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<ns0:Id>20250SB__094399INT</ns0:Id>
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<ns0:Action>
<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-02</ns0:ActionDate>
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<ns0:SessionYear>2025</ns0:SessionYear>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Senator Becker</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>SENATE</ns0:House>
<ns0:Name>Becker</ns0:Name>
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<ns0:Title> An act to add Sections 351 and 759 to the Public Utilities Code, relating to public utilities. </ns0:Title>
<ns0:RelatingClause>public utilities</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Public utilities: electricity: transmission charge: industrial transition usage.</ns0:Subject>
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<html:p> Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical 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 authorize the commission to direct an electrical corporation with more than 100,000 service connections in California, when billing an industrial customer for separately metered new load to provide industrial process heat, to apply an adjustment factor to the per kilowatthour rate so as to limit the nonbypassable charge ratio, as specified, in furtherance of facilitating electrification of industrial energy use.</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 provision would be part of the act and a violation of a commission action implementing that provision would be a crime, this bill would impose a state-mandated local program. </html:p>
<html:p>Existing law establishes the Independent System Operator as a nonprofit, public benefit corporation and requires the Independent System Operator, among other duties, to ensure the efficient use and reliable operation of the electrical transmission grid consistent with the achievement of planning and operating reserve criteria, as provided.</html:p>
<html:p>This bill would establish as a policy of the state that allocation of costs to ratepayers for transmission and distribution resources should follow cost causation principles. The bill would require the commission, on or before January 1, 2028, to develop recommendations
for changes to high voltage transmission access charges that would improve consistency with the commission’s causation principles, to communicate the recommendations to the Independent System Operator, and to request the Independent System Operator to reopen its transmission access charge structure enhancements proceeding to consider reforms to its high-voltage transmission access charges.</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:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_77F6A07F-EA8C-44C7-AA4D-1E7C2BBD4E08">
<ns0:Num>SECTION 1.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
The Legislature finds and declares all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Many regions of the state have consistently failed to meet National Ambient Air Quality Standards, with negative impacts on the health of people in those communities, and emissions of criteria air pollutants from industrial firms are one of the significant contributors to the state’s air quality challenges.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The state also has ambitious targets to reduce greenhouse gas emissions by 85 percent and achieve zero net emissions of greenhouse gas by 2045, and emissions from industrial sources accounted for 18.6 percent of emissions the state’s 2023 greenhouse gas inventory.
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<html:p>
(3)
<html:span class="EnSpace"/>
While the state’s climate laws direct the State Air Resources Board to “achieve the maximum technologically feasible and cost-effective reductions in greenhouse gas emissions,” they also require the State Air Resources Board to minimize “leakage,” which means attempting to achieve emissions reductions without just causing the underlying economic activity to leave the state and emit elsewhere.
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<html:p>
(4)
<html:span class="EnSpace"/>
To reduce air pollution and greenhouse gas emissions from the industrial sector while retaining and growing industrial activity and jobs in the state, it will be important for the state to support cost-effective pathways for industrial firms to adopt lower emissions solutions.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
One pathway with proven zero-emission solutions for some industrial use cases is electrification, including electric boilers, industrial heat
pumps, and thermal energy storage systems, but their economic feasibility depends critically on the cost of electricity.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
The Public Utilities Commission has been developing approaches to electricity rates to encourage demand flexibility, such as hourly dynamic rates linked to wholesale market prices, that could make electrification more cost effective, particularly for industrial loads that can be flexible, and avoid usage during peak time periods.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
However, two large components of industrial electricity bills, nonbypassable charges and transmission access charges, do not vary by time of use, which reduces the incentive for industrial customers to shift usage to off-peak times and makes it difficult for electrification solutions to be cost competitive with traditional energy sources, even when they focus on using electricity only during off-peak times.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
Rather than the Independent System Operator’s approach of spreading transmission costs equally across all usage, grid operators managing most other regions of the country, including PJM Interconnection LLC, Electric Reliability Council of Texas, Inc., Midcontinent Independent System Operator, Inc., Southwest Power Pool, ISO New England, Inc., and the New York Independent System Operator, allocate more of the cost of transmission to usage that occurs during peak times, which supports lower electricity prices during off-peak times to encourage shifting demand away from the times when the grid is most strained.
</html:p>
<html:p>
(9)
<html:span class="EnSpace"/>
A significant shift of industrial energy usage from traditional energy sources to electricity would represent large new demand for the electrical system that would contribute to paying for the fixed costs of the grid and could reduce rates for all ratepayers, as long as
the new load pays more than its marginal cost of service.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
It is the intent of the Legislature to retain and expand industrial firms and jobs in the state while also encouraging and supporting, where economically feasible, a shift in industrial energy usage toward zero-emission options, including electrification, in order to reduce greenhouse gas emissions, cut air pollution, and lower electricity rates.
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<ns0:Num>SEC. 2.</ns0:Num>
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Section 351 is added to the
<ns0:DocName>Public Utilities Code</ns0:DocName>
, to read:
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<ns0:Num>351.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
It is the policy of the state that allocation of costs to ratepayers for transmission and distribution resources should follow cost causation principles, including consideration of the differing impacts on costs caused by load occurring during the highest usage time periods relative to loads occurring during off-peak times.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
Recognizing that the Independent System Operator’s Federal Energy Regulatory Commission-approved tariff requires the Independent System Operator to determine the allocation of transmission costs in its high-voltage transmission access charges, it is the intent of the Legislature that the Independent System Operator should take notice of the state policies expressed in this section.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
On or before January 1, 2028, the commission shall develop recommendations for changes to high-voltage transmission access charges that would improve consistency with the commissions’s cost causation principles and shall communicate these recommendations to the Independent System Operator and request that the Independent System Operator reopen its transmission access charge structure enhancements proceeding to consider reforms to its high-voltage transmission access charges.
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<ns0:Num>SEC. 3.</ns0:Num>
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Section 759 is added to the
<ns0:DocName>Public Utilities Code</ns0:DocName>
, to read:
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<ns0:Fragment>
<ns0:LawSection id="id_FFA190A8-441E-4119-8FB3-B04E6CA855EA">
<ns0:Num>759.</ns0:Num>
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<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
For purposes of this section, the following definitions apply:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
“Eligible industrial transition customer” means a commercial or industrial customer with new load on or after January 1, 2027, that is metered separately from any previously existing loads and that consists solely of eligible industrial transition usage.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
“Eligible industrial transition usage” means using electricity to provide industrial process heat, including through the use of a thermal energy storage system, and may include de minimis consumption necessary for management and control of that usage.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
“Large electrical corporation” has the
same meaning as defined in Section 2827.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
“Nonbypassable charge ratio” means the sum of all volumetrically determined nonbypassable charges for a billing period divided by the sum of all volumetric energy and delivery charges for a billing period.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
The commission may direct each large electrical corporation, when billing an eligible industrial transition customer for eligible industrial transition usage, to apply an adjustment factor to the per kilowatthour rate for each volumetrically determined nonbypassable charge to limit the nonbypassable charge ratio to no more than 25 percent or an alternative maximum ratio determined by the commission to be just and reasonable and in furtherance of facilitating electrification of industrial energy use to improve air quality and reduce emissions of greenhouse gases.
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<ns0:BillSection id="id_1112C778-AB79-4209-A27B-D2BE8B329FD7">
<ns0:Num>SEC. 4.</ns0:Num>
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<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.
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