Existing law authorizes the Public Utilities Commission to fix the rates and charges for public utilities, including electrical corporations and gas corporations, and requires those rates and charges to be just and reasonable. Under existing law, a regulated public utility is prohibited from using ratepayer funds for advocacy-related activities that are political or do not otherwise benefit ratepayers. Existing law prohibits each electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recovering from ratepayers, direct or indirect costs of specified activities.

This bill would include in those activities for which costs may not be recovered from ratepayers any activities related to opposing the municipalization of electrical or gas utility service, as specified.

Existing law authorizes the commission, each commissioner, and each officer and person employed by the commission to inspect the accounts, books, papers, and documents of any public utility. Existing law establishes within the commission an independent Public Advocates Office of the Public Utilities Commission and authorizes the office to require an entity regulated by the commission to produce or disclose any information the office deems necessary to perform its duties, as provided.

This bill would additionally authorize the office to require an entity regulated by the commission to produce or disclose any information the office deems necessary to support the commissions duties. The bill would also specify that the office has the same authority to discover information and review the accounts of a public utility as the commission and would change the timing of a specified annual report by the office to the Legislature.

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-described provisions would be part of the act and a violation of a commission action implementing the bills 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.

Existing law authorizes the Public Utilities Commission to fix the rates and charges for public utilities, including electrical corporations and gas corporations, and requires those rates and charges to be just and reasonable. Under existing law, a regulated public utility is prohibited from using ratepayer funds for advocacy-related activities that are political or do not otherwise benefit ratepayers. Existing law prohibits each electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recovering from ratepayers, direct or indirect costs of specified activities.

This bill would include in those activities for which costs may not be recovered from ratepayers any activities related to opposing the municipalization of electrical or gas utility service, as specified.

Existing law authorizes the commission, each commissioner, and each officer and person employed by the commission to inspect the accounts, books, papers, and documents of any public utility. Existing law establishes within the commission an independent Public Advocates Office of the Public Utilities Commission and authorizes the office to require an entity regulated by the commission to produce or disclose any information the office deems necessary to perform its duties, as provided.

This bill would additionally authorize the office to require an entity regulated by the commission to produce or disclose any information the office deems necessary to support the commissions duties. The bill would also specify that the office has the same authority to discover information and review the accounts of a public utility as the commission and would change the timing of a specified annual report by the office to the Legislature.

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-described provisions would be part of the act and a violation of a commission action implementing the bills 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.

Existing law authorizes the Public Utilities Commission to fix the rates and charges for public utilities, including electrical corporations and gas corporations, and requires those rates and charges to be just and reasonable. Under existing law, a regulated public utility is prohibited from using ratepayer funds for advocacy-related activities that are political or do not otherwise benefit ratepayers. Existing law prohibits each electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recovering from ratepayers, direct or indirect costs of specified activities.

This bill would additionally prohibit, except as provided, each electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recovering from ratepayers, the direct or indirect costs of include in those activities for which costs may not be recovered from ratepayers any activities related to opposing the municipalization of electrical or gas utility service, as specified.

Existing law authorizes the commission, each commissioner, and each officer and person employed by the commission to inspect the accounts, books, papers, and documents of any public utility. Existing law establishes within the commission an independent Public Advocates Office of the Public Utilities Commission and authorizes the office to require an entity regulated by the commission to produce or disclose any information the office deems necessary to perform its duties, as provided.

This bill would additionally authorize the office to require an entity regulated by the commission to produce or disclose any information the office deems necessary to support the commissions duties. The bill would also specify that the office has the same authority to discover information and review the accounts of a public utility as the commission. commission and would change the timing of a specified annual report by the office to the Legislature.

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-described provisions would be part of the act and a violation of a commission action implementing the bills 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.

Existing law authorizes the Public Utilities Commission to fix the rates and charges for public utilities, including electrical corporations and gas corporations, and requires those rates and charges to be just and reasonable. Under existing law, a regulated public utility is prohibited from using ratepayer funds for advocacy-related activities that are political or do not otherwise benefit ratepayers. Existing law prohibits each electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recovering from ratepayers, direct or indirect costs of specified activities.

This bill would additionally prohibit, except as provided, each electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recovering from ratepayers, the direct or indirect costs of activities related to opposing the municipalization of electrical or gas utility service, as specified.

Existing law authorizes the commission, each commissioner, and each officer and person employed by the commission to inspect the accounts, books, papers, and documents of any public utility. Existing law establishes within the commission an independent Public Advocates Office of the Public Utilities Commission and authorizes the office to require an entity regulated by the commission to produce or disclose any information the office deems necessary to perform its duties, as provided.

This bill would additionally authorize the office to require an entity regulated by the commission to produce or disclose any information the office deems necessary to support the commissions duties. The bill would specify that the Public Advocates Office of the Public Utilities Commission office has the same authority to discover information and review the accounts of a public utility as the commission.

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-described provisions would be part of the act and a violation of a commission action implementing the bills 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.

Existing law authorizes the Public Utilities Commission to fix the rates and charges for public utilities, including electrical corporations and gas corporations, and requires those rates and charges to be just and reasonable. Under existing law, a regulated public utility is prohibited from using ratepayer funds for advocacy-related activities that are political or do not otherwise benefit ratepayers. Existing law prohibits each electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recovering from ratepayers, direct or indirect costs of specified activities.

This bill would additionally prohibit, except as provided, each electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recovering from ratepayers, the direct or indirect costs of activities related to opposing the municipalization of electrical or gas utility service, as specified.

Existing law authorizes the commission, each commissioner, and each officer and person employed by the commission to inspect the accounts, books, papers, and documents of any public utility.

This bill would specify that the Public Advocates Office of the Public Utilities Commission has the same authority to discover information and review the accounts of a public utility as the commission.

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-described provisions would be part of the act and a violation of a commission action implementing the bills 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.

Existing law authorizes the Public Utilities Commission to fix the rates and charges for public utilities, including electrical corporations and gas corporations, and requires those rates and charges to be just and reasonable. Under existing law, a regulated public utility is prohibited from using ratepayer funds for advocacy-related activities that are political or do not otherwise benefit ratepayers. Existing law prohibits each electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recovering from ratepayers, direct or indirect costs of specified activities.

This bill would additionally prohibit, except as provided, each electrical corporation or gas corporation from recording to accounts that contain expenses that the electrical corporation or gas corporation recovers from ratepayers, an above-the-line account, or otherwise recovering from ratepayers, the direct or indirect costs of activities related to opposing the municipalization of electrical or gas utility service, as specified. The bill would require the commission to monitor and investigate compliance and noncompliance with the prohibition.

Existing law authorizes the commission, each commissioner, and each officer and person employed by the commission to inspect the accounts, books, papers, and documents of any public utility.

This bill would specify that the Public Advocates Office of the Public Utilities Commission has the same authority to discover information and review the accounts of a public utility as the commission.

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-described provisions would be part of the act and a violation of a commission action implementing the bills 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.

Existing law requires the State Energy Resources Conservation and Development Commission to carry out technical assessment studies on all forms of energy and energy-related problems in order to influence federal research and development priorities and to be informed on future energy options and their impacts, including, among other things, advanced nuclear powerplant concepts, fusion, and fuel cells.

This bill would require the commission to initiate an agreement with the United States Department of Energy for the establishment of a fusion energy data center, as specified.

Existing law requires the State Energy Resources Conservation and Development Commission to carry out technical assessment studies on all forms of energy and energy-related problems in order to influence federal research and development priorities and to be informed on future energy options and their impacts, including, among other things, advanced nuclear powerplant concepts, fusion, and fuel cells.

This bill would state the intent of the Legislature to enact subsequent legislation that would develop standards for nuclear fusion research data sharing. require the commission to initiate an agreement with the United States Department of Energy for the establishment of a fusion energy data center, as specified.

Existing law requires the State Energy Resources Conservation and Development Commission to carry out technical assessment studies on all forms of energy and energy-related problems in order to influence federal research and development priorities and to be informed on future energy options and their impacts, including, among other things, advanced nuclear powerplant concepts, fusion, and fuel cells.

This bill would state the intent of the Legislature to enact subsequent legislation that would develop standards for nuclear fusion research data sharing.

 UNFINISHED BUSINESS 

Bill No: SB 327

Author: McNerney (D) and Wahab (D), et al.

Amended: 8/17/26

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 10-3, 1/12/26

AYES: Becker, Allen, Archuleta, Arreguín, Caballero, Hurtado, McNerney, Rubio, Stern, Wahab

NOES: Ochoa Bogh, Dahle, Strickland

NO VOTE RECORDED: Ashby, Gonzalez, Grove, Limón

SENATE APPROPRIATIONS COMMITTEE: 5-2, 1/22/26

AYES: Caballero, Cabaldon, Grayson, Richardson, Wahab

NOES: Seyarto, Dahle

SENATE FLOOR: 30-10, 1/27/26

AYES: Allen, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Cortese, Durazo, Gonzalez, Grayson, Hurtado, Laird, Limón, McGuire, McNerney, Menjivar, Padilla, Pérez, Reyes, Richardson, Rubio, Smallwood-Cuevas, Stern, Umberg, Wahab, Weber Pierson, Wiener

NOES: Alvarado-Gil, Choi, Dahle, Grove, Jones, Niello, Ochoa Bogh, Seyarto, Strickland, Valladares

ASSEMBLY FLOOR: 46-18, 8/27/26 - See last page for vote

SUBJECT: Public utilities: review of accounts: electrical and gas corporations: rates: political influence activities

SOURCE: The Utility Reform Network

DIGEST:

This bill (1) explicitly prohibits certain political influence activities and expenses by electrical or gas corporations, those related to opposing efforts to municipalize energy utility service, from being recorded in certain accounts and having the costs recovered from ratepayers; (2) states the Public Advocates Office (PAO) has the same authority as the California Public Utilities Commission (CPUC) to discover information and review the accounts of public utilities.

Assembly Amendments

recast the language concerning the PAO’s authority into a different code section; shift into a different subdivision of the same code section the language regarding prohibition on activities related to opposing municipalization and make other clarifying changes.

ANALYSIS:

Existing law:

1. Provides, under the Public Utility Regulatory Policies Act, that no electric utility may recover from any person other than the shareholders (or other owners) of the utility any direct or indirect expenditure by such utility for political advertising. This is defined to include advertising intended to influence public opinion with respect to legislative, administrative, or electoral matters, or with respect to any controversial issue of public importance. (16 United States Code §2623(b)(5))
2. Establishes and vests the CPUC with regulatory authority over public utilities, including electrical, gas, telephone, and water corporations. (Article XII of the California Constitution)
3. Authorizes the CPUC to, at any time, inspect the accounts, books, papers, and documents of any public utility. (Public Utilities Code §314)
4. Authorizes the CPUC to fix the rates and charges for public utilities and requires those rates and charges to be just and reasonable. (Public Utilities Code §451)
5. Prohibits a public utility from including any bill for services or commodities furnished by any customer or subscriber any advertising or literature designed or intended: (1) to promote the passage or defeat of a measure appearing on the ballot at an election; (2) to promote or defeat of a candidate to any public office, (3) to promote or defeat the appointment of any person to any administrative or executive positions in government; or (4) to promote or defeat any change in legislation or regulations. (Public Utilities Code §453(d))
6. Prohibits an electrical or gas corporation from recovering expenses for compensation (defined to include annual salary, bonus, benefits, or other consideration paid to an officer of the corporation) from ratepayers and requires compensation is paid solely by shareholders of the electrical or gas corporation. (Public Utilities Code §706)
7. Requires the CPUC to consider and adopt a code of conduct to govern the conduct of the electrical corporations in order to ensure that an electrical corporation does not market against a community choice aggregator (CCA) program except through an independent marketing division that is funded by the shareholders of the electrical corporation. (Public Utilities Code §707)
8. Prohibits a utility from recording to an above-the-line account, or otherwise recover from ratepayers, direct or indirect costs for political influence activities, among other activities. Defines “political influence activities” to include an activity for the purpose of directly or indirectly influencing: (1) the adoption, repeal, or modification of federal, state, regional, or local legislation; (2) the election or adoption of initiatives or referenda; or (3) the approval, modification, or revocation of franchise of a utility. Provides that a “political influence activity” does not include an activity that is directly and necessarily related to appearances before regulatory or other governmental bodies in connection with the utility’s existing or proposed operations of the utility’s regulated system or a request by a government agency for technical information. Requires the CPUC to assess a civil penalty based on the severity of the violation against a public utility that violates or fails to comply with the requirements to record political influence activities to an above-the-line account. (Public Utilities Code §748.3)
9. Prohibits the CPUC from prescribing a system of accounts and form of accounts, records, and memoranda for corporations subject to the regulatory authority of the United States that is inconsistent with that established and updated by or under the authority of the United States. (Public Utilities Code §793)

This bill:

1. Authorizes the PAO to require an entity regulated by the CPUC to produce or disclose any information the PAO deems necessary to support the CPUC’s duties. Specifies that the PAO has the same authority to discover information and review the accounts of a public utility as the CPUC.
2. Shifts the timing of the PAO’s annual report to the Legislature to February 1st, instead of January 10^th, of each year.
3. Explicitly prohibits, except as provided, an electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recover from ratepayers, direct or indirect costs for opposing the municipalization of electrical or gas service, including lobbying, engaging in city or county political proceedings, or other political influence activities related to opposing the municipalization of electrical or gas utility service.

Background

Cost recovery of expenses by investor-owned utilities (IOUs). CPUC-regulated utilities routinely submit requests for cost recovery from ratepayers related to their operations, including expanding their infrastructure, paying for operation expenses, etc. As required by statute in Public Utilities Code §451, the CPUC may only approve a utility’s request for cost recovery that is deemed just and reasonable. Review of utility expenses to ensure they are just and reasonable is the principal purpose of the CPUC’s existence and the main task of the agency as an economic regulator. Statutory authority also authorizes the CPUC to disallow expenses that are not deemed just and reasonable or prudent. The review of a utility’s expenses is largely, although not exclusively, conducted through the utility’s general rate case (GRC). Most utilities regulated by the CPUC are required to undergo a GRC whereby the utility requests funding for distribution, generation and operation costs associated with their service. Usually performed every three (now four) years and conducted over roughly 18+ months, the GRCs are major regulatory proceedings which allow the CPUC and stakeholders, including the PAO, to conduct a broad, exhaustive, and detailed review of a utility’s revenues, expenses, and investments in plant and equipment to establish an approved revenue requirement.

Federal Energy Regulatory Commission (FERC) accounting and financial reporting. FERC jurisdiction Account 426.4 of the Uniform System of Accounts (USofA) requires that utility shareholders pay for expenditures for the purpose of influencing public opinion or the decisions of public offices. FERC has established regulatory accounting and financial reporting requirements for its jurisdictional entities in the electric, natural gas, and oil pipeline industries. These requirements play a role in FERC’s strategy of setting just and reasonable cost-of-service rates. The foundation of the FERC’s accounting program is the USofA codified in the agency’s regulations. In addition, FERC issues accounting rulings relating to specific transactions and applications through orders and Chief Accountant guidance letters. This body of accounting regulations, orders, and guidance letters comprises the FERC’s accounting and financial reporting requirements which promote consistent, transparent, and decision-useful accounting information for the FERC and other stakeholders. These accounting and financial reporting requirements take into consideration the FERC’s ratemaking policies, past FERC actions, industry trends, and external factors (e.g., economic, environmental, and technological changes, and mandates from other regulatory bodies) that impact the industries under the agency’s jurisdiction. Electric Public Utilities & Licensees, Natural Gas, and Oil Pipeline companies within FERC jurisdiction are required to maintain their books and records in accordance with the USofA. The USofA provides basic account descriptions, instructions, and accounting definitions that are useful in understanding the information reported in the Annual Report.

Statute disallows recovery of certain expenses. Statute prohibits IOUs from recovering from ratepayers certain expenses, including activities related to elections of candidates, legislation, bonuses paid to executives of the IOU under specified conditions, activities marketing against CCAs, as well as, any situation where the IOU has failed to sufficiently maintain records to enable the CPUC to completely evaluate any relevant issues related to the prudence of any expense relating to the planning, construction, or operation of the IOU’s plant. Under the requirements of the Federal Public Utility Regulatory Policies Act of 1978 and subsequent state statute, IOUs are also prohibited from recovering from any person other than shareholders direct and indirect expenditures for promotional or political advertising. Additionally, IOUs must abide by CPUC orders.

AB 1167 (Berman, Chapter 634, Statutes of 2025). Recent legislation expanded the scope of prohibited activities. Most recently, AB 1167 prohibits recovery of political influence expenses from ratepayers by IOUs, including both direct and indirect costs of political activities and promotional advertisements. The bill takes effect this year, however, utilities report a need for clarity on implementing some of the requirements. SB 24 (McNerney, 2025) included nearly identical provisions as AB 1167 until it was amended in the Assembly, the final version which included nearly the identical language currently in this bill. SB 24 was vetoed by the Governor citing a clerical error related to the definition of political influence activity.

Comments

Supporters contend California law needs strengthening to protect ratepayers. The supporters of this bill argue that California law needs to be strengthened to better define the expenses that utilities must charge their shareholders and are not recoverable from their customers. They argue that high utility bills of electric IOU customers have led many cities to consider establishing publicly owned utilities - municipalization of electricity utility service that is operated by private companies (the opposite of privatization). The supporters of this bill state that electric IOUs have also spent millions historically to oppose these initiatives, including efforts by the City of Davis and more recently the City of San Diego. They argue that this bill is needed to protect against electric IOUs spending ratepayer funds to oppose efforts to municipalize electric utility service. There are currently active efforts across the state to municipalize electric utility service, including the City of San Diego and South San Joaquin Irrigation District, as well as recent efforts by the City of San Jose, and ongoing active exploration by the City of San Francisco. Given that efforts to municipalize electric utility service must be voted on by the affected electorate, IOUs are already prohibited from using ratepayer funds to take positions and campaign on ballot measures. However, this bill extends to activities beyond activities specific to ballot measures to include other activities to influence whether a local jurisdiction municipalizes electric utility service.

Utilities argue that the proposals in this bill are too far reaching and could hurt customers. They contend that the limitations imposed by this bill go beyond those in the FERC USofA accounting and reporting and could conflict. They suggest that the current law already protects ratepayers from funding political influence activities, including prohibitions on using ratepayer funds to oppose initiatives supporting efforts to municipalize electricity service. They, generally, point to the GRC proceedings as the venues where these issues should be appropriately resolved and where dozens of intervenors can review utility expenses, along with the CPUC. San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas) note that in recent CPUC decisions (SoCalGas GRC 2024 Test Year, D. 24-12-074) the CPUC required annual reporting and attestation mechanisms for SoCalGas to demonstrate its compliance and governance activities and monitor proper accounting for costs related to political activities.

PAO’s authority equivalent to CPUC’s to review accounts of public utilities. This bill includes a proposal to explicitly state that the PAO has equivalent authority to the CPUC in relation to the authority to discover information and review the accounts of a public utility, which includes electric, gas, telephone, and water corporations. In 2019 the Sierra Club alleged that an association, known as California for Balanced Energy Solutions (C4BES), which moved to obtain party status within a building decarbonization proceeding at the CPUC was funded by SoCalGas. Subsequently, the PAO began investigating the allegation which culminated in efforts to compel discovery by the utility, including of contracts funded by shareholders. Ultimately, the CPUC sided with the PAO and rejected the utility’s claim to First Amendment infringement on freedom of speech. SoCalGas then appealed to the court. The California Court of Appeals sided with SoCalGas, Southern California Gas Co. v. Public Utilities Com. (2023) 87 Cal. App. 5^th 324. SoCalGas was successful in its argument to the court that the PAO’s inquiries were an infringement on the utility’s First Amendment rights. The court stated the PAO’s authority is narrower to that of the CPUC, while also stating that SoCalGas has shown that disclosure of contracts funded by shareholders would impact its First Amendment rights. Furthermore, the court was convinced that disclosure of such information could result in a chilling effect on SoCalGas’ ability to contract for services, stating that impact outweighs the interest to view the contracts paid by shareholders. However, it is unclear whether the courts would find a similar decision if the CPUC compels this information directly, as opposed to the PAO.

This bill weighs into the legal challenges by making explicit that PAO has the same authority as the CPUC in discovery and reviewing the accounts of public utilities. The utilities opposed to this bill argue that this expansion of PAO’s authority undermines the utilities’ procedural due process, as it could lead to overbroad intrusions into constitutionally protected areas or fishing expeditions by the PAO. The PAO argues the court decision has stymied their historical authority and role. They and the supporters of this bill believe the PAO needs its discovery rights clearly reinstated in statute because it plays a critical watchdog role in protecting California ratepayers from utility misconduct, including the misuse of ratepayer funds. The PAO raises concerns about the limitations by the Appellate Court’s 2023 decision to allow them to issue data requests for shareholder accounts – under that authority they were able to discover the SoCalGas activity supporting C4BES. They believe SB 327 would restore the PAO’s discovery authority, which will help it in its role of protecting the public’s interest.

Prior/Related Legislation

AB 1167 (Berman, Chapter 634, Statutes of 2025) included related provisions prohibiting recovery of political influence expenses from ratepayers by IOUs.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Assembly Appropriations Committee:

… the CPUC characterizes the bill as creating “new prohibitions” the CPUC is to track and enforce. Accordingly, the CPUC provided the committee with a cost estimate to enable it to undertake additional activity: $958,000 annually (Public Utilities Commission Utilities Reimbursement Account) for four new positions (two attorneys, an administrative law judge and a regulatory analyst) to conduct ongoing regulatory and enforcement work.

SUPPORT: (Verified 8/24/26)

The Utility Reform Network (Source)

Mayor Todd Gloria, City of San Diego

350 Bay Area Action

350 Humboldt: Grass Roots Climate Action
Affordable Energy Campaign

Agricultural Energy Consumers Association
Alliance of Californians for Community Empowerment

California Environmental Justice Alliance

California Environmental Voters
California Public Interest Research Group

City of Pico Rivera

Climate Action California
Climate Action Campaign, Orange County

Climate Reality Project - Silicon Valley Chapter
Democrats of Greater Irvine

Earthjustice

Media Alliance

NextGen California

Orange County Young Democrats

Public Advocates Office
Rising Sun Center for Opportunity

SanDiego350

Sierra Club California

Small Business Utility Advocates

Sustainable Rossmoor

The Climate Center

Third Act Bay Area Working Group

Women for American Values and Ethics

OPPOSITION: (Verified 8/24/26)

California Broadband & Video Association

California Chamber of Commerce
California Communications Association

California Water Association

CTIA – The Wireless Association

Pacific Gas and Electric
San Diego Gas and Electric Company
Southern California Edison
Southern California Gas Company

USTelecom – The Broadband Association

ARGUMENTS IN SUPPORT: The Utility Reform Network (TURN), the sponsor of this bill, states:

TURN is proud to sponsor and support SB 327 to protect ratepayers from having their money used against them to support utility lobbying, promotional advertising, and to stop cities from creating or expanding municipal utilities. … It is critical that the legislature act to protect ratepayers and ensure that ratepayer dollars are not used to undermine the wellbeing of ratepayers. …For-profit utilities generally have a monopoly within their service territories, except where cities have established a municipal utility district. …The establishment of municipal utilities are significantly more affordable, and more attractive, for municipal residents, but removes customers from the for-profit utilities’ territories. For this reason, for-profit utilities spend ratepayer money lobbying city council members and using other means to fight the formation of municipal utilities. This inappropriate use of ratepayer money is another way that for-profit utilities use ratepayer money to harm ratepayers.

ARGUMENTS IN OPPOSITION: San Diego Gas & Electric and Southern California Gas state:

While we support efforts to ensure transparency and accountability in utility operations, SB 24 raises serious constitutional and regulatory concerns by expanding the authority of the Public Advocate’s Office (PAO) in ways that conflict with established law and judicial precedent. In addition, SB 327 is internally inconsistent with respect to its definition of political influence activity and how it treats costs associated with municipalization, some of which are legitimately treated as above the line costs. …Expanding PAO authority in a manner inconsistent with the intent for PAO to collect information relevant to rate affordability risks violating procedural due process, gives the PAO more discovery authority than any other advocate in the same proceeding, and increases the risk of PAO’s abuse of power, including unchecked intrusions into constitutionally protected areas in which the judiciary had to recently intervene. This expansion is unnecessary, as the PAO already has full access to ratepayer-funded accounts and data needed to assess ratepayer impacts. Thus, this change in law would not lower rates for utility customers – the purported purpose of this statute. Granting additional authority would not improve transparency but rather create imbalance and risk.

Assembly Floor 46 18 15

Ayes: Addis, Aguiar-Curry, Ahrens, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Caloza, Connolly, Elhawary, Fong, Gabriel, Garcia, Mark González, Haney, Harabedian, Hart, Irwin, Jackson, Kalra, Krell, Lee, Lowenthal, Muratsuchi, Ortega, Papan, Patel, Pellerin, Petrie-Norris, Quirk-Silva, Ransom, Celeste Rodriguez, Rogers, Schiavo, Schultz, Sharp-Collins, Solache, Stefani, Ward, Wicks, Zbur, Rivas

Noes: Alanis, Ávila Farías, Castillo, Chen, Davies, DeMaio, Dixon, Ellis, Flora, Jeff Gonzalez, Hadwick, Hoover, Johnson, Lackey, Macedo, Patterson, Sanchez, Tangipa

No Vote Recorded: Bains, Calderon, Carrillo, Gipson, McKinnor, Nguyen, Pacheco, Ramos, Michelle Rodriguez, Blanca Rubio, Soria, Ta, Valencia, Wallis, Wilson

Prepared by: Nidia Bautista / E., U. & C. / (916) 651-4107

10/20/26 16:03:47

**** END ****

 UNFINISHED BUSINESS  

Bill No: SB 327

Author: McNerney (D) and Wahab (D), et al.

Amended: 8/17/26

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 10-3, 1/12/26

AYES: Becker, Allen, Archuleta, Arreguín, Caballero, Hurtado, McNerney, Rubio, Stern, Wahab

NOES: Ochoa Bogh, Dahle, Strickland

NO VOTE RECORDED: Ashby, Gonzalez, Grove, Limón

SENATE APPROPRIATIONS COMMITTEE: 5-2, 1/22/26

AYES: Caballero, Cabaldon, Grayson, Richardson, Wahab

NOES: Seyarto, Dahle

SENATE FLOOR: 30-10, 1/27/26

AYES: Allen, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Cortese, Durazo, Gonzalez, Grayson, Hurtado, Laird, Limón, McGuire, McNerney, Menjivar, Padilla, Pérez, Reyes, Richardson, Rubio, Smallwood-Cuevas, Stern, Umberg, Wahab, Weber Pierson, Wiener

NOES: Alvarado-Gil, Choi, Dahle, Grove, Jones, Niello, Ochoa Bogh, Seyarto, Strickland, Valladares

ASSEMBLY FLOOR: Passed, 8/27/26

SUBJECT: Public utilities: review of accounts: electrical and gas corporations: rates: political influence activities

SOURCE: The Utility Reform Network

DIGEST:

This bill (1) explicitly prohibits certain political influence activities and expenses by electrical or gas corporations, those related to opposing efforts to municipalize energy utility service, from being recorded in certain accounts and having the costs recovered from ratepayers; (2) states the Public Advocates Office (PAO) has the same authority as the California Public Utilities Commission (CPUC) to discover information and review the accounts of public utilities.

Assembly Amendments

recast the language concerning the PAO’s authority into a different code section; shift into a different subdivision of the same code section the language regarding prohibition on activities related to opposing municipalization and make other clarifying changes.

ANALYSIS:

Existing law:

1. Provides, under the Public Utility Regulatory Policies Act, that no electric utility may recover from any person other than the shareholders (or other owners) of the utility any direct or indirect expenditure by such utility for political advertising. This is defined to include advertising intended to influence public opinion with respect to legislative, administrative, or electoral matters, or with respect to any controversial issue of public importance. (16 United States Code §2623(b)(5))
2. Establishes and vests the CPUC with regulatory authority over public utilities, including electrical, gas, telephone, and water corporations. (Article XII of the California Constitution)
3. Authorizes the CPUC to, at any time, inspect the accounts, books, papers, and documents of any public utility. (Public Utilities Code §314)
4. Authorizes the CPUC to fix the rates and charges for public utilities and requires those rates and charges to be just and reasonable. (Public Utilities Code §451)
5. Prohibits a public utility from including any bill for services or commodities furnished by any customer or subscriber any advertising or literature designed or intended: (1) to promote the passage or defeat of a measure appearing on the ballot at an election; (2) to promote or defeat of a candidate to any public office, (3) to promote or defeat the appointment of any person to any administrative or executive positions in government; or (4) to promote or defeat any change in legislation or regulations. (Public Utilities Code §453(d))
6. Prohibits an electrical or gas corporation from recovering expenses for compensation (defined to include annual salary, bonus, benefits, or other consideration paid to an officer of the corporation) from ratepayers and requires compensation is paid solely by shareholders of the electrical or gas corporation. (Public Utilities Code §706)
7. Requires the CPUC to consider and adopt a code of conduct to govern the conduct of the electrical corporations in order to ensure that an electrical corporation does not market against a community choice aggregator (CCA) program except through an independent marketing division that is funded by the shareholders of the electrical corporation. (Public Utilities Code §707)
8. Prohibits a utility from recording to an above-the-line account, or otherwise recover from ratepayers, direct or indirect costs for political influence activities, among other activities. Defines “political influence activities” to include an activity for the purpose of directly or indirectly influencing: (1) the adoption, repeal, or modification of federal, state, regional, or local legislation; (2) the election or adoption of initiatives or referenda; or (3) the approval, modification, or revocation of franchise of a utility. Provides that a “political influence activity” does not include an activity that is directly and necessarily related to appearances before regulatory or other governmental bodies in connection with the utility’s existing or proposed operations of the utility’s regulated system or a request by a government agency for technical information. Requires the CPUC to assess a civil penalty based on the severity of the violation against a public utility that violates or fails to comply with the requirements to record political influence activities to an above-the-line account. (Public Utilities Code §748.3)
9. Prohibits the CPUC from prescribing a system of accounts and form of accounts, records, and memoranda for corporations subject to the regulatory authority of the United States that is inconsistent with that established and updated by or under the authority of the United States. (Public Utilities Code §793)

This bill:

1. Authorizes the PAO to require an entity regulated by the CPUC to produce or disclose any information the PAO deems necessary to support the CPUC’s duties. Specifies that the PAO has the same authority to discover information and review the accounts of a public utility as the CPUC.
2. Shifts the timing of the PAO’s annual report to the Legislature to February 1st, instead of January 10^th, of each year.
3. Explicitly prohibits, except as provided, an electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recover from ratepayers, direct or indirect costs for opposing the municipalization of electrical or gas service, including lobbying, engaging in city or county political proceedings, or other political influence activities related to opposing the municipalization of electrical or gas utility service.

Background

Cost recovery of expenses by investor-owned utilities (IOUs). CPUC-regulated utilities routinely submit requests for cost recovery from ratepayers related to their operations, including expanding their infrastructure, paying for operation expenses, etc. As required by statute in Public Utilities Code §451, the CPUC may only approve a utility’s request for cost recovery that is deemed just and reasonable. Review of utility expenses to ensure they are just and reasonable is the principal purpose of the CPUC’s existence and the main task of the agency as an economic regulator. Statutory authority also authorizes the CPUC to disallow expenses that are not deemed just and reasonable or prudent. The review of a utility’s expenses is largely, although not exclusively, conducted through the utility’s general rate case (GRC). Most utilities regulated by the CPUC are required to undergo a GRC whereby the utility requests funding for distribution, generation and operation costs associated with their service. Usually performed every three (now four) years and conducted over roughly 18+ months, the GRCs are major regulatory proceedings which allow the CPUC and stakeholders, including the PAO, to conduct a broad, exhaustive, and detailed review of a utility’s revenues, expenses, and investments in plant and equipment to establish an approved revenue requirement.

Federal Energy Regulatory Commission (FERC) accounting and financial reporting. FERC jurisdiction Account 426.4 of the Uniform System of Accounts (USofA) requires that utility shareholders pay for expenditures for the purpose of influencing public opinion or the decisions of public offices. FERC has established regulatory accounting and financial reporting requirements for its jurisdictional entities in the electric, natural gas, and oil pipeline industries. These requirements play a role in FERC’s strategy of setting just and reasonable cost-of-service rates. The foundation of the FERC’s accounting program is the USofA codified in the agency’s regulations. In addition, FERC issues accounting rulings relating to specific transactions and applications through orders and Chief Accountant guidance letters. This body of accounting regulations, orders, and guidance letters comprises the FERC’s accounting and financial reporting requirements which promote consistent, transparent, and decision-useful accounting information for the FERC and other stakeholders. These accounting and financial reporting requirements take into consideration the FERC’s ratemaking policies, past FERC actions, industry trends, and external factors (e.g., economic, environmental, and technological changes, and mandates from other regulatory bodies) that impact the industries under the agency’s jurisdiction. Electric Public Utilities & Licensees, Natural Gas, and Oil Pipeline companies within FERC jurisdiction are required to maintain their books and records in accordance with the USofA. The USofA provides basic account descriptions, instructions, and accounting definitions that are useful in understanding the information reported in the Annual Report.

Statute disallows recovery of certain expenses. Statute prohibits IOUs from recovering from ratepayers certain expenses, including activities related to elections of candidates, legislation, bonuses paid to executives of the IOU under specified conditions, activities marketing against CCAs, as well as, any situation where the IOU has failed to sufficiently maintain records to enable the CPUC to completely evaluate any relevant issues related to the prudence of any expense relating to the planning, construction, or operation of the IOU’s plant. Under the requirements of the Federal Public Utility Regulatory Policies Act of 1978 and subsequent state statute, IOUs are also prohibited from recovering from any person other than shareholders direct and indirect expenditures for promotional or political advertising. Additionally, IOUs must abide by CPUC orders.

AB 1167 (Berman, Chapter 634, Statutes of 2025). Recent legislation expanded the scope of prohibited activities. Most recently, AB 1167 prohibits recovery of political influence expenses from ratepayers by IOUs, including both direct and indirect costs of political activities and promotional advertisements. The bill takes effect this year, however, utilities report a need for clarity on implementing some of the requirements. SB 24 (McNerney, 2025) included nearly identical provisions as AB 1167 until it was amended in the Assembly, the final version which included nearly the identical language currently in this bill. SB 24 was vetoed by the Governor citing a clerical error related to the definition of political influence activity.

Comments

Supporters contend California law needs strengthening to protect ratepayers. The supporters of this bill argue that California law needs to be strengthened to better define the expenses that utilities must charge their shareholders and are not recoverable from their customers. They argue that high utility bills of electric IOU customers have led many cities to consider establishing publicly owned utilities - municipalization of electricity utility service that is operated by private companies (the opposite of privatization). The supporters of this bill state that electric IOUs have also spent millions historically to oppose these initiatives, including efforts by the City of Davis and more recently the City of San Diego. They argue that this bill is needed to protect against electric IOUs spending ratepayer funds to oppose efforts to municipalize electric utility service. There are currently active efforts across the state to municipalize electric utility service, including the City of San Diego and South San Joaquin Irrigation District, as well as recent efforts by the City of San Jose, and ongoing active exploration by the City of San Francisco. Given that efforts to municipalize electric utility service must be voted on by the affected electorate, IOUs are already prohibited from using ratepayer funds to take positions and campaign on ballot measures. However, this bill extends to activities beyond activities specific to ballot measures to include other activities to influence whether a local jurisdiction municipalizes electric utility service.

Utilities argue that the proposals in this bill are too far reaching and could hurt customers. They contend that the limitations imposed by this bill go beyond those in the FERC USofA accounting and reporting and could conflict. They suggest that the current law already protects ratepayers from funding political influence activities, including prohibitions on using ratepayer funds to oppose initiatives supporting efforts to municipalize electricity service. They, generally, point to the GRC proceedings as the venues where these issues should be appropriately resolved and where dozens of intervenors can review utility expenses, along with the CPUC. San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas) note that in recent CPUC decisions (SoCalGas GRC 2024 Test Year, D. 24-12-074) the CPUC required annual reporting and attestation mechanisms for SoCalGas to demonstrate its compliance and governance activities and monitor proper accounting for costs related to political activities.

PAO’s authority equivalent to CPUC’s to review accounts of public utilities. This bill includes a proposal to explicitly state that the PAO has equivalent authority to the CPUC in relation to the authority to discover information and review the accounts of a public utility, which includes electric, gas, telephone, and water corporations. In 2019 the Sierra Club alleged that an association, known as California for Balanced Energy Solutions (C4BES), which moved to obtain party status within a building decarbonization proceeding at the CPUC was funded by SoCalGas. Subsequently, the PAO began investigating the allegation which culminated in efforts to compel discovery by the utility, including of contracts funded by shareholders. Ultimately, the CPUC sided with the PAO and rejected the utility’s claim to First Amendment infringement on freedom of speech. SoCalGas then appealed to the court. The California Court of Appeals sided with SoCalGas, Southern California Gas Co. v. Public Utilities Com. (2023) 87 Cal. App. 5^th 324. SoCalGas was successful in its argument to the court that the PAO’s inquiries were an infringement on the utility’s First Amendment rights. The court stated the PAO’s authority is narrower to that of the CPUC, while also stating that SoCalGas has shown that disclosure of contracts funded by shareholders would impact its First Amendment rights. Furthermore, the court was convinced that disclosure of such information could result in a chilling effect on SoCalGas’ ability to contract for services, stating that impact outweighs the interest to view the contracts paid by shareholders. However, it is unclear whether the courts would find a similar decision if the CPUC compels this information directly, as opposed to the PAO.

This bill weighs into the legal challenges by making explicit that PAO has the same authority as the CPUC in discovery and reviewing the accounts of public utilities. The utilities opposed to this bill argue that this expansion of PAO’s authority undermines the utilities’ procedural due process, as it could lead to overbroad intrusions into constitutionally protected areas or fishing expeditions by the PAO. The PAO argues the court decision has stymied their historical authority and role. They and the supporters of this bill believe the PAO needs its discovery rights clearly reinstated in statute because it plays a critical watchdog role in protecting California ratepayers from utility misconduct, including the misuse of ratepayer funds. The PAO raises concerns about the limitations by the Appellate Court’s 2023 decision to allow them to issue data requests for shareholder accounts – under that authority they were able to discover the SoCalGas activity supporting C4BES. They believe SB 327 would restore the PAO’s discovery authority, which will help it in its role of protecting the public’s interest.

Prior/Related Legislation

AB 1167 (Berman, Chapter 634, Statutes of 2025) included related provisions prohibiting recovery of political influence expenses from ratepayers by IOUs.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Assembly Appropriations Committee:

… the CPUC characterizes the bill as creating “new prohibitions” the CPUC is to track and enforce. Accordingly, the CPUC provided the committee with a cost estimate to enable it to undertake additional activity: $958,000 annually (Public Utilities Commission Utilities Reimbursement Account) for four new positions (two attorneys, an administrative law judge and a regulatory analyst) to conduct ongoing regulatory and enforcement work.

SUPPORT: (Verified 8/24/26)

The Utility Reform Network (Source)

Mayor Todd Gloria, City of San Diego

350 Bay Area Action

350 Humboldt: Grass Roots Climate Action
Affordable Energy Campaign

Agricultural Energy Consumers Association
Alliance of Californians for Community Empowerment

California Environmental Justice Alliance

California Environmental Voters
California Public Interest Research Group

City of Pico Rivera

Climate Action California
Climate Action Campaign, Orange County

Climate Reality Project - Silicon Valley Chapter
Democrats of Greater Irvine

Earthjustice

Media Alliance

NextGen California

Orange County Young Democrats

Public Advocates Office
Rising Sun Center for Opportunity

SanDiego350

Sierra Club California

Small Business Utility Advocates

Sustainable Rossmoor

The Climate Center

Third Act Bay Area Working Group

Women for American Values and Ethics

OPPOSITION: (Verified 8/24/26)

California Broadband & Video Association

California Chamber of Commerce
California Communications Association

California Water Association

CTIA – The Wireless Association

Pacific Gas and Electric
San Diego Gas and Electric Company
Southern California Edison
Southern California Gas Company

USTelecom – The Broadband Association

ARGUMENTS IN SUPPORT: The Utility Reform Network (TURN), the sponsor of this bill, states:

TURN is proud to sponsor and support SB 327 to protect ratepayers from having their money used against them to support utility lobbying, promotional advertising, and to stop cities from creating or expanding municipal utilities. … It is critical that the legislature act to protect ratepayers and ensure that ratepayer dollars are not used to undermine the wellbeing of ratepayers. …For-profit utilities generally have a monopoly within their service territories, except where cities have established a municipal utility district. …The establishment of municipal utilities are significantly more affordable, and more attractive, for municipal residents, but removes customers from the for-profit utilities’ territories. For this reason, for-profit utilities spend ratepayer money lobbying city council members and using other means to fight the formation of municipal utilities. This inappropriate use of ratepayer money is another way that for-profit utilities use ratepayer money to harm ratepayers.

ARGUMENTS IN OPPOSITION: San Diego Gas & Electric and Southern California Gas state:

While we support efforts to ensure transparency and accountability in utility operations, SB 24 raises serious constitutional and regulatory concerns by expanding the authority of the Public Advocate’s Office (PAO) in ways that conflict with established law and judicial precedent. In addition, SB 327 is internally inconsistent with respect to its definition of political influence activity and how it treats costs associated with municipalization, some of which are legitimately treated as above the line costs. …Expanding PAO authority in a manner inconsistent with the intent for PAO to collect information relevant to rate affordability risks violating procedural due process, gives the PAO more discovery authority than any other advocate in the same proceeding, and increases the risk of PAO’s abuse of power, including unchecked intrusions into constitutionally protected areas in which the judiciary had to recently intervene. This expansion is unnecessary, as the PAO already has full access to ratepayer-funded accounts and data needed to assess ratepayer impacts. Thus, this change in law would not lower rates for utility customers – the purported purpose of this statute. Granting additional authority would not improve transparency but rather create imbalance and risk.

Prepared by: Nidia Bautista / E., U. & C. / (916) 651-4107

8/27/26 16:54:52

**** END ****

SENATE THIRD READING

STR Bill Id:SB 327

Author:(McNerney and Wahab)

As Amended Ver:August 17, 2026

Majority vote

SUMMARY

Explicitly grants the Public Advocates Office (Cal Advocates) the same authority to discover information and review public utility accounts as the California Public Utilities Commission (CPUC), and adds municipalization opposition to the existing list of political influence activities that investor-owned utilities (IOUs) may not recover from ratepayers.

Major Provisions

1. Authorizes Cal Advocates to compel the production or disclosure of any information it deems necessary to perform its duties, or to support the CPUC's duties, from any entity regulated by the CPUC, and specifies that Cal Advocates has the same authority as the CPUC to discover information and review the accounts of any entity regulated by the CPUC.
2. Expands the list of "political influence activities" which IOUs are prohibited from recovering costs from ratepayers to include activities related to opposing the municipalization of electrical or gas utility service, including, but not limited to lobbying, engaging in city or county proceedings, such as city council meetings or county board of supervisor meetings, to oppose efforts to municipalize electrical or gas utility service, or other political influence activities intended to prevent the establishment of a publicly owned municipal utility.
3. Moves Cal Advocates' annual legislative reporting requirement from January 1 to February 1 of each year.

COMMENTS

This bill amends two sections of the Public Utilities Code to address utility accountability and ratepayer protections.

First, it explicitly grants Cal Advocates the same authority to discover information and review public utility accounts as the CPUC. Existing law grants the CPUC broad authority to inspect the accounts, books, papers, and documents of any public utility at any time, extending to each commissioner and each officer and person employed by the CPUC. The text of the statute governing Cal Advocates, by contrast, authorizes it to compel the production or disclosure of information only as necessary to perform its duties – language that the California Court of Appeal, Second Appellate District, construed in Southern California Gas Co. v. Public Utilities Com., 87 Cal.App.5^th 324 (2023), to limit Cal Advocates' discovery authority to information relating to rates for service. The CPUC, however, has historically interpreted Cal Advocates' authority far more broadly, treating Cal Advocates as Commission staff with access to the Commission’s investigatory tools. The SoCalGas decision brought this tension between the statutory text as construed by the Court of Appeal and the CPUC's longstanding administrative practice to a head, and this bill responds by codifying the broader interpretation in statute.

Second, it adds municipalization opposition to the existing list of political influence activities that IOUs may not recover from ratepayers. Specifically, this new clause prohibits cost recovery for activities opposing the municipalization of electrical or gas utility service, including lobbying, participation in city council or county board of supervisors proceedings to oppose municipalization efforts, and other political influence activities intended to prevent the establishment of a publicly-owned municipal utility. There are currently active efforts across the state to municipalize electric utility service, including the City of San Diego and South San Joaquin Irrigation District, as well as recent efforts by the City of San Jose, and ongoing active exploration by the City of San Francisco. Current law already prohibits ratepayer funding of IOU ballot measure activity; this bill extends that prohibition to a broader range of anti-municipalization activities.

The provisions in this bill are substantively identical to those in SB 24 (McNerney, 2025), which was vetoed due to a clerical error introducing a contradictory definition of "political influence activity." That error is not at issue in this bill.

According to the Author

"Utility bills are soaring, and California is becoming increasingly unaffordable as IOUs pocket billions in record profits. That's particularly appalling when those same utilities are using their customers' money to finance expensive lobbying and political campaigns and battle efforts by cities and counties to create their own municipal utilities. Additionally, this bill will ensure the Public Advocates Office has the authority to review utility information available to the CPUC."

Arguments in Support

Supporters argue that the SoCalGas decision mischaracterizes Cal Advocates' historical role and the administrative practice under which it has long operated as CPUC staff.

Supporters argue that California law needs to be strengthened to better define the expenses that IOUs must charge their shareholders and are not recoverable from their customers. They argue that high IOU bills have led many cities to consider establishing publicly-owned utilities. Supporters state that IOUs have spent millions historically to oppose these initiatives, including efforts by the City of Davis and, more recently, the City of San Diego. They argue that this bill is needed to protect against IOUs spending ratepayer funds to oppose efforts to municipalize electric utility service.

Arguments in Opposition

Opponents argue that this bill represents a meaningful expansion of Cal Advocates' powers rather than a codification of existing practice, conflicts with the 2023 appellate court ruling in SoCalGas, and could open the door to fishing expeditions into information unrelated to Cal Advocates' core ratepayer advocacy duties.

Opponents argue that the activities in this bill related to efforts to oppose municipalization are already prohibited under AB 1167 (Berman, Chapter 634, Statutes of 2025), which broadly bars the use of ratepayer funds for political influence activities, making this bill redundant at best and legally contradictory at worst. They further contend that the bill fails to account for circumstances where utilities are legally compelled – not acting voluntarily – to participate in municipalization proceedings, such as providing detailed information regarding the location, valuation, and function of utility assets, responding to discovery, and presenting testimony before courts or the CPUC.

FISCAL COMMENTS

According to the Assembly Committee on Appropriations, costs to the CPUC should be minor and absorbable as this bill specifies requirements of existing law but does not make new requirements of the CPUC.

VOTES

SENATE FLOOR: 31-9-0

YES: Allen, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Cortese, Durazo, Gonzalez, Grayson, Hurtado, Laird, Limón, McGuire, McNerney, Menjivar, Padilla, Pérez, Reyes, Richardson, Rubio, Smallwood-Cuevas, Stern, Umberg, Valladares, Wahab, Weber Pierson, Wiener

NO: Alvarado-Gil, Choi, Dahle, Grove, Jones, Niello, Ochoa Bogh, Seyarto, Strickland

ASM UTILITIES AND ENERGY: 12-2-4

YES: Petrie-Norris, Boerner, Mark González, Harabedian, Hart, Irwin, Kalra, Papan, Rogers, Schiavo, Schultz, Zbur

NO: Chen, Davies

ABS, ABST OR NV: Patterson, Calderon, Ta, Wallis

ASM APPROPRIATIONS: 11-3-1

YES: Wicks, Arambula, Calderon, Caloza, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache

NO: Hoover, Dixon, Tangipa

ABS, ABST OR NV: Ta

SENATE FLOOR: 40-0-0

YES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, Limón, McGuire, McNerney, Menjivar, Niello, Ochoa Bogh, Padilla, Pérez, Reyes, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener

SENATE FLOOR: 30-10-0

YES: Allen, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Cortese, Durazo, Gonzalez, Grayson, Hurtado, Laird, Limón, McGuire, McNerney, Menjivar, Padilla, Pérez, Reyes, Richardson, Rubio, Smallwood-Cuevas, Stern, Umberg, Wahab, Weber Pierson, Wiener

NO: Alvarado-Gil, Choi, Dahle, Grove, Jones, Niello, Ochoa Bogh, Seyarto, Strickland, Valladares

UPDATED

VERSION: August 17, 2026

CONSULTANT: Suman Tatapudy / U. & E. / (916) 319-2083 FN: 0003694

Date of Hearing: August 5, 2026

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 327

Author:(McNerney) – As Amended Ver:June 15, 2026

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill (1) adds efforts to oppose municipalization of electrical or gas utility service to the existing list of expenses that an electrical or gas investor-owned utility (IOU) may not recover from ratepayers (by recording such expenses to what is known as an “above-the-line account” or otherwise recovering from ratepayers) and (2) provides the Public Advocates Office (PAO) within the California Public Utilities Commission (CPUC) the same authority as the CPUC to compel disclosure or sharing of an IOU’s information and review of the IOU’s accounts.

FISCAL EFFECT:

As described further below, existing state law explicitly prohibits an IOU from recording to an above-the-line account or otherwise recovering from ratepayers costs for, among many other things, “political influence activities.” This bill further applies this prohibition to activities related to opposing the municipalization of IOU electrical or gas service. The bill then provides a nonexhaustive list of such political influence activities: lobbying and engaging in city or county proceedings, as well as “other political influence activities.”

It seems, therefore, that the author of the bill understands activities related to opposing municipalization to be types of political influence activities. Nonetheless, the bill structures political influence activities and activities related to opposing municipalization as distinct, coequal items, the costs of which an IOU may not recover from ratepayers.

Perhaps for this reason, the CPUC characterizes the bill as creating “new prohibitions” the CPUC is to track and enforce. Accordingly, the CPUC provided the committee with a cost estimate to enable it to undertake additional activity: $958,000 annually (Public Utilities Commission Utilities Reimbursement Account) for four new positions (two attorneys, an administrative law judge and a regulatory analyst) to conduct ongoing regulatory and enforcement work.

COMMENTS:

1. Purpose. This bill addresses two distinct issues: (a) an IOU’s ability to recover from its ratepayers costs the IOU incurs to oppose an effort to municipalize electrical or gas utility service and (b) the authority of PAO to compel an IOU to make certain information available to PAO. Each topic was addressed by legislation—SB 24 (McNerney)—approved by this committee in 2025; however, the Governor, who expressed his support for “clarifying” the authority of PAO to “collect information relevant to the affordability of customer electric and gas rates and bills” but asserted the bill “contains a significant clerical error…making this bill unimplementable,” vetoed SB 24.

This bill includes generally the same provisions as SB 24, though the author has pared back the language from SB 24 and seems to have resolved the clerical error to which the Governor objected. The author argues in favor of this bill, as he did for SB 24, that:

Utility bills are soaring, and California is becoming increasingly unaffordable as IOUs pocket billions in record profits. That’s particularly appalling when those same utilities are using their customers’ money to finance expensive lobbying and political campaigns and battle efforts by cities and counties to create their own municipal utilities. SB 327 will ban the use of ratepayer funds to oppose efforts to form municipal utilities. Additionally, this bill will ensure the Public Advocates Office has the authority to review utility information available to the CPUC.

1. Background. No Ratepayer Monies for IOU Political Communication. Existing law limits an IOU’s ability to collect from its ratepayers the costs of certain types of communication. For example, federal law prohibits an IOU to collect from its ratepayers costs for political advertising, which federal law defines as advertising having the purpose of influencing public opinion with respect to legislative, administrative or electoral matters, or with respect to any controversial issue of public importance. Similarly, state law prohibits an IOU from collecting from ratepayers any advertising or literature designed or intended to (a) promote the passage or defeat of a measure appearing on the ballot at an election, (b) promote or defeat of a candidate to any public office, (c) promote or defeat the appointment of any person to any administrative or executive positions in government or (d) promote or defeat any change in legislation or regulations. What’s more, state law prohibits the CPUC from allowing an IOU to collect from ratepayers costs for advertising that encourages increased consumption of the services or commodities the IOU provides.

It would seem this body of law already prohibits an IOU from collecting from its ratepayers costs to oppose municipalization of utility governance. Indeed, the state’s largest IOUs, writing collectively in opposition to this bill, make just this claim and warn:

At best, SB 327 is redundant and adds no substantive restriction beyond AB 1167. At worst, it creates confusion about the scope and application of existing law, making it more difficult for regulators and courts to interpret legislative intent. This ambiguity increases compliance risk and potential penalty exposure for utilities, without providing any meaningful additional protection for ratepayers.

Supporters do not counter this objection directly. Rather, they generally note California’s high electric utility rates and the propriety of prohibiting IOU ratepayer spending on political activities, such as municipalization.

PAO Authority to Compel Disclosure or IOU Information. State law creates PAO as an independent office within the CPUC to represent and advocate on behalf of the interests of IOU customers and subscribers with the goal of obtaining the lowest possible rate for service consistent with reliable and safe service levels.

State law provides the CPUC broad authority to inspect the accounts, books, papers and documents of any IOU. Similarly, state law provides PAO authority to compel the production or disclosure of any information it deems necessary to perform its duties from any entity regulated by the CPUC; however, the law conditions this authrority in that any objections to a PAO request for information is to be decided in writing by a commissioner of the CPUC.

For years, the CPUC has viewed PAO’s authority to compel production or discovery of IOU information as the same as the CPUC’s own authority. Despite the CPUC’s description of its longstanding view, in 2023, a state appellate court concluded PAO’s scope of authority is less than the CPUC’s scope of authority. Specifcally, the court noted state law’s description of the goal of PAO as limited to obtaining the lowest possible rate for service consistent with reliable and safe service levels. Consistent with that description, the court found PAO’s authority to compel disclosure is limited to its mission of achieving the lowest rates for ratepayers. (See Southern California Gas Co. v. Public Utilities Com., 87 Cal.App.5th 324 (2023).)

The CPUC, in February of 2023, petitioned the California Supreme Court to review the appellate court decision, arguing, among other things, that “the Opinion’s narrow focus on low utility rates as the mission of [PAO] is not correct” and that the CPUC “has consistently taken the position that [PAO] is Commission staff, with all of the requisite regulatory and investigatory tools as other Commission staff.”

The IOUs disagree, as does the California Chamber of Commerce, which writes:

Because SB 327 seeks to allow the PAO to discover information unnecessary to the performance of the PAO’s duties, SB 327 invites fishing expeditions, increases the risk of misuse of competitively sensitive or confidential information, and unnecessarily creates additional costs of compliance that ratepayers will ultimately bear.

The California Water Association makes similar arguments and asserts that providing PAO such discovery authority will result in increased PAO activity, with resulting increases in state costs.

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: June 10, 2026

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Cottie Petrie-Norris, Chair

SBPCA Bill Id:SB 327

Author:(McNerney) – As Amended Ver:May 7, 2026

SENATE VOTE: 30-10

SUBJECT: Public utilities: review of accounts: electrical and gas corporations: rates: political influence activities

SUMMARY: Explicitly grants the Public Advocates Office (Cal Advocates) the same authority to discover information and review public utility accounts as the California Public Utilities Commission (CPUC), and adds municipalization opposition to the existing list of expenses that investor-owned utilities (IOUs) may not recover from ratepayers.

EXISTING LAW:

Pursuant to Federal Law:

1. Provides that no electric utility may recover from any person other than the shareholders (or other owners) of the utility any direct or indirect expenditure by such utility for political advertising. This is defined to include advertising intended to influence public opinion with respect to legislative, administrative, or electoral matters, or with respect to any controversial issue of public importance. (16 United States Code § 2623(b)(5))
2. Defines “political advertising” as any advertising for the purpose of influencing public opinion with respect to legislative, administrative, or electoral matters, or with respect to any controversial issue of public importance. (16 United States Code § 2625(h)(1)(B))

Pursuant to State Law:

1. Establishes and vests the CPUC with regulatory jurisdiction over public utilities, including electrical, gas, telephone, and water corporations. (Article XII of the California Constitution)
2. Prohibits a public utility from including with any bill for services or commodities furnished any customer or subscriber any advertising or literature designed or intended (1) to promote the passage or defeat of a measure appearing on the ballot at any election whether local, statewide, or national, (2) to promote or defeat any candidate for nomination or election to any public office, (3) to promote or defeat the appointment of any person to any administrative or executive position in federal, state, or local government, or (4) to promote or defeat any change in federal, state, or local legislation or regulations. (Public Utilities Code § 453(d))
3. Provides the CPUC with general, broad authority to regulate every public utility in the state. (Public Utilities Code § 701)
4. Authorizes the CPUC to, at any time, inspect the accounts, books, papers, and documents of any public utility. (Public Utilities Code § 314)
5. Prohibits a utility from recording to an above-the-line account, or otherwise recovering from ratepayers, direct or indirect costs for political influence activities, among other activities. Defines “political influence activities” to include activity for the purpose of directly or indirectly influencing: (1) the adoption, repeal, or modification of federal, state, regional, or local legislation; (2) the election or adoption of initiatives or referanda; or (3) the approval, modification, or revocation of franchise of a utility. Provides that a “political influence activity” does not include an activity that is directly and necessarily related to appearance before regulatory or other governmental bodies in connection with the utility’s existing or proposed operations of the utility’s regulated system or a request by a government agency for technical information. Requires the CPUC to assess a civil penalty based on the severity of the violation against a public utility that violates or fails to comply with the requirements to record political influence activities to an above-the-line account. (Public Utilities Code § 748.3)
6. Establishes Cal Advocates as an independent office within the CPUC to represent and advocate on behalf of the interests of public utility customers and subscribers within the CPUC’s jurisdiction. Provides that the goal of Cal Advocates is to obtain the lowest possible rate for service consistent with reliable and safe service levels, and that Cal Advocates shall primarily consider the interests of residential and small commercial customers in revenue allocation and rate design matters. (Public Utilities Code § 309.5(a))
7. Authorizes Cal Advocates to compel the production or disclosure of any information it deems necessary to perform its duties from any entity regulated by the CPUC. Requires that any objections to a request for information be decided in writing by the assigned commissioner or, if there is no assigned commissioner, by the president of the CPUC. (Public Utilities Code § 309.5(e))

BACKGROUND:

Statute disallows recovery of certain expenses – Statute prohibits IOUs from recovering from ratepayers certain expenses, including activities related to elections of candidates, legislation, bonuses paid to executives of the IOU under specified conditions, activities marketing against CCAs, as well as, any situation where the IOU has failed to sufficiently maintain records to enable the CPUC to completely evaluate any relevant issues related to the prudence of any expense relating to the planning, construction, or operation of the IOU’s plant. Under the requirements of the Federal Public Utility Regulatory Policies Act of 1978 and subsequent state statute, IOUs are also prohibited from recovering from any person other than shareholders direct and indirect expenditures for promotional or political advertising. Additionally, IOUs must abide by CPUC orders.

Recent legislation expands the scope of prohibited activities. Most recently, AB 1167 (Berman, Chapter 634, Statutes of 2025) prohibits recovery of political influence expenses from ratepayers by IOUs, including both direct and indirect costs of political activities and promotional advertisements. The bill takes effect this year; however, utilities report need for clarity on implementing some of the requirements.

FISCAL EFFECT: Unknown. This bill is keyed fiscal, and will be referred to the Assembly Committee on Appropriations for its review. According to the Senate Committee on Appropriations, an earlier version of this measure resulted in unknown, potentially significant ongoing cost pressures (ratepayer funds) for the CPUC and Cal Advocates to expand their scope of activities as provided by an earlier version of this bill. This bill has since been amended.

COMMENTS:

1. Author’s Statement. According to the author, “Utility bills are soaring, and California is becoming increasingly unaffordable as IOUs pocket billions in record profits. That’s particularly appalling when those same utilities are using their customers’ money to finance expensive lobbying and political campaigns and battle efforts by cities and counties to create their own municipal utilities. SB 327 will ban the use of ratepayer funds to oppose efforts to form municipal utilities. Additionally, this bill will ensure the Public Advocates Office has the authority to review utility information available to the CPUC.”
2. Purpose of Bill. This bill amends two sections of the Public Utilities Code to address utility accountability and ratepayer protections. First, it adds subdivision (c) to Section 314 to explicitly grant Cal Advocates the same authority to discover information and review public utility accounts as the CPUC. Second, it amends Section 748.3 to add municipalization opposition to the existing list of expenses that IOUs may not recover from ratepayers. Specifically, new subdivision (b)(12) prohibits above-the-line cost recovery for activities opposing the municipalization of electrical or gas utility service, including lobbying, participation in city council or county board of supervisors proceedings to oppose municipalization efforts, and other political influence activities intended to prevent the establishment of a publicly owned municipal utility. Current law already prohibits ratepayer funding of IOU ballot measure activity; this bill extends that prohibition to a broader range of anti-municipalization activities.

The provisions in this bill are substantively identical to those in SB 24 (McNerney, 2025), which was vetoed due to a clerical error introducing a contradictory definition of “political influence activity.” That error is not at issue in this bill. Language substantially similar in policy effect previously passed this committee 11-1-6.

1. Cal Advocates Discovery Authority: Codification of CPUC Administrative Practice. Existing law grants the CPUC broad authority to inspect the accounts, books, papers, and documents of any public utility at any time, extending to each commissioner and each officer and person employed by the CPUC.^[1] The text of the statute governing Cal Advocates, by contrast, authorizes it to compel the production or disclosure of information only as necessary to perform its duties – language that the California Court of Appeal, Second Appellate District, construed in Southern California Gas Co. v. Public Utilities Com., 87 Cal.App.5th 324 (2023), to limit Cal Advocates’ discovery authority to information relating to rates for service.^[2] As discussed below, however, the CPUC has historically interpreted Cal Advocates’ authority far more broadly, treating Cal Advocates as Commission staff with access to the Commission’s investigatory tools. The SoCalGas decision brought this tension between the statutory text as construed by the Court of Appeal and the CPUC’s longstanding administrative practice to a head, and this bill responds by codifying the broader interpretation in statute.

The scope of Cal Advocates’ discovery authority was tested following a 2019 Sierra Club allegation that C4BES, a nonprofit that had sought party status in a building decarbonization proceeding before the CPUC, was actually founded and funded by Southern California Gas Company (SCG). Cal Advocates investigated and sought to compel discovery from SCG, including of contracts funded solely by shareholders. The CPUC sided with Cal Advocates, rejecting SCG’s First Amendment freedom of association objection. SCG appealed.

In SoCalGas, the Court of Appeal reversed and held that Cal Advocates’ discovery authority is not coextensive with that of the CPUC, concluding that their distinct statutory mandates necessarily produce different discovery rights. Because the shareholder-funded expenditures at issue were not directly related to ratepayer costs, the court held that Cal Advocates’ requests exceeded its authority under Section 309.5(e). The court further found that SCG had made a sufficient showing that disclosure of shareholder-funded contracts would chill its First Amendment right to freely associate, and that this interest outweighed the case for compelled disclosure. It is unclear whether the courts would reach a similar conclusion if the CPUC itself, rather than Cal Advocates, were to compel the same information.

Following the decision, the CPUC filed a petition for review with the California Supreme Court, arguing that the Opinion contained significant legal errors and “blocks Cal Advocates from accessing critical accounting data necessary to fulfill its core functions.”^[3] The CPUC maintained that the Opinion erred by failing to recognize that Resolution ALJ-391 compelling discovery “was issued by the Commission, not Cal Advocates,” and that the Commission “has consistently taken the position that Cal Advocates is Commission staff, with all of the requisite regulatory and investigatory tools as other Commission staff.”^[4] The CPUC also argued that the Court of Appeal’s treatment of ratepayer and shareholder accounts as clearly separable was mistaken, as “[t]he distinctions between shareholder and ratepayer-funded accounts are not always clear-cut” and “[t]he division itself is a regulatory construct,” such that “Cal Advocates cannot ensure that advocacy costs are not booked to ratepayer accounts by strictly examining ratepayer accounts.”^[5] The CPUC further relied on the legislative history of AB 476 (Stats. 1985, ch. 562), which created Cal Advocates’ predecessor, to argue that “the Opinion’s narrow focus on low utility rates as the mission of Cal Advocates is not correct” and that “[n]o California court has ever construed Cal Advocates’ authority so narrowly.”^[6]

This bill responds to the SoCalGas decision by adding a new subdivision (c) to Section 314 granting Cal Advocates the same discovery authority as the CPUC. Opponents argue that this represents a meaningful expansion of Cal Advocates’ powers rather than a codification of existing practice, conflicts with the 2023 appellate court ruling, and could open the door to fishing expeditions into information unrelated to Cal Advocates’ core ratepayer advocacy duties.

Supporters counter that the SoCalGas decision mischaracterizes Cal Advocates’ historical role and the administrative practice under which it has long operated as CPUC staff. As a statutory body, Cal Advocates may be granted additional duties and authority by the Legislature, and to the extent this bill codifies the CPUC’s longstanding administrative treatment of Cal Advocates as having coextensive discovery authority, it may be understood as a statutory expression of existing practice – even if it goes beyond what the Court of Appeals recognized as Cal Advocates’ existing statutory authority. While the bill codifies that longstanding practice, it would also have the practical effect of narrowing the legal grounds on which public utilities may challenge Cal Advocates data requests.

The Committee may wish to amend the bill to relocate the expanded authority from Section 314 to Section 309.5(e), which directly governs Cal Advocates’ role and powers. Doing so would consolidate all Cal Advocates-related provisions in one place, reduce the risk that amending the CPUC’s general discovery statute would unsettle existing precedent, and expressly preserve the existing procedural check requiring that any utility objection to a Cal Advocates data request be decided in writing by the assigned commissioner or CPUC president. These amendments would not alter the Author’s intent that Cal Advocates have coextensive discovery authority with the CPUC, including the ability to issue data requests both to perform its own duties and to support the CPUC’s duties – an interpretation this Committee understands to be consistent with the CPUC’s longstanding administrative practice under current law.

1. Scope of New Subdivision (b)(12) – What Activities Are Intended to Be Covered Beyond Current Law? Supporters of this bill argue that California law needs to be strengthened to better define the expenses that IOUs must charge their shareholders and are not recoverable from their customers. They argue that high IOU bills have led many cities to consider establishing publicly owned utilities – municipalization of electricity utility service that is operated by private companies (the opposite of privatization). The supporters of this bill state that IOUs have spent millions historically to oppose these initiatives, including efforts by the City of Davis and, more recently, the City of San Diego. They argue that this bill is needed to protect against IOUs spending ratepayer funds to oppose efforts to municipalize electric utility service. There are currently active efforts across the state to municipalize electric utility service, including the City of San Diego and South San Joaquin Irrigation District, as well as recent efforts by the City of San Jose, and ongoing active exploration by the City of San Francisco. Given that efforts to municipalize electric utility service must be voted on by the affected electorate, IOUs are already prohibited from using ratepayer funds to take positions and campaign on ballot measures. However, this bill would extend to activities beyond activities specific to ballot measures to include other activities to influence whether a local jurisdiction municipalizes electric utility service.

Opponents argue that these activities are already prohibited under AB 1167 (Berman, Chapter 634, Statutes of 2025), which broadly bars the use of ratepayer funds for political influence activities, making SB 327 redundant at best and legally contradictory at worst. They further contend that the bill fails to account for circumstances where utilities are legally compelled – not acting voluntarily – to participate in municipalization proceedings, such as providing detailed information regarding the location, valuation, and function of utility assets, responding to discovery, and presenting testimony before courts or the CPUC.

1. Prior Legislation.

AB 1167 (Berman) included related provisions prohibiting recovery of political influence expenses from ratepayers by IOUs. Status: Chapter 634, Statutes of 2025.

SB 24 (McNerney, 2025) included nearly identical provisions as this bill. The bill was vetoed by the Governor citing a clerical error.

SB 938 (Min, 2023) would have expanded the types of activities an electrical or gas corporation is prohibited from recovering in rates by expanding the definitions of political activities and advertising, and would have required specified reporting of related activities. The bill also would have required the CPUC to assess specified civil penalties for any violations of the proposed prohibition and required ¾ of the moneys to be deposited in a new Zero-Emission Equity Fund within the State Treasury. Status: Died in the Senate Committee on Energy, Utilities, and Communications.

AB 562 (Santiago) required that any expense incurred by an IOU in assisting or deterring union organizing, as defined, is not recoverable either directly or indirectly in the utility’s rates and is required to be borne exclusively by the shareholders of the IOU. Status: Chapter 429, Statutes of 2019.

AB 874 (Williams, 2013) would have prohibited any expense incurred by an IOU in assisting or deterring union organizing to be recoverable either directly or indirectly in the utility’s rates. Status: Died in the Assembly.

SB 790 (Leno) revised and expanded the definition of CCA, required the CPUC to initiate a Code of Conduct rulemaking, and allowed CCAs to receive public purpose funds to administer energy efficiency programs. Status: Chapter 599, Statutes of 2012.

REGISTERED SUPPORT / OPPOSITION:

Support

The Utility Reform Network (TURN) (sponsor)

350 Bay Area Action

350 Humboldt

Affordable Energy Campaign

Alliance for Californians for Community Empowerment (ACCE)

California Environmental Justice Alliance

California Environmental Voters

California Public Interest Research Group (CALPIRG)

Climate Action Campaign, Orange County

Democrats of Greater Irvine

Earthjustice

Media Alliance

NextGen California

Orange County Young Democrats

The Public Advocates Office

Rising Sun Center for Opportunity

San Diego 350

Sierra Club CA

Small Business Utility Advocates

Sustainable Rossmoor

Third Act Bay Area Working Group

The Climate Center

Women for American Values and Ethics (WAVE)

Opposition

The California Chamber of Commerce (CalChamber)

Pacific Gas and Electric (PG&E)

San Diego Gas and Electric (SDG&E)

Southern California Edison (SCE)

Southern California Gas Company (SoCalGas)

Oppose Unless Amended

California Broadband & Video Association

California Communications Association

California Water Association

CTIA

USTelecom – The Broadband Association

Analysis Prepared by: Suman Tatapudy / U. & E. / (916) 319-2083

1. Public Utilities Code § 314. ↑

2. Public Utilities Code § 309.5(a), (e). ↑

3. SCG v. CPUC, Pet. for Review, p. 9. ↑

4. Id. at pp. 18, 23. ↑

5. Id. at p. 26. ↑

6. Id. at p. 23. ↑

 THIRD READING 

Bill No: SB 327

Author: McNerney (D)

Amended: 1/15/26

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 10-3, 1/12/26

AYES: Becker, Allen, Archuleta, Arreguín, Caballero, Hurtado, McNerney, Rubio, Stern, Wahab

NOES: Ochoa Bogh, Dahle, Strickland

NO VOTE RECORDED: Ashby, Gonzalez, Grove, Limón

SENATE APPROPRIATIONS COMMITTEE: 5-2, 1/22/26

AYES: Caballero, Cabaldon, Grayson, Richardson, Wahab

NOES: Seyarto, Dahle

SUBJECT: Public utilities: review of accounts: electrical and gas corporations: rates: political influence activities

SOURCE: The Utility Reform Network

DIGEST:

This bill (1) explicitly prohibits certain political influence activities and expenses by electrical or gas corporations, those related to opposing efforts to municipalize energy utility service, from being recorded in certain accounts and having the costs recovered from ratepayers; (2) states the Public Advocates Office (PAO) has the same authority as the California Public Utilities Commission (CPUC) to discover information and review the accounts of public utilities.

ANALYSIS:

Existing law:

1. Provides, under the Public Utility Regulatory Policies Act, that no electric utility may recover from any person other than the shareholders (or other owners) of the utility any direct or indirect expenditure by such utility for political advertising. This is defined to include advertising intended to influence public opinion with respect to legislative, administrative, or electoral matters, or with respect to any controversial issue of public importance. (16 United States Code §2623(b)(5))
2. Establishes and vests the CPUC with regulatory authority over public utilities, including electrical, gas, telephone, and water corporations. (Article XII of the California Constitution)
3. Authorizes the CPUC to, at any time, inspect the accounts, books, papers, and documents of any public utility. (Public Utilities Code §314)
4. Authorizes the CPUC to fix the rates and charges for public utilities and requires those rates and charges to be just and reasonable. (Public Utilities Code §451)
5. Prohibits a public utility from including any bill for services or commodities furnished by any customer or subscriber any advertising or literature designed or intended: (1) to promote the passage or defeat of a measure appearing on the ballot at an election; (2) to promote or defeat of a candidate to any public office, (3) to promote or defeat the appointment of any person to any administrative or executive positions in government; or (4) to promote or defeat any change in legislation or regulations. (Public Utilities Code §453(d))
6. Prohibits an electrical or gas corporation from recovering expenses for compensation (defined to include annual salary, bonus, benefits, or other consideration paid to an officer of the corporation) from ratepayers and requires compensation is paid solely by shareholders of the electrical or gas corporation. (Public Utilities Code §706)
7. Requires the CPUC to consider and adopt a code of conduct to govern the conduct of the electrical corporations in order to ensure that an electrical corporation does not market against a community choice aggregator (CCA) program except through an independent marketing division that is funded by the shareholders of the electrical corporation. (Public Utilities Code §707)
8. Prohibits a utility from recording to an above-the-line account, or otherwise recover from ratepayers, direct or indirect costs for political influence activities, among other activities. Defines “political influence activities” to include an activity for the purpose of directly or indirectly influencing: (1) the adoption, repeal, or modification of federal, state, regional, or local legislation; (2) the election or adoption of initiatives or referenda; or (3) the approval, modification, or revocation of franchise of a utility. Provides that a “political influence activity” does not include an activity that is directly and necessarily related to appearances before regulatory or other governmental bodies in connection with the utility’s existing or proposed operations of the utility’s regulated system or a request by a government agency for technical information. Requires the CPUC to assess a civil penalty based on the severity of the violation against a public utility that violates or fails to comply with the requirements to record political influence activities to an above-the-line account. (Public Utilities Code §748.3)
9. Prohibits the CPUC from prescribing a system of accounts and form of accounts, records, and memoranda for corporations subject to the regulatory authority of the United States that is inconsistent with that established and updated by or under the authority of the United States. (Public Utilities Code §793)

This bill:

1. Provides that the PAO has the same authority to discover information and review the accounts of a public utility as the CPUC.
2. Explicitly prohibits, except as provided, an electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recover from ratepayers, direct or indirect costs for opposing the municipalization of electrical or gas service, including lobbying, engaging in city or county political proceedings, or other political influence activities related to opposing the municipalization of electrical or gas utility service.

Background

Cost recovery of expenses by investor-owned utilities (IOUs). CPUC-regulated utilities routinely submit requests for cost recovery from ratepayers related to their operations, including expanding their infrastructure, paying for operation expenses, etc. As required by statute in Public Utilities Code §451, the CPUC may only approve a utility’s request for cost recovery that is deemed just and reasonable. Review of utility expenses to ensure they are just and reasonable is the principal purpose of the CPUC’s existence and the main task of the agency as an economic regulator. Statutory authority also authorizes the CPUC to disallow expenses that are not deemed just and reasonable or prudent. The review of a utility’s expenses is largely, although not exclusively, conducted through the utility’s general rate case (GRC). Most utilities regulated by the CPUC are required to undergo a GRC whereby the utility requests funding for distribution, generation and operation costs associated with their service. Usually performed every three (now four) years and conducted over roughly 18+ months, the GRCs are major regulatory proceedings which allow the CPUC and stakeholders, including the PAO, to conduct a broad, exhaustive, and detailed review of a utility’s revenues, expenses, and investments in plant and equipment to establish an approved revenue requirement.

Federal Energy Regulatory Commission (FERC) accounting and financial reporting. FERC jurisdiction Account 426.4 of the Uniform System of Accounts (USofA) requires that utility shareholders pay for expenditures for the purpose of influencing public opinion or the decisions of public offices. FERC has established regulatory accounting and financial reporting requirements for its jurisdictional entities in the electric, natural gas, and oil pipeline industries. These requirements play a role in FERC’s strategy of setting just and reasonable cost-of-service rates. The foundation of the FERC’s accounting program is the USofA codified in the agency’s regulations. In addition, FERC issues accounting rulings relating to specific transactions and applications through orders and Chief Accountant guidance letters. This body of accounting regulations, orders, and guidance letters comprises the FERC’s accounting and financial reporting requirements which promote consistent, transparent, and decision-useful accounting information for the FERC and other stakeholders. These accounting and financial reporting requirements take into consideration the FERC’s ratemaking policies, past FERC actions, industry trends, and external factors (e.g., economic, environmental, and technological changes, and mandates from other regulatory bodies) that impact the industries under the agency’s jurisdiction. Electric Public Utilities & Licensees, Natural Gas, and Oil Pipeline companies within FERC jurisdiction are required to maintain their books and records in accordance with the USofA. The USofA provides basic account descriptions, instructions, and accounting definitions that are useful in understanding the information reported in the Annual Report.

Statute disallows recovery of certain expenses. Statute prohibits IOUs from recovering from ratepayers certain expenses, including activities related to elections of candidates, legislation, bonuses paid to executives of the IOU under specified conditions, activities marketing against CCAs, as well as, any situation where the IOU has failed to sufficiently maintain records to enable the CPUC to completely evaluate any relevant issues related to the prudence of any expense relating to the planning, construction, or operation of the IOU’s plant. Under the requirements of the Federal Public Utility Regulatory Policies Act of 1978 and subsequent state statute, IOUs are also prohibited from recovering from any person other than shareholders direct and indirect expenditures for promotional or political advertising. Additionally, IOUs must abide by CPUC orders.

AB 1167 (Berman, Chapter 634, Statutes of 2025). Recent legislation expanded the scope of prohibited activities. Most recently, AB 1167 (Berman) prohibits recovery of political influence expenses from ratepayers by IOUs, including both direct and indirect costs of political activities and promotional advertisements. The bill takes effect this year, however, utilities report a need for clarity on implementing some of the requirements. SB 24 (McNerney, 2025) included nearly identical provisions as AB 1167 until it was amended in the Assembly, the final version which included nearly the identical language currently in this bill. SB 24 was vetoed by the Governor citing a clerical error related to the definition of political influence activity.

Comments

Supporters contend California law needs strengthening to protect ratepayers. The supporters of this bill argue that California law needs to be strengthened to better define the expenses that utilities must charge their shareholders and are not recoverable from their customers. They argue that high utility bills of electric IOU customers have led many cities to consider establishing publicly owned utilities - municipalization of electricity utility service that is operated by private companies (the opposite of privatization). The supporters of this bill state that electric IOUs have also spent millions historically to oppose these initiatives, including efforts by the City of Davis and more recently the City of San Diego. They argue that this bill is needed to protect against electric IOUs spending ratepayer funds to oppose efforts to municipalize electric utility service. There are currently active efforts across the state to municipalize electric utility service, including the City of San Diego and South San Joaquin Irrigation District, as well as recent efforts by the City of San Jose, and ongoing active exploration by the City of San Francisco. Given that efforts to municipalize electric utility service must be voted on by the affected electorate, IOUs are already prohibited from using ratepayer funds to take positions and campaign on ballot measures. However, this bill would extend to activities beyond activities specific to ballot measures to include other activities to influence whether a local jurisdiction municipalizes electric utility service.

Utilities argue that the proposals in this bill are too far reaching and could hurt customers. They contend that the limitations imposed by this bill go beyond those in the FERC USofA accounting and reporting and could conflict. They suggest that the current law already protects ratepayers from funding political influence activities, including prohibitions on using ratepayer funds to oppose initiatives supporting efforts to municipalize electricity service. They, generally, point to the GRC proceedings as the venues where these issues should be appropriately resolved and where dozens of intervenors can review utility expenses, along with the CPUC. San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas) note that in recent CPUC decisions (SoCalGas GRC 2024 Test Year, D. 24-12-074) the CPUC required annual reporting and attestation mechanisms for SoCalGas to demonstrate its compliance and governance activities and monitor proper accounting for costs related to political activities.

PAO’s authority equivalent to CPUC’s to review accounts of public utilities. This bill includes a proposal to explicitly state that the PAO has equivalent authority to the CPUC in relation to the authority to discover information and review the accounts of a public utility, which includes electric, gas, telephone, and water corporations. In 2019 the Sierra Club alleged that an association, known as California for Balanced Energy Solutions (C4BES), which moved to obtain party status within a building decarbonization proceeding at the CPUC was funded by SoCalGas. Subsequently, the PAO began investigating the allegation which culminated in efforts to compel discovery by the utility, including of contracts funded by shareholders. Ultimately, the CPUC sided with the PAO and rejected the utility’s claim to First Amendment infringement on freedom of speech. SoCalGas then appealed to the court. The California Court of Appeals sided with SoCalGas, Southern California Gas Co. v. Public Utilities Com. (2023) 87 Cal. App. 5^th 324. SoCalGas was successful in its argument to the court that the PAO’s inquiries were an infringement on the utility’s First Amendment rights. The court stated the PAO’s is more narrow to that of the CPUC, while also stating that SoCalGas has shown that disclosure of contracts funded by shareholders would impact its First Amendment rights. Furthermore, the court was convinced that disclosure of such information could result in a chilling effect on SoCalGas’ ability to contract for services, stating that impact outweighs the interest to view the contracts paid by shareholders. However, it is unclear whether the courts would find a similar decision if the CPUC compels this information directly, as opposed to the PAO.

This bill weighs into the legal challenges by making explicit that PAO has the same authority as the CPUC in discovery and reviewing the accounts of public utilities. The utilities opposed to this bill argue that this expansion of PAO’s authority undermines the utilities’ procedural due process, as it could lead to overbroad intrusions into constitutionally protected areas or fishing expeditions by the PAO. The PAO argues the court decision has stymied their historical authority and role. They and the supporters of this bill believe the PAO needs its discovery rights clearly reinstated in statute because it plays a critical watchdog role in protecting California ratepayers from utility misconduct, including the misuse of ratepayer funds. The PAO raises concerns about the limitations by the Appellate Court’s 2023 decision to allow them to issue data requests for shareholder accounts – under that authority they were able to discover the SoCalGas activity supporting C4BES. They believe SB 327 would restore the PAO’s discovery authority, which will help it in its role of protecting the public’s interest.

Prior/Related Legislation

AB 1167 (Berman, Chapter 634, Statutes of 2025) included related provisions prohibiting recovery of political influence expenses from ratepayers by IOUs.

SB 24 (McNerney) of 2025, included nearly identical provisions as this bill. The bill was vetoed by the Governor.

SB 938 (Min) of 2023, would have expanded the types of activities an electrical or gas corporation is prohibited from recovering in rates by expanding the definitions of political activities and advertising, and requires specified reporting of related activities. The bill also would have required the CPUC to assess specified civil penalties for any violations of the proposed prohibition and required ¾ of the moneys to be deposited in a new Zero-Emission Equity Fund within the State Treasury. The bill died in this committee.

AB 562 (Santiago, Chapter 429, Statutes of 2019) required that any expense incurred by an IOU in assisting or deterring union organizing, as defined, is not recoverable either directly or indirectly in the utility’s rates and is required to be borne exclusively by the shareholders of the IOU.

SB 790 (Leno, Chapter 599, Statutes of 2012) revised and expanded the definition of CCA, required the CPUC to initiate a Code of Conduct rulemaking, and allows CCAs to receive public purpose funds to administer energy efficiency programs.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee, unknown, potentially significant ongoing cost pressures (ratepayer funds) for the CPUC and PAO to expand their scope of activities as provided by this bill.

SUPPORT: (Verified 1/22/26)

The Utility Reform Network (Source)

350 Humboldt: Grass Roots Climate Action
Agricultural Energy Consumers Association
California Environmental Voters
Climate Action California
Climate Reality Project - Silicon Valley Chapter
Media Alliance

Public Advocates Office

OPPOSITION: (Verified 1/22/26)

California Chamber of Commerce
Pacific Gas and Electric
San Diego Gas and Electric Company
Southern California Edison
Southern California Gas Company

ARGUMENTS IN SUPPORT: The Utility Reform Network (TURN), the sponsor of this bill, states:

TURN is proud to sponsor and support SB 327 to protect ratepayers from having their money used against them to support utility lobbying, promotional advertising, and to stop cities from creating or expanding municipal utilities. … It is critical that the legislature act to protect ratepayers and ensure that ratepayer dollars are not used to undermine the wellbeing of ratepayers. …For-profit utilities generally have a monopoly within their service territories, except where cities have established a municipal utility district. …The establishment of municipal utilities are significantly more affordable, and more attractive, for municipal residents, but removes customers from the for-profit utilities’ territories. For this reason, for-profit utilities spend ratepayer money lobbying city council members and using other means to fight the formation of municipal utilities. This inappropriate use of ratepayer money is another way that for-profit utilities use ratepayer money to harm ratepayers.

The Public Advocates Office states:

… [SB 327] would directly support and advance our mission to advocate for affordable, safe, and reliable utility services. Californians face the highest energy rates in the country. Decisionmakers are working diligently to find ways to make monthly utility bills more affordable while continuing to advance the state’s clean energy goals. This is done in part by gathering input and analysis from interested stakeholders – including our office, the IOUs, the public, and others – to support well-informed decisions. SB 327 would establish much-needed safeguards, transparency, and support the ensure that ratepayer dollars are not used appropriately – not for political influence or advertising that can unnecessarily increase customers’ bills.

ARGUMENTS IN OPPOSITION: Pacific Gas & Electric and Southern California Edison state:

As noted in prior comments on SB 24 and AB 1167, IOUs are already prohibited from using customer funds in direct support of, or opposition to, campaigns on proposed or actual municipalization initiatives or proposals from local agencies. CPUC orders require IOUs to track time spent analyzing and monitoring proposed legislation or regulations for campaign purposes. SB 327 fails to clarify that customer funds can and should be spent on activities necessary to implement a municipalization order.

San Diego Gas & Electric and Southern California Gas state:

While we support efforts to ensure transparency and accountability in utility operations, SB 24 raises serious constitutional and regulatory concerns by expanding the authority of the Public Advocate’s Office (PAO) in ways that conflict with established law and judicial precedent. In addition, SB 327 is internally inconsistent with respect to its definition of political influence activity and how it treats costs associated with municipalization, some of which are legitimately treated as above the line costs. …Expanding PAO authority in a manner inconsistent with the intent for PAO to collect information relevant to rate affordability risks violating procedural due process, gives the PAO more discovery authority than any other advocate in the same proceeding, and increases the risk of PAO’s abuse of power, including unchecked intrusions into constitutionally protected areas in which the judiciary had to recently intervene. This expansion is unnecessary, as the PAO already has full access to ratepayer-funded accounts and data needed to assess ratepayer impacts. Thus, this change in law would not lower rates for utility customers – the purported purpose of this statute. Granting additional authority would not improve transparency but rather create imbalance and risk.

Prepared by: Nidia Bautista / E.U. & C. / (916) 651-4107

1/23/26 15:39:11

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SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2025 - 2026 Regular Session

SB 327 (McNerney) - Public utilities: review of accounts: electrical and gas corporations: rates: political influence activities

Bill Summary:

This bill would expand the prohibition on certain political influence activities and advertising expenses by electrical or gas corporations from being recovered from ratepayer to include those related to opposing efforts to municipalize energy utility service. It would also expand the authority of the Public Advocates Office (PAO) to discover information and review the accounts of public utilities.

Fiscal Impact:

• Unknown, potentially significant ongoing cost pressures (ratepayer funds) for the CPUC and PAO to expand their scope of activities as provided by this bill.

Background:

CPUC-regulated utilities routinely submit requests for cost recovery from ratepayers related to their operations, including expanding their infrastructure, paying for operation expenses, etc. As required by statute in Public Utilities Code §451, the CPUC may only approve a utility’s request for cost recovery that is deemed just and reasonable. Review of utility expenses to ensure they are just and reasonable is the principal purpose of the CPUC’s existence and the main task of the agency as an economic regulator. Statutory authority also authorizes the CPUC to disallow expenses that are not deemed just and reasonable or prudent. The review of a utility’s expenses is largely, although not exclusively, conducted through the utility’s general rate case (GRC). Most utilities regulated by the CPUC are required to undergo a GRC whereby the utility requests funding for distribution, generation and operation costs associated with their service. Usually performed every three (now four) years and conducted over roughly 18+ months, the GRCs are major regulatory proceedings which allow the CPUC and stakeholders, including the PAO, to conduct a broad, exhaustive, and detailed review of a utility’s revenues, expenses, and investments in plant and equipment to establish an approved revenue requirement.

Proposed Law:

Under existing law, a regulated public utility is prohibited from using ratepayer funds for advocacy-related activities that are political or do not otherwise benefit ratepayers. Existing law prohibits each electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recovering from ratepayers, direct or indirect costs of specified activities. This bill would additionally prohibit, except as provided, each electrical corporation or gas corporation from recording to, an above-the-line account, or otherwise recovering from ratepayers, the direct or indirect costs of activities related to opposing the municipalization of electrical or gas utility service, as specified.

This bill would also specify that the PAO has the same authority to discover information and review the accounts of a public utility as the CPUC.

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-described 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.

Related Legislation:

AB 1167 (Berman, Chapter 634, Statutes of 2025) included related provisions prohibiting recovery of political influence expenses from ratepayers by IOUs.

SB 24 (McNerney) of 2025, included nearly identical provisions as this bill. The bill was vetoed by the Governor.

SB 938 (Min) of 2023, would have expanded the types of activities an electrical or gas corporation is prohibited from recovering in rates by expanding the definitions of political activities and advertising, and requires specified reporting of related activities. The bill also would have required the CPUC to assess specified civil penalties for any violations of the proposed prohibition and required ¾ of the moneys to be deposited in a new Zero-Emission Equity Fund within the State Treasury. The bill died in policy committee.

AB 562 (Santiago, Chapter 429, Statutes of 2019) required that any expense incurred by an IOU in assisting or deterring union organizing, as defined, is not recoverable either directly or indirectly in the utility’s rates and is required to be borne exclusively by the shareholders of the IOU.

AB 874 (Williams) of 2013, would have prohibited any expense incurred by an IOU in assisting or deterring union organizing to be recoverable either directly or indirectly in the utility’s rates. The bill died in the Assembly.

SB 790 (Leno, Chapter 599, Statutes of 2012) revised and expanded the definition of CCA, required the CPUC to initiate a Code of Conduct rulemaking, and allows CCAs to receive public purpose funds to administer energy efficiency programs.

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SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Josh Becker, Chair

2025 - 2026 Regular

Bill No: Hearing Date: 1/12/2026

SUBJECT: Public utilities: review of accounts: electrical and gas corporations: rates: political influence activities

DIGEST: This bill prohibits certain political influence activities and expenses by electrical or gas corporations (those related to opposing efforts to municipalize energy utility service) from being recorded in certain accounts and having the costs recovered from ratepayers. This bill also expands the authority of the Public Advocates Office (PAO) to discover information and review the accounts of public utilities.

ANALYSIS:

Existing law:

1. Provides, under the Public Utility Regulatory Policies Act, that no electric utility may recover from any person other than the shareholders (or other owners) of the utility any direct or indirect expenditure by such utility for political advertising. This is defined to include advertising intended to influence public opinion with respect to legislative, administrative, or electoral matters, or with respect to any controversial issue of public importance. (16 United States Code §2623(b)(5))
2. Establishes and vests the California Public Utilities Commission (CPUC) with regulatory authority over public utilities, including electrical, gas, telephone, and water corporations. (Article XII of the California Constitution)
3. Authorizes the CPUC to, at any time, inspect the accounts, books, papers, and documents of any public utility. (Public Utilities Code §314)
4. Authorizes the CPUC to fix the rates and charges for public utilities and requires those rates and charges to be just and reasonable. (Public Utilities Code §451)
5. Prohibits a public utility from including any bill for services or commodities furnished by any customer or subscriber any advertising or literature designed or intended: (1) to promote the passage or defeat of a measure appearing on the ballot at an election; (2) to promote or defeat of a candidate to any public office, (3) to promote or defeat the appointment of any person to any administrative or executive positions in government; or (4) to promote or defeat any change in legislation or regulations. (Public Utilities Code §453(d))
6. Prohibits an electrical or gas corporation from recovering expenses for compensation (defined to include annual salary, bonus, benefits, or other consideration paid to an officer of the corporation) from ratepayers and requires compensation is paid solely by shareholders of the electrical or gas corporation. (Public Utilities Code §706)
7. Requires the CPUC to consider and adopt a code of conduct to govern the conduct of the electrical corporations in order to ensure that an electrical corporation does not market against a community choice aggregator (CCA) program except through an independent marketing division that is funded by the shareholders of the electrical corporation. (Public Utilities Code §707)
8. Prohibits a utility from recording to an above-the-line account, or otherwise recover from ratepayers, direct or indirect costs for political influence activities, among other activities. Defines “political influence activities” to include activity for the purpose of directly or indirectly influencing: (1) the adoption, repeal, or modification of federal, state, regional, or local legislation; (2) the election or adoption of initiatives or referenda; or (3) the approval, modification, or revocation of franchise of a utility. Provides that a “political influence activity” does not include an activity that is directly and necessarily related to appearance before regulatory or other governmental bodies in connection with the utility’s existing or proposed operations of the utility’s regulated system or a request by a government agency for technical information. Requires the CPUC to assess a civil penalty based on the severity of the violation against a public utility that violates or fails to comply with the requirements to record political influence activities to an above-the-line account. (Public Utilities Code §748.3)
9. Prohibits the CPUC from prescribing a system of accounts and form of accounts, records, and memoranda for corporations subject to the regulatory authority of the United States that is inconsistent with that established and updated by or under the authority of the United States. (Public Utilities Code §793)
10. Provides the CPUC with authority to levy fines against regulated entities for violation of law. Requires penalties to be deposited in the State’s General Fund. (Public Utilities Code §2100 et seq.)

This bill:

1. Provides that the PAO has the same authority to discover information and review the accounts of a public utility as the CPUC.
2. Defines “political influence activity” to mean: (1) an activity that is directly and necessarily related to appearances before regulatory or other governmental bodies in connection with the utility’s existing or proposed operations of the utility’s regulated system; or (2) research, preparation, or any other activity undertaken for the purpose of supporting any activities specified. These activities include adoption, repeal, or modification of federal, state, regional, or local legislation, regulations, or ordinances, election, recall, appointment or removal of a public official or adoption of initiative or referenda, or the approval, modification, or revocation of franchises of a utility, and activities in support of these efforts.
3. Provides that the definition of “political influence activity” does not include an activity that is directly and necessarily related to appearances before regulatory or other governmental bodies in connection with the utility’s existing or proposed operations. These activities include those that directly relate to CPUC-approved energy efficiency programs or other public purpose programs, public messages providing necessary information to customers, and those required by federal or state statute or orders of a regulatory authority.
4. Makes explicit that policies affecting gaseous fuels or electricity are not directly and necessarily related to the utility’s existing or proposed operations.
5. Prohibits, except as provided, an electrical corporation or gas corporation from recording to an above-the-line account, or otherwise recover from ratepayers, direct or indirect costs for opposing the municipalization of electrical or gas service, including lobbying, engaging in city or county political proceedings, or other political influence activities to undermine the establishment of a publicly owned municipal utility.
6. Requires the CPUC to monitor and investigate compliance and noncompliance.
7. Makes explicit that the requirements to prohibit electrical or gas corporations from recording or recovering costs for opposing municipalization of energy utility service does not prohibit a utility from recording to an above-the-line account a payment made pursuant to an agreement authorized by the National Labor Relations Act or payment authorized by the National Labor Management Cooperation Act of 1978.

Background

Cost recovery of expenses by investor-owned utilities (IOUs). CPUC-regulated utilities routinely submit requests for cost recovery from ratepayers related to their operations, including expanding their infrastructure, paying for operation expenses, etc. As required by statute in Public Utilities Code §451, the CPUC may only approve a utility’s request for cost recovery that is deemed just and reasonable. Review of utility expenses to ensure they are just and reasonable is the principal purpose of the CPUC’s existence and the main task of the agency as an economic regulator. Statutory authority also authorizes the CPUC to disallow expenses that are not deemed just and reasonable or prudent. The review of a utility’s expenses is largely, although not exclusively, conducted through the utility’s general rate case (GRC). Most utilities regulated by the CPUC are required to undergo a GRC whereby the utility requests funding for distribution, generation and operation costs associated with their service. Usually performed every three (now four) years and conducted over roughly 18+ months, the GRCs are major regulatory proceedings which allow the CPUC and stakeholders, including the PAO, to conduct a broad, exhaustive, and detailed review of a utility’s revenues, expenses, and investments in plant and equipment to establish an approved revenue requirement.

Federal Energy Regulatory Commission (FERC) accounting and financial reporting. FERC jurisdiction Account 426.4 of the Uniform System of Accounts (USofA) requires that utility shareholders pay for expenditures for the purpose of influencing public opinion or the decisions of public offices. FERC has established regulatory accounting and financial reporting requirements for its jurisdictional entities in the electric, natural gas, and oil pipeline industries. These requirements play a role in FERC’s strategy of setting just and reasonable cost-of-service rates. The foundation of the FERC’s accounting program is the USofA codified in the agency’s regulations. In addition, FERC issues accounting rulings relating to specific transactions and applications through orders and Chief Accountant guidance letters. This body of accounting regulations, orders, and guidance letters comprises the FERC’s accounting and financial reporting requirements which promote consistent, transparent, and decision-useful accounting information for the FERC and other stakeholders. These accounting and financial reporting requirements take into consideration the FERC’s ratemaking policies, past FERC actions, industry trends, and external factors (e.g., economic, environmental, and technological changes, and mandates from other regulatory bodies) that impact the industries under the agency’s jurisdiction. Electric Public Utilities & Licensees, Natural Gas, and Oil Pipeline companies within FERC jurisdiction are required to maintain their books and records in accordance with the USofA. The USofA provides basic account descriptions, instructions, and accounting definitions that are useful in understanding the information reported in the Annual Report.

Statute disallows recovery of certain expenses. Statute prohibits IOUs from recovering from ratepayers certain expenses, including activities related to elections of candidates, legislation, bonuses paid to executives of the IOU under specified conditions, activities marketing against CCAs, as well as, any situation where the IOU has failed to sufficiently maintain records to enable the CPUC to completely evaluate any relevant issues related to the prudence of any expense relating to the planning, construction, or operation of the IOU’s plant. Under the requirements of the Federal Public Utility Regulatory Policies Act of 1978 and subsequent state statute, IOUs are also prohibited from recovering from any person other than shareholders direct and indirect expenditures for promotional or political advertising. Additionally, IOUs must abide by CPUC orders.

Recent legislation expands the scope of prohibited activities. Most recently, AB 1167 (Berman, Chapter 634, Statutes of 2025) prohibits recovery of political influence expenses from ratepayers by IOUs, including both direct and indirect costs of political activities and promotional advertisements. The bill takes effect this year, however, utilities report need for clarity on implementing some of the requirements. SB 24 (McNerney, 2025) included nearly identical provisions as AB 1167 until it was amended on the Assembly Floor and reflecting nearly the identical language currently in this bill. SB 24 was vetoed by the Governor citing a clerical error related to the definition of political influence activity.

Comments

Supporters contend California law needs strengthening to protect ratepayers. The supporters of this bill argue that California law needs to be strengthened to better define the expenses that utilities must charge their shareholders and are not recoverable from their customers. They argue that high utility bills of electric IOU customers have led many cities to consider establishing publicly owned utilities - municipalization of electricity utility service that is operated by private companies (the opposite of privatization). The supporters of this bill state that electric IOUs have also spent millions historically to oppose these initiatives, including efforts by the City of Davis and more recently the City of San Diego. They argue that this bill is needed to protect against electric IOUs spending ratepayer funds to oppose efforts to municipalize electric utility service. There are currently active efforts across the state to municipalize electric utility service, including the City of San Diego and South San Joaquin Irrigation District, as well as recent efforts by the City of San Jose, and ongoing active exploration by the City of San Francisco. Given that efforts to municipalize electric utility service must be voted on by the affected electorate, IOUs are already prohibited from using ratepayer funds to take positions and campaign on ballot measures. However, this bill would extend to activities beyond activities specific to ballot measures to include other activities to influence whether a local jurisdiction municipalizes electric utility service.

Utilities argue that the proposals in this bill are too far reaching and could hurt customers. They contend that the limitations imposed by this bill go beyond those in the FERC USofA accounting and reporting and could conflict. They suggest that the current law already protects ratepayers from funding political influence activities, including prohibitions on using ratepayer funds to oppose initiatives supporting efforts to municipalize electricity service. They, generally, point to the GRC proceedings as the venues where these issues should be appropriately resolved and where dozens of intervenors can review utility expenses, along with the CPUC. San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas) note that in recent CPUC decisions (SoCalGas GRC 2024 Test Year, D. 24-12-074) the CPUC required annual reporting and attestation mechanisms for SoCalGas to demonstrate its compliance and governance activities and monitor proper accounting for costs related to political activities.

Expanding PAO’s authority. This bill includes a proposal to explicitly state that the PAO has equivalent authority to the CPUC in relation to the authority to discover information and review the accounts of a public utility, which includes electric, gas, telephone, and water corporations. In 2019 the Sierra Club alleged that an association, known as California for Balanced Energy Solutions (C4BES), which moved to obtain party status within a building decarbonization proceeding at the CPUC was funded by SoCalGas. Subsequently, the PAO began investigating the allegation which culminated in efforts to compel discovery by the utility, including of contracts funded by shareholders. Ultimately, the CPUC sided with the PAO and rejected the utility’s claim to First Amendment infringement on freedom of speech. SoCalGas then appealed to the court. The California Court of Appeals sided with SoCalGas, Southern California Gas Co. v. Public Utilities Com. (2023) 87 Cal. App. 5^th 324. SoCalGas was successful in its argument to the court that the PAO’s inquiries were an infringement on the utility’s First Amendment rights. The court stated the difference between the statutory authority of the PAO to that of the CPUC, viewing PAO’s authority as more narrow, while also stating that SoCalGas has shown that disclosure of contracts funded by shareholders would impact its First Amendment rights. Furthermore, the court was convinced that disclosure of such information could result in a chilling effect on SoCalGas’ ability to contract for services, stating that impact outweighs the interest to view the contracts paid by shareholders. However, it is unclear whether the courts would find a similar decision if the CPUC compels this information directly, as opposed to the PAO. This bill weighs into the legal challenges by making explicit that PAO has the same authority as the CPUC in discovery and reviewing the accounts of public utilities. The utilities opposed to this bill argue that this expansion of PAO’s authority undermines the utilities’ procedural due process, as it could lead to overbroad intrusions into constitutionally protected areas or fishing expeditions by the PAO. The PAO argues the court decision has stymied their historical authority and role. They and the supporters of this bill believe the PAO needs its discovery rights clearly reinstated in statute because it plays a critical watchdog role in protecting California ratepayers from utility misconduct, including the misuse of ratepayer funds. The PAO raises concerns about the limitations by the Appellate Court’s 2023 decision to allow them to issue data requests for shareholder accounts – under that authority they were able to discover the SoCalGas activity supporting C4BES. They believe SB 327 would restore the PAO’s discovery authority, which will help it in its role of protecting the public’s interest.

Amendments needed. The author and committee may wish to amend this bill to address redundancy and conflicts with the chaptering of AB 1167 (Berman, 2025). Specifically, the author and committee may wish to delete Section 2 of this bill and instead replace the author’s language, with some clarifications, within Public Utilities Code §748.3, as added by AB 1167.

Prior/Related Legislation

AB 1167 (Berman, Chapter 634, Statutes of 2025) included related provisions prohibiting recovery of political influence expenses from ratepayers by IOUs.

SB 24 (McNerney) of 2025, included nearly identical provisions as this bill. The bill was vetoed by the Governor.

SB 938 (Min) of 2023, would have expanded the types of activities an electrical or gas corporation is prohibited from recovering in rates by expanding the definitions of political activities and advertising, and requires specified reporting of related activities. The bill also would have required the CPUC to assess specified civil penalties for any violations of the proposed prohibition and required ¾ of the moneys to be deposited in a new Zero-Emission Equity Fund within the State Treasury. The bill died in this committee.

AB 562 (Santiago, Chapter 429, Statutes of 2019) required that any expense incurred by an IOU in assisting or deterring union organizing, as defined, is not recoverable either directly or indirectly in the utility’s rates and is required to be borne exclusively by the shareholders of the IOU.

AB 874 (Williams) of 2013, would have prohibited any expense incurred by an IOU in assisting or deterring union organizing to be recoverable either directly or indirectly in the utility’s rates. The bill died in the Assembly.

SB 790 (Leno, Chapter 599, Statutes of 2012) revised and expanded the definition of CCA, required the CPUC to initiate a Code of Conduct rulemaking, and allows CCAs to receive public purpose funds to administer energy efficiency programs.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

The Utility Reform Network (Sponsor)

350 Humboldt: Grass Roots Climate Action
Agricultural Energy Consumers Association
California Environmental Voters
Climate Action California
Climate Reality Project - Silicon Valley Chapter
Public Advocates Office

OPPOSITION:

California Chamber of Commerce
Pacific Gas and Electric
San Diego Gas and Electric Company
Southern California Edison
Southern California Gas Company

ARGUMENTS IN SUPPORT: The Utility Reform Network (TURN), the sponsor of this bill, states:

TURN is proud to sponsor and support SB 327 to protect ratepayers from having their money used against them to support utility lobbying, promotional advertising, and to stop cities from creating or expanding municipal utilities. … It is critical that the legislature act to protect ratepayers and ensure that ratepayer dollars are not used to undermine the wellbeing of ratepayers. …For-profit utilities generally have a monopoly within their service territories, except where cities have established a municipal utility district. …The establishment of municipal utilities are significantly more affordable, and more attractive, for municipal residents, but removes customers from the for-profit utilities’ territories. For this reason, for-profit utilities spend ratepayer money lobbying city council members and using other means to fight the formation of municipal utilities. This inappropriate use of ratepayer money is another way that for-profit utilities use ratepayer money to harm ratepayers.

The Public Advocates Office states:

… [SB 327] would directly support and advance our mission to advocate for affordable, safe, and reliable utility services. Californians face the highest energy rates in the country. Decisionmakers are working diligently to find ways to make monthly utility bills more affordable while continuing to advance the state’s clean energy goals. This is done in part by gathering input and analysis from interested stakeholders – including our office, the IOUs, the public, and others – to support well-informed decisions. SB 327 would establish much-needed safeguards, transparency, and support the ensure that ratepayer dollars are not used appropriately – not for political influence or advertising that can unnecessarily increase customers’ bills.

ARGUMENTS IN OPPOSITION: Pacific Gas & Electric and Southern California Edison state:

SB 327 creates duplicative regulation, adds additional vague terms, and imposes unnecessary compliance costs—ultimately harming the customers it seeks to protect. PG&E and SCE urge the Legislature to narrow SB 327 to clarifications aligned with Governor Newsom’s veto message and avoid duplicating AB 1167. SB 327 disregards the Governor’s veto message of SB 24 and creates a code section that is duplicative to AB 1167 (Berman, 2025), which was just enacted. While SB 327 corrects the drafting error, it still creates a new code section (PUC § 748.4) that is essentially identical to AB 1167 (PUC §743.3). …As noted in prior comments on SB 24 and AB 1167, IOUs are already prohibited from using customer funds in direct support of, or opposition to, campaigns on proposed or actual municipalization initiatives or proposals from local agencies. CPUC orders require IOUs to track time spent analyzing and monitoring proposed legislation or regulations for campaign purposes. SB 327 fails to clarify that customer funds can and should be spent on activities necessary to implement a municipalization order.

San Diego Gas & Electric and Southern California Gas state:

While we support efforts to ensure transparency and accountability in utility operations, SB 24 raises serious constitutional and regulatory concerns by expanding the authority of the Public Advocate’s Office (PAO) in ways that conflict with established law and judicial precedent. In addition, SB 327 is internally inconsistent with respect to its definition of political influence activity and how it treats costs associated with municipalization, some of which are legitimately treated as above the line costs. …Expanding PAO authority in a manner inconsistent with the intent for PAO to collect information relevant to rate affordability risks violating procedural due process, gives the PAO more discovery authority than any other advocate in the same proceeding, and increases the risk of PAO’s abuse of power, including unchecked intrusions into constitutionally protected areas in which the judiciary had to recently intervene. This expansion is unnecessary, as the PAO already has full access to ratepayer-funded accounts and data needed to assess ratepayer impacts. Thus, this change in law would not lower rates for utility customers – the purported purpose of this statute. Granting additional authority would not improve transparency but rather create imbalance and risk.

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