California electricity prices surged 96% in a decade. Is your state next?

California electricity prices have nearly doubled in the last decade—and the supply cost of power isn’t to blame. 

The average price of electricity in the Golden State soared a whopping 96% between 2014 and 2024, according to the U.S. Energy Information Administration (EIA). Electricity rates surged especially high between 2021 and 2023, climbing by double-digit percentages year-over-year and spiking more than 14% between 2022 and 2023 alone.

Even after adjusting for inflation, real electricity prices in California—electricity’s value adjusted for inflation to reflect purchasing power over time—rose by more than 20% from 2021 to 2024, according to economists Jenya Kahn-Lang and Jesse Buchsbaum of Resources For the Future (RFF). By contrast, in many other states, electricity rates only increased at around the same rate or more slowly than inflation, largely because wholesale power prices stayed stable.

If not inflation, what’s causing the massive jump in California’s electric bills? Expensive—but necessary and long-overdue—investments in utility infrastructure upgrades aimed at addressing aging equipment and worsening extreme weather drive the state’s rising rates. At the center of it all are wildfires. 

The frequency and intensity of wildfires on the West Coast have increased in recent years, due to both climate change and preventable utility equipment failures. California has shouldered the brunt of these destructive events, but it won’t be the last state to face the steep price of resilience in a changing climate. 

“California is an outlier, but it's also a harbinger,” Severin Borenstein, professor at UC Berkeley Haas School of Business and faculty director of the Energy Institute, told EnergySage. “We have drastically higher rates, but that’s not a function of higher wholesale costs—those have risen almost exactly in line with inflation.”

“They're a result of dealing with climate change,” he said. “Extreme weather impacts electricity systems and requires new investments, which feed into rates.”

Kahn-Lang and Buchsbaum break down electricity system costs into four categories: Power production, transmission, distribution, and other expenses. Their analysis shows that transmission and distribution—not production—are the main drivers of electricity rate hikes. In California, inflation-adjusted distribution costs have increased by 18% since 2021. 

Transmission and distribution costs reflect the massive investments needed to build new grid resources. These expenses are especially burdensome in regions hit by increasingly frequent and severe weather events, like California’s wildfires.

“The recent price increases in California are primarily due to wildfires,” Kahn-Lang told EnergySage. “Californians are paying for past wildfires and for upgrades to the power grid to prevent and reduce the spread of future wildfires. Utilities are responsible for the costs of the wildfires in California. As we've seen in the past, that’s a huge amount of money.”

As Borenstein put it, California is as much a harbinger as it is an outlier. The state’s skyrocketing electricity prices foreshadow what’s likely to come nationwide, as wildfires, floods, hurricanes, and storms require badly needed investments in new and improved grid resources. 

“California is already there, but I think a lot of other states will soon be there, too,” Borenstein said. “Look at the wildfires in Washington and Oregon and the flooding in Texas. To be realistic about increasingly extreme weather, they’re going to have to make more investments, and typically those end up getting loaded into rates.” 

Borenstein also pointed to other states that also face major transmission and distribution costs. “Maine comes to mind—they have real problems with reliability and have had to make some very expensive investments,” he said.

Kahn-Lang echoed Borenstein’s assessment: “In some sense, California is an isolated case, but extreme weather events are becoming more common across the country, so we may see more price increases related to extreme events in other states going forward,” she said. “We’re seeing some interesting patterns [in transmission and distribution prices] elsewhere. Maine really stands out in that analysis.”

Climate disasters aren’t the only factor driving up transmission and distribution costs. Electricity demand is projected to jump far beyond what the current grid can reliably handle, fueled in large part by the rapid growth of generative AI. Data center electricity demand alone is expected to grow 130% by the end of the decade. To meet this, states must build new generation sources on top of the investments already being made in infrastructure upgrades. 

Although California’s electricity prices are an extreme case, the rest of the country isn’t immune to future spikes.

“If you take California out of the national average, the rest of the country’s [electricity prices] did not increase faster than inflation; it increased slightly slower than inflation,” Borenstein said. “But that's not to say they won't increase faster in the future, particularly given data center demand.”

Building new power plants and upgrading transmission and distribution infrastructure takes years, even without extreme weather disruptions. On top of that, recent roll backs of federal clean energy incentives and harmful political rhetoric will make it harder and more expensive to develop new renewable generation sources, which deploy faster than their fossil fuel counterparts. All of this is happening at a time when electricity demand is surging, creating additional pressure on the grid and making higher rates almost inevitable.

How to protect yourself against rising electricity prices

For homeowners, installing solar panels is one of the most effective ways to protect themselves against soaring electricity costs. It lets you generate your own power and rely less on a grid already stretched thin by extreme weather, aging infrastructure, and growing demand.

The financial case for going solar is especially strong right now: If you install a solar panel system before the 30% federal solar tax credit expires at the end of 2025, you can take advantage of one of the last major federal incentives available for clean energy. 

With or without federal support, solar offers both long-term energy and financial stability. By generating your own power, you can avoid skyrocketing California rates and stay ahead of the rising grid issues proliferating across the country.