Many of California’s farmers and rural residents are paying triple the national average for energy rates. Recent spikes at the gas pumps and on natural gas bills are in the spotlight as the Legislature kicks off a new session and explores policy options for reining in the costs.
Fending off a reputation for skyrocketing rates and for igniting catastrophic wildfires, Pacific Gas & Electric was on defense last week during an oversight hearing on energy affordability for the Assembly Utilities and Energy Committee. Michael Boccadoro, executive director of the Agricultural Energy Consumers Association, ran through a litany of complaints with the investor-owned utility that he racked up during his 30 years of lobbying on energy costs.
“If they're doing all these efforts to reduce costs, why are they proposing to increase rates in 2023 alone by 36%—[to an additional 9.1 cents per kilowatt hour over the current 30 cents]?” asked Boccadoro, as he chastised PG&E for proposing increases through at least 2026. “It's a massive rate increase and it's just the beginning.”
He predicted rates for consumers and businesses will rise to four times the national average by 2030, far outpacing PG&E’s promise to maintain them at or below the level of inflation. Agriculture in the Golden State already uses more electricity than many other parts of the country due to irrigation and groundwater well pumping. Boccadoro said the high rates put his farmers “at a huge competitive disadvantage to farming operations in other parts of the country.” Bills are also rising faster in the Central Valley than other parts of the state, since extreme heat is putting more demand on air conditioners.
He pushed lawmakers to find ways to shift costs out of the rate base to the companies for shouldering investments in undergrounding power lines for wildfire hardening while also planning for a surge in demand from electric vehicles and a major transition to renewable energy.
“If you don't have skin in the game, you're not really truly concerned,” he said. “Shareholder interests always take precedence over ratepayer interests with the investor-owned utilities.”
Sitting next to Boccadoro, Carla Peterman defended PG&E in her role as an executive vice president for the corporation.
“We are in an unprecedented time where there's a lot of investment that needs to happen in a very short period of time,” said Peterman, as she responded to Boccadoro’s reference of a 39% bump in rates. “Those numbers he cited are very high end. That would be if the [California Public Utilities Commission] approved everything that we asked for, which, contrary to popular belief, does not happen.”
Boccadoro shot back that PG&E is significantly investing in wildfire mitigation now because they neglected to do the necessary maintenance to their system over time.
“We made the same points during legislative hearings on wildfire mitigation,” he said. “They fell a little bit on deaf ears.”
Peterman responded that shareholders “have definitely had skin in the game” and cited PG&E’s bankruptcies, their contributions to a wildfire fund and their disallowances. She pointed fingers at the state for tasking PG&E with quickly making the system as safe as possible following severe wildfires in 2017 and 2018, investments that are just starting to be reflected in rate changes today.
Boccadoro described his attempts to work with the utility to address those costs but portrayed PG&E as taking a combative stance with ratepayers.
“I can give you endless stories of proposals we've taken to PG&E and the rate team to design rates that would be better for agriculture in the San Joaquin Valley and the rest of the state,” he said. “And most of it falls by the wayside.”
He blasted the utility for trying to take away the ability to aggregate loads under the net energy metering program, explaining that lawmakers approved legislation last year recognizing agriculture is different from residential customers when it comes to adding solar installations on farms.
In contrast, Boccadoro praised municipal utilities for designing programs that work with farmers. As publicly elected bodies, these utilities are much more sensitive to rate increases and investment decisions than investor-owned utilities, he reasoned.
“It’s really our bread and butter,” added Mitch Sears, executive officer of Valley Clean Energy, a community choice aggregation program that serves Yolo County and is the only one in the Central Valley. “We're really close to the communities that we're serving. Our customers can leave. We're very sensitive to the idea that rates matter.”
Sears has worked with farmers to launch an innovative dynamic pricing pilot project in the county. The utility provides the participating farmers with hourly rates a week ahead of time. Each farmer then uses automated pumping equipment to schedule irrigation periods during the most affordable times, when the grid is least stressed. It lowers costs for the farmer, saves water and builds resilience in the grid while hardening agriculture against drought.
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“Simple, actionable market-based price signals is what makes this really appealing to the farmers who are participating in this program,” he explained.
The system even worked effectively during a record heat wave last September. He described this as “a significant opportunity” to scale up throughout California, with about 1,000 megawatts of agricultural load that can be shifted. Sears is looking to apply this model to charging electric vehicles as well.
Accomplishing such demand management programs, however, requires capital investments in farm equipment, added Boccadoro. He stressed that it is really important to work closely with utilities to keep the signals consistent.
“Unfortunately, in the investor-owned utilities, with a lot of the signals that we got 15, 20 years ago, the rug has been pulled out from under us now today,” he said, describing how peak rates used to end at 6 p.m. but now run three hours later. “Having workers in the fields—restarting irrigation and driving the fields in the dark—is not safe for our employees.”
While the conversation focused on electricity rates, Boccadoro has faced a slew of policy hurdles with natural gas. Generating biomethane through dairy digesters, for example, is getting more expensive as smaller dairies adopt the technology—the same for anaerobic digesters at wastewater treatment facilities and landfills. The economies of scale are lost, not gained, he explained.
Gov. Gavin Newsom, meanwhile, has set a priority for the Legislature to examine potential corporate profiteering from spikes in gas and diesel prices last year, though lawmakers have shied away from approving any urgent legislation. Oversight hearings on this and several other energy issues are continuing into March before action gets underway on policy bills and lawmakers carve out their own priorities for the session.
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