PG&E & SMUD Rate Increases: What Rising Rates Mean for Your Bill

PG&E rates have increased over 50 percent since 2020. The average residential customer now pays 35 to 45 cents per kWh, depending on rate plan and time of day. SMUD rates have climbed as well, though more slowly. Both utilities have filed for additional rate increases in 2026, and the trend shows no sign of stopping.

Every rate increase makes solar more attractive. When electricity costs 40+ cents per kWh and climbing, the payback period for solar shrinks to under 3 years. Here is what is driving the increases, how much more you can expect to pay, and how solar helps you opt out of the rate spiral.

Why Are PG&E Rates Rising So Fast?

PG&E blames several factors: wildfire mitigation costs, grid upgrades, vegetation management, insurance, and regulatory compliance. After the 2017 and 2018 wildfires that killed over 100 people and burned thousands of homes, PG&E was found liable and forced into bankruptcy. The utility emerged with a mandate to harden the grid and reduce fire risk.

That mandate is expensive. PG&E is undergrounding power lines in high-fire-risk areas at a cost of millions of dollars per mile. They are upgrading poles, installing weather monitoring stations, and expanding their wildfire safety operations center. All of this gets passed to ratepayers.

PG&E also pays for previous wildfire settlements, legal costs, and higher insurance premiums. The utility is allowed to recover these costs through rates, subject to approval by the California Public Utilities Commission. The CPUC has approved most requested increases, though sometimes phasing them in over multiple years.

How Much More Will You Pay?

PG&E residential rates averaged about 24 cents per kWh in 2020. By mid-2026, the blended average is 38 to 44 cents per kWh depending on your rate plan. Peak time-of-use rates can exceed 50 cents per kWh during summer evenings. That is a 60 to 80 percent increase in six years.

For a typical household using 600 kWh per month, your bill has climbed from around $144 in 2020 to $240 to $270 in 2026. If rates continue rising at the same pace, expect $300+ monthly bills by 2028. Larger homes or homes with electric heating, cooling, or vehicle charging will see even bigger increases.

PG&E has proposed additional rate increases for 2027 and 2028 to fund ongoing wildfire programs and grid maintenance. The CPUC has not approved these yet, but historical trends suggest they will pass in some form. There is no regulatory or political mechanism to reverse the trend.

SMUD Rates: Slower Growth, Still Rising

SMUD, the Sacramento Municipal Utility District, has historically had lower rates than PG&E. As of mid-2026, SMUD residential rates average 16 to 20 cents per kWh depending on rate plan. Time-of-use rates peak at 25 to 28 cents per kWh during summer evenings.

SMUD rates have increased about 20 to 30 percent since 2020, slower than PG&E but still significant. SMUD cites rising wholesale power costs, transmission upgrades, and renewable energy investments as drivers. The utility is targeting 100 percent carbon-free electricity by 2030, which requires new solar farms, battery storage, and grid infrastructure.

SMUD customers still pay less than PG&E customers on average, but the gap is narrowing. If you live in SMUD territory and use 600 kWh per month, expect bills around $100 to $120 in 2026, up from $80 to $90 in 2020. That is still cheaper than PG&E, but the direction is the same.

What About Fixed-Charge Proposals?

In 2024, PG&E and other California investor-owned utilities floated proposals to add a fixed monthly charge to all customer bills, regardless of usage. The idea was to shift some costs away from per-kWh rates and onto a flat fee, making bills more predictable and reducing the incentive for high-usage customers to cut consumption.

Solar advocates and consumer groups pushed back hard, arguing that fixed charges punish efficiency and make solar less attractive. The CPUC approved a scaled-back version with income-based fixed charges starting in 2025, but it remains controversial and subject to legal challenges.

If fixed charges increase significantly in future years, the math for solar changes. You still save on per-kWh costs, but the flat fee eats into your savings. Off-grid solar sidesteps this entirely because you disconnect from the utility and pay no monthly fees.

How Solar Helps You Opt Out

With grid-tie solar under NEM 3.0, you still pay some utility charges -- connection fees, non-bypassable charges, and any grid power you draw at night. But you cut your usage dramatically, which reduces your exposure to rate increases.

Off-grid solar eliminates your utility bill entirely. You generate your own power, store it in a battery, and use it on-site. No meter. No monthly bill. No rate increases. You pay the upfront system cost, then your electricity is free. When PG&E raises rates another 10 percent next year, it does not affect you.

At current Northern California rates of 40+ cents per kWh, a VoltSol off-grid system covering your heating, cooling, and essential loads pays for itself in under 3 years. After that, you bank the savings. Over 20 years, assuming 4 percent annual rate increases, you save $60,000 to $80,000 compared to staying on the grid.

What Can You Do Right Now?

First, understand your current usage and cost. Pull up your last 12 months of utility bills and calculate your average monthly kWh and cost. Identify your biggest loads: HVAC, water heating, electric vehicle charging, pool pumps. These are the targets for solar.

Second, consider your options. Grid-tie solar with battery backup is one path. Off-grid solar focused on your biggest loads is another. Hybrid approaches -- off-grid for HVAC and essentials, grid connection for heavy appliances -- are also viable. VoltSol can assess your situation and recommend the best fit.

Third, act sooner rather than later. Every month you wait, you pay more to the utility. Solar panels, batteries, and inverters have stable pricing, but installation timelines can stretch during peak seasons. The federal 30 percent Investment Tax Credit is in place through 2032, so you have time, but every year of delay costs you thousands in utility bills.