SCE Rate Increase 2021: What You Need to Know

If you live in Southern California, and specifically in Southern California Edison territory, you are likely fed up with the already high cost of electricity. It seems like every year there is a rate increase, and, as you could likely guess, there are more increases on the horizon. SCE recently published a notice of public forums for them to request a large rate increase for 2021, with similar increases proposed for coming years.  Let’s take a look at the history of SCE rate increases and what is included in their current request, to see what homeowners can expect as far as increases go in 2021 and coming years. Why Utilities Request Rate Increases Every utility has to increase rates periodically to cover increasing grid maintenance and service costs. The grid, like any network of equipment, goes through wear and tear, and therefore, rates have to increase to cover the increasing costs of paying employees, buying new equipment, etc. to keep it up to date.  In SCE’s recently released notice, they state that the reason for the rate increase is to “set rates that customers pay to fund SCE’s day-to-day operations, including maintenance for its equipment and electricity grid upgrades.” The increases are there to cover the anticipated costs in the coming four years, from 2021 to 2024. Utilities like SCE have had increased scrutiny over the past few years as a result of the 2018 Paradise, CA fires that resulted in many deaths. These fires were found to be caused by neglect on Pacific Gas & Electric’s part, due mostly to outdated and shotty electrical equipment. So with this increased scrutiny on all utilities in California has come increased regulation, which means that the utilities are having to put more money into maintenance. Why You Should Maintain Skepticism of Increases The three big utilities, PG&E, SCE and SDG&E are "investor-owned utilities" (IOUs) and as such, they are publicly traded companies. But this means they are incorporated to provide a substantial return on investment (ROI) to their shareholders, not their customer base. So while they do have to have money to keep these elements maintained, they also have to be profitable to appease their shareholders. So while we can give them the benefit of the doubt that some of the increases are absolutely necessary to keep the grid running properly, it is also necessary to maintain healthy skepticism of the amount of the increases. This is why, when it comes down to it, you should attempt to free yourself from the utility so you will no longer be subject to any rate increases. The Effect on Residential Rates Not all utility customers are impacted by rate increases the same. Residential rates are generally rising more rapidly than average rates, and additionally, are rising more quickly than inflation. Residential rates in CPUC (California Public Utilities Commission) jurisdiction, the jurisdiction that SCE is under, are growing faster than residential rates statewide. The Effect on Baseline Rates Baseline rates are affected more significantly than any other rates. For those that don’t know, a "baseline" of electricity consumption is an amount of electricity, measured in kilowatt hours (kWh), that satisfies a substantial amount of electrical use of the average residential customer in a given area. The baseline statute was established by The 1976 Warren-Miller Lifeline Act (CAL PUC Code § 739) as a response to significant energy cost spikes in the 70’s. Baseline rates are set at a lower rate and are meant to cover 50-70% of average household consumption - but are the most susceptible to large increases when rate changes are requested. The History of SCE Residential Rate Increases SCE has seen steady increases in their residential rates every year since 2009. Between 2009 and 2019, residential rates have increased 18% in SCE territory. Unlike other utilities in the CPUC jurisdiction like PG&E and SDG&E, SCE’s residential average rates have actually paced similar to inflation, and have actually paced below the CA average. See the rates below, where (EIA) CA represents the CA residential average rate, and CPI represents rate of inflation.So you can see that rates have increased every year, and you can expect that to continue into the future. The History of SCE Baseline Rates Baseline rates have risen much more significantly since 2009 than those of the general residential rates. Even in SCE, where rates in general have not risen like that of SDG&E and PG&E, baseline rates have risen 48% since 2009. See below:So since baseline rates are meant to cover most usage for the average customer, these dramatically increasing rates are largely affecting lower use customers - making power more expensive for lower income earners. It’s estimated that a quarter to a third of residential customers never exceed their baseline - so really, these baseline rates are a better representation of what kind of increases most customers are seeing. SCE Application for Rate Increase 2021 SCE has again filed an application for a rate increase in 2021 and increases over the next consecutive three years.  If approved by the California Public Utilities Commission, there will be a 14% rate increase for residential rates in SCE territory in 2021.  According to the application, this amounts to increases of approximately $14 in 2021, $4 in 2022 and $6 in 2023 to the average bill. These amounts will be less for lower income residents that are enrolled in the California Alternate Rates for Energy (CARE) program. These rates could take effect as early as 2021. This 14% increase is a significant jump from previous years for SCE. After only 18% in increases over the last 10 years, a 14% increase in one year is astounding. For those customers with higher than average bills, this could result in significant bill increases that could be hard to swallow.  How You Can Avoid these Increases by Going Solar So if you’re a homeowner in SCE territory, you may be worried about these impending rate increases. If your usage is higher than average, you will be faced with much higher bills, that, especially in the summer, will strain your already tight finances. You may be wondering how you can get relief from this impending financial strain. At the end of the day, you can add all the home efficiencies you want, but you will still be susceptible to high rates. In reality, there is only one answer: you should go solar.  By installing solar panels and producing your own power with the Sun, you can create enough power to offset most or all of the power that you pull from the grid. How it works is through a billing mechanism known as “net metering” where homeowners can sell the extra solar power their panels create during the day back to the power company for “credits” that can be used at night when the solar is not producing. Through this system of producing credits and using them at night, most homeowners who install solar can completely eliminate any electric charges they may have had previous to installing solar. So by eliminating electric charges, homeowners who install solar can shield themselves from the increases coming in SCE in 2021, and any increases moving forward by creating their own power instead of having to rely on power from the utility. By doing this, they will no longer have to worry about rate increases, and as rates increase, the return on investment of the solar actually increases, as when rates increase, savings from solar increase. Save Even More by installing Battery Storage With the new “Time of Use” rate structures that have been implemented in SCE territory, electricity costs more or less based on the time of day it is used. It is most expensive in the “On-Peak” times, which are typically in the afternoon / early evening, as during these times, more people are at home using power, and therefore the power company charges more, as the higher demand puts strain on the grid. For many homeowners, the increased rates at these times mean they will be spending much more than before Time of Use was implemented, as they are typically getting home from work or school and using appliances in these hours.  Luckily, if you install solar and add battery storage, you can offset these Time of Use charges by charging your battery with the extra solar power you create during the day and using it during on-peak times. Instead of pulling power back from the grid when the sun starts to go down and the solar produces less, you can set up your solar + battery system such that you can pull power from the battery during this on-peak times. That way, you don’t have to use the expensive power from the utility, and can save a ton by using the extra power you created during the day.  So, as you can see, SCE rates are going up in 2021, and pretty significantly. If you’re a homeowner in this utility, you should see this as a sign of things to come, and should seriously consider going solar so that you can produce your own power so you will no longer have to worry about the dramatic rate increases like the one coming next year. If you’re a homeowner in SCE utility and are interested in getting a solar quote or adding battery storage, contact us today.

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