Public Utilities Commission: rates: cost of capital proceeding: authorized return on equity

The authorized return on equity affects utility rates and can involve billions of dollars in capital investments. The law makes the California Public Utilities Commission’s reasoning more transparent and reproducible while preserving its discretion over the methods it uses.

What the law does ​

• Requires the commission, for cost-of-capital decisions issued on or after December 31, 2030, to independently assess parties’ proposals and disclose the financial models, inputs, data sources, model weights, calculations, and qualitative adjustments behind its return-on-equity decision.
• Requires enough detail for a utility-finance expert to independently reproduce the commission’s result, including treatment of model-result ranges, settlements, peer utilities, and utility credit quality.
• Requires the commission to identify and explain any material change from the methodology used in its prior return-on-equity decision for the same utility.
• Requires the commission to include annual analysis of California utilities’ credit-rating trends in its report to the Legislature, updated when needed even if no return-on-equity decision is issued.

Who it affects ​

• Investor-owned electrical corporations and gas corporations seeking authorized returns on equity.
• The California Public Utilities Commission and parties participating in its cost-of-capital proceedings.
• Utility customers and other stakeholders reviewing the basis for rates.

Context ​

The requirements apply to qualifying commission decisions issued on or after December 31, 2030.