Little Hoover Commission urges rate-design, oversight and feasibility study to curb soaring electricity costs

The Little Hoover Commission on Friday outlined policy steps it says could slow rapidly rising electricity costs in California while protecting climate and wildfire safety goals.

Daniel Harris McCoy, the commission’s project manager for the October report, told webinar attendees that California’s residential and commercial electricity rates are “about double the U.S. average” and that “1 in 5 households is behind on their electricity bill,” framing affordability as a top statewide concern. He said the Commission’s analysis identifies wildfire mitigation and insurance costs, rate designs that fold fixed costs into per-kilowatt-hour charges, utilities’ profit structures tied to capital spending, and flat consumption as central drivers of high bills.

The Commission’s three headline recommendations are targeted reforms to rate design, a feasibility study to assess shifting certain costs off customer bills, and stronger oversight of utilities’ returns. On rate design, the report recommends revisiting and increasing an income-graduated fixed charge and lowering per-kWh charges to reduce bill volatility and ease burdens on low-income households in hot-climate zones. On cost-shifting, the Commission recommends a formal, criteria-based feasibility study to determine which costs—such as particular wildfire spending or subsidies—could be moved to state funding sources like the General Fund or the Greenhouse Gas Reduction Fund, but stresses that study rather than immediate mandates.

McCoy also called for reforms to the California Public Utilities Commission’s (CPUC) general rate case process, saying the current proceedings are lengthy and can produce unpredictable retrospective costs. “This process takes too long, is too complicated, and should be limited by statute,” he said. To address concerns about how permitted returns and borrowing rates are set, the report urges independent state-led analysis of utility profits—proposing a larger role for the State Treasurer’s Office so that utility rate recommendations are aligned with market forces rather than driven primarily by utility-hired consultants.

The report’s broader thematic recommendations include better regulatory accountability—integrating proceedings related to wildfire costs and cost of capital—an evaluation of CPUC staffing capacity by the state auditor, and equity measures such as redirecting some California climate credits to lower-income households in the hottest climate zones and reexamining net energy metering to address cost-shift effects while recognizing homeowner investment in rooftop solar.

The Little Hoover Commission staff said they stand ready to help legislative offices translate these recommendations into bills. Ethan Rarek, the commission’s executive director, told attendees the Commission will take formal support positions on bills implementing its recommendations, provide technical assistance to authors’ offices and counsel, send letters of support, and is available to testify in hearings.

What’s next: the Commission’s report establishes a menu of legislative and administrative options—rate-design changes, a feasibility study on funding sources, statutory limits on aspects of CPUC rate proceedings, and new oversight structures—that legislative staff could use to craft bills in the coming session.