Assembly BillIntroducedPublic Utilities
AB 1677: Public utilities: electrical and gas corporations: return on equity.
What AB 1677 does, verified March 24, 2026
The bill aims to regulate public utilities, specifically electrical and gas corporations, by requiring them to justify rate changes with a return on invested capital study. The commission must evaluate the proposal to ensure the new rate is reasonable. The bill also prohibits the commission from setting an authorized return on equity that exceeds the rate on long-term federal debt by more than 400 basis points. This regulation aims to prevent excessive returns on investment, ensuring fair rates for customers.
Bill journey
1IntroducedCurrent
2In CommitteePending
3First Chamber FloorPending
4Second ChamberPending
5GovernorPending
6ChapteredPending
Last action: In committee: Hearing postponed by committee. (2026-03-23)Alert me
Author and sponsors
Full contact details, staff, and committees with Connect, $16/moUnlockRecent actions8 total · showing 5
| Mar. 23, 2026 | In committee: Hearing postponed by committee. |
| Mar. 23, 2026 | Re-referred to Com. on U. & E. |
| Mar. 19, 2026 | From committee chair, with author's amendments: Amend, and re-refer to Com. on U. & E. Read second time and amended. |
| Mar. 11, 2026 | Re-referred to Com. on U. & E. |
| Mar. 10, 2026 | From committee chair, with author's amendments: Amend, and re-refer to Com. on U. & E. Read second time and amended. |
Latest bill textAmended version, March 19, 2026 · 914 words
| Amended IN Assembly March 19, 2026 |
| Amended IN Assembly March 10, 2026 |
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
Assembly Bill
No. 1677
| Introduced by Assembly (Coauthor: Assembly Member Gallagher) |
February 02, 2026 |
An act to add Section 454.05 to the Public Utilities Code, relating to public utilities.
LEGISLATIVE COUNSEL'S DIGEST
AB 1677, as amended, Boerner. Public utilities: electrical and gas corporations: return on equity.
Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable. Existing law prohibits a public utility from changing a rate or altering a classification, contract, practice, or rule that would result in a new rate, except upon a showing before the commission and a finding by the commission that the new rate is justified and the public utility notifying its customers of the rate change.
This bill would require the commission to require an electrical corporation or gas corporation proposing to change a rate, or to alter a classification, contract, practice, or rule so as to result in a new rate based directly or indirectly on its request for return on invested capital, to include in its proposal certain studies, as provided. The bill would prohibit the commission from establishing an authorized return on equity for an electrical corporation or gas corporation that exceeds the rate on long-term debt issued by the federal government by more than 400 basis points.
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 above provisions would be part of the act and a violation of a commission action implementing the bill’s requirements would be a crime, this bill would impose a state-mandated local program.
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.
The people of the State of California do enact as follows:
SECTION 1.
(a) The Legislature finds and declares all of the following:(1) The Public Utilities Commission’s statutory mandates, constitutional limitations, and fundamental finance principles all require the commission to consider the interests of ratepayers and the public and to avoid the compounding costs to ratepayers that result from authorizing revenue requirements that result in return on equity (ROE) investments that exceed public utilities’ costs of capital in the market and their operational needs.
(2) ROEs over and above investors’ market-based expectations, the cost of capital, harms ratepayers in a myriad of ways, including all of the following harms:
(A) The immediate costs of the excess ROE.
(B) The cost of the incremental taxes owed on that excess ROE.
(C) The additional costs of unnecessary investment incentivized by excess ROE, which includes not only the cost of the investment but also the costs of capital on the investment and the associated taxes.
(D) The surplus shareholder profit from excess ROE on that unnecessary investment.
(E) The associated taxes on that surplus profit.
(3) The constitutional limitation on confiscation applied to establish a lower bound for public utility rates applies equally to establish an upper bound to public utility rates so as to prevent confiscation of ratepayer funds to support excessive public utility profits.
(b) It is the intent of the Legislature to enact legislation that would reduce utility rates by 25 percent.
SEC. 2.
Section 454.05 is added to the Public Utilities Code, immediately following Section 454, to read:454.05.
(a) If an electrical corporation or gas corporation proposes to change a rate, or to alter a classification, contract, practice, or rule(1) A study showing the amount of internally generated cash available to self-fund the investment needed to provide safe and reliable electrical or gas service, including deferred taxes, depreciation, and amortization, and the extent of the need to acquire external investment.
(2) A study showing the relationship between capital structure and return on equity is optimized from the ratepayer perspective and minimizes the overall revenue requirement, including taxes.
(b) The commission shall make findings consistent with Section 1705 on the matters specified in subdivision (a) to support an order authorizing a new rate pursuant to this section.
(c) The commission shall not, for an electrical corporation or gas corporation, authorize a return on equity that exceeds the rate on long-term debt issued by the federal government by more than 400 basis points.
SEC. 3.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.Text of AB 1677 as amended, from the official record. Connect Plus keeps every version and highlights what changed.Compare versions