For years California has had the nation’s highest energy costs. Recent price increases for natural gas have added to the misery, and have led to renewed interest in the California Public Utilities Commission, which has held hearings on the price increases under its authority to regulate and oversee utilities.
The CPUC was created in 1911 when voters approved a constitutional amendment to reorganize the Railroad Commission. Commission authority was expanded in 1912 to cover utilities such as gas, electric and telephone companies, and in 1946, voters approved renaming the Railroad Commission the California Public Utilities Commission. The CPUC’s commissioners are appointed by the Governor and approved by the Senate. All five current commissioners were appointed by Governor Newsom.
The CPUC has sole authority to establish rates charged by investor-owned utilities through its “revenue requirement,” based on the costs of maintaining, operating and financing utility operations. This requirement is the basis for determining rates paid by customers. However, decisions by the Governor and other policymakers outside the CPUC can have a huge impact on utility costs. For example, between 1985 and 2021, California’s natural gas production decreased by 72%. We now import over 90% of our natural gas, making us vulnerable to price spikes that result from decreased national production, pipeline interruptions, weather fluctuations, and federal policies that export gas overseas, despite current shortages.
California has vast reserves of natural gas and oil, mostly in the Central Valley. Over the years, state policymakers have limited exploitation of those resources, policies that have accelerated in recent years. Shortages and cost increases are the inevitable result.
Obviously, we need to protect the environment. But we can do that without cutting local production that results in self-induced shortages. It makes no sense to reduce production here, limiting supplies and driving up costs, only to purchase more expensive oil and gas that we must have, elsewhere. California’s hard-pressed ratepayers can’t be squeezed any more.