Existing law requires each utility, on and after January 1, 2017, to, upon the request and authorization of the owner, owners agent, or operator of a covered building, as defined, deliver or otherwise provide aggregated energy usage data for a covered building to the owner, owners agent, or building operator, or to the owners account in the ENERGY STAR Portfolio Manager, as specified.

This bill would authorize a utility to satisfy that requirement by delivering or otherwise providing aggregated energy usage data to the owners account in any alternative system or tool approved by the State Energy Resources Conservation and Development Commission.

Existing law requires each utility, on and after January 1, 2017, to, upon the request and authorization of the owner, owners agent, or operator of a covered building, as defined, deliver or otherwise provide aggregated energy usage data for a covered building to the owner, owners agent, or building operator, or to the owners account in the ENERGY STAR Portfolio Manager, as specified.

This bill would authorize a utility to satisfy that requirement by delivering or otherwise providing aggregated energy usage data to the owners account in any alternative system or tool approved by the State Energy Resources Conservation and Development Commission.

Existing law requires each utility, on and after January 1, 2017, to, upon the request and authorization of the owner, owners agent, or operator of a covered building, as defined, deliver or otherwise provide aggregated energy usage data for a covered building to the owner, owners agent, or building operator, or to the owners account in the ENERGY STAR Portfolio Manager, as specified.

This bill would authorize a utility to satisfy that requirement by delivering or otherwise providing aggregated energy usage data to the owners account in any alternative system or tool approved by the State Energy Resources Conservation and Development Commission.

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations. Under existing law, it is the policy of the state that each electrical corporation continue to operate its electric distribution grid in its service territory and to do so in a safe, reliable, efficient, and cost-effective manner.

This bill would require authorize the commission to evaluate performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align electrical corporation operations, expenditures, and investments with delivering safe and reliable electrical service and achieving public policy goals, while minimizing costs for ratepayers. The bill would require the commission to prioritize performance metrics and financial performance-based incentives that can reduce electrical corporations preference for investments that can be added to their ratebase and instead encourage electrical corporations to propose the most cost-effective solutions for providing safe and reliable electrical service, as provided. The bill would require the commission to study incentive mechanisms approved by the commission, and other incentive mechanisms deployed by other jurisdictions, to determine their effectiveness and to identify any unintended consequences of their adoption, as provided. The bill would require authorize the commission, on or before January 1, 2028, to begin tracking one or more of the performance metrics identified, and to subsequently consider whether financial performance-based incentives linked to those performance metrics would be effective and beneficial for minimizing costs for ratepayers.

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

Because the provisions of this bill would be a part of the act and a violation of a commission action implementing the requirements of the bill would be a crime, the 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 vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations. Under existing law, it is the policy of the state that each electrical corporation continue to operate its electric distribution grid in its service territory and to do so in a safe, reliable, efficient, and cost-effective manner.

This bill would require the commission to evaluate performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align electrical corporation operations, expenditures, and investments with delivering safe and reliable electrical service and achieving public policy goals, while minimizing costs for ratepayers. The bill would require the commission to prioritize performance metrics and financial performance-based incentives that can reduce electrical corporations preference for investments that can be added to their ratebase and instead encourage electrical corporations to propose the most cost-effective solutions for providing safe and reliable electrical service, as provided. The bill would require the commission to study incentive mechanisms approved by the commission, and other incentive mechanisms deployed by other jurisdictions, to determine their effectiveness and to identify any unintended consequences of their adoption, as provided. The bill would require the commission, on or before January 1, 2028, to begin tracking one or more of the performance metrics identified, and to subsequently consider whether financial performance-based incentives linked to those performance metrics would be effective and beneficial for minimizing costs for ratepayers.

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

Because the provisions of this bill would be a part of the act and a violation of a commission action implementing the requirements of the bill would be a crime, the 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 (Energy Commission) and the Public Utilities Commission (PUC), on or before December 15, 2022, and quarterly thereafter, to submit to the Legislature a joint Reliability Planning Assessment that, among other things, includes prospective information on existing and expected resources, including updates on the interconnection status for renewable projects and any delays in interconnection, and expected retirements for both system and local resources. Existing law requires the Energy Commission to report in the energy almanac on California energy resources that serve load in California.

This bill would require that the assessment also include the status of utility transmission upgrades and electrical grid infrastructure capacity, PUC approvals of applications for certificates of public convenience and necessity and permits to construct utility and independent projects, and applications for permits for projects from the Energy Commission and the queue of projects from the Independent System Operator, include the expected completion dates for both system and local resources, and report on the use of fossil fuel by certain facilities constructed by, purchased by, or under contract with the Department of Water Resources, as specified. The bill would require the Energy Commission to quarterly publish on its internet website and update a tracking energy development dashboard that synthesizes and publishes the information included in the assessment and reported on California energy resources in the energy almanac.

Existing law requires the Energy Commission, on a biennial basis, to adopt an integrated energy policy report containing an overview of major trends and issues facing the state. Existing law requires the report to include an assessment and forecast of system reliability and the need for resource additions, efficiency, and conservation that considers all aspects of energy industries and markets that are essential for the state economy, general welfare, public health and safety, energy diversity, and protection of the environment.

This bill would require the Energy Commission to ensure that the demand forecasts in the integrated energy policy report and wind and solar energy generation profiles account for increased weather variability, interactive weather effects, and increased likelihood of heat events, including multiday events, due to climate change, and to use the demand forecasts and those energy generation profiles to inform its energy planning, as specified.

 UNFINISHED BUSINESS  

Bill No: SB 500

Author: Stern (D)

Amended: 6/30/25 in Assembly

Vote: 21

Prior votes not relevant, pursuant to Senate rule 29.10(d).

SENATE ENERGY, U. & C. COMMITTEE: 12-0, 9/11/25

AYES: Becker, Ochoa Bogh, Archuleta, Arreguín, Ashby, Caballero, Gonzalez, Limón, McNerney, Stern, Strickland, Wahab

NO VOTE RECORDED: Allen, Dahle, Grove, Hurtado, Rubio

ASSEMBLY FLOOR: 79-0, 9/10/25 - See last page for vote

SUBJECT: Energy: usage data

SOURCE: Author

DIGEST:

This bill authorizes the use of an alternative system or tool approved by the California Energy Commission (CEC) for purposes of satisfying the requirement on utilities to provide energy usage data as part of the CEC’s Building Energy Benchmarking Program, instead of solely as provided by the federal ENERGY STAR Portfolio Manager program.

Assembly Amendments

of 6/30/25 deletes the contents of this bill related to performance-based ratemaking and replace with the language currently in this bill regarding energy usage data systems and tools.

ANALYSIS:

Existing law:

1. Establishes within the U.S. Department of Energy (U.S. DOE) and the U.S. Environmental Protection Agency (U.S. EPA) a voluntary program, the ENERGY STAR program, to identify and promote energy-efficient products and buildings in order to reduce energy consumption, improve energy security, and reduce pollution through voluntary labeling of, or other forms of communication about, products and buildings that meet the highest energy conservation standards. Requires the U.S. EPA administrator and U.S. DOE secretary to take specified actions, including: to promote ENERGY STAR compliant technologies as the preferred technologies in the marketplace, work to enhance public awareness of the ENERGY STAR label, and regularly update the ENERGY STAR product criteria for product categories. (42 U.S. Code §6294a)
2. Authorizes the State Energy Resources Conservation and Development Commission (also known as the California Energy Commission (CEC)) to prescribe, by regulation, lighting, insulation, climate control system, and other building design and construction standards, and energy and water conservation design standards, for new residential and new nonresidential buildings to reduce the wasteful, uneconomic, inefficient, or unnecessary consumption of energy, as specified. (Public Resources Code §25402)
3. Requires each utility (energy utilities, defined as electrical and gas utilities, but also utilities providing steam and fuel oil), on and after January 1, 2017, to, upon the request and authorization of the owner, owner’s agent, or operator of a covered building, deliver or otherwise provide aggregated energy usage data for a covered building to the owner, owner’s agent, or building operator, or to the owner’s account in the ENERGY STAR Portfolio Manager, as specified. (Public Resources Code §25402.1)
4. Requires each utility to maintain records of the energy usage data of all buildings to which they provide service for at least the most recent 12 complete calendar months, and to deliver or otherwise provide that aggregated energy usage data for each covered building, as defined, to the owner, as specified. (Public Resources Code §25402.10)
5. Requires the CEC to assess the potential for the state to reduce the emissions of greenhouse gas (GHG) from the state’s residential and commercial building stock by at least 40% below 1990 levels by January 1, 2030. (Public Resources Code §25403)
6. Requires the CEC biennially to conduct assessments and forecasts of all aspects of energy industry supply, production, transportation, delivery and distribution, demand, and prices and to use these assessments and forecasts to develop energy policies that conserve resources, protect the environment, and protect public health and safety. The CEC publishes its assessments and forecasts every two years in its Integrated Energy Policy Report (IEPR). (Public Resources Code §25301)
7. Requires each electrical corporation plan to first meet unmet resource needs through all available energy efficiency, and demand reduction resources that are cost effective, reliable, and feasible. (Public Utilities Code §§454.5 (b)(9)(C))
8. Requires the California Public Utilities Commission (CPUC) to identify all potentially achievable cost-effective electricity and natural gas efficiency savings and to establish energy efficiency procurement targets and ratepayer-funded programs for investor-owned utilities (IOUs). Requires a gas corporation to first meet its unmet resource needs through all available natural gas efficiency and demand reduction resources that are cost effective, reliable, and feasible. (Public Utilities Code §§454.55 and 454.56.)
9. Establishes a charge on electricity and natural gas consumption to fund cost-effective energy efficiency and conservation activities. (Public Utilities Code §§381 and 890)
10. Requires the CEC to develop and implement a comprehensive program to achieve greater energy savings in California’s existing residential and nonresidential building stock. (Public Resources Code §25943)

This bill:

1. Authorizes a utility to satisfy the requirement of the building benchmarking program to provide energy usage data by delivering or otherwise providing aggregated energy usage data to the building owner’s account in any alternative system or tool approved by the CEC, instead of solely as provided by the federal ENERGY STAR Portfolio Manager program.
2. Makes additional clarifying changes.

Background

About ENERGY STAR®. ENERGY STAR is the government-backed symbol for energy efficiency. The blue ENERGY STAR label is intended to provide simple, credible, and unbiased information related to an appliance and building’s energy efficiency performance to help consumers, including residents and businesses, make well-informed decisions regarding their purchases. ENERGY STAR is administered as a voluntary program by the U.S. EPA, in partnership with the U.S. DOE, pursuant to federal law. Thousands of organizations partner with ENERGY STAR to deliver cost-saving energy efficiency solutions that protect the environment, improve air quality, and protect public health. According to its website, since 1992, ENERGY STAR and its partners have helped families and businesses: save five trillion kilowatt-hours of electricity; avoid more than $500 billion in energy costs; and achieve four billion metric tons of GHGs emissions reductions.

About ENERGY STAR® Portfolio Manager. In addition to the blue labels on appliances, ENERGY STAR also hosts the ENERGY STAR Portfolio Manager tool to measure and track energy and water use, and/or waste and materials of buildings. ENERGY STAR Portfolio Manager is the industry standard for benchmarking commercial buildings. According to its website, more than 330,000 commercial properties use the U.S. EPA’s ENERGY STAR Portfolio Manager tool, comprising more than 30 billion square feet of floor space – more than a quarter of all the commercial floor space in the nation. Additionally, 48 local governments, seven states, two Canadian provinces, and three Canadian cities rely on the ENERGY STAR Portfolio Manager tool as the foundation for their building benchmarking and transparency policies, including California. The Portfolio Manager is an interactive resource management tool that enables property owners to benchmark the energy use of their building on a secure online platform where they can compare their building’s energy use to a yearly baseline, national medians, or similar buildings. The Portfolio Manager features include:

• ENERGY STAR score of 1-100: Each entered building receives a simple number that evaluates a buildings’ energy efficiency relative to similar buildings across the country – with a score of 50 representing the median. The score accounts for the building’s physical assets, operations, and occupant behavior.
• ENERGY STAR certification: Buildings that earn an ENERGY STAR score of 75 or higher can apply for the U.S. EPA’s ENERGY STAR certification, which identifies the most energy efficient buildings.
• GHG emissions tracking: Calculates a building’s GHG emissions from energy use.
• Water and waste tracking: Measures and tracks a building’s water use and waste.

CEC Building Energy Benchmarking program. Pursuant to statute – AB 802 (Williams, Chapter 590, Statutes of 2015) – energy utilities are required to maintain energy usage records for all covered buildings to which they provide service, and to provide energy usage data to the owner, owner’s agent, or operator of a covered building upon request. The bill defined “covered buildings” to be those with no residential utility accounts and those with five more utility accounts (regardless if residential or commercial). The bill also directed the CEC to adopt regulations providing for the collection and public disclosure of building energy benchmarking information and stated the Legislature’s intent that the CEC create the program for commercial and multifamily buildings above 50,000 square feet gross floor area. The regulations enacting the benchmarking and public disclosure program went into effect June 1, 2018 and required the first batch of commercial buildings to report. Subsequently, multifamily buildings had their first reporting deadline on June 1, 2019. As part of the implementation, building owners and energy utilities utilize the ENERGY STAR Portfolio Manager to report annual energy usage for the state’s commercial and multifamily buildings required to participate, including those where local jurisdictions have adopted their own benchmarking programs (including: Berkeley, Brisbane, Chula Vista, Los Angeles, San Francisco, and San Diego). The CEC’s benchmarking program is part of the broader state policy efforts to address GHGs and energy efficiency in buildings, which represent roughly 24% of the state’s total GHG emissions. These policies include those related to implementing AB 758 (Skinner, Chapter 470, Statutes of 2009) and SB 48 (Becker, Chapter 720, Statutes of 2023). AB 758 required the development of the Existing Buildings Program and resulted in the triennial Existing Building Energy Efficiency Action Plan, most recently incorporated into the 2021 IEPR with a more current update still in development. SB 48 required the CEC, along with other agencies, to develop a strategy by July 1, 2026 for using the energy usage data from the benchmarking program to track and manage energy usage and GHG emissions of covered buildings in order to achieve the state’s goals.

Trump administration threatens rollbacks of U.S. EPA, including ENERGY STAR program. The Trump administration has been vocal about its efforts to rollback many U.S. EPA programs and regulations, and to make significant agency staffing cuts. Multiple news reports this year have noted the Trump administration has threated to zero out ENERGY STAR funding at U.S. EPA. At a May 20, 2025 hearing by the U.S. House Committee on Energy and Commerce, U.S. EPA Administrator Lee Zeldin expressed skepticism about the estimated savings from the program (news reports have noted that agency staff have provided multiple pages of technical notes on its calculations). Additionally, Administrator Zeldin expressed an interest in privatizing the program, noting that multiple entities have reached out to U.S. EPA to take over ENERGY STAR. Although President Trump’s proposed budget zeroed out funding for ENERGY STAR at U.S. EPA, the Appropriations Committees in the U.S. House and Senate voted to restore funding for the agency and program, including $32 and $36 million, respectively, for the ENERGY STAR program. Nonetheless, there is continued concerns the Trump administration will pursue eliminating or privatizing the program as part of Administrator Zeldin’s ongoing efforts to reorganize the agency.

Comments

Need for this bill. The author contends:

At a time where the federal government is changing direction on energy efficiency standards, this bill will empower the California Energy Commission to prepare for a future without the Energy Star Portfolio Manager. This bill will allow California to continue to have predictable benchmarking systems for utilities and building owners, if needed due to changes in federal policy

The uncertainty generated by the Trump administration’s efforts to eliminate or privatize ENERGY STAR have raised concerns from many who rely on the software platform to manage building energy usage, including: regulators implementing building benchmarking and disclosure programs (including the CEC), building owners whose data is stored within the software platform to comply with benchmarking programs, commercial real estate entities who rely on the energy use data to inform their financial transactions, and others. Various third-party sites encourage building owners to download their data in the event the program is eliminated. Some news reports have stated that commercial real estate entities are uncertain what alternative might exist given their reliance on ENERGY STAR Portfolio Manager to help manage their real estate holdings, including informing decisions about whether to make energy-related upgrades at particular buildings.

Desire for statutory authority for alternative tool during time of uncertainty. Considering the widespread use of the ENERGY STAR Portfolio Manager across the country (and Canada) and its critical role in the state’s building energy benchmarking program an alternative tool or system may be difficult to urgently identify. This bill would authorize the CEC to approve an alternative tool or system for the building energy benchmarking program whether or not the Trump administration eliminates the ENERGY STAR Portfolio Manager program. In communication with this committee, the CEC staff acknowledges it has not identified an alternative tool or system to replace ENERGY STAR Portfolio Manager and it is not aware of any that is readily available to deliver data for the benchmarking program. However, given the vocal statements and actions by the Trump administration, and subsequent to them, the CEC has shared there is a national discussion about how best to develop alternatives. They share that the agency remains committed to using ENERGY STAR Portfolio Manager and has no plans to move away from its use, unless the program is discontinued or becomes functionally obsolete. They worry that current California law would be an impediment to using an alternative should it become urgently needed. The CEC states that this bill affords them and the benchmarking program with the flexibility to adopt another tool if, and when, it becomes necessary.

Available options for alternative tool or system. The CEC notes they are unaware of any current viable options and would prefer to have ENERGY STAR preserved. However, they believe it is important to authorize the use of an alternative tool approved by them in the event the federal administration does away with ENERGY STAR. Given the plethora of local and international entities who would be affected by the loss of ENERGY STAR Portfolio Manager, many of the potentially affected entities and stakeholders have begun to discuss options for alternatives. The potential alternative systems and tools to ENERGY STAR Portfolio Manager may entail the CEC developing their own tool or working with other entities to develop or adapt an alternative tool. This bill authorizes the CEC to approve an alternative tool or system, but does not require the CEC to do so.

Prior/Related Legislation

AB 102 (Ting, Chapter 38, Statutes of 2023) as part of the Budget Act of 2023, which among its provisions, appropriated $10 million to enhance outreach and enforcement activities for the benchmarking program.

SB 48 (Becker, Chapter 720, Statutes of 2023) required the CEC, in consultation with other agencies, by July 1, 2026, to develop a strategy for using the energy usage data from the benchmarking program to track and manage energy usage and GHG emissions of covered buildings in order to achieve the state’s goals and requires the CEC to submit the strategy to the Legislature by August 1, 2026 for further legislative action.

AB 802 (Williams, Chapter 590, Statutes of 2015) required utilities to maintain energy usage records for all buildings to which they provide service, and to provide energy usage data to the owner, owner’s agent, or operator of a covered building upon request. The bill also directed the CEC to adopt regulations providing for the collection and public disclosure of building energy benchmarking information.

SB 350 (De León, Chapter 547, Statutes of 2015) The Clean Energy and Pollution Reduction Act of 2015 continued, enhanced, and expanded the building energy efficiency program established by AB 758.

AB 758 (Skinner, Chapter 470, Statutes of 2009) required the development of the Existing Buildings Program, which resulted in the triennial EBEE Action Plan, now incorporated into this biennial 2019 EE Action Plan.

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

According to the Assembly Appropriations Committee:

Onetime costs to CEC, likely less than $150,000 (Energy Resources Programs Account), should CEC need to conduct a rulemaking to implement this bill. The CEC asserts a rulemaking is likely not needed, but, if it is, the rulemaking would be exempt from the Administrative Procedures Act, which would reduce the costs of carrying out the rulemaking.

ERPA faces an ongoing structural deficit, with expenditures exceeding revenue, and, therefore, likely cannot support the costs to implement this bill.

SUPPORT: (Verified 9/10/25)

City of San Diego

County of San Diego

Natural Resources Defense Council

OPPOSITION: (Verified 9/10/25)

None received

ARGUMENTS IN SUPPORT: According to the Natural Resources Defense Council, they support this bill in order:

…to enable the Energy Commission to provide an alternative benchmarking data tool to preserve existing energy efficiency data and backstop against federal efforts to terminate the Energy Star program. …Despite the success of this voluntary program in saving businesses and households in electricity bills, the federal administration last month announced their intent to dissolve the program and close the managing department, according to recent reporting. This rapid dissolution threatens the value of existing resources and efforts placed into building data aggregation and information for the purpose of expanding energy efficiency, and compounds rollbacks to progress on energy efficiency happening in H.R.1 ‘One Big Beautiful Bill Act’ which is set to cut the new energy efficient home tax credit and the energy efficient home improvement tax credit. California must step up to preserve existing energy efficiency data and customer choice to reduce their electricity bills through more efficient appliances. SB 500 would expand the options to maintain this type of building benchmarking data to reduce disruption to energy efficiency progress.

ASSEMBLY FLOOR: 79-0, 9/10/25

AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas

NO VOTE RECORDED: Tangipa

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

9/12/25 10:36:05

**** END ****

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Josh Becker, Chair

2025 - 2026 Regular

Bill No: SB 500 Hearing Date: 9/11/2025

SUBJECT: Energy: usage data

DIGEST: This bill authorizes the use of an alternative system or tool approved by the California Energy Commission (CEC) for purposes of satisfying the requirement on utilities to provide energy usage data as part of the CEC’s Building Energy Benchmarking Program, instead of solely as provided by the federal ENERGY STAR Portfolio Manager program.

ANALYSIS:

Existing law:

1. Establishes within the U.S. Department of Energy (U.S. DOE) and the U.S. Environmental Protection Agency (U.S. EPA) a voluntary program, the ENERGY STAR program, to identify and promote energy-efficient products and buildings in order to reduce energy consumption, improve energy security, and reduce pollution through voluntary labeling of, or other forms of communication about, products and buildings that meet the highest energy conservation standards. Requires the U.S. EPA administrator and U.S. DOE secretary to take specified actions, including: to promote ENERGY STAR compliant technologies as the preferred technologies in the marketplace, work to enhance public awareness of the ENERGY STAR label, and regularly update the ENERGY STAR product criteria for product categories. (42 U.S. Code §6294a)
2. Authorizes the State Energy Resources Conservation and Development Commission (also known as the California Energy Commission (CEC)) to prescribe, by regulation, lighting, insulation, climate control system, and other building design and construction standards, and energy and water conservation design standards, for new residential and new nonresidential buildings to reduce the wasteful, uneconomic, inefficient, or unnecessary consumption of energy, as specified. (Public Resources Code §25402)
3. Requires each utility (energy utilities, defined as electrical and gas utilities, but also utilities providing steam and fuel oil), on and after January 1, 2017, to, upon the request and authorization of the owner, owner’s agent, or operator of a covered building, deliver or otherwise provide aggregated energy usage data for a covered building to the owner, owner’s agent, or building operator, or to the owner’s account in the ENERGY STAR Portfolio Manager, as specified. (Public Resources Code §25402.1)
4. Requires each utility to maintain records of the energy usage data of all buildings to which they provide service for at least the most recent 12 complete calendar months, and to deliver or otherwise provide that aggregated energy usage data for each covered building, as defined, to the owner, as specified. (Public Resources Code §25402.10)
5. Requires the CEC to assess the potential for the state to reduce the emissions of greenhouse gas (GHG) from the state’s residential and commercial building stock by at least 40% below 1990 levels by January 1, 2030. (Public Resources Code §25403)
6. Requires the CEC biennially to conduct assessments and forecasts of all aspects of energy industry supply, production, transportation, delivery and distribution, demand, and prices and to use these assessments and forecasts to develop energy policies that conserve resources, protect the environment, and protect public health and safety. The CEC publishes its assessments and forecasts every two years in its Integrated Energy Policy Report (IEPR). (Public Resources Code §25301)
7. Requires each electrical corporation plan to first meet unmet resource needs through all available energy efficiency, and demand reduction resources that are cost effective, reliable, and feasible. (Public Utilities Code §§454.5 (b)(9)(C))
8. Requires the California Public Utilities Commission (CPUC) to identify all potentially achievable cost-effective electricity and natural gas efficiency savings and to establish energy efficiency procurement targets and ratepayer-funded programs for investor-owned utilities (IOUs). Requires a gas corporation to first meet its unmet resource needs through all available natural gas efficiency and demand reduction resources that are cost effective, reliable, and feasible. (Public Utilities Code §§454.55 and 454.56.)
9. Establishes a charge on electricity and natural gas consumption to fund cost-effective energy efficiency and conservation activities. (Public Utilities Code §§381 and 890)
10. Requires the CEC to develop and implement a comprehensive program to achieve greater energy savings in California’s existing residential and nonresidential building stock. (Public Resources Code §25943)

This bill:

1. Authorizes a utility to satisfy the requirement of the building benchmarking program to provide energy usage data by delivering or otherwise providing aggregated energy usage data to the building owner’s account in any alternative system or tool approved by the CEC, instead of solely as provided by the federal ENERGY STAR Portfolio Manager program.
2. Makes additional clarifying changes.

Background

About ENERGY STAR®. ENERGY STAR is the government-backed symbol for energy efficiency. The blue ENERGY STAR label is intended to provide simple, credible, and unbiased information related to an appliance and building’s energy efficiency performance to help consumers, including residents and businesses, make well-informed decisions regarding their purchases. ENERGY STAR is administered as a voluntary program by the U.S. EPA, in partnership with the U.S. DOE, pursuant to federal law. Thousands of organizations partner with ENERGY STAR to deliver cost-saving energy efficiency solutions that protect the environment, improve air quality, and protect public health. According to its website, since 1992, ENERGY STAR and its partners have helped families and businesses: save five trillion kilowatt-hours of electricity; avoid more than $500 billion in energy costs; and achieve four billion metric tons of GHGs emissions reductions.

About ENERGY STAR® Portfolio Manager. In addition to the blue labels on appliances, ENERGY STAR also hosts the ENERGY STAR Portfolio Manager tool to measure and track energy and water use, and/or waste and materials of buildings. ENERGY STAR Portfolio Manager is the industry standard for benchmarking commercial buildings. According to its website, more than 330,000 commercial properties use the U.S. EPA’s ENERGY STAR Portfolio Manager tool, comprising more than 30 billion square feet of floor space – more than a quarter of all the commercial floor space in the nation. Additionally, 48 local governments, seven states, two Canadian provinces, and three Canadian cities rely on the ENERGY STAR Portfolio Manager tool as the foundation for their building benchmarking and transparency policies, including California. The Portfolio Manager is an interactive resource management tool that enables property owners to benchmark the energy use of their building on a secure online platform where they can compare their building’s energy use to a yearly baseline, national medians, or similar buildings. The Portfolio Manager features include:

• ENERGY STAR score of 1-100: Each entered building receives a simple number that evaluates a buildings’ energy efficiency relative to similar buildings across the country – with a score of 50 representing the median. The score accounts for the building’s physical assets, operations, and occupant behavior.
• ENERGY STAR certification: Buildings that earn an ENERGY STAR score of 75 or higher can apply for the U.S. EPA’s ENERGY STAR certification, which identifies the most energy efficient buildings.
• GHG emissions tracking: Calculates a building’s GHG emissions from energy use.
• Water and waste tracking: Measures and tracks a building’s water use and waste.

CEC Building Energy Benchmarking program. Pursuant to statute – AB 802 (Williams, Chapter 590, Statutes of 2015) – energy utilities are required to maintain energy usage records for all covered buildings to which they provide service, and to provide energy usage data to the owner, owner’s agent, or operator of a covered building upon request. The bill defined “covered buildings” to be those with no residential utility accounts and those with five more utility accounts (regardless if residential or commercial). The bill also directed the CEC to adopt regulations providing for the collection and public disclosure of building energy benchmarking information and stated the Legislature’s intent that the CEC create the program for commercial and multifamily buildings above 50,000 square feet gross floor area. The regulations enacting the benchmarking and public disclosure program went into effect June 1, 2018 and required the first batch of commercial buildings to report. Subsequently, multifamily buildings had their first reporting deadline on June 1, 2019. As part of the implementation, building owners and energy utilities utilize the ENERGY STAR Portfolio Manager to report annual energy usage for the state’s commercial and multifamily buildings required to participate, including those where local jurisdictions have adopted their own benchmarking programs (including: Berkeley, Brisbane, Chula Vista, Los Angeles, San Francisco, and San Diego). The CEC’s benchmarking program is part of the broader state policy efforts to address GHGs and energy efficiency in buildings, which represent roughly 24% of the state’s total GHG emissions. These policies include those related to implementing AB 758 (Skinner, Chapter 470, Statutes of 2009) and SB 48 (Becker, Chapter 720, Statutes of 2023). AB 758 required the development of the Existing Buildings Program and resulted in the triennial Existing Building Energy Efficiency Action Plan, most recently incorporated into the 2021 IEPR with a more current update still in development. SB 48 required the CEC, along with other agencies, to develop a strategy by July 1, 2026 for using the energy usage data from the benchmarking program to track and manage energy usage and GHG emissions of covered buildings in order to achieve the state’s goals.

Trump administration threatens rollbacks of U.S. EPA, including ENERGY STAR program. The Trump administration has been vocal about its efforts to rollback many U.S. EPA programs and regulations, and to make significant agency staffing cuts. Multiple news reports this year have noted the Trump administration has threated to zero out ENERGY STAR funding at U.S. EPA. At a May 20, 2025 hearing by the U.S. House Committee on Energy and Commerce, U.S. EPA Administrator Lee Zeldin expressed skepticism about the estimated savings from the program (news reports have noted that agency staff have provided multiple pages of technical notes on its calculations). Additionally, Administrator Zeldin expressed an interest in privatizing the program, noting that multiple entities have reached out to U.S. EPA to take over ENERGY STAR. Although President Trump’s proposed budget zeroed out funding for ENERGY STAR at U.S. EPA, the Appropriations Committees in the U.S. House and Senate voted to restore funding for the agency and program, including $32 and $36 million, respectively, for the ENERGY STAR program. Nonetheless, there is continued concerns the Trump administration will pursue eliminating or privatizing the program as part of Administrator Zeldin’s ongoing efforts to reorganize the agency.

Comments

Need for this bill. The author contends:

At a time where the federal government is changing direction on energy efficiency standards, this bill will empower the California Energy Commission to prepare for a future without the Energy Star Portfolio Manager. This bill will allow California to continue to have predictable benchmarking systems for utilities and building owners, if needed due to changes in federal policy

The uncertainty generated by the Trump administration’s efforts to eliminate or privatize ENERGY STAR have raised concerns from many who rely on the software platform to manage building energy usage, including: regulators implementing building benchmarking and disclosure programs (including the CEC), building owners whose data is stored within the software platform to comply with benchmarking programs, commercial real estate entities who rely on the energy use data to inform their financial transactions, and others. Various third-party sites encourage building owners to download their data in the event the program is eliminated. Some news reports have stated that commercial real estate entities are uncertain what alternative might exist given their reliance on ENERGY STAR Portfolio Manager to help manage their real estate holdings, including informing decisions about whether to make energy-related upgrades at particular buildings.

Desire for statutory authority for alternative tool during time of uncertainty. Considering the widespread use of the ENERGY STAR Portfolio Manager across the country (and Canada) and its critical role in the state’s building energy benchmarking program an alternative tool or system may be difficult to urgently identify. This bill would authorize the CEC to approve an alternative tool or system for the building energy benchmarking program whether or not the Trump administration eliminates the ENERGY STAR Portfolio Manager program. In communication with this committee, the CEC staff acknowledges it has not identified an alternative tool or system to replace ENERGY STAR Portfolio Manager and it is not aware of any that is readily available to deliver data for the benchmarking program. However, given the vocal statements and actions by the Trump administration, and subsequent to them, the CEC has shared there is a national discussion about how best to develop alternatives. They share that the agency remains committed to using ENERGY STAR Portfolio Manager and has no plans to move away from its use, unless the program is discontinued or becomes functionally obsolete. They worry that current California law would be an impediment to using an alternative should it become urgently needed. The CEC states that this bill affords them and the benchmarking program with the flexibility to adopt another tool if, and when, it becomes necessary.

Available options for alternative tool or system. The CEC notes they are unaware of any current viable options and would prefer to have ENERGY STAR preserved. However, they believe it is important to authorize the use of an alternative tool approved by them in the event the federal administration does away with ENERGY STAR. Given the plethora of local and international entities who would be affected by the loss of ENERGY STAR Portfolio Manager, many of the potentially affected entities and stakeholders have begun to discuss options for alternatives. The potential alternative systems and tools to ENERGY STAR Portfolio Manager may entail the CEC developing their own tool or working with other entities to develop or adapt an alternative tool. This bill authorizes the CEC to approve an alternative tool or system, but does not require the CEC to do so. Per the Assembly Appropriations Committee analysis, the CEC estimates onetime costs likely less than $150,000 from the Energy Resources Programs Account, which is collected from electric utility ratepayers, should the CEC need to conduct a rulemaking to implement this bill. However, the CEC states a rulemaking is likely not needed and if needed, per statute, would be exempt from the Administrative Procedures Act, which would help to reduce the costs.

Prior/Related Legislation

AB 102 (Ting, Chapter 38, Statutes of 2023) as part of the Budget Act of 2023, which among its provisions, appropriated $10 million to enhance outreach and enforcement activities for the benchmarking program.

SB 48 (Becker, Chapter 720, Statutes of 2023) required the CEC, in consultation with other agencies, by July 1, 2026, to develop a strategy for using the energy usage data from the benchmarking program to track and manage energy usage and GHG emissions of covered buildings in order to achieve the state’s goals and requires the CEC to submit the strategy to the Legislature by August 1, 2026 for further legislative action.

AB 802 (Williams, Chapter 590, Statutes of 2015) required utilities to maintain energy usage records for all buildings to which they provide service, and to provide energy usage data to the owner, owner’s agent, or operator of a covered building upon request. The bill also directed the CEC to adopt regulations providing for the collection and public disclosure of building energy benchmarking information.

SB 350 (De León, Chapter 547, Statutes of 2015) The Clean Energy and Pollution Reduction Act of 2015 continued, enhanced, and expanded the building energy efficiency program established by AB 758.

AB 758 (Skinner, Chapter 470, Statutes of 2009) required the development of the Existing Buildings Program, which resulted in the triennial EBEE Action Plan, now incorporated into this biennial 2019 EE Action Plan.

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

SUPPORT:

City of San Diego

Natural Resources Defense Council

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to the Natural Resources Defense Council, they support this bill in order:

…to enable the Energy Commission to provide an alternative benchmarking data tool to preserve existing energy efficiency data and backstop against federal efforts to terminate the Energy Star program. …Despite the success of this voluntary program in saving businesses and households in electricity bills, the federal administration last month announced their intent to dissolve the program and close the managing department, according to recent reporting. This rapid dissolution threatens the value of existing resources and efforts placed into building data aggregation and information for the purpose of expanding energy efficiency, and compounds rollbacks to progress on energy efficiency happening in H.R.1 ‘One Big Beautiful Bill Act’ which is set to cut the new energy efficient home tax credit and the energy efficient home improvement tax credit. California must step up to preserve existing energy efficiency data and customer choice to reduce their electricity bills through more efficient appliances. SB 500 would expand the options to maintain this type of building benchmarking data to reduce disruption to energy efficiency progress.

-- END --

SENATE THIRD READING

STR Bill Id:SB 500

Author:(Stern)

As Amended Ver:June 30, 2025

Majority vote

SUMMARY

Mandates the authority of the California Energy Commission (CEC) to approve and use a system or tool alternative to the ENERGY STAR Portfolio Manager to collect energy usage data of covered buildings in the state of California.

Major Provisions

COMMENTS

AB 802 (William), Chapter 590, Statutes of 2015 directed the CEC to create a statewide building energy use benchmarking program for buildings larger than 50,000 square feet. Benchmarking allows a building's energy use to be compared to its prior performance and to that of its peers. This program is called the Building Energy Use Disclosure and Public Benchmarking Program (Building Benchmarking Program). The CEC's regulations require building owners to report building characteristic information and energy use data to the CEC by June 1 annually, for non-residential buildings and buildings with 5 or more residential utility accounts. Building owners complete their reporting using ENERGY STAR Portfolio Manager, a free online tool provided by the United States Environmental Protection Agency. Assembly Bill 802 also required that energy utilities provide building-level energy use data to building owners, owners' agents, and operators upon request for buildings with no residential utility accounts and for buildings with five or more utility accounts.

The 2026 fiscal year federal budget has dramatically cut the budget of the United States Environmental Protection Agency (US EPA). As part of this budget cut, the federal administration plans to eliminate the Energy Star Portfolio Manager program. This program provides voluntary energy efficiency certification for appliances, such as refrigerators and dishwashers, and has helped American consumers save hundreds of billions of dollars in energy costs since the program began in 1992. As discussed above, California's Building Benchmarking Program reporting is done through the Federal Energy Star Portfolio Manager. If the Federal Government ends the Energy Star Portfolio Manager, this could put the CEC's authority to administer the Building Benchmarking Program into jeopardy. SB 500 gives the CEC the authority to use an alternative tool or database for building owners and utilities to report benchmarking data. This will enable the CEC to continue the program regardless of decisions made by the federal administration related to the Energy Star Portfolio Manager.

According to the Author

"At a time when the federal government is changing direction on energy efficiency standards, this bill will empower the California Energy Commission to prepare for a future without the Energy Star Portfolio Manager. This bill will allow California to continue to have predictable benchmarking systems for utilities and building owners, if needed due to changes in federal policy."

Arguments in Support

This bill is supported by the City of San Diego and the Natural Resources Defense Council. They argue that in the face of the federal government ending the Environmental Protection Agency's Energy Star program, the bill is necessary to maintain access to the energy efficiency data foundational to achieving the state's climate goals.

Arguments in Opposition

None on file for the current version of the bill.

FISCAL COMMENTS

According to the Assembly Committee on Appropriations predicts a onetime cost to CEC of less than $150,000 (Energy Resources Programs Account), should CEC need to conduct a rulemaking to implement this bill. The CEC asserts a rulemaking is likely not needed.

ERPA faces an ongoing structural deficit, with expenditures exceeding revenue, and, therefore, likely cannot support the costs to implement this bill.

VOTES

SENATE FLOOR: 29-10-1

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

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

ABS, ABST OR NV: Reyes

ASM UTILITIES AND ENERGY: 18-0-0

YES: Petrie-Norris, Patterson, Boerner, Calderon, Chen, Davies, Mark González, Harabedian, Hart, Irwin, Kalra, Papan, Rogers, Schiavo, Schultz, Ta, Wallis, Zbur

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Sanchez, Arambula, Calderon, Caloza, Dixon, Elhawary, Fong, Mark González, Ahrens, Pacheco, Pellerin, Solache, Ta, Tangipa

UPDATED

VERSION: June 30, 2025

CONSULTANT: Kristen Koenig / U. & E. / (916) 319-2083 FN: 0001357

Date of Hearing: August 20, 2025

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 500

Author:(Stern) – As Amended Ver:June 30, 2025

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

SUMMARY:

This bill authorizes the California Energy Commission (CEC) to approve and use a system or tool as an alternative to the federal ENERGY STAR Portfolio Manager to collect energy usage data of covered buildings in California.

FISCAL EFFECT:

Onetime costs to CEC, likely less than $150,000 (Energy Resources Programs Account), should CEC need to conduct a rulemaking to implement this bill. The CEC asserts a rulemaking is likely not needed, but, if it is, the rulemaking would be exempt from the Administrative Procedures Act, which would reduce the costs of carrying out the rulemaking.

ERPA faces an ongoing structural deficit, with expenditures exceeding revenue, and, therefore, likely cannot support the costs to implement this bill.

COMMENTS:

1. Purpose. The author describes this bill as being in response to actions by the federal government to weaken, or even reverse, energy efficiency standards. According to the author, “this bill will empower the California Energy Commission to prepare for a future without the Energy Star Portfolio Manager” and “allow California to continue to have predictable benchmarking systems for utilities and building owners, if needed due to changes in federal policy.”
2. Background. As authorized by legislation—AB 802, Chapter 590, Statutes of 2015—CEC established its Building Energy Benchmarking Program to require owners of large commercial and multifamily buildings to report energy use to CEC by June 1 of each year, the idea being this information provides an energy use intensity baseline—like gas mileage for a car—against which a building owner, or others, may compare potential energy efficiency measures. To report building energy use, as specified in state law, building owners use the federal Environmental Protection Agency’s ENERGY STAR Portfolio Manager, an online tool that allows measurement and tracking of energy and water consumption, as well as greenhouse gas emissions. Unfortunately, the Trump administration is considering elimination of the ENERGY STAR Portfolio Manager. This bill allows CEC to approve and use an alternative tool, whether or not the federal tool is available.

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

Date of Hearing: July 9, 2025

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Cottie Petrie-Norris, Chair

SBPCA Bill Id:SB 500

Author:(Stern) – As Amended Ver:June 30, 2025

SENATE VOTE: 29-10

SUBJECT: Energy: usage data

SUMMARY: Mandates the authority of the California Energy Commission (CEC) to approve and use a system or tool alternative to the ENERGY STAR Portfolio Manager to collect energy usage data of covered buildings in the state of California.

EXISTING LAW:

1. Requires a charge on electricity and natural gas consumption to fund cost-effective energy efficiency and conservation activities. (Public Utilities Code §§ 381 and 890)
2. Requires electric corporation procurement plans to first meet its unmet resource needs through all available energy efficiency and demand reduction resources that are cost-effective, reliable, and feasible. (Public Utilities Code § 454.5 (b)(9)(C))
3. Requires the CPUC to establish targets for all potentially achievable cost-effective electricity and gas efficiency savings. (Public Utilities Code §§ 454.55 and 454.56)
4. Requires the California Public Utilities Commission (CPUC) to make certain information regarding electric service and electrical corporations available on its internet website. (Public Utilities Code § 8380)
5. Requires IOUs and POUs to use reasonable security procedures and practices to protect a customer’s unencrypted electrical or gas consumption data from unauthorized access, destruction, use, modification, or disclosure. (Public Utilities Code § 8380)
6. Requires the CEC to establish a building energy use benchmarking program for covered buildings. (Public Resources Code § 25402.10)
7. Defines covered building to be a building with no residential utility accounts or any building with five or more active utility accounts. (Public Resources Code § 25402.10)
8. Requires each utility to maintain records of the energy usage data of all buildings to which is provides service for at least the most recent 12 complete calendar months and upon request of the owner, owner’s agent or operator of a covered building to provide aggregated energy usage data for a covered building to the owner, owner’s agent building operator or to the owner’s account in the ENERGY STAR Portfolio Manager. (Public Resources Code § 25402.10)
9. Requires the CEC to assess the potential for the state to reduce GHG emissions from the state’s residential and commercial building stock by at least 40% below 1990 levels by January 1, 2030. (Public Resources Code § 25403)
10. Requires the CEC to develop a statewide estimate of all potentially achievable cost-effective electricity and natural gas savings, establish targets for statewide annual energy efficiency savings, and demand reduction for the next 10-year period. (Public Resources Code § 25310)
11. Requires the CEC to develop and implement a comprehensive program to achieve greater energy savings in California’s existing residential and nonresidential building stock. (Public Resources Code § 25943)

FISCAL EFFECT: Unknown

CONSUMER COST IMPACTS: Unknown.

BACKGROUND:

Buildings Energy Efficiency Action Plan – The Buildings Energy Efficiency Action Plan has been published by the CEC in 2015, 2019, 2021 and will be published in late 2025. The Plan and its subsequent updates provide a 10-year roadmap to activate market forces and transform California’s existing residential, commercial, and public building stock into high performing and energy-efficient buildings. The Action Plan is separated into three goals that drive energy efficiency: doubling energy efficiency savings by 2030, removing and reducing barriers to energy efficiency in low-income and disadvantaged communities, and reducing GHG emissions from the building sector.

Assembly Bill 802 (Williams, Chapter 2015) and Energy Benchmarking – AB 802 directed the CEC to create a statewide building energy use benchmarking program for buildings larger than 50,000 square feet. Benchmarking allows a building’s energy use to be compared to its prior performance and to that of its peers. This program is called the Building Energy Use Disclosure and Public Benchmarking Program (Building Benchmarking Program). The CEC’s regulations require building owners to report building characteristic information and energy use data to the CEC by June 1 annually, for non-residential buildings and buildings with 5 or more residential utility accounts. Building owners complete their reporting using ENERGY STAR Portfolio Manager, a free online tool provided by the United States Environmental Protection Agency. Assembly Bill 802 also required that energy utilities provide building-level energy use data to building owners, owners' agents, and operators upon request for buildings with no residential utility accounts and for buildings with five or more utility accounts.

COMMENTS:

1. Author’s Statement. According to the author: “At a time when the federal government is changing direction on energy efficiency standards, this bill will empower the California Energy Commission to prepare for a future without the Energy Star Portfolio Manager. This bill will allow California to continue to have predictable benchmarking systems for utilities and building owners, if needed due to changes in federal policy.”
2. Reason for the Bill. The 2026 fiscal year federal budget has dramatically cut the budget of the United States Environmental Protection Agency (US EPA). As part of this budget cut, the federal administration plans to eliminate the Energy Star Portfolio Manager program.^[1] This program provides voluntary energy efficiency certification for appliances, such as refrigerators and dishwashers, and has helped American consumers save hundreds of billions of dollars in energy costs since the program began in 1992.^[2] As discussed above, California’s Building Benchmarking Program reporting is done through the Federal Energy Star Portfolio Manager. If the Federal Government ends the Energy Star Portfolio Manager, this could put the CEC’s authority to administer the Building Benchmarking Program into jeopardy. SB 500 gives the CEC the authority to use an alternative tool or database for building owners and utilities to report benchmarking data. This will enable the CEC to continue the program regardless of decisions made by the federal administration related to the Energy Star Portfolio Manager.
3. Prior Legislation.

SB 596 (Becker) would require the state board to establish interim targets for reductions in the greenhouse gas intensity of cement used within the state relative to the average greenhouse gas intensity of cement used within the state during the 2019 calendar year, with the goal of reducing the greenhouse gas intensity of cement used within the state to 40% below the 2019 average levels by December 31, 2035. Status: Chapter 246, Statutes of 2021.

SB 68 (Becker) directed the CEC to gather and develop guidance and best practices to overcome barriers to the electrification of buildings and installation of electric vehicle charging equipment. This project implements the requirements of that bill to help commercial and residential building owners, the construction industry, and local governments. Status: Chapter 720, Statutes of 2021.

AB 3232 (Friedman) requires the CEC, by January 1, 2021, to assess the potential for the state to reduce GHG emissions from the state’s residential and commercial building stock by 40% below 1990 levels by January 1, 2030. Status: Chapter 373, Statutes of 2018.

SB 782 (Skinner) requires the CEC to establish a system for assigning global unique identifiers for each building in the state and requires the electrical service provider to assign the global unique identifier to the aggregated electricity usage of all the customers within the building. Status: Chapter 684, Statutes of 2018.

SB 1477 (Stern) requires the CEC to develop a statewide market transformation initiative to transform the state’s market for low-emission space and water heating equipment for new and existing residential and nonresidential buildings and to develop an incentive program to fund near-zero emission technology for new residential and commercial buildings. Status: Chapter 378, Statutes of 2018.

AB 802 (Williams), among many provisions, requires the CEC to adopt regulations providing for the delivery to the Commission and public disclosure of benchmarking results for covered buildings. Status: Chapter 590, Statutes of 2015.

Assembly Bill 758 (Skinner) requires the CEC, in collaboration with the CPUC and stakeholders, to develop a comprehensive program to achieve greater energy efficiency in the state’s existing buildings. Status: Chapter 470, Statutes 2009.

REGISTERED SUPPORT / OPPOSITION:

Support

The Climate Reality Project Orange County Chapter
The Climate Reality Project, California State Coalition
The Climate Reality Project, Los Angeles Chapter
The Climate Reality Project, Riverside County Chapter
The Climate Reality Project, Sacramento Chapter
The Climate Reality Project, San Diego Chapter
The Climate Reality Project, San Fernando Valley CA Chapter

Other support has been filed for the bill that addresses a version of the bill prior to significant amendments. That support has been omitted.

Opposition

None on file.

Analysis Prepared by: Kristen Koenig / U. & E. / (916) 319-2083

1. Lisa Friedman and Rebecca F. Elliott, “E.P.A Plans to Shut Down the Energy Star Program,” The New York Times, May 6, 2025 ↑

2. Ibid. ↑

 THIRD READING  

Bill No: SB 500

Author: Stern (D)

Amended: 5/23/25

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 13-3, 4/29/25

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

NOES: Ochoa Bogh, Dahle, Strickland

NO VOTE RECORDED: Grove

SENATE APPROPRIATIONS COMMITTEE: 5-1, 5/23/25

AYES: Caballero, Cabaldon, Grayson, Richardson, Wahab

NOES: Seyarto

NO VOTE RECORDED: Dahle

SUBJECT: Electrical corporations: performance metrics and incentives

SOURCE: Author

DIGEST:

This bill authorizes the California Public Utilities Commission (CPUC) to evaluate performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align an electrical corporation’s expenditures with achieving public policy goals, among other objectives.

ANALYSIS:

Existing law:

1. Establishes and vests the CPUC with regulatory authority over public utilities, including electrical corporations. Authorizes the CPUC, among other things, to establish its own procedures, subject to statute and due process, and to fix rates and establish rules for all public utilities, subject to control by the Legislature. (California Constitution, Article XII, §§2, 3, 5, and 6)
2. Establishes it is the policy of the state that each electrical corporation continue to operate its electric distribution grid in its service territory and to do so in a safe, reliable, efficient, and cost-effective manner. (Public Utilities Code §399.2)
3. Requires that all charges demanded and received by a public utility must be just and reasonable. (Public Utilities Code §451)

This bill:

1. Authorizes the CPUC to evaluate performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align electrical corporation operations, expenditures, and investments with delivering safe and reliable electrical service and achieving public policy goals, while minimizing costs for ratepayers.
2. Requires the CPUC to prioritize performance metrics and financial performance-based incentives that can reduce electrical corporations’ preference for investments that can be added to their rate base and instead encourage electrical corporations to propose the most cost-effective solutions for providing safe and reliable electrical service.
3. Requires the CPUC to study incentive mechanisms approved by the CPUC, and other incentive mechanisms deployed by other jurisdictions, to determine their effectiveness and to identify any unintended consequences of their adoption.
4. Authorizes the CPUC, on or before January 1, 2028, to begin tracking one or more of the performance metrics identified, and to subsequently consider whether financial performance-based incentives linked to those performance metrics would be effective and beneficial for minimizing costs for ratepayers.

Background

Performance-based ratemaking (PBR). PBR is a term used to describe a wide variety of tools that regulators can use to incentivize utility actions of desired outcomes. PBR is offered as an alternative to the utility cost of service regulation (also called a rate of return regulation). Cost of service has been the dominant model through which regulators seek to maximize social welfare in natural monopoly markets. Under the cost of service model, the price level that maximizes societal welfare, while allowing firms to stay viable, is where the price equals the average cost of producing a good. The model requires: (1) identifying the fair-rate of return on capital expenditures for utilities in order to attract the investment needed to fund high fixed-cost projects and (2) to ensure that utilities investments are prudent. On the other hand, PBR relies on incentives to induce a natural monopoly to act more like a competitive firm. Per much of the literature, PBR is used to address asymmetry of information between the regulator and the regulated firm. While PBR frameworks can vary, they often include incentives for various actions by the regulated utility, as an alternative to the perceived bias for capital expenditures. These can include incentives for deploying distributed energy resources, meeting safety performance metrics, and others.

Comments

Need for this bill. The author states:

The current utility energy regulatory paradigm (cost-of-service model) creates systemic misalignments between utility financial interests, rate-payer interests, and broader environmental goals. The models incentivize over-investment. This problem means the activities taken by the legislature (or even by the CPUC) are not as effective in implementation as they ought to be. This bill changes the paradigm to the performance-based incentives and metrics paradigm.

PBR shows promise, but may not be a silver bullet. This bill appropriately requires the CPUC to evaluate performance metrics and incentives to identify mechanisms that may serve to better align an electrical corporation’s operations, expenditures, and investments with delivering safe and reliable electrical service and achieving public policy goals. The author’s intent is to help realize savings through this new paradigm, specifically by reducing the utility’s preference for investments that can be added to the utility’s rate-base. Many of the supporters of this bill view PBR as an opportunity to advance distributed energy resources, which they argue the utilities oppose due to diluting the opportunity for capital investments that provide the utility additional profit seeking opportunities.

Several jurisdictions have adopted PBR, or variations thereof, as an alternative to the traditional cost of service model, most notably these include Hawaii and the United Kingdom, which has the longest running program. Though in each case, there is much by way of learnings about how these programs may, or may not work, for California. A recent blog post by Andrew Campbell at the Energy Institute at Haas^[1] discussed the challenges of why PBR may not help with California’s immediate electric utility affordability concerns. Specifically, the author cited the need to forecast the future to ensure PBR achieves its goals as the biggest drawback given the uncertainty around the state’s climate and policy environment. Mr. Campbell argues that much is outside the control of the utility so PBRs may have limited usefulness in the state. However, he did note some advantages of the PBR relative to California’s current regulatory approach, including the need to establish holistic goals and provide clear communication on the results. However, PBR, like any other rate-mechanism, rests on the effectiveness of the regulator’s oversight.

Proceed with caution – unintended consequences. In some literature, aspects of California’s economic regulation is cited as containing characteristics of PBR, including the multi-year rate cases, decoupling of sales of electricity and rate of return, and others. California has also had unfortunate experiences with performance incentives, including in the 1990s, with a PBR price-cap mechanism that included performance incentives for safety and reliability. Unfortunately, a utility gamed the customer service and safety incentives, including under-reporting injuries. The CPUC ultimately found that incentives led to a culture that discouraged reporting of safety violations. Given California’s history with performance-based incentives and metrics specifically, a need to proceed with caution is warranted.

Prior/Related Legislation

SB 254 (Becker) of 2025, includes various proposals to address electric utility affordability, including those related to wildfire mitigation. The bill is pending in the Senate.

SB 947 (Dodd) of 2020, would have required the CPUC to evaluate financial performance-based incentives and performance-based metric tracking to identify mechanisms that may serve to better align electrical corporation operations, expenditures, and investments with public benefit goals, including safety, reliability, cost efficiency, and other state energy policies the CPUC believes may benefit from PBR. The bill was held by the author.

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

According to the Senate Appropriations Committee:

• The CPUC estimates ongoing costs of about $1.9 million annually (ratepayer funds) to evaluate and implement performance metrics and financial performance-based incentives, perform a study determining the effectiveness of adopted or implemented mechanisms, as provided, and track performance of the incentive mechanisms to ensure cost effectiveness, among other things.
• To the extent that this bill impacts electricity rates, it could result in costs or savings to the state as an electric utility ratepayer. The State of California is an electricity customer, purchasing roughly one percent of the state’s electricity. As such, the state incurs costs when rates increase, and realizes cost savings if rates go down (various funds).

SUPPORT: (Verified 5/23/25)

301 Organics
350s: Bay Area, Humboldt, San Diego, and Southland Legislative Alliance
California Environmental Voters
California Solar & Storage Association
CARES Coalition
Center for Community Energy
Chun -McGill Group
Citizen's Climate Lobby Santa Cruz Chapter
CleanEarth4Kids.org
Climate Action California
Climate Action Petaluma
Climate Health Now
Elders Climate Action NorCal
Environmental Committee of the Valley Women’s Club of San Lorenzo Valley
FACT - Fires Aren't Started by Trees Coalition
Fractracker Alliance
Glendale Environmental Coalition
Hang Out Do Good
Indivisible Alta Pasadena
Indivisible Green Team
NELA Climate Collective
NRG Energy
Pink Panthers
Resilient Palisades
Silver Lake Couch Collective
Stand.Earth
Sustainable Rossmoor
The Climate Center
The Climate Reality Project: California State Coalition, Los Angeles, Monterey Bay, Orange County, San Diego, and San Fernando Valley CA
The Phoenix Group
Transformative Wealth Management LLC
Transition South Pasadena
Urban Ecology Project
US Green Building Council-California

Vector Green Power, LLC
Voting 4 Climate & Health

OPPOSITION: (Verified 5/23/25)

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

ARGUMENTS IN SUPPORT: A coalition of environmental organizations, including the 350 Southland Legislative Alliance and others state:

As our grid evolves, electricity rate models must adapt to support reliability and the transition to electrification. Performance-based ratemaking (PBR) frameworks incentivize utilities to align their work with the interests of ratepayers and penalize utilities for not meeting important milestones. PBR promotes efficient grid investment in local distributed resources, hardens the grid against disruption during peak demand and increases resiliency during outage scenarios. This framework also incentivizes utilization of abundant renewable resources to help meet California’s clean energy goals and reduce rates. Similar legislation in Hawaii resulted in lower residential rates, customer dividends and faster Internet connection of small scale, solar projects. SB 500 is a critical solution to provide affordability for consumers using legislative oversight to minimize rate increases by pursuing least-cost alternatives to deliver reliable clean energy to residents.

ARGUMENTS IN OPPOSITION: Pacific Gas and Electric Company, San Diego Gas and Electric Company, and Southern California Edison state:

SB 500’s implicit assumption that utilities prioritize capital projects rejects and misrepresents the reality of the thorough processes in place that inform decision making. Each mitigation tool is rigorously evaluated — from advanced technology such as “fast trip”, to covered conductors, to undergrounding — and chosen based on location-specific needs, risk level, and community impact. These decisions are already subject to CPUC oversight and often incorporate feedback from stakeholder input. The notion that utilities would prefer rate base investments for their own sake ignores the detailed, transparent, and safety-driven process that underpins every project proposal. We appreciate the bill’s intent to ensure cost-effective delivery of safe and reliable electric service, but as currently drafted, SB 500 would limit utility flexibility, undermine wildfire safety strategies, and complicate infrastructure development at a time when California needs bold, coordinated investment to electrify and decarbonize its economy.

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

5/27/25 11:17:16

**** END ****

1. https://energyathaas.wordpress.com/2025/03/17/getting-utility-profits-to-align-with-public-benefits/#:~:text=California%20has%20tried%20performance%2Dbased,outside%20of%20the%20IOUs%20control. ↑

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2025 - 2026 Regular Session

SB 500 (Stern) - Electrical corporations: performance metrics and incentives

Bill Summary:

This bill would require the California Public Utilities Commission (CPUC) to evaluate and study performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align an electrical corporation’s expenditures with achieving public policy goals, among other things.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 23, 2025

Fiscal Impact:

• The CPUC estimates ongoing costs of about $1.9 million annually (ratepayer funds) to evaluate and implement performance metrics and financial performance-based incentives, perform a study determining the effectiveness of adopted or implemented mechanisms, as provided, and track performance of the incentive mechanisms to ensure cost effectiveness, among other things.
• To the extent that this bill impacts electricity rates, it could result in costs or savings to the state as a an electric utility ratepayer. The State of California is an electricity customer, purchasing roughly one percent of the state’s electricity. As such, the state incurs costs when rates increase, and realizes cost savings if rates go down (various funds).

Author Amendments:

Authors amendments would make some CPUC requirements permissive.

-- END --

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2025 - 2026 Regular Session

SB 500 (Stern) - Electrical corporations: performance metrics and incentives

Bill Summary:

This bill would require the California Public Utilities Commission (CPUC) to evaluate and study performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align an electrical corporation’s expenditures with achieving public policy goals, among other things.

Fiscal Impact:

• The CPUC estimates ongoing costs of about $1.9 million annually (ratepayer funds) to evaluate and implement performance metrics and financial performance-based incentives, perform a study determining the effectiveness of adopted or implemented mechanisms, as provided, and track performance of the incentive mechanisms to ensure cost effectiveness, among other things.
• To the extent that this bill impacts electricity rates, it could result in costs or savings to the state as a an electric utility ratepayer. The State of California is an electricity customer, purchasing roughly one percent of the state’s electricity. As such, the state incurs costs when rates increase, and realizes cost savings if rates go down (various funds).

Background:

Performance-based ratemaking (PBR) is a term used to describe a wide variety of tools that regulators can use to incentivize utility actions of desired outcomes. PBR is offered as an alternative to the utility cost of service regulation (also called a rate of return regulation). Cost of service has been the dominant model through which regulators seek to maximize social welfare in natural monopoly markets. Under the cost of service model, the price level that maximizes societal welfare, while allowing firms to stay viable, is where the price equals the average cost of producing a good. The model requires: (1) identifying the fair-rate of return on capital expenditures for utilities in order to attract the investment needed to fund high fixed-cost projects and (2) to ensure that utilities investments are prudent. On the other hand, PBR relies on incentives to induce a natural monopoly to act more like a competitive firm. Per much of the literature, PBR is used to address asymmetry of information between the regulator and the regulated firm. While PBR frameworks can vary, they often include incentives for various actions by the regulated utility, as an alternative to the perceived bias for capital expenditures. These can include incentives for deploying distributed energy resources, meeting safety performance metrics, and others.

Proposed Law:

This bill would require CPUC to evaluate and study performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align an electrical corporation’s expenditures with achieving public policy goals, among other things. Specifically, it would:

1. Require the CPUC to evaluate performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align electrical corporation operations, expenditures, and investments with delivering safe and reliable electrical service and achieving public policy goals, while minimizing costs for ratepayers.
2. Require the CPUC to prioritize performance metrics and financial performance-based incentives that can reduce electrical corporations’ preference for investments that can be added to their ratebase and instead encourage electrical corporations to propose the most cost-effective solutions for providing safe and reliable electrical service, as provided.
3. In addition to evaluating performance metrics and financial performance-based incentives, require the CPUC to study incentive mechanisms approved by the commission, and other incentive mechanisms deployed by other jurisdictions, to determine their effectiveness and to identify any unintended consequences of their adoption. Require that the CPUC use its findings from the study to inform its adoption of any new or continuing incentive mechanisms.
4. Require the CPUC, on or before January 1, 2028, to begin tracking one or more of the performance metrics identified, and to subsequently consider whether financial performance-based incentives linked to those performance metrics would be effective and beneficial for minimizing costs for ratepayers.

Related Legislation:

SB 254 (Becker) of the current legislative session, includes various proposals to address electric utility affordability, including those related to wildfire mitigation.

SB 947 (Dodd) of 2020, would have required the CPUC to evaluate financial performance-based incentives and performance-based metric tracking to identify mechanisms that may serve to better align electrical corporation operations, expenditures, and investments with public benefit goals, including safety, reliability, cost efficiency, and other state energy policies the commission believes may benefit from performance-based ratemaking. The bill was held by the author.

-- END --

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Josh Becker, Chair

2025 - 2026 Regular

Bill No: SB 500 Hearing Date: 4/29/2025

SUBJECT: Electrical corporations: performance metrics and incentives

DIGEST: This bill requires the California Public Utilities Commission (CPUC) to evaluate performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align an electrical corporation’s expenditures with achieving public policy goals, among other objectives.

ANALYSIS:

Existing law:

1. Establishes and vests the CPUC with regulatory authority over public utilities, including electrical corporations. (Article XII of the California Constitution)
2. The California Constitution authorizes the CPUC, among other things, to establish its own procedures, subject to statute and due process, and to fix rates and establish rules for all public utilities, subject to control by the Legislature. (California Constitution, Article XII, §§2,3, 5, and 6)
3. Establishes it is the policy of the state that each electrical corporation continue to operate its electric distribution grid in its service territory and to do so in a safe, reliable, efficient, and cost-effective manner. (Public Utilities Code §399.2)
4. Requires that all charges demanded and received by a public utility must be just and reasonable. (Public Utilities Code §451)

This bill:

1. Requires the CPUC to evaluate performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align electrical corporation operations, expenditures, and investments with delivering safe and reliable electrical service and achieving public policy goals, while minimizing costs for ratepayers.
2. Requires the CPUC to prioritize performance metrics and financial performance-based incentives that can reduce electrical corporations’ preference for investments that can be added to their ratebase and instead encourage electrical corporations to propose the most cost-effective solutions for providing safe and reliable electrical service, as provided.
3. Requires the CPUC, on or before January 1, 2028, to begin tracking one or more of the performance metrics identified, and to subsequently consider whether financial performance-based incentives linked to those performance metrics would be effective and beneficial for minimizing costs for ratepayers.

Background

Performance-based ratemaking (PBR). PBR is a term used to describe a wide variety of tools that regulators can use to incentivize utility actions of desired outcomes. PBR is offered as an alternative to the utility cost of service regulation (also called a rate of return regulation). Cost of service has been the dominant model through which regulators seek to maximize social welfare in natural monopoly markets. Under the cost of service model, the price level that maximizes societal welfare, while allowing firms to stay viable, is where the price equals the average cost of producing a good. The model requires: (1) identifying the fair-rate of return on capital expenditures for utilities in order to attract the investment needed to fund high fixed-cost projects and (2) to ensure that utilities investments are prudent. On the other hand, PBR relies on incentives to induce a natural monopoly to act more like a competitive firm. Per much of the literature, PBR is used to address asymmetry of information between the regulator and the regulated firm. While PBR frameworks can vary, they often include incentives for various actions by the regulated utility, as an alternative to the perceived bias for capital expenditures. These can include incentives for deploying distributed energy resources, meeting safety performance metrics, and others.

Comments

Need for the bill. The author states:

The current utility energy regulatory paradigm (cost-of-service model) creates systemic misalignments between utility financial interests, rate-payer interests, and broader environmental goals. The models incentivize over-investment. This problem means the activities taken by the legislature (or even by the PUC) are not as effective in implementation as they ought to be. This bill changes the paradigm to the performance-based incentives and metrics paradigm.

PBR shows promise, but may not be a silver bullet. This bill appropriately requires the CPUC to evaluate performance metrics and incentives to identify mechanisms that may serve to better align an electrical corporation’s operations, expenditures, and investments with delivering safe and reliable electrical service and achieving public policy goals. The intent is to help realize savings through this new paradigm, specifically by reducing the utility’s preference for investments that can be added to their rate-base. Many of the supporters of this bill view PBR as an opportunity to advance distributed energy resources, which they argue the utilities oppose as diluting their opportunity for capital investments. Several jurisdictions have adopted PBR, or variations thereof, as an alternative to the traditional cost of service model, most notably these include Hawaii and the United Kingdom, which has the longest running program. Though in each case, there is much by way of learnings about how these programs may, or may not work, for California. A recent blog post by Andrew Campbell at the Energy Institute at Haas^[1] discussed the challenges of why PBR may not help with California’s immediate electric utility affordability concerns. Specifically, the author cited the need to forecast the future to ensure PBR achieves its goals is the biggest drawback given the uncertainty around the state’s climate and policy environment. The author argues that much is outside the control of the utility so PBRs may have limited usefulness in the state. However, the author did note some advantages of the PBR relative to California’s current regulatory approach, including the need to establish holistic goals and provide clear communication on the results. PBR, like a rate-mechanism, rests on the effectiveness of the regulator’s oversight.

Proceed with caution – unintended consequences. In some literature, aspects of California’s economic regulation is cited as containing characteristics of PBR, including the multi-year rate cases, decoupling of sales of electricity and rate of return, and others. California has also had unfortunate experiences with performance incentives, including in the 1990s, with a PBR price-cap mechanism that included performance incentives for safety and reliability. Unfortunately, a utility gamed the customer service and safety incentives, including under-reporting injuries. The CPUC ultimately found that incentives led to a culture that discouraged reporting of safety violations. Given California’s history with performance-based incentives and metrics specifically, a need to proceed with caution is warranted.

Need for amendments. Given the existing framework for wildfire mitigation and the numerous bills related to expanding on the existing framework, the author and committee may wish to add provisions to identify unintended consequences that should also be evaluated.

Prior/Related Legislation

SB 254 (Becker) of the current legislative session, includes various proposals to address electric utility affordability, including those related to wildfire mitigation.

SB 947 (Dodd) of 2020, would have required the CPUC to evaluate financial performance-based incentives and performance-based metric tracking to identify mechanisms that may serve to better align electrical corporation operations, expenditures, and investments with public benefit goals, including safety, reliability, cost efficiency, and other state energy policies the commission believes may benefit from performance-based ratemaking. The bill was held by the author.

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

SUPPORT:

301 Organics
350 Bay Area
350 Humboldt
350 Southland Legislative Alliance
California Environmental Voters
California Solar & Storage Association
CARES Coalition
Center for Community Energy
Chun -McGill Group
Citizen's Climate Lobby Santa Cruz Chapter
CleanEarth4Kids.org
Climate Action California
Climate Action Petaluma
Climate Health Now
Elders Climate Action NorCal
Environmental Committee of the Valley Women’s Club of San Lorenzo Valley
FACT - Fires Aren't Started by Trees Coalition
Fractracker Alliance
Glendale Environmental Coalition
Hang Out Do Good
Indivisible Alta Pasadena
Indivisible Green Team
NELA Climate Collective
NRG Energy
Pink Panthers
Resilient Palisades
SanDiego 350
Silver Lake Couch Collective
Stand.Earth
Sustainable Rossmoor
The Climate Center
The Climate Reality Project, California State Coalition
The Climate Reality Project, Los Angeles Chapter
The Climate Reality Project, Monterey Bay
The Climate Reality Project, Orange County Chapter
The Climate Reality Project, San Diego Chapter
The Climate Reality Project, San Fernando Valley CA Chapter
The Phoenix Group
Transformative Wealth Management LLC
Transition South Pasadena
Urban Ecology Project
Vector Green Power, LLC
Voting 4 Climate & Health

OPPOSITION:

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

ARGUMENTS IN SUPPORT: A coalition of environmental organizations, including the 350 Southland Legislative Alliance and others state:

As our grid evolves, electricity rate models must adapt to support reliability and the transition to electrification. Performance-based ratemaking (PBR) frameworks incentivize utilities to align their work with the interests of ratepayers and penalize utilities for not meeting important milestones. PBR promotes efficient grid investment in local distributed resources, hardens the grid against disruption during peak demand and increases resiliency during outage scenarios. This framework also incentivizes utilization of abundant renewable resources to help meet California’s clean energy goals and reduce rates. Similar legislation in Hawaii resulted in lower residential rates, customer dividends and faster Internet connection of small scale, solar projects. SB 500 is a critical solution to provide affordability for consumers using legislative oversight to minimize rate increases by pursuing least-cost alternatives to deliver reliable clean energy to residents.

ARGUMENTS IN OPPOSITION: Pacific Gas and Electric Company, San Diego Gas and Electric Company, and Southern California Edison state:

SB 500’s implicit assumption that utilities prioritize capital projects rejects and misrepresents the reality of the thorough processes in place that inform decision making. Each mitigation tool is rigorously evaluated — from advanced technology such as “fast trip”, to covered conductors, to undergrounding — and chosen based on location-specific needs, risk level, and community impact. These decisions are already subject to CPUC oversight and often incorporate feedback from stakeholder input. The notion that utilities would prefer rate base investments for their own sake ignores the detailed, transparent, and safety-driven process that underpins every project proposal. We appreciate the bill’s intent to ensure cost-effective delivery of safe and reliable electric service, but as currently drafted, SB 500 would limit utility flexibility, undermine wildfire safety strategies, and complicate infrastructure development at a time when California needs bold, coordinated investment to electrify and decarbonize its economy.

-- END --

1. https://energyathaas.wordpress.com/2025/03/17/getting-utility-profits-to-align-with-public-benefits/#:~:text=California%20has%20tried%20performance%2Dbased,outside%20of%20the%20IOUs%20control. ↑

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Josh Becker, Chair

2025 - 2026 Regular

Bill No: SB 500 Hearing Date: 4/29/2025

SUBJECT: Electrical corporations: performance metrics and incentives

DIGEST: This bill requires the California Public Utilities Commission (CPUC) to evaluate performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align an electrical corporation’s expenditures with achieving public policy goals, among other objectives.

ANALYSIS:

Existing law:

1. Establishes and vests the CPUC with regulatory authority over public utilities, including electrical corporations. (Article XII of the California Constitution)
2. The California Constitution authorizes the CPUC, among other things, to establish its own procedures, subject to statute and due process, and to fix rates and establish rules for all public utilities, subject to control by the Legislature. (California Constitution, Article XII, §§2,3, 5, and 6)
3. Establishes it is the policy of the state that each electrical corporation continue to operate its electric distribution grid in its service territory and to do so in a safe, reliable, efficient, and cost-effective manner. (Public Utilities Code §399.2)
4. Requires that all charges demanded and received by a public utility must be just and reasonable. (Public Utilities Code §451)

This bill:

1. Requires the CPUC to evaluate performance metrics and financial performance-based incentives to identify mechanisms that may serve to better align electrical corporation operations, expenditures, and investments with delivering safe and reliable electrical service and achieving public policy goals, while minimizing costs for ratepayers.
2. Requires the CPUC to prioritize performance metrics and financial performance-based incentives that can reduce electrical corporations’ preference for investments that can be added to their ratebase and instead encourage electrical corporations to propose the most cost-effective solutions for providing safe and reliable electrical service, as provided.
3. Requires the CPUC, on or before January 1, 2028, to begin tracking one or more of the performance metrics identified, and to subsequently consider whether financial performance-based incentives linked to those performance metrics would be effective and beneficial for minimizing costs for ratepayers.

Background

Performance-based ratemaking (PBR). PBR is a term used to describe a wide variety of tools that regulators can use to incentivize utility actions of desired outcomes. PBR is offered as an alternative to the utility cost of service regulation (also called a rate of return regulation). Cost of service has been the dominant model through which regulators seek to maximize social welfare in natural monopoly markets. Under the cost of service model, the price level that maximizes societal welfare, while allowing firms to stay viable, is where the price equals the average cost of producing a good. The model requires: (1) identifying the fair-rate of return on capital expenditures for utilities in order to attract the investment needed to fund high fixed-cost projects and (2) to ensure that utilities investments are prudent. On the other hand, PBR relies on incentives to induce a natural monopoly to act more like a competitive firm. Per much of the literature, PBR is used to address asymmetry of information between the regulator and the regulated firm. While PBR frameworks can vary, they often include incentives for various actions by the regulated utility, as an alternative to the perceived bias for capital expenditures. These can include incentives for deploying distributed energy resources, meeting safety performance metrics, and others.

Comments

Need for the bill. The author states:

The current utility energy regulatory paradigm (cost-of-service model) creates systemic misalignments between utility financial interests, rate-payer interests, and broader environmental goals. The models incentivize over-investment. This problem means the activities taken by the legislature (or even by the PUC) are not as effective in implementation as they ought to be. This bill changes the paradigm to the performance-based incentives and metrics paradigm.

PBR shows promise, but may not be a magic bullet. This bill appropriately requires the CPUC to evaluate performance metrics and incentives to identify mechanisms that may serve to better align an electrical corporation’s operations, expenditures, and investments with delivering safe and reliable electrical service and achieving public policy goals. The intent is to help realize savings through this new paradigm, specifically by reducing the utility’s preference for investments that can be added to their rate-base. Many of the supporters of this bill view PBR as an opportunity to advance distributed energy resources, which they argue the utilities oppose as diluting their opportunity for capital investments. Several jurisdictions have adopted PBR, or variations thereof, as an alternative to the traditional cost of service model, most notably these include Hawaii and the United Kingdom, which has the longest running program. Though in each case, there is much by way of learnings about how these programs may, or may not work, for California. A recent blog post by Andrew Campbell at the Energy Institute at Haas^[1] discussed the challenges of why PBR may not help with California’s immediate electric utility affordability concerns. Specifically, the author cited the need to forecast the future to ensure PBR achieves its goals is the biggest drawback given the uncertainty around the state’s climate and policy environment. The author argues that much is outside the control of the utility so PBRs may have limited usefulness in the state. However, the author did note some advantages of the PBR relative to California’s current regulatory approach, including the need to establish holistic goals and provide clear communication on the results. PBR, like a rate-mechanism, rests on the effectiveness of the regulator’s oversight.

Proceed with caution – unintended consequences. In some literature aspects of California’s economic regulation is cited as containing characteristics of PBR, including the multi-year rate cases, decoupling of sales of electricity and rate of return, and others. California has also had unfortunate experiences with performance incentives, including the 1990s, where a PBR price-cap mechanism that include performance incentives for safety and reliability. Unfortunately, a utility gamed the customer service and safety incentives, including under reporting injuries. The CPUC ultimately found that incentives led to a culture that discouraged reporting of safety violations. Given California’s history with performance-based incentives and metrics specifically, a need to proceed with caution is warranted.

Need for amendments. Given the existing framework for wildfire mitigation and the numerous bills related to expanding on the existing framework, the author and committee may wish to add provisions to identify intended consequences that should also be evaluated.

Prior/Related Legislation

SB 254 (Becker) of the current legislative session, includes various proposals to address electric utility affordability, including those related to wildfire mitigation.

SB 947 (Dodd) of 2020, would have required the CPUC to evaluate financial performance-based incentives and performance-based metric tracking to identify mechanisms that may serve to better align electrical corporation operations, expenditures, and investments with public benefit goals, including safety, reliability, cost efficiency, and other state energy policies the commission believes may benefit from performance-based ratemaking. The bill was held by the author.

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

SUPPORT:

301 Organics
350 Bay Area
350 Humboldt
350 Southland Legislative Alliance
California Environmental Voters
California Solar & Storage Association
CARES Coalition
Center for Community Energy
Chun -McGill Group
Citizen's Climate Lobby Santa Cruz Chapter
CleanEarth4Kids.org
Climate Action California
Climate Action Petaluma
Climate Health Now
Elders Climate Action NorCal
Environmental Committee of the Valley Women’s Club of San Lorenzo Valley
FACT - Fires Aren't Started by Trees Coalition
Fractracker Alliance
Glendale Environmental Coalition
Hang Out Do Good
Indivisible Alta Pasadena
Indivisible Green Team
NELA Climate Collective
NRG Energy
Pink Panthers
Resilient Palisades
SanDiego 350
Silver Lake Couch Collective
Stand.Earth
Sustainable Rossmoor
The Climate Center
The Climate Reality Project, California State Coalition
The Climate Reality Project, Los Angeles Chapter
The Climate Reality Project, Monterey Bay
The Climate Reality Project, Orange County Chapter
The Climate Reality Project, San Diego Chapter
The Climate Reality Project, San Fernando Valley CA Chapter
The Phoenix Group
Transformative Wealth Management LLC
Transition South Pasadena
Urban Ecology Project
Vector Green Power, LLC
Voting 4 Climate & Health

OPPOSITION:

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

ARGUMENTS IN SUPPORT: A coalition of environmental organizations, including the 350 Southland Legislative Alliance and others state:

As our grid evolves, electricity rate models must adapt to support reliability and the transition to electrification. Performance-based ratemaking (PBR) frameworks incentivize utilities to align their work with the interests of ratepayers and penalize utilities for not meeting important milestones. PBR promotes efficient grid investment in local distributed resources, hardens the grid against disruption during peak demand and increases resiliency during outage scenarios. This framework also incentivizes utilization of abundant renewable resources to help meet California’s clean energy goals and reduce rates. Similar legislation in Hawaii resulted in lower residential rates, customer dividends and faster Internet connection of small scale, solar projects. SB 500 is a critical solution to provide affordability for consumers using legislative oversight to minimize rate increases by pursuing least-cost alternatives to deliver reliable clean energy to residents.

ARGUMENTS IN OPPOSITION: Pacific Gas and Electric Company, San Diego Gas and Electric Company, and Southern California Edison state:

SB 500’s implicit assumption that utilities prioritize capital projects rejects and misrepresents the reality of the thorough processes in place that inform decision making. Each mitigation tool is rigorously evaluated — from advanced technology such as “fast trip”, to covered conductors, to undergrounding — and chosen based on location-specific needs, risk level, and community impact. These decisions are already subject to CPUC oversight and often incorporate feedback from stakeholder input. The notion that utilities would prefer rate base investments for their own sake ignores the detailed, transparent, and safety-driven process that underpins every project proposal. We appreciate the bill’s intent to ensure cost-effective delivery of safe and reliable electric service, but as currently drafted, SB 500 would limit utility flexibility, undermine wildfire safety strategies, and complicate infrastructure development at a time when California needs bold, coordinated investment to electrify and decarbonize its economy.

-- END --

1. https://energyathaas.wordpress.com/2025/03/17/getting-utility-profits-to-align-with-public-benefits/#:~:text=California%20has%20tried%20performance%2Dbased,outside%20of%20the%20IOUs%20control. ↑