Legislators Did Not Relieve California’s Energy Poverty Problem
Wayne Winegarden
September 2025
The legislative year is over and there is lots to be concerned about. Paramount among these concerns, the legislature passed several bills that will worsen the state’s energy affordability problems.
Perhaps most disappointing, though not unexpected, legislators passed SB 840 and AB 1207. These bills expanded California’s expensive cap-and-trade mandates. California’s cap-and-trade program imposes a government mandated limit on the amount of CO2 that large industrial facilities, electricity generators, and distributors of natural gas, gasoline, diesel, and other fuels can emit (the cap).
To impose the cap, the state auctions off permits that these organizations need to purchase before they can emit greenhouse gases. Once auctioned off, businesses are then able to buy and sell these permits to ensure these permits are allocated to the organizations that need them. Because these companies must pay for these permits, the cap-and-trade system essentially functions as a type of tax on emissions that is ultimately passed on to consumers (either in whole or in part).
According to California’s Legislative Analyst’s Office (LAO), the costs from the state’s cap-and-trade program added $0.23 to the price of a gallon of gasoline as of February 2025. More troubling, these costs could potentially grow to $0.74 per gallon should allowances hit their ceiling price.
For perspective, compared to the U.S. average, California’s gas prices were $1.47 more expensive per gallon as of September 16.
This gap is the expected result of the state’s cap-and-trade program, highest gasoline tax in the country, refinery mandates, and stringent fuel standards. Extending the cap-and-trade program for 15 years (through 2045) ensures that California drivers will be paying a premium on gasoline for years to come.
The same affordability problem also applies to the cost of electricity. According to the EIA California’s electricity prices in June 2025 were 102 percent higher – about $0.28/kWh in the Golden State while the average price in the U.S. was around $0.14/kWh. The higher costs burden all Californians but are most impactful on inland communities that tend to be poorer.
In other disappointing news, the legislature has committed $1 billion a year from the cap-and-trade revenues to the high-speed rail project. This boondoggle was supposed to connect San Francisco and Los Angeles with high-speed rail service for $33 billion. It is now slated to connect Merced to Bakersfield by 2033, and its projected costs are now exceeding $135 billion.
Continuing to throw good money after bad is fiscally irresponsible. Any claimed reduction in emissions is also questionable if for no other reason than the project is failing to connect the major endpoints. Therefore, the bullet train will not appreciably reduce automobile or airline travel.
From the perspective that the cup is a quarter full, there were some positive changes this year. While not significant enough to fully offset the harm from the ill-conceived proposals, these bills will create some beneficial outcomes for Californians.
Most promising, SB 237 provided state approval to a local Kern County ordinance that should streamline environmental permitting for new oil wells. This legislation will help boost oil extraction in the region and help moderate the sharp production declines that have occurred in recent years. Stabilizing the in-state sourced oil will also alleviate some of the problems burdening refiners, which is a growing concern for the state considering the announced closures of the Phillips 66 refinery in Wilmington and the Valero refinery in Benicia.
Another positive bill, AB 825, authorizes the California Independent System Operator (CAISO) and participating utilities to establish a west-wide regional grid. Such an interconnected grid could help create a more stable, reliable, affordable, and even cleaner electricity system.
On net, these positive actions are insufficient, while the extension of the cap-and-trade program and continued support of the bullet train boondoggle is particularly disappointing. It demonstrates that legislators still do not understand the root causes of the state’s energy affordability crisis – state tax and regulatory policies are discouraging supply and inflating costs. Until policymakers come to accept this reality, the state’s problems of growing energy unaffordability and pervasive energy poverty will persist.
