What an upcoming vote by state regulators could mean for your electric bill<\/p>\n
The California Public Utilities Commission will vote this week on how much profit private utility companies, such as Southern California Edison and San Diego Gas & Electric, can make.<\/p>\n
State regulators are poised to vote on how much profit utility companies can make, a decision with big implications for Californians\u2019 bills and the aging power grid.<\/p>\n
The California Public Utilities Commission, which regulates privately owned utilities in the state, will vote on a proposed decision<\/a> to lower the payout to shareholders from the state\u2019s investor-owned utilities \u2014 Southern California Edison, San Diego Gas & Electric, Southern California Gas Co. and Pacific Gas & Electric.<\/p>\n Unlike public utilities, such as the L.A. Department of Water and Power, investor-owned utilities are private companies that operate as government-regulated monopolies.<\/p>\n California\u2019s electricity rates are the second-highest in the nation, behind only Hawai\u2019i. As the state works to transition to a cleaner energy economy that runs largely on electricity, those high bills threaten to derail progress.<\/p>\n Keep up with LAist.<\/p>\n If you’re enjoying this article, you’ll love our daily newsletter, The LA Report. Each weekday, catch up on the 5 most pressing stories to start your morning in 3 minutes or less. <\/p>\n Experts say lowering utility profits is just one piece, albeit a big one, in the puzzle to address energy affordability.<\/p>\n The background<\/p>\n Every three years, \u200athe CPUC, which is made up of five commissioners<\/a> appointed by the governor, oversees applications from the state\u2019s private utilities during which they ask for a certain \u201crate of return\u201d \u2014 essentially their amount of expected profits above the cost of operations \u2014 to attract the capital they say they need<\/a> to make necessary investments in California\u2019s aging power grid. That includes building new power plants, transmission lines and other infrastructure.<\/p>\n These profits are also important to ensure the utilities don\u2019t go into bankruptcy and can maintain reliable service.<\/p>\n Over the last two decades, the amount of profits allowed has only gone up \u2014 it hovers at a little over 10% for the state\u2019s big three investor-owned electric utilities, which is slightly higher than the industry average across the nation.<\/p>\n Mark Ellis \u2014 a former executive at Sempra Energy (the parent company of SoCal Gas and SDG&E) turned ratepayer advocate \u2014 estimates that profit, plus income taxes on profit, which are passed through to ratepayers, accounts for about one-quarter of Californians\u2019 utility bills.<\/p>\n The CPUC is expected to vote on whether to approve a slight decrease to those returns at a meeting Thursday<\/a>.<\/p>\n What the proposal says<\/p>\n The proposed decision would lower the return on equity for each utility by about 0.35% \u2014 even such a small change can mean millions of dollars in reductions for ratepayers.<\/p>\n If approved, SoCal Edison\u2019s maximum return on equity would be 9.98%, down from 10.33%, and San Diego Gas & Electric would be 9.88%, down from 10.23%.<\/p>\n What critics say<\/p>\n Some stakeholders say the return percentage should be far lower. Ellis, who provided testimony <\/a>in the proceeding on behalf of the Sierra Club and Protect Our Communities Foundation, argues the return should be as low as 6%. He estimates that could reduce Californians\u2019 electric bills by as much as 10%.<\/p>\n \u201cThere’s no other industry that really has that type of return that’s virtually guaranteed,\u201d Ellis said. \u201cWe haven’t touched their profits for decades, and what has it gotten us? It’s gotten us really expensive electricity and a very brittle system.\u201d<\/p>\n He says current returns on equity incentivize the state\u2019s monopoly utilities to overinvest, raising rates for customers and the expense of the energy transition.<\/p>\n \u201cSo I’m saying, the first step is, get the incentives right and see how they behave,\u201d Ellis said.<\/p>\n The Little Hoover Commission, the state\u2019s independent watchdog agency, cited Ellis\u2019 work in a recent report on lowering electricity rates<\/a>, as well as two UC Berkeley<\/a> studies<\/a> showing how \u201cutility regulators often approve profit levels that exceed what is truly needed to attract investment.\u201d<\/p>\n In the report, the commission recommends shifting the initial proposal of the rate of return on equity to the state Treasurer\u2019s Office, instead of the utilities themselves. The report also calls for an audit of California Public Utilities Commission staffing to assess whether the agency has enough capacity to provide rigorous oversight of these proceedings.<\/p>\n \u201cWe want to make sure that the rate of return isn’t so high that this is just a cash grab from everyday customers and rate payers to big corporate interests,\u201d said Katherine Ramsey, a senior attorney with the Sierra Club. \u201cYou want to make sure the number is no more and no less than what is necessary for the utilities to remain financially healthy.\u201d<\/p>\n What the utilities say<\/p>\n The utilities had asked to increase or maintain their current rates of return. They\u2019ve called on the commissioners to reject the proposed reduction.<\/p>\n They argue that their return on equity has to be competitive with nationwide utilities or else investors will go elsewhere, which could slow long-term investments in public infrastructure to improve wildfire safety and boost clean energy and hurt the companies\u2019 credit.<\/p>\n And, especially since the 2025 L.A. wildfires and other catastrophic fires in the last decade, they say California electric utilities are seen as riskier, increasing costs of equity.<\/p>\n \u201cWe are disappointed that the proposed decision does not fully reflect current market conditions or the unique risks California utilities face,\u201d a spokesperson for SDG&E wrote to LAist.<\/p>\n David Eisenhauer, a spokesperson for Southern California Edison told LAist that \u201cwhen investors view the rate established by the CPUC as not commensurate with the risk, that impacts investor willingness to invest in California, which then drives up the cost of capital and increases customer costs over time.\u201d<\/p>\n In their latest comments<\/a> to the commission, Edison said the company has already not been meeting the return approved by the CPUC \u201csince at least 2017, with 2024 actual earnings at 6.38% as compared to 10.75% authorized, in part due to financing of wildfire claims and SCE\u2019s contributions to the Wildfire Fund.\u201d<\/p>\n \u201cThe commission\u2019s objective is not to maximize customer savings by setting the authorized [return on equity] as low as possible,\u201d they write, but rather to set a rate \u201ccommensurate with market returns on investments\u201d so that company can attract investors to finance infrastructure and \u201cfulfill its public utility service obligation.\u201d<\/p>\n How to share your comments ahead of the vote<\/p>\n The CPUC is expected to vote Thursday<\/a>. You can submit a comment by calling into the meeting<\/a>, or submitting one online ahead of time. To submit online<\/a>, you\u2019ll have to enter the proceeding\u2019s docket number, which is A2503010, then click the tab that says \u201cAdd public comment.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"What an upcoming vote by state regulators could mean for your electric bill The California Public Utilities Commission…\n","protected":false},"author":2,"featured_media":96680,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[7,9,8,36816,52394,52992,7035,52993,52994,28790],"class_list":["post-96679","post","type-post","status-publish","format-standard","has-post-thumbnail","category-california","tag-california","tag-california-headlines","tag-california-news","tag-cpuc","tag-electric","tag-investor-owned","tag-profit","tag-public-utilities-commission","tag-so-cal-edison","tag-utility-bills"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/96679","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=96679"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/96679\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/96680"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=96679"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=96679"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=96679"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}