Haas School of Business, University of California, Berkeley
How California electricity rates undermine decarbonization and equity
Monday, May 15, 2023 – 05:15 – 06:30 PM (CEST)
This event will take place online only. To join virtually, please register in advance using this link.
The price of electricity to most households in California is 2 to 3 times higher than the full societal cost of providing additional supply (including GHG emissions). This difference, effectively an „electricity tax,“ averages $500-$800 annually per household. These funds pay for climate change mitigation, wildfire adaptation and mitigation, legacy infrastructure, and subsidies for new technology R&D, energy efficiency investments, low-income customers, and rooftop solar, among other fixed costs and policy expenses. And prices are set to rise further, primarily due to wildfire costs and climate change policies. High and rising prices undermine efforts to decarbonize transportation and buildings through electrification. The current rate structure is also highly regressive, more so than other ways of raising revenue, such as sales or income taxes. We examine alternative ways of recovering the costs of the electricity system that are more efficient and more equitable, with a focus on the creation of income-based monthly fixed charges on electricity bills. The electricity tax also has important implications for the private and social value of installing residential rooftop solar.
Severin Borenstein is E.T. Grether Professor of Business Administration and Public Policy at the Haas School of Business and faculty director of the Energy Institute at Haas. He is also Director emeritus of the University of California Energy Institute (1994-2014). He received his AB from UC Berkeley and PhD in Economics from MIT. His research focuses on business competition, strategy, and regulation. He has published extensively on the airline industry, the oil and gasoline industries, and electricity markets. His current research projects include the economics of renewable energy, economic policies for reducing greenhouse gases, and alternative models of retail electricity pricing. Borenstein is also a research associate of the National Bureau of Economic Research in Cambridge, MA. He served on the Board of Governors of the California Power Exchange from 1997 to 2003. During 1999-2000, he was a member of the California Attorney General’s Gasoline Price Task Force. In 2010–11, Borenstein was a member of U.S. Secretary of Transportation Ray LaHood’s Future of Aviation Advisory Committee. In 2012–13, he served on the Emissions Market Assessment Committee, which advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases. In 2014, he was appointed to the California Energy Commission’s Petroleum Market Advisory Committee, which he chaired from 2015 until the Committee was dissolved in 2017. Since 2015, he has served on the Advisory Council of the Bay Area Air Quality Management District. In 2019, he was appointed to the Governing Board of the California Independent System Operator.
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