Public utilities: electrical and gas corporations: return on equity.

Plain English Breakdown

The bill summary does not provide details on customer notification or specific penalties for non-compliance.

Regulating Electric and Gas Companies' Profits

The bill sets rules for how much profit electric and gas companies can make from their investments and requires them to provide specific information when they want to change rates.

What This Bill Does

• Requires the Public Utilities Commission (PUC) to ask electric and gas companies to include certain studies if they propose rate changes based on profits from investments.
• Limits how much more profit an electric or gas company can make compared to what it would earn from long-term government bonds by 400 basis points (or 4%).

Who It Names or Affects

• Electric and gas companies in California.
• The Public Utilities Commission, which regulates these companies.

Terms To Know

Return on equity

How much profit a company makes compared to the money invested by shareholders.

Basis points

A unit used to measure interest rates and other financial percentages. 100 basis points equal 1%.

Limits and Unknowns

• The bill does not specify how the PUC will enforce these rules.
• It is unclear what specific studies electric and gas companies must include in their proposals to change rates.

Official Summary Text

AB 1677, as amended, Boerner.
Public utilities: electrical and gas corporations: return on equity.
Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable. Existing law prohibits a public utility from changing a rate or altering a classification, contract, practice, or rule that would result in a new rate, except upon a showing before the commission and a finding by the commission that the new rate is justified and the public utility notifying its customers of the rate change.
This bill would require the commission to require an electrical corporation or gas corporation proposing to change a rate, or to alter a classification, contract, practice, or rule so as to result in a new rate
based directly or indirectly on its request for return on invested capital, to include in its proposal certain studies, as provided. The bill would prohibit the commission from establishing an authorized return on equity for an electrical corporation or gas corporation that exceeds the rate on long-term debt issued by the federal government by more than 400 basis points.
Under existing law, a violation of the Public Utilities Act or an order, decision, rule, direction, demand, or requirement of the commission is a crime.
Because the above provisions would be part of the act and a violation of a commission action implementing the bill’s requirements 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.

Current Bill Text

Download Bill PDF