SCE , PG&E, SDG&E Rate Increases

California Power Bills Are Rigged to Rise: How the CPUC–Utility Machine Keeps You Paying More (and How Virtual Power Plants Let You Opt Out)

News
February 12, 2026•11 min read

California electric customers watching their bills jump year after year are not imagining things. Under the way the California Public Utilities Commission (CPUC) regulates investor‑owned utilities like Southern California Edison (SCE), Pacific Gas & Electric (PG&E), and San Diego Gas & Electric (SDG&E), total costs are structurally set to climb — and almost all of those dollars are recovered through per‑kWh charges on customers.[CPUC Electric Rates][LAO Rates]

At the same time, a parallel trend is emerging: virtual power plant (VPP) programs that pay customers to let their batteries and solar systems support the grid, effectively letting participants step outside part of the traditional rate‑payer role.[EPIC RPS Study][SolarReviews RPS]

This article walks through how the “CPUC–utility machine” works, why clean‑energy and wildfire policies are layered into your rates, and how programs like the Grid Resilience Program from My Home & Solar Solution give Californians a way to push back.[CPUC RPS Program][My Home Solution]

A System Designed to Recover Costs — No Matter What

California’s big utilities operate as regulated monopolies. They do not compete on price; instead, they file detailed “general rate cases” and other applications telling the CPUC how much revenue they need to operate, invest, and earn a regulated profit.[CPUC Electric Rates] If the CPUC finds those costs “reasonable and prudent,” they become part of the utility’s authorized revenue requirement, which must be collected from customers.[CPUC Electric Rates]

Key features of this model:

  • Cost‑of‑service regulation: Utilities recover operating expenses plus a guaranteed return on their capital investments (poles, wires, substations, meters, IT, etc.), a structure the CPUC describes explicitly on its electric‑rates pages.[CPUC Electric Rates]

  • Guaranteed recovery: Once costs are approved, the utility is entitled to collect that money. If total sales fall (due to mild weather, energy efficiency, or rooftop solar), rates are adjusted upward so total revenue still comes in — a dynamic the Legislative Analyst’s Office (LAO) highlights as one reason California’s rates are high even when usage is relatively low.[LAO Rates]

  • Mostly volumetric charges: Historically, the CPUC has required IOUs to recover most of their revenue through per‑kWh charges rather than high fixed monthly fees, which amplifies the rate impact when costs rise and sales flatten.[CPUC Electric Rates][LAO Rates]

The LAO reports that average residential rates for California IOUs are roughly twice the U.S. average on a cents‑per‑kWh basis, even though average household consumption is lower, so customers feel the pain on every kilowatt‑hour they use.[LAO Rates][EnergySage CA Rates]

RPS: Clean Energy Is Now a Big Slice of the Cost Stack

California’s Renewables Portfolio Standard (RPS) requires utilities and other load‑serving entities to get 60% of their retail electricity from eligible renewables by 2030 and to reach 100% clean retail sales by 2045.[CEC RPS Overview][CPUC RPS Program] The current CPUC RPS proceeding and fact sheets describe how investor‑owned utilities, community choice aggregators, and electric service providers all submit annual procurement plans and compliance reports against those targets.[CPUC RPS Program]

The latest RPS cost report (the “Padilla Report”) shows that:

  • For the big IOUs, RPS‑eligible energy now makes up roughly half of total generation volumes, but a larger share of total generation cost — on the order of the high‑50% range.[CPUC Padilla Report]

  • Average RPS contract prices fell for more than a decade as solar and wind costs dropped, but recent years have seen a reversal: the report documents a noticeable increase in 2024 RPS contract prices versus 2023 in real‑dollar terms.[CPUC Padilla Report]

Independent analyses back this up. A 2019 study from the University of Chicago’s Energy Policy Institute found that, across U.S. states, RPS policies increased retail prices by roughly 11% on average about 7 years after adoption, as utilities passed through higher procurement and integration costs.[EPIC RPS Study] Other policy reviews note that RPS mandates can increase costs in the short to medium term even as they reduce fuel‑price risk and pollution over the long run.[NCSL RPS][Breakthrough Renewables Prices]

In practice, that means clean‑energy procurement is no longer a small rider at the bottom of the bill; it is a central cost block inside the CPUC‑approved revenue requirement.[CPUC Padilla Report]

Wildfire, Wires, and the “Stacking” Problem

The RPS gets much of the political attention, but state analysts and the CPUC itself are clear that wildfire‑related spending and broader grid investments are at least as important in driving up bills.[LAO Rates][Haas Runaway Rates] The LAO cites wildfire mitigation, undergrounding, and hardening projects as major contributors to rising IOU revenue requirements, on top of normal infrastructure replacement.[LAO Rates]

Recent CPUC general rate case materials and fact sheets for SCE’s 2025–2028 period explain how this works:

  • SCE requested billions in new spending for wildfire risk reduction, pole and wire replacement, and reliability projects; the CPUC trimmed the request but still authorized a large multi‑year revenue increase.[CPUC SCE GRC Fact Sheet]

  • SCE’s own “rate advisory” pages show that as of late 2025, average residential energy rates would climb into the mid‑30¢/kWh range, with a portion of that increase specifically attributed to wildfire‑mitigation and disaster‑recovery cost recovery layered onto base delivery and generation charges.[SCE Rate Advisory]

The Public Advocates Office has repeatedly warned in its quarterly rates reports that this “stacking” of new cost categories — wildfire, RPS, transmission, EV infrastructure, low‑income programs — on a shrinking sales base is the fundamental driver behind what it calls “runaway” electricity rates.[Cal Advocates Q2 2025][Cal Advocates Q3 2025]

Because the CPUC’s framework treats most of these expenditures as prudent and necessary for safety, reliability, and decarbonization, it routinely authorizes them into rate base. Once there, they earn a regulated return and must be recovered from customers over decades.[CPUC Electric Rates]

Transmission Delays Reveal the Scale of the Build‑Out

Massive transmission and interconnection build‑outs are another part of the picture. The CPUC RPS and transmission‑planning materials show:

  • Since 2020, more than 20 GW of new clean energy and storage resources have interconnected to the CAISO grid, with many more gigawatts in the queue.[CPUC RPS Program][CAISO Interconnection]

  • At the same time, transmission projects across PG&E and SCE territories have experienced widespread delays tied to permitting, materials, and “bundling” dependencies, prompting the CPUC to overhaul its transmission permitting rules in General Order 131‑E to speed approvals.[CPUC GO 131‑E Decision]

Each new line, substation, and network upgrade represents new capital that will be recovered from ratepayers. Faster permitting can help keep reliability and RPS timelines on track, but it does not change the basic business model: more steel in the ground means more rate base and, all else equal, more dollars that have to be collected in bills.[CPUC GO 131‑E Decision][CAISO Interconnection]

The Structural Logic: Why “The Cake Is Baked” on Higher Rates

Economists at the Energy Institute at Haas summarize California’s situation as a combination of high fixed system costs and a pricing structure that loads most of those costs into per‑kWh charges.[Haas Runaway Rates] The LAO reaches a similar conclusion: even if total utility spending were perfectly justified, the way those costs are recovered means that residential customers see very high cents‑per‑kWh, especially as efficiency and rooftop solar suppress total sales.[LAO Rates]

The logic chain looks like this:

  1. Policies and risk drive spending.

    • RPS and SB 100 require aggressive clean‑energy procurement and long‑lead‑time transmission and storage investments.[CEC RPS Overview][CPUC RPS Program]

    • Wildfire liability and safety requirements push utilities to undertake multi‑billion‑dollar hardening and vegetation‑management programs.[LAO Rates]

    • Electrification of vehicles and buildings requires upgrades to distribution and transmission networks.[Haas Runaway Rates]

  2. CPUC approves and guarantees recovery.

    • Through general rate cases and dedicated cost‑recovery applications, the CPUC authorizes utilities to collect those expenditures plus a regulated return, as long as they are deemed reasonable.[CPUC Electric Rates][CPUC SCE GRC Fact Sheet]

  3. Costs are put into per‑kWh rates.

    • Because fixed monthly charges are relatively low for IOU residential customers, most of the revenue requirement is recovered through energy and demand charges, so any increase in the revenue requirement translates to sharper increases in cents‑per‑kWh.[CPUC Electric Rates][LAO Rates]

  4. Customers feel “astronomical” bills even at modest usage.

    • Public data compiled by EnergySage show average residential rates in California in the mid‑20¢ to mid‑30¢/kWh range in early 2026, compared to roughly half that in many other states.[EnergySage CA Rates][ElectricChoice State Rates]

Put bluntly: once the CPUC approves the spending, customers are on the hook. They have little influence over the trajectory of rates beyond using less or physically exiting part of the system.

How Virtual Power Plants Let Customers Opt Out (Partially)

Against this backdrop, grid‑integrated solutions like virtual power plants offer one of the few ways customers can materially change their relationship to the CPUC–utility machine.

A virtual power plant (VPP) aggregates thousands of distributed energy resources — rooftop solar, home batteries, EV chargers, smart thermostats — and operates them as a coordinated fleet that can supply or reduce load on demand.[Hydro Reform RPS][EPIC RPS Study] When the grid is stressed, the VPP dispatches stored energy or shifts consumption, providing capacity and grid services that would otherwise be supplied by expensive peaker plants or new wires.

Programs such as the Grid Resilience Program offered through My Home & Solar Solution are designed to do three things for customers in SCE, PG&E, and SDG&E territories:[My Home Solution]

  1. Reduce exposure to IOU energy charges.

    • By pairing rooftop solar with batteries, customers can self‑supply a significant share of their usage and time‑shift that energy into peak‑price windows, cutting the number of IOU‑billed kWh at the highest rates. Solar advocacy sources note that, under California’s time‑of‑use and NEM 3.0 structure, batteries have become crucial for maximizing savings.[SolarReviews RPS]

  2. Create a grid‑services revenue stream.

    • VPP participants allow their batteries to be dispatched within agreed‑upon limits during grid events. In return, they can receive bill credits or payments funded by utility capacity contracts, demand‑response programs, or wholesale market revenues. Analyses of early VPPs suggest these payments can offset a meaningful share of the system cost over time, especially as capacity needs grow.[Breakthrough Renewables Prices][EPIC RPS Study]

  3. Improve resilience during outages.

    • Batteries provide backup power when the grid goes down — a rapidly growing concern in California’s high‑fire‑threat districts and PSPS‑prone areas. Wildfire‑related outages and public safety shutoffs are specifically cited by the LAO and CPUC as key reliability challenges; behind‑the‑meter storage directly mitigates that risk at the customer level.[LAO Rates][CPUC RPS Program]

By enrolling in a VPP‑style initiative like the Grid Resilience Program, customers move from being pure consumers of IOU‑priced energy to being part of the resource stack that serves the grid. They still interact with the CPUC–utility system, but on far more favorable terms: buying fewer kilowatt‑hours at retail, and sometimes getting paid for the flexibility they provide.

The Bottom Line

California’s recent RPS, cost, and rate reports tell a consistent story. Clean‑energy mandates, wildfire safety, and infrastructure reinvestment are all politically popular and, in many cases, necessary. But under the CPUC’s cost‑of‑service model, once these expenditures are approved, they must be recovered from ratepayers — and because recovery is heavily per‑kWh, residential customers see some of the highest energy prices in the country.[CPUC Padilla Report][LAO Rates][Haas Runaway Rates]

RPS policy is a real contributor: renewable procurement now represents a large share of IOU generation spending, and recent contract prices have ticked up.[CPUC Padilla Report][EPIC RPS Study] Yet it is only one layer in a stacked cost structure that also includes wildfire mitigation, transmission expansion, and social programs, all moving through the same CPUC–utility pipeline.[LAO Rates][Cal Advocates Q3 2025]

For Californians, the practical question is not whether rates will rise multiple official sources suggest they will but how much of that risk they want to keep on their own bills. Virtual power plants and programs like the Grid Resilience Program with My Home & Solar Solution provide one of the few scalable ways to opt out, at least partially: by owning generation and storage, getting compensated for grid services, and reducing the number of IOU‑priced kilowatt‑hours you ever have to buy in the first place.[My Home Solution][SolarReviews RPS]

Sources

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