School districts: reorganization: state board approval: qualified special taxes.

The entire Article 6.5 (Sections 860-860.3) of the Public Utilities Code was deleted. This article would have authorized electrical corporations to issue recovery bonds to finance undergrounding of utility infrastructure, with costs recovered through nonbypassable fixed charges on consumers until bonds were paid in full by December 31, 2035.

New provisions added to the Education Code and Government Code governing school district reorganization. The bill now amends Sections 35560 and 35753 of, and adds Section 35555.5 to, the Education Code, and adds Section 50079.4 to the Government Code.

Amendments to Section 748.5 of the Public Utilities Code requiring California Climate Credits to be volumetric (tied to consumption) and delivered on bills during July, August, and September were removed entirely.

New Section 35555.5 requires that in a reorganization approved under the new pathway: (a) both permanent and probationary certificated and noncertificated employees who elect to remain with the reorganized portion of the divided district have at least 2 years of employment protection, and (b) any collective bargaining agreement in effect immediately before the reorganization remains in full force until its expiration or renewal, binding on both portions of the divided district.

Section 35753 amendment authorizes the State Board of Education to approve a reorganization proposal if: (1) the school district is an excess tax entity with fewer than 10,000 pupils, (2) a city, county, special district, or LAFC with more than 10,000 residents adopted a resolution seeking reorganization, and (3) both parties executed legally binding written agreements that satisfactorily address statutory criteria. This authority is limited to January 1, 2030.

New Section 50079.4 of the Government Code authorizes both the reorganized portion and the remaining portion of a divided school district to continue imposing qualified special taxes within their respective geographical boundaries that were imposed in the original district before division.

Removed the requirement that the PUC review and approve or deny transmission line projects, including extensions, expansions, upgrades, or other modifications of existing transmission lines, based on appropriateness and cost effectiveness. The legislative digest no longer references a 'transmission projects: review and approval' component.

In Section 860.1(a)(1)(A), changed 'the following conditions are satisfied' to 'all of the following conditions are satisfied,' making the standard slightly more explicit that every listed condition must be met before a financing order is issued.

In Section 860(b), changed 'the following definitions apply' to 'all of the following definitions apply,' a minor clarifying edit consistent with California drafting conventions.

Introduced apparent drafting errors: the new digest contains a duplicated word ('and and, if the commission finds') and Section 860.1(a)(3) reads 'applicable law and regulation laws and regulations' instead of the prior clean 'applicable law and regulation.'

The entire 'Consumer Utility Bill of Rights' title section and legislative findings were removed. These findings had cited that the average California utility bill was $186 (nearly 30% higher than the national average), that rates increased 40% over three years, and that wildfire mitigation and transmission investments were the top rate drivers.

New Article 6.5 (Sections 860 through at least 860.4) is added to the Public Utilities Code, creating a comprehensive framework for electrical corporations to finance undergrounding of utility infrastructure through recovery bonds issued under PUC financing orders.

The transmission review provision now explicitly includes 'the extension, expansion, upgrade, or other modification of existing transmission lines' within the PUC's authority to review and approve or deny projects based on appropriateness and cost effectiveness.

New Section 1 amends Public Resources Code Section 94520 (part of Proposition 4, approved November 2024) to make $325,000,000 available upon legislative appropriation to the California Infrastructure and Economic Development Bank, the State Energy Resources Conservation and Development Commission, or another entity chosen by the Legislature, for public financing of clean energy transmission projects necessary to meet state clean energy goals.

The amendment authorizes the Legislature to appropriate additional funds beyond those provided by Proposition 4 to further facilitate public financing of clean energy transmission projects.

Under the new Article 6.5, the PUC must issue a financing order if it determines that undergrounding costs are just and reasonable, that bond terms are just and reasonable and consistent with the public interest, and that recovery through fixed charges would reduce rates on a present value basis compared to traditional utility financing.

Recovery bonds may be issued in one or more series on or before December 31, 2035. The rate recovery proceeding pathway (paragraph (a)(2)) does not apply to costs incurred after December 31, 2035.

Customers participating in the California Alternative Rates for Energy (CARE) or Family Electric Rate Assistance (FERA) programs are exempt from paying recovery costs under the new undergrounding financing framework.

The bill prohibits the PUC from allowing a large electrical corporation to include infrastructure undergrounding amounts in its equity rate base, effectively limiting how these costs can be recovered through rates.

The new Article 6.5 includes detailed provisions for security interests in recovery property, true sale characterization (protecting transfers from being recharacterized as financing in bankruptcy), statutory liens, commingling rules, and default remedies - modeled on similar wildfire bond financing structures already in the Public Utilities Code.

Removed the amendment to Public Resources Code Section 94520 that made $325 million available from Proposition 4 bond proceeds for public financing of clean energy transmission projects, including preference for projects reducing wildfire risk, fossil fuel reliance in disadvantaged communities, and rate pressure.

Allowed the commission to allocate up to 15 percent of greenhouse gas allowance revenues for clean energy and energy efficiency projects administered by the electrical corporation or a qualified third-party administrator, provided they are not otherwise funded.

Added new Public Utilities Code Section 748.5 requiring electrical corporations to credit revenues from direct allocation of greenhouse gas allowances directly to residential, small business, and emissions-intensive trade-exposed retail customers (the California Climate Credit).

Required the California Climate Credit for residential customers to be volumetric (tied to consumption) rather than a flat amount independent of consumption.

Required each electrical corporation to adopt and implement a customer outreach plan (including bill notices and media) to maximize public awareness of the crediting, with implementation costs recoverable in rates under Section 454.

Required that credits to residential customers appear on bills for July, August, and September of each year, or as otherwise directed by the commission to address extreme, unforeseen, and temporary circumstances.

Section 761.7 now requires the commission to 'review and approve or deny' transmission line projects, rather than merely 'review and approve.' This gives the commission explicit authority to reject projects, not just rubber-stamp them.

A new decision-making standard is added: the commission must base its approval or denial on 'the appropriateness and cost effectiveness of the projects.' This provides a concrete criterion for evaluating transmission line proposals rather than leaving the standard undefined.