Severin Borenstein will present the paper “Who Will Pay for the Energy Transition? Affordability, Efficiency, and Electricity Price Regulation” by Severin Borenstein, Meredith Fowlie and Jim Sallee.

Mr. 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. 

The price of electricity to households in the US varies widely across regions and tends to be most expensive in areas where the incremental cost of providing additional supply (including GHG and pollution emissions) is actually lowest. California is the leading example, where prices 2-3 times higher than incremental cost are used to pay for climate change and 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.  High and rising prices undermine efforts to decarbonize transportation and buildings through electrification.  We show that 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, including income-based monthly fixed charges on electricity bills and moving appropriate costs to government budgets.  Around the country, as grids become cleaner and expenses for responding to climate change are added to utility revenue requirements, the experience in California is likely to become increasingly relevant for other states.

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