California lawmakers have introduced legislation targeting utility spending practices as residential electricity bills reach roughly twice the national average. The bill would require utilities to demonstrate full utilization of existing grid assets before approving new infrastructure, reduce return on equity for lower-risk investments, and direct the California Public Utilities Commission to establish performance-based metrics. This represents a fundamental shift from traditional cost-of-service regulation toward accountability-driven grid planning that could reshape how investor-owned utilities justify capital expenditures nationwide.
The legislation responds to a rate crisis years in the making. California’s three largest investor-owned utilities — Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric — have seen rate increases outpace inflation for over a decade, driven by wildfire mitigation mandates, grid hardening programs, and the integration of renewable resources. Yet critics argue the current regulatory framework incentivizes capital-heavy solutions over operational efficiency, since utilities earn a guaranteed return on every dollar of rate base they build. The proposed ROE adjustment for “less-risky” investments directly challenges that incentive structure.
Performance-based regulation has gained traction in jurisdictions from New York to the United Kingdom, but California’s approach is notable for its specificity. By mandating transparent utilization data for distribution assets before new construction, the bill addresses a longstanding information asymmetry: regulators and intervenors often lack granular visibility into how existing circuits, substations, and automation systems are actually performing. Clean energy and environmental groups backing the measure argue this data gap has allowed redundant build-outs that inflate customer bills without improving reliability or decarbonization outcomes.
If enacted, the law would force a cultural shift within utility planning departments accustomed to defending capital budgets rather than optimizing asset throughput. The CPUC’s implementation of performance metrics — likely including asset utilization rates, outage duration normalized by investment, and interconnection queue processing times — will determine whether the reform produces meaningful discipline or becomes another reporting exercise. Other states watching California’s experiment include New York, Massachusetts, and Colorado, where similar affordability pressures are mounting.
Read the full report at Energy Central.