Electricity.

The reduced return on equity provision (Section 451.11) changed from mandatory ('shall assign') to discretionary ('shall consider assigning'), giving the Public Utilities Commission flexibility to decide whether to apply a reduced rate of return to certain capital costs.

The commission must now issue a written explanation of its decision on whether to assign a reduced return on equity, including reasoning on each listed factor (cost recovery risk, timing of cost recovery, wildfire liability risk reduction, and overspending incentives).

The 2030 evaluation proceeding must now include submission of recommendations to the Assembly Committee on Utilities and Energy and the Senate Committee on Energy, Utilities and Communications, creating a direct legislative feedback loop.

The alternative financing rulemaking was restructured: instead of requiring utilities to annually submit open-ended reports on all opportunities, the commission will now establish categories of alternative financing mechanisms, and utilities must evaluate and report on those categories at intervals set by the commission, presenting the most cost-effective options for evaluation.

A new 'peak utilization metric' was added to Section 769.1, measuring a distribution segment's peak load divided by its maximum electrical capacity, supplementing the existing average capacity utilization metric.

A new safety valve (subdivision (e) of Section 451.11) allows the commission to decline applying a reduced return on equity to any cost upon a written finding that doing so would not be just and reasonable, overriding the general rule.

The term 'average cost of electricity' was replaced with 'adjusted average cost of electricity,' which now excludes costs recovered through public purpose program surcharges, Wildfire Fund charges, Continuation Account charges, and other nonbypassable statutory charges over which the utility has no control. This affects both the performance metric and the executive compensation incentive.

Performance-based metrics requirements were narrowed from applying to all 'electrical corporations' to only 'large electrical corporations' in multiple provisions, including historical data submission, target assessment during rate cases, and the public dashboard.

The distribution planning assessment requirement in Section 769.1(c) was narrowed to apply specifically to 'each distribution segment for which a distribution grid need has been identified that may require new investments,' rather than applying more broadly.

The executive incentive compensation requirement (minimum 20% tied to electricity cost) now explicitly excludes employees the commission determines are officers subject to Section 706, carving out top-level executives already covered by existing law.

The reduced return on equity provision now includes 'memorandum accounts' alongside balancing accounts as a category of capital costs eligible for a reduced rate of return.

Section 399.10 is entirely removed. It would have required the CPUC to initiate a proceeding by January 1, 2028 to develop a framework of performance-based metrics for large electrical corporations covering 15 categories including reliability, utilization, capital spending, greenhouse gas emissions, and cost.

The requirement that the CPUC establish targets for performance metrics and assess corporate performance against them during general rate cases is removed.

The requirement that each large electrical corporation have an incentive compensation structure for VP-level and higher employees (funded through rates) where at least 20 percent of total annual compensation is contingent on the adjusted average cost of electricity increasing no more than the federal Social Security cost-of-living adjustment over a rolling three-year period is removed.

The requirement for a public dashboard on the CPUC website showing each large electrical corporation's performance against all metrics and targets is removed.

The requirement for the CPUC to initiate an evaluation proceeding by January 1, 2030 to assess results of the performance framework and recommend whether to create financial incentives and penalties is removed.

Definitions for 'adjusted average cost of electricity,' 'distributed resources,' and 'large electrical corporation' that supported Section 399.10 are removed (though 'large electrical corporation' remains defined in Section 769.1).

The amendment to Section 381 of the Public Utilities Code (nonbypassable charge for energy efficiency, R&D, and renewable energy programs) was entirely removed from the bill, narrowing its scope.

The fiscal committee determination changed from 'no' to 'yes,' indicating the bill now has a fiscal impact requiring legislative appropriation or budget consideration.

The state-mandated local program determination changed from 'no' to 'yes,' meaning the remaining provisions now impose costs on local agencies or school districts that trigger reimbursement obligations under the California Constitution.

The entire POWER Program (Chapter 20, Division 15, Public Resources Code, Sections 25998-25998.50) was deleted. This program would have established a state reimbursement fund to pay electric utilities for expenditures driven by public policy goals such as transportation electrification, building electrification, energy efficiency, wildfire mitigation, and low-income programs. It included allocation guidelines requiring reimbursed amounts be excluded from rate base and funded without return on equity, an annual spending plan requirement, annual legislative reporting on utility bill impacts, and a 3 percent or $5 million administrative cost cap.

Section 399.10(c)(3) adds a requirement that on or before January 1, 2030, the Public Utilities Commission initiate a proceeding to evaluate the results of the adopted performance-based metrics framework and determine whether to recommend statutory changes authorizing financial incentives and penalties tied to those metrics.

Section 451.11(c) adds a clarification that the reduced return on equity assigned for specific capital cost types (balancing account costs, costs exempted from reasonableness review, undergrounding costs) shall not be considered by the commission when determining the overall authorized rate of return on equity for the electrical corporation.

Section 769.1(c) is expanded to require that each large electrical corporation's distribution planning process include, for each distribution segment with an identified grid need requiring new investment, an assessment of whether strategies to increase utilization (such as load flexibility and distribution-connected energy storage) could resolve the need at a lower cost than traditional infrastructure upgrades.

Section 769.1(b) changes the target language from 'increase distribution grid capacity utilization' to 'increase average distribution grid capacity utilization,' adding the word 'average' for precision.

Entirely new POWER Program (Chapter 20, Division 15, Public Resources Code) requiring the Energy Commission to reimburse electric utilities for expenditures driven by public policy goals including transportation electrification, building electrification, wildfire mitigation, energy efficiency, and low-income affordability programs. Reimbursed amounts are excluded from rate base and earn no return on equity.

The bill's scope expanded from a single nonsubstantive amendment to Section 381 (fund allocation language) to six sections spanning two codes (Public Resources Code and Public Utilities Code), covering utility regulation, executive compensation, rate design, financing, and data transparency.

Establishes the Policy-Oriented and Wildfire Electric Reimbursement Fund in the State Treasury. Moneys must be appropriated by the Legislature before being expended. Administrative costs capped at the lesser of 3 percent of appropriated moneys or $5,000,000 per year.

Fiscal committee designation changed from 'no' to 'yes' and state-mandated local program designation changed from 'no' to 'yes,' reflecting the bill's new fiscal impact and local program implications.

New Section 399.10 requires the PUC to initiate a proceeding by January 1, 2028, to develop performance-based metrics for large electrical corporations covering 14 metric types including reliability, utilization, emissions intensity, and average cost of electricity. Requires 10 years of historical data and a public dashboard.

New Section 399.10(d) requires each large electrical corporation to have an incentive compensation structure for vice presidents and above where at least 20 percent of total annual compensation is contingent on the average cost of electricity increasing by no more than the federal Social Security cost-of-living adjustment over a rolling three-year period.

New Section 451.11 requires the PUC to assign a reduced return on equity for capital costs recovered through balancing accounts, costs exempted from reasonableness review, and undergrounding costs. The reduction reflects lower cost recovery risk, earlier cost recovery, wildfire liability reduction, and the need to minimize overspending incentives.

New Section 701.11 requires the PUC to initiate a rulemaking on alternative financing methods for electrical distribution, generation, and transmission that reduce ratepayer costs. Utilities must submit annual reports identifying opportunities, and the PUC must report findings to the Legislature by December 31, 2028.

New Section 769.1 requires large electrical corporations to make public data quantifying distribution grid capacity utilization, off-peak load-hosting capacity, and locations of constrained distribution areas. The PUC may set targets and timelines for increasing grid utilization.