power era could be priced on free-market phrases through which distributed era competes on degree footing with utility-scale provide. So long as charges stay bundled and grid infrastructure stays privately held by IOUs whose approved returns rely on volumetric gross sales, the battle between utility shareholder pursuits and photo voltaic system homeowners will proceed to form each rate-making continuing.
It’s time to double down on insurance policies that develop photo voltaic possession rights not solely as one of the best course for the surroundings, but additionally as one of the best course for the financial pursuits of all ratepayers.
In regards to the Authors
Angela Lipanovich is a clear power lawyer with greater than twenty years of expertise advising clear power firms and the purchasers they serve. She based Estriatus Regulation, co-founded SolarWAVE Motion, and beforehand served as Normal Counsel to a publicly traded photo voltaic firm. She has helped form key coverage selections defending photo voltaic possession rights and is a long-standing member and former Board member of the American Photo voltaic Power Society (ASES).
Jenny Folkesson, Ph.D., is Govt Director and co-founder of SolarWAVE Motion. A pc scientist skilled on the College of Copenhagen, she brings 20 years of expertise in information science and machine studying, together with picture evaluation on the Chan Zuckerberg Biohub. Her work facilities on clear power information evaluation and using open-source code and information to help local weather options and coastal and marine conservation.
