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SB 905

Electricity.

2025-2026 Regular Session Introduced by Josh Becker and 1 co-sponsor

SB 905 creates the POWER program to reimburse utility expenditures driven by public policy goals, aiming to lower ratepayer costs.

From committee with author's amendments. Read second time and amended. Re-referred to Com. on U. & E.
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Bill Summary · SB 905

Summary of SB 905 (California, 2025-2026) — Electricity

Aimed at rethinking how electric utility expenditures influence ratepayers, SB 905 proposes new programs, funding, and performance requirements for electrical corporations and local publicly owned electric utilities (LPOUs). It includes establishment of a new reimbursement program (POWER), creation of a fund, incentive reforms, performance-based metrics, and disclosure requirements. The bill was amended and set for hearing in 2026.

1) Purpose and Intent

  • Create the Policy-Oriented and Wildfire Electric Reimbursement (POWER) Program to reimburse electric utilities for expenditures driven by public policy goals that benefit the general public, with the intent of reducing ratepayer costs.
  • Introduce performance-based metrics for large electrical corporations to promote safe, reliable service at the lowest cost to ratepayers.
  • Explore alternative financing methods for capital investments to lower the cost of capital passed through to ratepayers.
  • Improve public transparency around grid capacity, utilization, and potential for demand-side and distributed energy resources.

2) Key Provisions and Changes

A. POWER Program and Fund (Public Resources Code Chapter 20)

  • Establish the POWER Program to reimburse expenditures driven by public policy goals (e.g., transportation/building electrification, public purpose programs, wildfire mitigation, DER incentives, equity programs).
  • Fund created: Policy-Oriented and Wildfire Electric Reimbursement Fund in the State Treasury.
  • Guidelines for reimbursements:
    • Reimbursements must be for expenditures driven by public policy goals that benefit the general public (not merely ratepayers) and not required for basic safe/reliable delivery.
    • Eligible expenditures require prior approval: just and reasonable for rate-of-return purposes for electrical corporations; approved by governing bodies for LPOUs.
    • Reimbursements must be used solely to reduce ratepayer costs; cannot be used for shareholder incentives or return on equity (ROE).
    • Reimbursements must be excluded from rate base; assets funded by reimbursed expenditures cannot earn ROE for the life of the reimbursed portion.
  • Annual spending plans and public report requirements.
  • Administrative cap: no more than the lesser of 3% of funds or $5 million per year for admin/overhead.

B. Public Utilities Commission (PUC) Requirements (Electric Corporations)

  • For each electrical corporation, the PUC must assign a reduced ROE to certain capital costs in the rate base, reflecting reduced risk, earlier cost recovery, and wildfire mitigation investments (undergrounding, balancing accounts, etc.).
  • New framework for performance-based metrics (see Section 399.10).

C. Performance-Based Metrics Framework (Public Utilities Code Section 399.10)

  • By January 1, 2028, PUC must initiate a proceeding to develop a framework of performance metrics for large electrical corporations, covering:
    • Distribution/transmission reliability and utilization
    • Generation/transfer utilization
    • Customer energization and interconnection timelines
    • Demand response and distributed resources utilization
    • Capital and expense spending by segment (distribution, transmission, generation, wildfire mitigation)
    • Greenhouse gas emissions intensity
    • Average electricity cost by customer class
  • Each corporation must provide 10 years of historical data where feasible.
  • PUC may set targets and assess performance in general rate cases; no financial incentives tied to target achievement.
  • Public dashboard to display metrics and targets.

D. Incentive Compensation (Public Utilities Code Section 399.10)

  • By January 1, 2028, large electrical corporations must have incentive compensation for senior executives (VP level and above) with at least 20% of annual compensation contingent on average cost of electricity (with a cap tied to SSA COLA for the period).

E. Alternative Financing Rulemaking (Public Utilities Code Section 701.11)

  • PUC must initiate a rulemaking to evaluate alternative financing methods for capital investments (distribution, generation, transmission) to lower ratepayer costs.
  • Corporations must annually report opportunities for alternative financing.
  • By December 31, 2028, PUC must report findings and recommendations to the Legislature (operation of this reporting obligation ends January 1, 2029 per Government Code 10231.5).

F. Distribution Grid Utilization Data (Public Utilities Code Section 769.1)

  • Large electrical corporations must disclose public data quantifying:
    • Capacity utilization of distribution segments
    • Off-peak load-hosting capacity
    • Locations of constrained distribution areas to help identify where distributed resources could help
  • PUC may set targets and require inclusion of these assessments in distribution planning; findings shared with the public.

G. Rate Component and Program Funding (Public Utilities Code Section 381)

  • Electrical corporations must identify a separate nonbypassable rate component to fund these programs, with funds allocated to in-state reliability and public-benefit activities (energy efficiency, R&D, in-state renewable activity).
  • Customers may contribute voluntary amounts via bills to support eligible programs.

3) Who Would Be Affected

  • Electrical corporations (the investor-owned utilities) would experience:
    • Potentially reduced ROE on certain costs
    • New reporting, data-sharing, and performance metric requirements
    • Public dashboards and transparency obligations
    • Incentive compensation adjustments for senior executives tied to electricity costs
  • Local publicly owned electric utilities (LPOUs) would participate in the POWER Program and governance, subject to governing board approvals for reimbursements.
  • California ratepayers would be the primary beneficiaries if the program effectively lowers electricity bills.
  • State agencies (Energy Commission, PUC) would oversee the POWER Program, performance metrics, financing rulemakings, and reporting.

4) Procedural and Timeline Aspects

  • Timeline milestones:
    • By January 1, 2028: PUC initiate performance-metrics framework; require incentive-based compensation structure for VP+ positions; commence rulemaking for alternative financing; require large utilities to publish public data on grid capacity utilization.
    • By December 31, 2028: PUC to submit a Legislature report on financing rulemaking findings; distribution planning assessments to be aligned with metrics; continue annual reporting on utility bill impacts of POWER.
  • Administrative limits:
    • Annual overhead cap: up to 3% or $5 million, whichever is less, for POWER program administration.
  • Funding and budgeting:
    • POWER Fund established in the State Treasury; funds expended by Energy Commission per legislative appropriation.

Overall, SB 905 seeks to align California’s utility spending with broad public-policy goals, reduce ratepayer costs through a dedicated reimbursement program, and introduce performance-based oversight and new financing possibilities to encourage efficient, low-cost electric service.

Compiled from official sources — confirm details with the bill’s official record.

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