The California Public Utilities Commission opened a proceeding on September 3 to overhaul how energy utilities file general rate cases, according to an order from the regulator. The commission said its rate case plan hasn't been fully updated or reviewed since 2007. The stated goal is to boost transparency and accountability around utility rates while keeping costs affordable for customers.
As of June, California had the nation's second-highest average retail electricity price behind only Hawaii, according to Energy Information Administration data cited in the order. The commission said it aims to streamline general rate cases and give parties and decision-makers more complete information as they balance ensuring rates can support utility services while keeping those rates as affordable as possible for customers. The order also said the commission may consider broader revisions to promote more efficient and effective management of the rate case process while encouraging consistency and uniformity in energy utilities' general rate case applications.
Commission President John Reynolds said during the September 3 meeting that he expects the rulemaking will focus on carrying out legislative direction while also addressing aspects not covered in legislation "that can really improve our general rate case process to create more efficiencies for our review of costs, and ultimately enable both greater certainty in utility rates … and greater affordability for customers." The proceeding will implement several new state laws, including AB2666, which passed in 2024 and requires utilities to report and track their actual rates of return against their forecasted rates of return. It'll also address AB2847, which requires utilities to increase cost transparency and disclosure regarding long-term capital expenditures, and SB254, which increased ratepayer protections and made adjustments to the California Wildfire Fund.
The proceeding could reshape how utilities justify their spending and earn profits. Commissioner Darcie Houck suggested during the meeting that staff and the assigned judge consider "the correlation between utility performance and compensation," pointing to innovative approaches from Hawaii's public utilities commission. Those include requiring investor-owned utilities to hit certain performance-based targets—such as reaching decarbonization goals and meeting interconnection timelines—in order to earn a certain return on equity, as well as profit sharing arrangements where a utility that overearns its authorized return has to share a portion of those gains with ratepayers. Energy and regulatory analyst Michael Cade told Utility Dive that the proceeding "could be a pretty significant rulemaking," though he cautioned that "similar to relying on rate design as an affordability panacea, tweaking the framework of GRCs can only do so much."
The commission said in a fact sheet that comments can be submitted on the order within 45 days of it being issued. One or more public workshops and party or staff proposals may be needed to develop and build consensus around the issues considered in the proceeding. Pacific Gas and Electric, Southern California Edison, San Diego Gas & Electric, and Southern California Gas Company are named as parties to the proceeding, with PG&E saying it supports the commission's efforts and looks forward to working on potential improvements that can streamline the regulatory process and increase transparency.