A better deal on the power we need

OPINION – In an era of skyrocketing living costs and soaring energy bills, it’s more important than ever to seize opportunities that reduce unnecessary expenses for consumers and lay the groundwork for a more affordable future. Fortunately, California legislators have the chance to do just that—by reducing the costs of expanding vital infrastructure to meet our growing energy needs and climate goals.

The California Independent System Operator, which runs most of the state’s high-voltage electric transmission grid, has identified over $50 billion of new transmission needed to meet growing electricity demand, connect new clean energy resources, and decarbonize the electric system. This new transmission infrastructure isn’t optional—it is necessary to connect new solar, wind, batteries, geothermal, and other clean energy resources that keep our lights on. However, as we make these critical investments, we must prioritize keeping costs low for ratepayers.

New transmission infrastructure is typically financed and owned by for-profit utilities using a combination of investor funds and debt. This approach yields robust profits for utilities that are paid by customers on their monthly bills. Pacific Gas and Electric, the largest investor-owned utility in California, is currently asking the Federal Energy Regulatory Commission for a significant increase to their shareholder equity rate of return on transmission assets, which would drive up costs for ratepayers even more.

But there’s an alternative. By using lower-cost public financing and ownership, we could significantly reduce the burden on consumers. Today, a portion of the California grid is already publicly owned by municipal utilities that deliver electricity to their customers at prices well below those charged by private utilities. Scaling up this approach would deliver proven economic savings to customers across the state.

New research by Net-Zero California and the Clean Air Task Force finds that the use of new institutional models and lower-cost public financing can reduce the cost of transmission development and ownership by more than 50%. Annual savings of up to $3 billion are possible when building future transmission infrastructure using alternative financing. Those savings would flow directly to customers in the form of lower rates.

Sen. Steve Padilla (D-San Diego) introduced SB 330, a bill that will enable public agencies to use the three levers identified in our research—public ownership, increased competition, and low-cost debt—to achieve these savings for new investments in the largest high voltage transmission lines. These elements would allow us to build, maintain, and operate new transmission lines at significant overall savings to ratepayers.

This bill represents a crucial opportunity to set California on a more affordable, sustainable path to a zero carbon grid. Public financing is a tool already used by other industries serving the public good. By pursuing the most cost-effective approach to building the clean energy infrastructure we need, we can achieve a zero-carbon grid, meet future demand, and do it all at a fraction of the cost.

We can choose the better deal for customers and our energy grid now or pay the price with higher costs later.

Neil Matouka leads Net-Zero California’s Clean Power program, and Matthew Freedman is a staff attorney for The Utility Reform Network (TURN) specializing in electricity.