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Below are the monthly updates from the most current November 2020 fuel price data (GasBuddy.com) and September 2020 electricity and natural gas price data (US Energy Information Agency). The September data incorporates the final electricity data published for 2019, which affects the previously reported monthly averages and rankings which are all calculated on a 12-month moving average basis. To view these updates along with additional data and analysis related to the California economy, visit our website at www.centerforjobs.org/ca.
As with prior reports, the most recent data continues to show a surge in California energy costs compared to the rest of the nation, driven primarily by the state’s expanding regulations over this key component in the cost of living and the cost of operating a business.
Other recent data reports from the Center illustrate the extent to which the state’s pandemic strategies have intensified the two-tier structure of the state’s economy, focusing the impacts on lower wage workers while leaving higher wage jobs largely untouched. The continuing rounds of closures and reopenings have primarily affected industries with a larger small business component and those with lower wage jobs. The higher wage industries have largely minimized the effect on jobs and incomes for their workers through teleworking, and as reflected in the stock market surges since this dual economic outcome became apparent, many have in fact have continued operating fully during this period.
The employers and workers least able to afford the disruptions from the state’s strategies have been the ones most impacted. The continued surge in energy prices creates yet another barrier to their eventual economic recovery that is unique to this state and that has been created by this state. In the most recent results below, California’s commercial electricity rates are the highest among the contiguous states, and the industrial rates now lag only those in Rhode Island. Residential natural gas prices went from 37th highest in 2010—the year the climate change program early action items went into effect under AB 32—to 10th highest in the latest data. Commercial and industrial price rankings saw similar shifts, but less from the price increases in California seen during this period and more from the price drops experienced in most other states.
Throughout the current emergency period, actions have been taken in response to concerns over the ability of many lower income households to afford their monthly rent, especially those lower wage workers who now comprise the bulk of the unemployed and the workers who have left the labor force altogether. No attention has been paid to the energy components of housing costs, and in fact the regulatory agencies have shown no comparable forbearance under the current crisis conditions by continuing to promulgate regulations that will increase energy prices even further.
In the Center’s Affordability Index update, energy (electricity and natural gas) was 6.8% of total housing costs for the average homeowner in 2019, and 6.7% for the average renter, but these costs varied widely across the state as a result of differences in climate and income levels. Costs ranged from an average of 4.4% of total housing costs for homeowners in the high-income counties of San Francisco, Santa Cruz, San Mateo, Santa Clara, and Santa Barbara, to nearly three times this level at 12.7% in the southern part of the Central Valley and higher in Imperial and some of the mountain counties. Similarly, renters in San Francisco, San Mateo, Marin, Santa Clara, and Alameda paid an average of 4.5% of their housing costs for
energy. In the Central Valley’s more variable climate, the average renter in the southern part saw 15.1% of their housing costs going to energy, rising to a fifth in many mountain counties and over a quarter in Imperial County.
Lower wage workers similarly have faced a disparate impact from higher fuel prices in the current crisis. California’s gasoline prices continue to lag only Hawaii’s as the highest in the country, costing $1.14 more a gallon than the average for the rest of the states and $1.41 a gallon more than the lowest cost state as a result of the state’s fuel regulations, highest-in-the-nation fuel taxes, and a market isolated by regulations from the rest of the country and the world. Higher wage workers have been able to avoid these added costs, again through a rapid shift to telework. Following the near collapse in public transit ridership, essential workers and lower wage workers turning to jobs in deliveries, warehousing, and similar options that have remained open have relied more heavily on vehicles as their only commute option.
The rapid shift to telework as an accepted operations model means higher wage workers now have the flexibility to adjust to these and the other the high costs of living in California by shifting where they live if not avoiding them altogether by moving to another state while retaining their jobs and career prospects. This new work model similarly increases the options for companies to move their headquarters or other operations out of state, joining companies such as Hewlett Packard, Palantir, CBRE Group, McKesson, Charles Schwab, Commercial Metals Co., Core-Mark, Jamba Juice, and others. In particular, access to the workforce essential to the success of many tech companies is no longer limited to a few core regions, but can now be accessed nationwide under telework.
The lower wage workers and the service and tourism industries most heavily affected in the current crisis have fewer such options. These come from businesses reliant on serving resident populations or are travel/tourism oriented operations dependent on their particular location. Many will be under challenge to survive as they exhaust their capital under the continuing rounds of closure, markets for smaller retailers remain permanently shifted to a few larger internet sellers, telecommuting workers continue to work in places other than in the prior job centers supporting restaurants and shops, and as confidence in the safety of travel only slowly returns. The continued rise in regulation-driven energy costs will add to the challenges faced by these workers and businesses.
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