SB905 - Electricity.

Enrolled September 01, 2026 Passed IN Senate August 30, 2026 Passed IN Assembly August 30, 2026 Amended IN Assembly August 17, 2026 Amended IN Assembly June 29, 2026 Amended IN Assembly June 01, 2026 Amended IN Senate May 14, 2026 Amended IN Senate March 17, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Senate Bill No. 905 Introduced by Senator Becker (Coauthor: Senator Stern) (Coauthor: Assembly Member Boerner) January 22, 2026 An act to add Sections 451.11, 701.11, and 769.1 to the Public Utilities Code, relating to electricity. LEGISLATIVE COUNSEL'S DIGEST SB 905, Becker. Electricity. 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 public utilities and requires that those rates and charges be just and reasonable. This bill would require the commission, for each electrical corporation, to consider assigning a reduced return on equity, as a reduction applied each year to the then current authorized rate of return on equity, for specified types of capital costs included in the electrical corporation’s rate base, as specified. This bill would require the commission to initiate a rulemaking proceeding to evaluate opportunities for alternative methods of financing capital investments in electrical distribution, electrical generation, and electrical transmission that reduce costs for ratepayers, as specified. As part of the rulemaking, the bill would require the commission to establish categories of alternative financing mechanisms for each electrical corporation to evaluate and report on with respect to opportunities for alternative financing of electrical distribution, electrical generation, and electrical transmission costs, as specified. The bill would require the commission, on or before December 31, 2028, to submit a report to the Legislature outlining any findings and recommendations resulting from the rulemaking, as specified. This bill would require the commission to require each large electrical corporation to make data available to the public that quantifies the potential for increased utilization of segments of its electrical distribution grid, as specified. Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime. Because the above provisions would be a part of the act, and because a violation of a commission action implementing those provisions would be a crime, this bill would impose a state-mandated local program. 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. This bill would provide that no reimbursement is required by this act for a specified reason. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YES Bill Text The people of the State of California do enact as follows: SECTION 1. Section 451.11 is added to the Public Utilities Code, to read: 451.11. (a) For each electrical corporation, the commission shall consider assigning a reduced return on equity, as a reduction applied each year to the then current authorized rate of return on equity, for the following categories of costs included in the electrical corporation’s rate base: (1) Capital costs recovered through a balancing account or a memorandum account. (2) Capital costs exempted from a reasonableness review. (3) Capital costs relating to undergrounding of the electrical system. (b) The commission shall determine whether to assign a reduced return on equity applicable to the categories of capital costs identified in subdivision (a) and shall issue a written explanation of its decision that includes, but is not limited to, its reasoning with respect to each of the following factors and why each factor does or does not support a reduced return on equity for the categories of capital costs at issue: (1) The lower level of cost recovery risk faced by the electrical corporation, including for costs that are exempted from a reasonableness review. (2) The ability to begin cost recovery sooner, including for costs in balancing accounts or memorandum accounts. (3) Any other reduction in risk for the shareholders of the electrical corporation, including reductions in the risk of liability for wildfire-related losses achieved by the undergrounding of electrical equipment or other wildfire mitigation investments. (4) The need to minimize incentives for overspending on capital relative to expense. (c) The commission shall require an electrical corporation to apply the reduced return on equity determined pursuant to subdivision (b), if any, at the time applicable costs are initially authorized for inclusion in the electrical corporation’s rate base. (d) The establishment of a reduced return on equity for certain categories of capital costs pursuant to this section shall not be considered by the commission in making any determination regarding the reasonableness of the authorized rate of return on equity for the electrical corporation. (e) Notwithstanding subdivision (d), this section does not prevent the commission from setting just and reasonable rates, including by declining to apply a reduced return on equity to any cost upon a written finding by the commission that doing so would not be just and reasonable. SEC. 2. Section 701.11 is added to the Public Utilities Code, to read: 701.11. (a) The commission shall initiate a rulemaking proceeding to evaluate opportunities for alternative methods of financing capital investments in electrical distribution, electrical generation, and electrical transmission that reduce costs for ratepayers. The proceeding shall consider options for substituting alternative financing for shareholder equity and other financing mechanisms that could lower the cost of capital recovered in retail rates. (b) As part of the rulemaking initiated pursuant to subdivision (a), the commission shall establish categories of alternative financing mechanisms that each electrical corporation shall evaluate and report on, at intervals determined by the commission, with respect to opportunities for alternative financing of electrical distribution, electrical generation, and electrical transmission costs. Each electrical corporation shall identify all opportunities within those categories and present the most cost-effective alternative financing options from among those opportunities for commission evaluation pursuant to subdivision (a). This subdivision does not preclude an electrical corporation from identifying and presenting additional alternative financing opportunities beyond those categories established by the commission. (c) (1) On or before December 31, 2028, the commission shall submit a report to the Legislature outlining any findings and recommendations resulting from the rulemaking proceeding initiated pursuant to subdivision (a), including recommendations for any legislative or administrative actions that may be necessary to implement identified financing opportunities. (2) The requirement for submitting a report imposed under paragraph (1) is inoperative on January 1, 2029, pursuant to Section 10231.5 of the Government Code. (3) A report to be submitted pursuant to paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code. SEC. 3. Section 769.1 is added to the Public Utilities Code, to read: 769.1. (a) The commission shall require each large electrical corporation to make data available to the public that quantifies the potential for increased utilization of segments of its distribution grid, including all of the following: (1) A capacity utilization metric that measures the average electricity delivered over a distribution segment during a period of time divided by that distribution segment’s maximum electrical capacity. (2) A peak utilization metric that measures a distribution segment’s peak load divided by that distribution segment’s maximum electrical capacity. (3) Off-peak load-hosting capacity data that estimates the capacity of a distribution segment to support new loads outside of the highest peak load periods annually for that distribution segment, or data providing a similar quantification of off-peak capacity, as determined by the commission. (4) The location of constrained distribution areas with sufficient detail to allow third parties to identify locations where distributed resources could benefit the constrained distribution area. (b) In approving a capacity utilization metric pursuant to subdivision (a), the commission shall consider establishing a target and timeline for each large electrical corporation to increase average distribution grid capacity utilization in accordance with the approved metric. (c) As part of its distribution planning process, each large electrical corporation shall include an assessment of current distribution grid capacity utilization for each distribution segment for which a distribution grid need has been identified that may require new investments to meet expected future demand growth and an assessment of whether strategies to increase distribution grid utilization, such as load flexibility and distribution-connected energy storage, could resolve the distribution grid need at a lower cost to ratepayers than traditional distribution grid infrastructure upgrades. (d) For purposes of this section, both of the following definitions apply: (1) “Constrained distribution area” means a segment of the distribution grid where capacity limits are already delaying, or are anticipated to delay, energization of new loads or the ability to handle load growth from existing customers, as identified by low load-hosting capacity or by locational net benefits analysis, or a similar successor metric, as determined by the commission. (2) “Large electrical corporation” has the same meaning as defined in Section 2827. SEC. 4. No reimbursement is required by this act pursuant to Section 6 of Article XIII 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 B of the California Constitution.