Bill Full Text
Home
-
Bills
-
Bill
-
Authors
-
Dates
-
Locations
-
Analyses
-
Organizations
<?xml version="1.0" ?>
<ns0:MeasureDoc xmlns:html="http://www.w3.org/1999/xhtml" xmlns:ns0="http://lc.ca.gov/legalservices/schemas/caml.1#" xmlns:ns3="http://www.w3.org/1999/xlink" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" version="1.0" xsi:schemaLocation="http://lc.ca.gov/legalservices/schemas/caml.1# xca.1.xsd">
<ns0:Description>
<ns0:Id>20250AB__246398AMD</ns0:Id>
<ns0:VersionNum>98</ns0:VersionNum>
<ns0:History>
<ns0:Action>
<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-20</ns0:ActionDate>
</ns0:Action>
<ns0:Action>
<ns0:ActionText>AMENDED_ASSEMBLY</ns0:ActionText>
<ns0:ActionDate>2026-03-26</ns0:ActionDate>
</ns0:Action>
</ns0:History>
<ns0:LegislativeInfo>
<ns0:SessionYear>2025</ns0:SessionYear>
<ns0:SessionNum>0</ns0:SessionNum>
<ns0:MeasureType>AB</ns0:MeasureType>
<ns0:MeasureNum>2463</ns0:MeasureNum>
<ns0:MeasureState>AMD</ns0:MeasureState>
</ns0:LegislativeInfo>
<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Assembly Member Petrie-Norris</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Petrie-Norris</ns0:Name>
</ns0:Legislator>
</ns0:Authors>
<ns0:Title> An act to add Sections 753 and 910.10 to the Public Utilities Code, relating to the Public Utilities Commission. </ns0:Title>
<ns0:RelatingClause>the Public Utilities Commission</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Public Utilities Commission: rates: returns on equity.</ns0:Subject>
</ns0:GeneralSubject>
<ns0:DigestText>
<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.</html:p>
<html:p>This bill would require the commission, in any decision issued on or after January 1, 2028, determining an authorized return on equity, as defined, for an electrical corporation or gas corporation, to include specified information reflecting the commission’s independent analytical basis for making that determination, including, among other things,
an identification of each financial model the commission relied upon in determining the authorized return on equity and an analysis of the relationship between the credit quality of the electrical corporation or gas corporation and the authorized return on equity. If, in any cost of capital proceeding, as defined, the commission adopts a methodology for determining the authorized return on equity that differs in any material respect from the methodology disclosed in the most recent prior decision in which the commission determined an authorized return on equity for the same electrical corporation or gas corporation, the bill would require the commission to identify each material departure from the prior methodology and provide a reasoned explanation for each material departure.</html:p>
<html:p>The bill would also require the commission to initiate a rulemaking proceeding to
update its determinations of the cost of capital to conform with the requirements of the bill. The bill would require the proceeding to consider a long-term plan related to these requirements, as specified.</html:p>
<html:p>Existing law requires the commission to develop, publish, and annually update a report containing specified information, including the commission’s annual work plan and a summary of deenergization event trends, as specified. Existing law requires the commission to post the report in a conspicuous area of its internet website.</html:p>
<html:p> This bill would require the commission to include the analysis of the trends in the California corporation credit ratings described above in that annual report to the Legislature.</html:p>
<html:p>Under existing law, a violation of an order, decision, rule, direction, demand, or requirement of the commission is a crime.</html:p>
<html:p>Because a
violation of a commission action implementing this bill’s requirements would be a crime, the 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>
</ns0:DigestText>
<ns0:DigestKey>
<ns0:VoteRequired>MAJORITY</ns0:VoteRequired>
<ns0:Appropriation>NO</ns0:Appropriation>
<ns0:FiscalCommittee>YES</ns0:FiscalCommittee>
<ns0:LocalProgram>YES</ns0:LocalProgram>
</ns0:DigestKey>
<ns0:MeasureIndicators>
<ns0:ImmediateEffect>NO</ns0:ImmediateEffect>
<ns0:ImmediateEffectFlags>
<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>
</ns0:ImmediateEffectFlags>
</ns0:MeasureIndicators>
</ns0:Description>
<ns0:Bill id="bill">
<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_6C923010-6B0A-49A4-A4BF-ACC444064C1F">
<ns0:Num>SECTION 1.</ns0:Num>
<ns0:Content>
<html:p>The Legislature finds and declares all of the following:</html:p>
<html:p>
(a)
<html:span class="EnSpace"/>
The authorized rate of return, including the authorized return on equity and capital structure, as determined by the Public Utilities Commission for electrical corporations and gas corporations is a central determinant of the revenue requirement and underlying rates charged to California ratepayers and represents billions of dollars in annual revenue requirements. These requests
are known as “cost of capital.” The authorized rate of return, including the return on equity, applies to all capital investments made by the utilities, but does not include other aspects of their revenue requirements, such as operational expenditures.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
The process by which the commission determines the authorized return on equity relies on competing financial models and analyses of investment risk as adjudicated by parties and the utilities. Under current practice, commission decisions in cost of capital proceedings typically summarize the positions of the parties and state a conclusion, but do not consistently disclose the specific financial models, inputs, assumptions, or weighting that the commission relied upon in arriving at the authorized capital structure, including the return on equity. This limits the ability of ratepayers, the Legislature, and other stakeholders to evaluate the analytical basis for these determinations.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
The Federal Energy Regulatory Commission has, through a series of adjudicatory and policy proceedings, moved toward a more structured and reproducible analytical framework for determining the authorized return on equity for jurisdictional utilities, including the adoption of defined financial model weighting and enhanced disclosure of analytical methods.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
As California advances policies to electrify transportation, buildings, and industrial processes, an increasing share of the state’s economy will depend on electricity rates established by the commission. This will require significant investments in new capital infrastructure that will be subject to the cost of capital determinations.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
The rate base of electrical corporations, which is a segment of how much physical infrastructure the electrical corporations
can earn a rate of return upon, will grow substantially to support the clean energy transition. The authorized return on equity, applied to that expanding rate base, will represent an increasingly significant component of the rates paid by residential, commercial, and industrial customers.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
The expanding scope and financial magnitude of commission determinations regarding the cost of capital heighten the need for analytical transparency and public accountability in the process by which those determinations are made.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
Requiring the commission to disclose its analytical methodology and to maintain consistency in its approach across proceedings, or to explain departures from prior methodology, will promote accountability, predictability, and public confidence in the ratemaking process without dictating any particular substantive outcome.
</html:p>
</ns0:Content>
</ns0:BillSection>
<ns0:BillSection id="id_C6A56F38-C669-4509-B12B-E51A84C52868">
<ns0:Num>SEC. 2.</ns0:Num>
<ns0:ActionLine action="IS_ADDED" ns3:href="urn:caml:codes:PUC:caml#xpointer(%2Fcaml%3ALawDoc%2Fcaml%3ACode%2F%2Fcaml%3ALawSection%5Bcaml%3ANum%3D'753'%5D)" ns3:label="fractionType: LAW_SECTION" ns3:type="locator">
Section 753 is added to the
<ns0:DocName>Public Utilities Code</ns0:DocName>
, to read:
</ns0:ActionLine>
<ns0:Fragment>
<ns0:LawSection id="id_38B12479-59F1-4650-ABE2-EAB0A7A8DB29">
<ns0:Num>753.</ns0:Num>
<ns0:LawSectionVersion id="id_C516A282-C68E-4DE7-9998-06F3582859D6">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
For purposes of this section, all of the following definitions apply:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
“Authorized return on equity” means the return on common equity authorized by the commission for an electrical corporation or gas corporation in a cost of capital proceeding or through an automatic adjustment mechanism adopted in connection with a cost of capital proceeding.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
“Cost of capital proceeding” means a proceeding in which the commission considers and determines the authorized return on equity for an electrical corporation or gas corporation, including a proceeding to establish or modify an automatic adjustment mechanism for the return on equity.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
“Financial model” means a quantitative method used to estimate the cost of equity capital, including, but not limited to, a discounted cash flow model, capital asset pricing model, risk premium analysis, and comparable earnings analysis.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
In a decision determining an authorized return on equity, the commission shall include all of the following, which shall reflect the commission’s independent analytical basis for its determination and shall not consist solely of a selection from the positions or analyses submitted by the parties:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
An identification of each financial model the commission relied upon in determining the authorized return on equity.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
For each financial model identified pursuant to paragraph (1), a specification of the key inputs and
assumptions used, including, but not limited to, the proxy group of companies, growth rate estimates, risk-free rate benchmarks, equity risk premiums, beta estimates, and any other material analytical inputs.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The data sources for each material input to each financial model relied upon by the commission.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
The relative weight assigned to each financial model in arriving at the authorized return on equity, expressed in quantitative terms.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
A mathematical derivation demonstrating how the authorized return on equity follows from the models, inputs, and weights specified pursuant to paragraphs (1) to (4), inclusive, so that a person with expertise in utility finance could independently reproduce the result from the information contained in the decision.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
A description of any qualitative adjustments made to the result produced by the financial models, including the direction and magnitude of each adjustment and the specific basis for each adjustment.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
The complete calculations underlying the authorized return on equity, presented in a structured format that permits independent verification.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
If the commission relied upon a range of results from a financial model, the full range and the basis for selecting a point estimate within that range.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
If the commission relied upon a settlement from the parties to adopt an authorized rate of return, the settling parties shall furnish sufficient information to enable the commission to make a finding in subparagraph (A) that the amount agreed upon in the settlement is just and
reasonable.
</html:p>
<html:p>
(9)
<html:span class="EnSpace"/>
A comparison of the authorized return on equity to the results produced by each individual financial model before weighting or qualitative adjustment.
</html:p>
<html:p>
(10)
<html:span class="EnSpace"/>
An identification of the peer group of similarly situated electrical corporations or gas corporations used in the commission’s analysis, the most recently authorized return on equity for each member of the peer group, and an explanation of where the authorized return on equity for the subject electrical corporation or gas corporation falls relative to the range of authorized returns on equity for the peer group, including the basis for any material deviation from the central tendency of the peer group.
</html:p>
<html:p>
(11)
<html:span class="EnSpace"/>
An analysis of the relationship between the credit quality of the electrical corporation or gas corporation and the authorized return on
equity, including a discussion of how changes in the corporation’s credit ratings or other credit market indicators informed the commission’s determination.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
If, in any cost of capital proceeding, the commission adopts a methodology for determining the authorized return on equity that differs in any material respect from the methodology disclosed in the most recent prior decision in which the commission determined an authorized return on equity for the same electrical corporation or gas corporation, the commission shall, in addition to the requirements of subdivision (b), do both of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Identify each material departure from the prior methodology, including any change in the financial models used, the weighting of models, the categories of inputs relied upon, or the approach to qualitative adjustments.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Provide a reasoned explanation for each material departure, including an explanation of why the prior methodology was inadequate or why changed circumstances warranted adoption of a different methodology.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
This section does not prescribe or limit the financial models, inputs, or methods that the commission may use in determining the authorized return on equity. The commission retains full discretion to select and apply the analytical methods it determines to be appropriate, subject to the disclosure and consistency requirements of this section.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
This section applies to any decision determining an authorized return on equity issued on or after January 1, 2028.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
This section applies regardless of whether the decision results in a decrease or increase in rates or in a
change to a rate schedule.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
The commission shall initiate a rulemaking proceeding to update its determinations of the cost of capital to conform with the requirements of this section. This proceeding shall consider a long-term plan that does both of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Revises financial models for electrical corporations to accommodate large demand growth between the years 2030 and 2045 in order to meet the state’s climate goals, while enabling sufficient investment and ensuring that rates remain just and reasonable.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Analyzes whether the selection of financial models aligns with new investments made by gas corporations and with changes to customer demand for natural gas.
</html:p>
</ns0:Content>
</ns0:LawSectionVersion>
</ns0:LawSection>
</ns0:Fragment>
</ns0:BillSection>
<ns0:BillSection id="id_837833C8-4BDD-46BB-8DB1-957199182D0A">
<ns0:Num>SEC. 3.</ns0:Num>
<ns0:ActionLine action="IS_ADDED" ns3:href="urn:caml:codes:PUC:caml#xpointer(%2Fcaml%3ALawDoc%2Fcaml%3ACode%2F%2Fcaml%3ALawSection%5Bcaml%3ANum%3D'910.10'%5D)" ns3:label="fractionType: LAW_SECTION" ns3:type="locator">
Section 910.10 is added to the
<ns0:DocName>Public Utilities Code</ns0:DocName>
,
<ns0:Positioning>to immediately follow Section 910.8</ns0:Positioning>
, to read:
</ns0:ActionLine>
<ns0:Fragment>
<ns0:LawSection id="id_60EDC190-15E2-476B-8796-5058774109E8">
<ns0:Num>910.10.</ns0:Num>
<ns0:LawSectionVersion id="id_20A18EE8-8F80-4081-8FCD-3C8CE361F0EE">
<ns0:Content>
<html:p>The commission shall annually provide to the Legislature an analysis of the trends in the California corporation credit ratings based on an analysis of the relationship between the credit quality of the electrical corporations and gas corporations, as required by Section 753. The commission shall provide this analysis as part of its annual report published pursuant to Section 910.</html:p>
</ns0:Content>
</ns0:LawSectionVersion>
</ns0:LawSection>
</ns0:Fragment>
</ns0:BillSection>
<ns0:BillSection id="id_D7AA3A11-CD71-427E-8A97-FC56FC0FB37A">
<ns0:Num>SEC. 4.</ns0:Num>
<ns0:Content>
<html:p>
No reimbursement is required by this act pursuant to Section 6 of Article XIII
<html:span class="ThinSpace"/>
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
<html:span class="ThinSpace"/>
B of the California Constitution.
</html:p>
</ns0:Content>
</ns0:BillSection>
</ns0:Bill>
</ns0:MeasureDoc>