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<ns0:Id>20250AB__167797AMD</ns0:Id>
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<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-02</ns0:ActionDate>
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<ns0:ActionText>AMENDED_ASSEMBLY</ns0:ActionText>
<ns0:ActionDate>2026-03-10</ns0:ActionDate>
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<ns0:ActionText>AMENDED_ASSEMBLY</ns0:ActionText>
<ns0:ActionDate>2026-03-19</ns0:ActionDate>
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<ns0:SessionYear>2025</ns0:SessionYear>
<ns0:SessionNum>0</ns0:SessionNum>
<ns0:MeasureType>AB</ns0:MeasureType>
<ns0:MeasureNum>1677</ns0:MeasureNum>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Assembly Members Boerner and Harabedian</ns0:AuthorText>
<ns0:AuthorText authorType="COAUTHOR_ORIGINATING">(Coauthor: Assembly Member Gallagher)</ns0:AuthorText>
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<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Boerner</ns0:Name>
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<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Harabedian</ns0:Name>
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<ns0:Contribution>COAUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Gallagher</ns0:Name>
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<ns0:Title> An act to add Section 454.05 to the Public Utilities Code, relating to public utilities.</ns0:Title>
<ns0:RelatingClause>public utilities</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Public utilities: electrical and gas corporations: return on equity.</ns0:Subject>
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<html:p>Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable. Existing law prohibits a public utility from changing a rate or altering a classification, contract, practice, or rule that would result in a new rate, except upon a showing before the commission and a finding by the commission that the new rate is justified and the public utility notifying its customers of the rate change.</html:p>
<html:p>This bill would require the commission to require an electrical corporation or gas corporation proposing to change a rate, or to alter a classification, contract, practice, or rule so as to result in a new rate
based directly or indirectly on its request for return on invested capital, to include in its proposal certain studies, as provided. The bill would prohibit the commission from establishing an authorized return on equity for an electrical corporation or gas corporation that exceeds the rate on long-term debt issued by the federal government by more than 400 basis points.</html:p>
<html:p>Under existing law, a violation of the Public Utilities Act or an order, decision, rule, direction, demand, or requirement of the commission is a crime.</html:p>
<html:p>Because the above provisions would be part of the act and a violation of a commission action implementing the bill’s requirements would be a crime, this bill would impose a state-mandated local program.</html:p>
<html:p>The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory
provisions establish procedures for making that reimbursement.</html:p>
<html:p>This bill would provide that no reimbursement is required by this act for a specified reason.</html:p>
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<ns0:VoteRequired>MAJORITY</ns0:VoteRequired>
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<ns0:ImmediateEffect>NO</ns0:ImmediateEffect>
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<ns0:Urgency>NO</ns0:Urgency>
<ns0:TaxLevy>NO</ns0:TaxLevy>
<ns0:Election>NO</ns0:Election>
<ns0:UsualCurrentExpenses>NO</ns0:UsualCurrentExpenses>
<ns0:BudgetBill>NO</ns0:BudgetBill>
<ns0:Prop25TrailerBill>NO</ns0:Prop25TrailerBill>
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<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
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<ns0:Num>SECTION 1.</ns0:Num>
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<html:p>
(a)
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The Legislature finds and declares all of the following:
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<html:p>
(1)
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The Public Utilities Commission’s statutory mandates, constitutional limitations, and fundamental finance principles all require the commission to consider the interests of ratepayers and the public and to avoid the compounding costs to ratepayers that result from authorizing revenue requirements that result in return on equity (ROE) investments that exceed public utilities’ costs of capital in the market and their operational needs.
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<html:p>
(2)
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ROEs over and above investors’ market-based expectations, the
cost of capital, harms ratepayers in a myriad of ways, including all of the following harms:
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<html:p>
(A)
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The immediate costs of the excess ROE.
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<html:p>
(B)
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The cost of the incremental taxes owed on that excess ROE.
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<html:p>
(C)
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The additional costs of unnecessary investment incentivized by excess ROE, which includes not only the cost of the investment but also the costs of capital on the investment and the associated taxes.
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<html:p>
(D)
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The surplus shareholder profit from excess ROE on that unnecessary investment.
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<html:p>
(E)
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The associated taxes on that surplus profit.
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<html:p>
(3)
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The constitutional limitation on confiscation applied to establish a lower bound for public utility rates applies equally to establish an upper bound to public utility rates so as to prevent confiscation of ratepayer funds to support excessive public utility profits.
</html:p>
<html:p>
(b)
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It is the intent of the Legislature to enact legislation that would reduce utility rates by 25 percent.
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<ns0:Num>SEC. 2.</ns0:Num>
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Section 454.05 is added to the
<ns0:DocName>Public Utilities Code</ns0:DocName>
,
<ns0:Positioning>immediately following Section 454</ns0:Positioning>
, to read:
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<ns0:Num>454.05.</ns0:Num>
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<html:p>
(a)
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If an electrical corporation or gas corporation proposes to change a rate, or to alter a classification, contract, practice, or rule resulting in a new rate based directly or indirectly on its request for return on invested capital, the commission shall require the electrical corporation or gas corporation to include in its proposal both of the following:
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<html:p>
(1)
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A study showing the amount of internally generated cash available to self-fund the investment needed to provide safe and reliable
electrical or gas service, including deferred taxes, depreciation, and amortization, and the extent of the need to acquire external investment.
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<html:p>
(2)
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A study showing the relationship between capital structure and return on equity is optimized from the ratepayer perspective and minimizes the overall revenue requirement, including taxes.
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<html:p>
(b)
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The commission shall make findings consistent with Section 1705 on the matters specified in subdivision (a) to support an order authorizing a new rate pursuant to this section.
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<html:p>
(c)
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The commission shall not, for an electrical corporation or gas corporation, authorize a return on equity that exceeds the rate on long-term debt issued by the federal government by more than 400 basis
points.
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<ns0:Num>SEC. 3.</ns0:Num>
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<html:p>
No reimbursement is required by this act pursuant to Section 6 of Article XIII
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B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII
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B of the California Constitution.
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