SDG&E Rate Hikes in 2021
| Sullivan Solar Power
If you've lived in California, you undoubtedly know that the Golden State has some of the highest electricity rates in America. Rates have gotten so high that the average Californian pays two to three times what it costs to generate electricity. As if that weren't enough, San Diego Gas & Electric instituted a temporary rate hike in March that will have customers paying more through the end of the year. As a consumer, it's more important than ever to understand what's driving these surging costs and how to protect yourself against further SDG&E rate hikes in the future.
If you've noticed your energy bills from SDG&E have been higher than usual lately, you certainly aren't alone. In March, the utility company was granted permission to enact a 3.3% price hike, increasing the average residential rate from 27 to 31 cents per kilowatt-hour. Under the terms of the proposal, the inflated prices will continue until January 1, 2022.
According to SDG&E, a temporary rate adjustment was necessary to offset the soaring market price of electricity during an unusually hot second half of 2020. As an investor-owned utility, SDG&E is permitted to recover 100% of certain costs through its Energy Resource Recovery Account. Since rising costs led to a shortfall the company projected at $181 million, the added expenses were passed on to customers through higher rates.
While SDG&E's temporary 3.3% hike undoubtedly comes at a bad time for many people, experts warn that the situation may soon become much worse. In early 2021, energy analysts warned the California Public Utilities Commission that electricity rates could rise faster than inflation over the next decade. Without major changes, residents across the San Diego area could ultimately feel the pinch of rapidly escalating energy costs.
This explosion in electricity rates has been driven by a confluence of factors. Frequent, intense heat waves have driven market prices higher and put added strain on the electrical grid. At the same time, utility companies have been scrambling to upgrade obsolete equipment and institute wildfire mitigation measures. California's ambitious renewable energy goals have added pressure as well, creating a situation in which skyrocketing rates are becoming the norm.
Another complication is the fact that, unlike most public utilities, SDG&E is a for-profit company owned by a Fortune 500 holding company. In addition to covering its operating expenses, SDG&E is responsible for earning enough profits to generate dividends. As a private company, it's also potentially liable for the costs associated with wildfires started by its equipment. In a state as fire-prone as California, customers rightly worry that these expenses may ultimately be passed on to them.
Between sky-high electricity prices, surprise rate hikes and unpredictable grid disruptions, it's a stressful time to be a homeowner in San Diego. With such an unpredictable state of affairs, taking control over your energy needs can provide much-needed peace of mind. Fortunately, a solar energy system can help you do just that.
Going solar is the easiest and most economical way to break free from the spiral of ever-increasing utility bills. When you invest in a solar power system, you can ensure your home has clean, affordable, reliable energy for years to come. Never again will you be asked to pick up the bill for wildfire damages or shell out more money to ensure shareholders get their dividends. With the right system, you can even protect yourself against outages and other disruptions.
Best of all, new installations are currently still eligible for the 26% Investment Tax Credit. Also known as the federal solar tax credit, this invaluable incentive allows you to claim 26% of the cost of your solar installation as a credit on your federal tax bill. If you don't owe enough in taxes to take advantage of the entire credit, the remaining portion can even be rolled over into the following year. It's a fantastic way to minimize the cost of going solar and maximize your return on investment, but the 26% credit will only be available through the end of 2022.
The SDG&E rate hikes in 2021 may expire at the end of the year, but they're clearly a sign of things to come. As Californians continue to grapple with mounting electricity challenges, there's no better time to safeguard your energy future with an affordable solar power installation