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Missing The Big Picture About California's Low Electric Bills Again

Sierra Martinez, Legal Director, California Energy Projects, San Francisco

Despite all the facts, the myth that Californians pay a lot of money for their electricity every month continues to be perpetuated, with its proponents using their misguided interpretation of the data to justify their claim that California shouldn’t be the model for developing a clean energy future.

This time around, it was a Forbes blog contributor who fell for the same misconception, mistakenly claiming that California’s clean energy progress is too expensive and shouldn’t be a model for ways to cut America’s emissions from existing power plants.

But the reality is that California is cleaning up its electricity act—while at the same time—maintaining extremely low residential bills and merely normal growth in prices.

Californians know this is true – the money coming out of their pockets to pay for electricity is much less than most places in the nation. But I’m not writing to tell California utility bill payers something they already know. I’m writing because other people are twisting the facts, and proffering them as reasons to thwart America’s progress toward cleaner energy and less climate-disrupting pollution.

California ranks high in low bills

Let’s get something out of the way: California residents pay an average monthly electric bill that is lower than all but nine other states in the union. You heard that right. Despite all the rhetoric about how expensive it’s been for California to make progress on clean energy, if you are an average American, your California counterpart pays a lower electric bill than you.

How is that possible? One of the main reasons why California has been able to maintain its low residential electric bills is that it invests so heavily in energy efficiency—finding ways to support smarter use of energy like upgrading old leaky homes and setting better standards for energy-guzzling appliances. This energy efficiency is cheaper than all the other types of energy, so it keeps California’s electric bills low. (In other words, if we use less electricity, utilities don’t have to generate as much of it, which keeps everyone’s costs low – and reduces the emissions that come along with making it.)

There’s a big difference between rates and bills

One technical aspect of energy efficiency is that it puts downward pressure on people’s electric bills, but it doesn’t apply the same kind of pressure to the price of electricity (or “rate”), which usually shows up on our bills as cents per kilowatt-hour (a unit of electricity). [Caveat lector: to avoid the boring stuff, skip to next paragraph.] Electric rates/prices are a function of the costs incurred to meet our electricity needs spread over how much electricity is used. (Numerically, this means an equation of costs over units of energy). Energy efficiency does reduce the cost of that electricity, which cuts the total amount of money being charged. But energy efficiency also leads to fewer kilowatt-hours used. Because both the numerator and the denominator of the rate equation decrease, as you can see in this illustration. energy efficiency doesn’t result in downward pressure on the rate.

110114_WordArt1.jpg

However, because Californians optimize their energy use through efficiency improvements, they use many fewer of those kilowatt hours of electricity than they would otherwise. The result: LOWER BILLS. And isn’t that what people care about? I can’t think of a single person who would trade a lower bill for a lower rate.

Now, people who fail to grasp the importance of electric bills often latch onto prices, and the fact that California’s electric rates are higher than the rest of the country – rather than looking at how much Californians actually PAY for electricity. Sometimes these naysayers even try to tie (unsuccessfully) these high rates to the idea that California’s environmental progress in the energy space must end. That’s what happened in the incorrect Forbes opinion piece – but it took a leap that just doesn’t exist. 

California electricity prices growing on par with the U.S.

The Forbes contributor measured the growth in California electric rates since 2003, altered the vertical axis, and omitted any reference to what’s happening generally in the country. All this made it appear like California rates are skyrocketing.

But here’s the truth: California rates have been rising less quickly than national rates since 2003. All you need is a ruler and you can see that residential rates have risen somewhat less in California than in the United States since 2003 (34 percent compared to 39 percent, respectively). By only showing the California increase, the Forbes article ignored the general phenomenon of increasing prices around the country. 

110614_Graph2.jpg

Source: U.S. Energy Information Administration (2014).

California annual growth rates similar to U.S. rates

The contributor’s additional claim that the growth in California’s electricity prices has quadrupled since 2003 is both false and misleading. It’s also a classic example of portending a doomsday end to California’s progress on clean energy by exaggerating statistics. Just take a look at the raw price data above – there’s no quadrupling of anything related to electricity prices over the last quarter-century. The truth is that over the long run, both California and the United States experienced moderate increases in electricity prices, rising at about the same pace as inflation (rising around 2% compound annual growth rate since 1990). By comparison, something like the nominal price of gasoline has tripled over the same period, (or grew at over 5% compound annual growth since then).

Here’s how Californian’s electricity prices stack up against inflation of the price of some other commonly purchased items:

110614_Graph3.jpg

Source: U.S. Bureau of Labor Statistics, U.S. Energy Information Administration (2014).

As you can see, California electricity rates have increased below the rate of inflation and the prices for coffee, eggs and bread.

The big picture

What’s really happening in California is that one of the nation’s most creative suite of initiatives to tackle climate change is working. California is investing unparalleled sums of money into clean energy like solar panels and wind turbines (which produce electricity without polluting the air), and at the same time helping cut energy waste in our homes and businesses. This powerful combination allows a state to both clean up its energy supply and keep electric bills low for its residents. And it shows in California‘s story: electricity consumption per person in the state of California is lower now than it was in 1973. As a result, Californians have some of the lowest electric bills in the country, and electric rates that grow at a normal pace. (Let’s also not forget those significant byproducts of creating clean energy jobs and a healthier economy, either.)

So don’t let the naysayers scare you into believing that California’s successful clean energy policies are too experimental or too expensive—they’re not.

The real experiment is the one occurring in the earth’s atmosphere right now due in large part to the world’s energy use. It’s causing climate-warming pollution and resulting in catastrophic weather events—and that’s a real expense.

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Discussions

Bob Meinetz's picture
Bob Meinetz on Nov 16, 2014 4:12 pm GMT

SIerra, actually you’re missing the big picture here. Your claim that

What’s really happening in California is that one of the nation’s most creative suite of initiatives to tackle climate change is working.

is, frankly, B.S.

Despite all the hype about renewables, CA carbon emissions are unchanged since 2000, in part because of NRDC’s aggressive efforts to fight carbon-free nuclear power.

Please set the record straight.

Joris van Dorp's picture
Joris van Dorp on Nov 17, 2014 12:04 pm GMT

We all want to decarbonize the economy as fast as possible”

Being anti-nuclear means you don’t want to decarbonise the economy as fast as possible.California is a bastion of anti-nuclear propaganda. California does not want to decarbonise as fast as possible. Q.E.D.

Bob Meinetz's picture
Bob Meinetz on Nov 17, 2014 7:35 pm GMT

Daniele, I concede that 1.6% is not “unchanged”. Would “virtually unchanged” be acceptable?

California’s supposed progress in decarbonizing its electricity sector is indeed B.S.:

  • “Per capita emissions” includes all sectors, including transportation. Electricity makes up only 21% of this total.
  • “Per capita emissions in California have decreased by 12 percent from 2000 to 2012, in spite of the overall 11.4 percent increase in population during the same period.” Per capita emissions have nothing to do with the “overall 11.4 percent increase in population”, do they?
  • The state’s electricity consumption is increasing by 2% annually, but California generates slightly less electricity than it did fourteen years ago. That’s because 33% of electricity is now imported from places like Palo Verde Nuclear Generating Station in Arizona, which is more than happy to divert money from the California economy so that renewables advocates can trumpet the amazing progress of their expensive toys. Aiding in this deception is the technique of contract reshuffling.

One picture is worth a thousand words, and the graph below shows that NRDC negated the entire contribution of CA’s wind (and the negligible contribution of CA solar) by helping to close one nuclear power station. While millions of the state’s citizens seem content to buy into this shell game, the environment doesn’t care one way or the other.

 

Jeffrey Miller's picture
Jeffrey Miller on Nov 17, 2014 7:17 pm GMT

Below are the figures for total and CO2e per capita emissions for the US (us) and for California (ca) in 2000 and 2012. Since 2000, carbon intensity (mT (metric tons) CO2e/capita) has declined 17% in the US as a whole and 12% in California. California’s per capita emissions have declined more slowly, at about 1% per year, than emissions in the US as a whole over the period 2000-2012.

Is 1% a year good enough? No. It does no more than offset population growth, leaving total emissions unchanged. If California over the last 12 years is our template for reducing total carbon emissions – which is the only thing that matters as far as the climate is concerned – call me underwhelmed. 

Le’s suppose that California could reduce its per capita emissions by half over the next 35 years. This would be an extraordinary feat. At 1% per year, the actual rate of improvement over the last 12 years, it would take 70 years. So this requires California to double its rate of per capita decarbonization to 2% per year. Let’s also suppose the rest of the US could reduce its per capita emissions over the same time frame to equal half those of California today – to about 6 mT. This would be an even more astounding achievement. It would require per capita emissions reductions of almost 75% and a decarbonization rate of 4% per year. As the climate in most of the country is far more inclement than in California with many more heating degree and cooling degree days, and as the industrial mix is far different and in many places much more energy intensive than in California, this will be very difficult to achieve. Finally let’s suppose that suppose the rest of the world – expected to be around 10 billion by mid century – were to also match California’s achievement. This would require emissions reductions in the developed world on the same order as those in California. For the currently less developed world, I assume the billions of poor who use little energy today want the same lifestyle that we enjoy in the developed world and will do whatever it takes to achieve that. For the poor countries to develop while keeping emissions under 6 mT per person per year will be very hard, as it would certainly require them to forswear coal (China’s emissions are already way past 6 mT per person per year and growing rapidly). 

Under this wildly optimistic scenario of drastic per capita emission reductions in the developed world and highly constrained growth in the developing world, total emissions will be 6 * 10e9 = 60 GT CO2e per year. This is more than 50% more than what we emit today. Far from being a solution, this is a recipe for a climate disaster. I see no way to avoid this other than by keeping the world’s poor in energy poverty (which would be highly unethical and impossible in any case) or by drastically ramping up production of zero emission energy sources, so that we can reduce per capita emissions to well under 1 mT per person. I see only one clear route to drastically ramping up carbon free energy and that is nuclear.  And even with a concerted all out global effort on that front, I am not sure it will be enough. But the course we are on now – very modest per capita reductions in the developed world, dramatic per capita growth in the developing world, with a lot of hot air about how efficency and renewables alone will save us – I find unconscionable. 

 

           usCO2e(MmT) caCO2e      usPop(M)  caPop    usCO2e/pop(mT)  caCO2e/pop

2000               7107.0      466.0           281.4         33.9        25.3                              13.7

2012               6526.0      459.0           312.8         38.0        20.9                              12.1

% change           -8.2       -1.5             11.2           12.1       -17.4                              -11.7

 

Source for California data: 

http://www.arb.ca.gov/cc/inventory/pubs/reports/ghg_inventory_00-12_repo...

Source for US data:

http://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory...

For some insights into why Califonia’s per capita emissions are much lower than most of the country, see this 2010 study “Wide do State Emissions Differ so Widely?” 

http://www.e3network.org/papers/Why_do_state_emissions_differ_so_widely.pdf

Figure 1 and Table A1 are especially interesting. 

Bob Meinetz's picture
Bob Meinetz on Nov 17, 2014 7:37 pm GMT

Great post Jeffrey, and it’s important to emphasize that with only 21% of CA energy consumption from electricity, the heavy lifting will have to be done in transporation.

As EVs become more practical we’ll likely see a shift from gasoline to electricity consumption, and it will be more important than ever that generation is clean and scalable enough to deliver.

Jeffrey Miller's picture
Jeffrey Miller on Nov 17, 2014 8:00 pm GMT

Bob,

That’s right. Around 3/4 of “residential” emissions in California are from cars. There is lots of room for improvement there as you note, especially with EVs on a clean grid. What is also striking about California is how low their industrial emissions are relative to other states. I assume this has more to do with the mix of industries in California than industry being more efficient there. Presumably California’s high electricty rates “help” in this regard by driving heavy industrial energy users to other states. If that is the case, it means that reducing emissions elsewhere in the country to California levels won’t be easy. Just looking at emissions at the individual level, Califronia is not much better than my home state of Illinois, and a lot of that difference is from differences in heating and cooling degree days. 

Bob Meinetz's picture
Bob Meinetz on Nov 17, 2014 8:04 pm GMT

Jeffrey, my home state is Illinois as well (I live in California now) so I grew up in the state with the largest net generation of nuclear electricity – I think being home to Argonne has a lot to do with that. Unfortunately, almost as much of Illinois’s electricity comes from coal, and no doubt climate adds to the state’s emissions burden.

As progressive as Californians like to consider themselves, their lack of coal generation stems more from supply considerations than environmental ones. And at this point, there’s really nothing progressive about shutting down nuclear.

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