As of early 2025, businesses in California are paying more than double the national average for electricity. This sharp disparity has major implications for small businesses, large corporations, and the broader state economy. So, what’s driving these sky-high costs — and what can be done to fix it?

California’s Commercial Power Premium
According to the latest data from the U.S. Energy Information Administration, California’s average commercial electricity rate stands at 25.39 cents per kilowatt-hour (¢/kWh)—112% higher than the U.S. average of 11.96 ¢/kWh. That’s the highest among all 50 states and Washington, D.C.

Over the past year alone, this rate gap has cost California businesses an estimated $21.6 billion more than what they would have paid at the national average.

What’s Causing the Surge?
Several intertwined factors contribute to California’s uniquely high commercial electricity rates:

1. Wildfire Mitigation & Safety Investments
With wildfires becoming more frequent and devastating, California utilities — especially PG&E, Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) — have invested billions in grid safety upgrades. These include underground power lines, installing advanced shutoff systems, and expanding vegetation management programs. These critical but costly efforts are funded largely through ratepayer dollars.

2. Aging Grid Infrastructure
Much of California’s electricity transmission and distribution infrastructure was built decades ago. Utilities are now racing to modernize these systems to meet 21st-century demands, adding further pressure to utility budgets — and customer bills.

3. Natural Gas Dependency
Despite significant renewable energy progress, over 38% of California’s electricity still comes from natural gas. Volatile fuel prices and tight supply chains have made electricity more expensive for all customers, especially businesses with high demand.

4. Guaranteed Utility Profits
California’s investor-owned utilities operate under a regulated model that guarantees them a set rate of return (around 10%) on capital investments. This system encourages infrastructure spending — which, while necessary, further inflates electricity bills.

5. Policy and Regulatory Costs
Ambitious renewable energy mandates, emissions targets, and complex compliance requirements all contribute to rising costs. Additionally, the rising cost of capital (due to higher interest rates) makes utility borrowing more expensive, and those costs are passed down to customers.

The Impact on Businesses
The consequences of rising rates are being felt across sectors:

⏺ Small and medium-sized businesses (SMBs), which operate on thin margins, struggle to absorb rate increases. Many are forced to pass costs on to consumers or cut operations.
⏺ Energy-intensive industries — like agriculture, data centers, hospitality, and manufacturing — face existential pressure as operating costs surge.
⏺ The broader economy feels the ripple effects through higher prices and reduced competitiveness for California-based firms.

A Look at the Trend
⏺ PG&E commercial rates have increased roughly 40% between January 2023 and January 2025.
⏺ SDG&E saw a staggering 68% increase from mid-2019 to early 2023.
⏺ SCE reported 56% higher commercial rates over the same timeframe.
⏺ On average, California commercial electricity rates have jumped 20–23% year over year in recent years.

What’s Being Done?
While costs remain high, both the public and private sectors are actively exploring solutions:

☀️ Onsite Solar and Energy Storage
Many businesses are investing in solar panels and battery storage to offset utility bills. Solar leasing and Power Purchase Agreements (PPAs) make this more accessible for smaller firms. These systems not only cut costs but also provide resiliency during outages. 

Danke Solar is at the forefront of bringing to California a Zero Investment – the easiest and fastest way to save immediately on your electricity bill – program backed by a PPA contract to California.

📉 Demand Management and Smart Pricing
Danke Solar offers a flat, permanent rate for the life of the contract offering two distinct advantages for you: 1) Zero up-front investment for achieving energy resiliency, 2) Energy cost savings from the day installation is completed and electricity is generated from your own building.

Looking Ahead
Wholesale power prices are projected to increase another 30–35% in 2025, driven by continued natural gas costs and surging demand. And as utilities expand safety and climate adaptation projects, rate pressures are unlikely to ease soon — unless bold policy and regulatory changes are enacted.  Schedule a Free Consultation with us today to discover how you can take advantage of our program and achieve savings to your electricity bill: sales@dankesolar.com