New PG&E Study Shows Electrification Will Lower Electricity Rates Over Time

PG&E has released Part 2 of its Electrification Impact Study (EIS). This major study looks at how California’s clean energy goals and the shift to electric technologies will affect the power grid, costs and customer bills in the years ahead.

What is electrification and why is it important?

Electrification means replacing systems that use fossil fuels with cleaner, high-efficiency electric technologies in homes and businesses. These upgrades can happen one at a time or all together, depending on a customer’s needs and budget.

As more people drive electric vehicles (EVs) and install electric heat pumps and other appliances, electric use goes up. PG&E’s study examines how this growing demand will affect the grid and customers. The study includes:

• Light-duty and heavy-duty EVs
• Electric heating, cooling and cooking
• Energy efficiency tools
• Customer-owned solar and battery storage

What did PG&E study?

The CPUC directed this research as part of the “High DER Future Grid” proceeding. PG&E worked with E3 and Integral Analytics to estimate:

• The cost of upgrading large grid equipment like power lines and substations
• The cost of upgrading local equipment like neighborhood transformers
• How new technologies and policies can help manage demand and improve equity

How electrification can lower rates

When more homes, businesses and vehicles switch to electricity, the grid is used more efficiently. Grid costs are mostly fixed. This means that when more electricity is sold without major increases in operating costs, rates can go down.

Key findings

Investments today = savings tomorrow

PG&E expects to spend about $25 billion to upgrade the electric distribution grid to support new electric demand by 2040. These investment forecasts build on similar findings from the first phase of the study, and are consistent with PG&E’s current plans, which reflect bundled electric bills decreasing in 2026 and remaining flat (compared to 2025) through 2027, with PG&E’s goal to stabilize customer bills through 2030. All else equal, the distribution portion of the electric rate is expected to remain relatively flat in the near term with grid investments and upgrades. But forecasts reflect that the upgrades enabled by these investments could decrease distribution rates up to 25% by 2040. This is because the incremental revenue from this electric usage will more than cover the investment costs. This means the fixed costs of the grid will be spread across more usage. PG&E also found about $3.4 billion in savings by using more precise engineering and better forecasting, compared to forecasts in the first part of the study

Demand flexibility helps lower costs

“Demand flexibility” means using strategies that shift electric use to times when demand is low and energy is cheaper. These strategies—like smart EV charging and time-of-use rates—can help avoid expensive grid upgrades.

By 2040, these smarter energy-use practices could save about $1.8 billion in infrastructure costs.

Supporting equity and clean energy access

The study also looks at how these upgrades can benefit disadvantaged communities. By focusing upgrades and clean energy programs in these areas, PG&E can help:

• Support more EVs, solar panels, and efficient heating and cooling
• Lower energy bills
• Improve access to clean energy
• Reduce pollution and greenhouse gas emissions

The benefits of going electric

• Switching to electric technologies can help customers:
• Lower their energy use
• Reduce long-term costs
• Improve comfort at home
• Support a cleaner environment

Learn more and get resources to start planning your own upgrades.