OAKLAND — State regulators Thursday reined in the profit returns that shareholders of PG&E and other utility providers can harvest, a decision that failed to quell a debate over whether customers can easily afford to pay their monthly electric and gas bills.
The state Public Utilities Commission voted 4-1 to approve slightly lower rates of return for shareholders starting in 2026 compared to current levels.
“Today’s decision does not set rates, but it does affect customer bills over time,” PUC President and Commissioner Alice Reynolds said before voting to approve the new capital cost and rate of return structure for PG&E, Southern California Edison, San Diego Gas & Electric, and Southern California Gas Co.
In the wake of the decision, PG&E said monthly electricity bills are lower than they were at the start of 2024. The investor-owned utility predicted that costs for electricity customers would drift lower in 2026 compared to now.
For PG&E, the new maximum return on equity will be 9.98%, which is a bit lower than the current 10.28% return on equity, according to the company and the PUC. This equates to a slightly greater curb on profits.
PUC Commissioner Darcie Houck, who voted against the new return on equity, expressed concern that the commission’s action doesn’t adequately protect ratepayers from future jumps in monthly bills.
“This decision does not quite strike the right balance in addressing customer costs,” Houck said before casting the sole no vote.
State regulators noted that PG&E and its utility siblings must be able to offer shareholders and investors a sufficiently robust rate of return to attract the capital the companies need to finance an array of critical requirements.
“Energy service is capital-intensive,” PUC Commissioner John Reynolds said before voting yes. “Wires and poles, generators and transformers, pipelines and compressors, labor and equipment” are among those expenses, he added.
A lower rate of return reduces the profits that utilities can make on their investments in their systems and operations, such as mitigating wildfire risks. The lower return levels can ease upward pressure on future monthly bills.
The commission’s vote displeased both PG&E and consumer advocates.
“PG&E is disappointed that the final decision fails to acknowledge current elevated risks to help attract the needed investment for California’s energy systems,” PG&E said in a statement. “We will keep working with regulators and state leaders to ensure adequate funding needs and reasonable long-term rates for customers so we can continue stabilizing our energy prices and funding critical energy system improvements for customers.”
The Utility Reform Network also disagreed with the decision — because the PUC didn’t sufficiently reduce PG&E’s rate of return.
At one point, state regulators were considering reducing the return on equity to somewhere around 6% but then decided to lean more toward the 10% level in their final decision, PUC observers have stated.
“Revising the decision in favor of utility shareholders is more than just buckling under pressure from PG&E and other major utilities,” TURN Executive Director Mark Toney said. “It is part of a disturbing pattern of commissioners disregarding proposals to address the affordability crisis.”
Toney urged state politicians to step in and help utility customers.
“This is a clear sign that the Legislature needs to take more action to address the affordability crisis, because the CPUC has failed to do so,” Toney said.
Amid the controversy, PG&E stated that the average residential customer will continue to experience lower monthly bills for electricity.
“We take our responsibility seriously, and we are working hard to lower our prices,” PG&E stated. “We are making progress.”
PG&E’s monthly electric bill for a typical residential customer who uses about 500 kilowatt hours is about $12 lower than it was in January 2024, the utility estimated.
“Additionally, electric rates and bills for customers who receive energy supply and delivery from PG&E are expected to go down again in 2026,” PG&E stated.