The Morning Report
Get the news and information you need to take on the day.
This story is part of our new reporting series that explores the different pressures affecting cost of living for San Diegans. View more stories here.
San Diego’s energy prices are the highest in California, but bills for January of 2022 were particularly brutal for many pocketbooks.
Local news stations turned to daily coverage of shocked residents reacting to their bills, leading CBS 8 to launch an investigation into San Diego Gas and Electric’s bill spikes called “Amped Up.” One local lawmaker called for an audit of the company.
Befuddled San Diegans posted photos of their projected bills to social media sites like Reddit and NextDoor. Commenters cast doubt on the four-digit prices some residents had coming in February, hoping it was a software error on the utility’s end.
Prices spiked for a handful of reasons, not all of them in SDG&E’s control. At the beginning of the year, the rate the company charged for electricity increased about 11 percent systemwide – those are hikes the California Public Utilities Commission had previously approved. For residential customers, that increase was about 7.6 percent, lower than the impact for commercial, industrial and agricultural payors.
But prices for natural gas spiked too, due to unusually cold winter weather countywide and upward pressure on the natural gas market worldwide.
It’s hard to generalize just how bad the latest bout of inflation affected each customer because how much San Diegans pay per month for energy depends, for the most part, on how much energy they use.
Two other things, broadly affect the final bill.
Where a San Diegan lives determines how much electricity a customer can use before being dinged for a high energy use charge. Also the price of electricity drastically changes depending on the hour it’s being used. The most expensive electricity is between 4 p.m. and 9 p.m., when the sun is setting and power is in high demand.
Here’s an explanation on all the charges and fees on an average residents SDG&E bill and why those bills are spiking.
The price of natural gas or methane gas, a fossil fuel generated by fracking, spiked about 25 percent in January. Two big things contributed to that, SDG&E says. The first was a decrease in global supply, based on supply-chain disruptions from the COVID-19 pandemic and likely exacerbated by Russia’s invasion of Ukraine.
The other reason SDG&E has cited for increased prices was a colder-than-usual winter, with San Diego experiencing one of its coldest Decembers in years as low temperatures stretched into January as well. That means people were cranking up the mostly gas- or sometimes electric-powered heat in their homes.
“That was the primary driver of the recent high bills,” said Scott Crider, senior vice president of external affairs at SDG&E.
Gas prices “change every single month,” Crider said. As February warmed-up and San Diego heads into Spring, Crider said he’s hopeful gas prices taper off.
How much a customer is charged for gas is based on a “rate per therm.” Those rates can fluctuate monthly, even hourly.
A “therm” is how SDG&E measures the amount of energy someone uses. It equates to 100,000 British thermal units. One BTU, more specifically, is defined as the amount of heat required to raise the temperature of a pound of water by one degree Fahrenheit. It takes about 100,000 BTUs to heat a 2,000-square-foot home in a mild climate like San Diego.
According to one bill, the rate-per-therm, for instance, in April of 2021 on the actual price of natural gas – listed as “gas energy charge” – was about 34 cents per therm. The rate on one bill in February of 2022 was about 72 cents per therm on average.
Here’s a rundown of one customer’s gas charges and fees and what they mean:
Gas service charge: That’s the cost of delivering natural gas. It pays for the pipelines and power plants that get natural gas from the fracking fields to the stovetop. SDG&E profits off building infrastructure, its main bread and butter of the business. Investor-owned utilities like SDG&E make their profit in California by earning a 10 percent rate of return on building stuff like electric poles and wires. There’s no specific line item to show for that profit on an energy bill. It’s spread out over each customer under the service charge for both gas and electric. Customers paid about the same for gas service between February 2021 and February 2022, about $1.44 per therm.
Gas energy charge: That’s the cost of the actual molecules of natural gas, the amount of gas that SDG&E buys to provide to San Diegans. SDG&E can’t profit off this under state law. So the utility has to charge what it costs.
City of San Diego Franchise Fee Differential: This particular fee is something extra those living in the City of San Diego pay on top of a base franchise fee. Franchise fees are what SDG&E pays the city to own the exclusive right to build electric poles and wires in city public rights of ways. The utility would normally pay that fee but the utility regulator, the California Public Utilities Commission, permitted utilities to pass that onto customers as a charge. Those in the city of San Diego pay an extra 1.03 percent on top of the amount of gas they use.
Public purpose programs: This is a fee San Diegans pay to help support poorer San Diegans cover their energy bill. About a third of SDG&E’s customers get about a 35 percent discount on their bill under this program, Crider said. When the hard energy a customer uses increases, so does this fee. Customers paid about 10 cents times the number of therms they used in February.
State regulatory fee: This is charged to all investor-owned utility customers to help pay for the California Public Utilities Commission’s operation costs. The commission is the state regulatory agency over these utilities. Customers paid about a half of one cent times the number of therms used since at least April 2021.
SDG&E electricity prices are the highest of the three investor-owned utilities in California. SDG&E argues that’s because it has the smallest customer base over which to spread-out the costs of providing energy. That, and the utility has spent at least $3 billion on wildfire prevention over the last decade. Most of wildfire prevention involves building or fixing infrastructure, where the company can also take that extra 10 percent rate of return on the actual cost of any wildfire project. SDG&E has an updated plan it proposed in 2022 that would cost another $770 million. There’s no specific line item on the customer’s bill showing how those costs are applied, but SDG&E officials said it’s baked into the electric delivery rate, described below.
Where San Diegans live also affects how much someone pays for electricity. All California investor-owned utilities organize customers by climate zone, each with a certain energy allowance before being dinged for a high energy use charge. The four zones are coastal, inland, mountain and desert. (Find that on page four of the bill under electric charges.) The state requires climate zone allowances to encourage energy conservation.
Desert and mountain areas get a bigger allowance because those climate zones are harsher and typically require more energy to heat or cool a home. The coastal and inland areas, in contrast, have a lower allowance because cool ocean breezes help moderate the temperature, keeping things more comfortable. But that allowance amounts change twice a year, too, in summer (November through May) and in winter (June through October).
Most residential customers were automatically transitioned to “time of use” plans, in which the price of electricity is dependent on when a household uses electricity, not just how much it uses. Using electricity during “super off peak” hours, between midnight and 6 a.m., is cheapest. The second cheapest is from 6 a.m. to 4 p.m. and from 9 p.m. to midnight, called “off-peak.” And the most expensive is “on-peak,” or energy used between 4 p.m. and 9 p.m., when its most in demand.
“Really what we’re trying to do is incentivize behavior from customers to use energy when we have more renewables on the grid,” Crider said.
In the springtime at midday during “off-peak” hours, there is so much solar and wind on the grid that it’s very cheap to get it to people. It’s probably the best time to charge an electric vehicle at home or run the dishwasher, for instance.
As with gas prices, the electric rate can change mid-month, or daily, or even hourly, Crider said. The company is looking at a new program, a voluntary rate, that would change every 15 minutes for bigger commercial and industrial business consumers.
“Our larger customers, oftentimes have energy managers that are tracking this type of information. So they would be able to look, on an hourly basis, at the day ahead what the forecast looks like for pricing that day. And they can adjust their energy accordingly and optimize usage and save money,” Crider said.
Let’s take a look at all the different pieces of an electric bill. Like the gas side, customers are paying both for the delivery of electricity along poles and wires as well as the purchase of that energy, generation. There are different sets of rates for both, the sum of which is the total electric charge.
Electric delivery: Customers pay a set rate per kilowatt hour of energy per billing period, no matter when the energy is used. That rate can change depending on the season. This charge pays for two different things: transmission and distribution lines. Transmission lines are the huge, 200-foot-tall structures that support really big power lines that often run through the backcountry. Distribution lines are the wood or steel poles that line residential streets and bring power to individual homes along smaller lines.
Customers can actually see how much of their bill pays for transmission versus distribution in the right-hand column of their bill’s third page, underneath the wheel chart showing a breakdown of current energy charges. More of that money is going toward distribution because the costs to keep that system operating and maintained is higher, SDG&E officials said.
Electric generation: Customers pay a fluctuating rate per kilowatt hour of energy used depending on when they use it, between on-peak and super-off-peak. Customers pay less for energy generation if they use it during super off-peak hours because that energy is cheaper to produce.
Wildfire Fund Charge: This is a fee assessed to all customers of the big three investor-owned utilities. It supports a $20 billion pot of funding (paid by ratepayers and shareholders) that helps utilities cover wildfire damage claims. It’s about a half a cent charge times the amount of energy used by a customer.
A number of charges and fees customers pay have little to do with energy choices of the customer.
San Diegans are paying for wildfire prevention, tearing down the retired San Onofre nuclear power plant, and the burying of power lines underground, which historically has had a price point that’s been hard to pin down.
Some portion of the bill goes toward paying for energy projects no longer in use or the transition to a public power purchasing agency called San Diego Community Power, which is working to get the region to use 100 percent renewable electricity faster and cheaper than SDG&E.
Nuclear decommissioning: SDG&E customers are paying for the demolition of the San Onofre Nuclear Power Generating Station which hasn’t provided carbon-free energy to the region since it was shut down in 2012.
Competition transition charge: This helps SDG&E pay off contracts for power made before 1998 when the market shifted from a guaranteed monopoly to the big three power providers to a more competitive energy space.
Local generation charge: This pays for power the CPUC requires utilities to procure to make sure the energy grid has enough energy, especially during times of crisis like heat waves.
Total rate adjustment compensation: This pot of funding is charged to customers statewide and helps cover the subsidy customers get should they use less than their energy allowance, as discussed above.
PCIA charge: PCIA stands for power charge indifference adjustment, sometimes called an “exit fee” in the energy space. SDG&E buys long-term power contracts, be it for natural gas or renewables, but it’s getting out of that business as a new publicly-run power purchasing agency called San Diego Community Power takes over. SDG&E and San Diego Community Power will charge all customers the difference between what it cost SDG&E to purchase that power years ago and what that energy costs now and spread it out among the customer base. How much a customer pays for the PCIA charge depends on how much energy they use.