Wholesale Electricity Prices Have Increased by 59% In California

Wholesale Electricity Prices Have Increased by 59% In California Credit: cowardlion / Shutterstock.com[/caption]

As natural gas is the second most widely used energy source in California, the state’s power market has experienced a 59 percent increase in wholesale power prices. The state has been unevenly impacted by rising costs: Since April 2012, prices in Southern California have exceeded those of Northern California by approximately 12 percent.

According to the U.S. Energy Information Administration, average wholesale electricity prices rose in every region of the contiguous U.S. this year. According to agency spokesman M. Tyson Brown, the main reason for the increase is the rebound in historically low natural gas prices. Natural gas spot prices at major hubs nationwide increased between 42 and 146 percent between the first half of 2012 and the first half of 2013.

In New England and New York, pipeline constraints limited the delivery of natural gas, causing electricity prices in the region to exceed $200 per MWh during the summer. The Northwest, the region hit by the largest price increases, experienced declines in precipitation that led to reduced hydroelectric generation, making the region more dependent on gas-fired power and driving electricity prices up 82 percent.

Prices across California remain divergent due to the continued outage of two units at the San Onofre Nuclear Generating Station. In what the EIA referred to as a “large and unusual” separation in power prices between the northern and southern Californian electricity grids, which have historically tracked each other closely. The spread has been attributed to the need for more-expensive generation in the region, including the use of local generation sources, to fill the shortage.

As a result of legislation passed in 2001, the current California rate structure is not based on income, making price increases particularly harmful to seniors and low to middle income families who use more energy, but can’t afford more efficient technology. A new bill, AB 327, would:

“Repeal the limitations upon increasing the electric service rates of residential customers… but would require the commission, in establishing rates for CARE program participants, to ensure that low-income ratepayers are not jeopardized or overburdened by monthly energy expenditures and to adopt CARE rates in which the level of discount for low-income electricity and gas ratepayers correctly reflects their level of need.”

The bill, after having passed both the Assembly floor and the Senate Energy, Utilities, and Communications Committee, now sits in the Appropriations Committee.

Opponents of AB 327 argue that the current rate structure gives incentive to those who use the most energy to adopt alternative energy technology. Supporters argue that the current rate structure unfairly targets many consumers who can’t afford new technology, and that the California Public Utilities Commission should be allowed to consider a variety of factors in determining the best way to make alternative energy appealing to lower-income families.