SB 1098: Public utilities: forecast-based ratemaking.

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 requires the commission, whenever the commission authorizes a change in rates reflecting and passing through to customers specific changes in costs, to require a public utility to establish and maintain a balancing account to reflect the balance between the related costs and revenues. Existing law further directs the commission to authorize public utilities to establish catastrophic event memorandum accounts, as provided. Existing law authorizes each electrical corporation to establish a memorandum account to track costs incurred for wildfire risk mitigation that are unforeseen and incremental to the wildfire risk mitigation programs and activities authorized in the electrical corporations revenue requirements, as specified.

This bill would provide that it is the policy of the state that forecast-based ratemaking through the regularly scheduled general rate case process is the preferred and primary method of establishing authorized revenue requirements for electrical corporations and gas corporations. The bill would require the commission, in exercising its ratemaking authority over all public utilities, to adhere to specified principles and requirements, including requirements that forecast-based ratemaking be the default approach for establishing revenue requirements and cost recovery mechanisms and that memorandum accounts and balancing accounts, as defined, be authorized and maintained only under exceptional circumstances. when necessary to address costs that cannot reasonably be forecasted in the general rate case process, as provided. The bill would require each memorandum account or balancing account authorized by statute statute, or by the commission commission, before January 1, 2027, to include an expiration date. be included and reviewed in the subsequent general rate case proceeding, and would require the commission, during its review, to consider assigning an expiration date to each memorandum account or balancing account, as provided. The bill would authorize the commission to establish exceptions to those principles and requirements for categories of costs not reviewed in a general rate case, reviewed pursuant to that requirement, as provided. The bill would further require that the ratemaking treatment of memorandum accounts or balancing accounts that are in effect on January 1, 2027, remain unchanged until the commission reviews the account pursuant to that requirement.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above requirements would be a part of the act, and a violation of a commission action implementing those 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.