Senate BillChaptered/SignedPublic Utilities
SB 1098: Public Utilities Commission: memorandum and balancing accounts.
What SB 1098 does, verified October 3, 2026
This bill aims to make forecast-based ratemaking the preferred method for establishing revenue requirements for public utilities. It requires the Public Utilities Commission to adhere to specific principles, including using forecast-based ratemaking as the default approach and authorizing memorandum accounts and balancing accounts only under exceptional circumstances. The bill also requires each memorandum account or balancing account to include an expiration date and authorizes the commission to establish exceptions for certain categories of costs. Additionally, the bill does not require reimbursement for certain costs.
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Last action: Chaptered by Secretary of State. Chapter 1008, Statutes of 2026. (2026-09-30)Alert me
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| Sep. 30, 2026 | Chaptered by Secretary of State. Chapter 1008, Statutes of 2026. |
| Sep. 30, 2026 | Approved by the Governor. |
| Sep. 09, 2026 | Enrolled and presented to the Governor at 2 p.m. |
| Aug. 31, 2026 | Read third time. Passed. (Ayes 50. Noes 15. Page 7071.) Ordered to the Senate. |
| Aug. 31, 2026 | Assembly amendments concurred in. (Ayes 30. Noes 10.) Ordered to engrossing and enrolling. |
Latest bill textChaptered version, September 30, 2026 · 1,507 words
Senate Bill No. 1098
CHAPTER 1008
An act to add Section 457 to the Public Utilities Code, relating to public utilities.
[ Approved by Governor September 30, 2026. Filed with Secretary of State September 30, 2026. ]
LEGISLATIVE COUNSEL'S DIGEST
SB 1098, Pérez. Public Utilities Commission: memorandum and balancing accounts.
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 requires the commission, whenever the commission authorizes a change in rates reflecting and passing through to customers specific changes in costs, to require a public utility to establish and maintain a balancing account to reflect the balance between the related costs and revenues. Existing law further directs the commission to authorize public utilities to establish catastrophic event memorandum accounts, as provided. Existing law authorizes each electrical corporation to establish a memorandum account to track costs incurred for wildfire risk mitigation that are unforeseen and incremental to the wildfire risk mitigation programs and activities authorized in the electrical corporation’s revenue requirements, as specified.
This bill would provide that it is the policy of the state that the regularly scheduled general rate case process is the preferred and primary method of establishing authorized revenue requirements for electrical corporations and gas corporations. The bill would require the commission, in exercising its ratemaking authority, to apply specified principles and requirements, including a requirement that memorandum accounts and balancing accounts, as defined, be authorized and maintained only when necessary to address costs that cannot reasonably be anticipated in the general rate case process, as provided. The bill would require each memorandum account or balancing account authorized by statute, or by the commission, before January 1, 2027, to be included and reviewed in the subsequent general rate case proceeding cycle or at a similar cyclical review interval to the general rate case proceeding, as provided. The bill would require the commission, as part of its review, to close any memorandum account or balancing account if the commission determines that the account is no longer necessary, as specified. The bill would authorize the commission to establish exceptions to those principles and requirements for categories of costs not reviewed pursuant to that requirement, as provided. The bill would require the commission to prepare a report to post on its public website about the process and outcome of the review of each utility’s memorandum accounts and balancing accounts. The bill would further require that the ratemaking treatment of memorandum accounts or balancing accounts that are in effect on January 1, 2027, remain unchanged until the commission reviews the account pursuant to that requirement.
Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.
Because the above requirements would be a part of the act, and a violation of a commission action implementing those 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.
The Legislature finds and declares all of the following:(a) California faces an affordability crisis in energy utility rates.
(b) The general rate case process, under which the Public Utilities Commission adopts forward-looking forecasts and ties cost recovery to utility management performance within those forecasts, provides essential incentives for cost containment and efficiency.
(c) Memorandum and balancing accounts are utility ratemaking mechanisms that provide an opportunity for a utility to seek recovery of incurred costs beyond amounts previously authorized by the Public Utilities Commission.
(d) The expansion of memorandum accounts and balancing accounts, particularly following the enactment of Senate Bill 901 of the 2017–2018 Regular Session (Chapter 626 of the Statutes of 2018), has enabled utilities to recover tens of billions of dollars in expenditures outside the general rate case process.
(e) Senate Bill 254 of the 2025–2026 Regular Session (Chapter 119 of the Statutes of 2025) gave the Public Utilities Commission the discretion to permit electrical utilities to establish memorandum accounts to record incremental and unforeseen wildfire mitigation costs not authorized in their general rate cases, whereas the establishment of those memorandum accounts previously had been mandatory.
SEC. 2.
Section 457 is added to the Public Utilities Code, to read:457.
(a) For purposes of this section, both of the following definitions apply:(1) “Balancing account” means a utility regulatory accounting mechanism that tracks specific costs incurred by a utility for comparison to the level of authorized costs and may provide an opportunity for the utility to seek recovery of costs above authorized amounts or for ratepayers to receive credits for costs below authorized amounts.
(2) “Memorandum account” means a utility regulatory accounting mechanism that tracks specific unanticipated costs incurred by a utility that have not been previously authorized by the commission and provides an opportunity for the utility to seek recovery of tracked costs.
(b) It is the policy of the State of California that the regularly scheduled general rate case process is the preferred and primary method of establishing authorized revenue requirements for electrical corporations and gas corporations because it promotes greater oversight, transparency, and protection for ratepayers.
(c) In exercising its ratemaking authority, the commission shall apply the following principles and requirements:
(1) A memorandum account or balancing account shall be authorized and maintained only when necessary to address costs that cannot reasonably be anticipated in the general rate case process. The commission shall make a written finding explaining why that account is necessary, why the relevant costs are outside of the utility’s control, and why those relevant costs cannot be adequately anticipated.
(2) If a memorandum account or balancing account is authorized for a specific activity or program, the activity or program shall be transitioned to forecast-based ratemaking as sufficient historical data becomes available to support that approach.
(3) When the commission authorizes the creation or continuation of a memorandum account or balancing account, the commission shall consider the following, as appropriate:
(A) Pursuant to existing commission authority, cost-sharing mechanisms for costs recovered through the memorandum account, and costs above authorized amounts recovered through the balancing account, as applicable.
(B) A rate of return that is lower than the utility’s authorized rate of return on capital costs recovered through the memorandum account, and on capital costs above authorized amounts recovered through the balancing account, as applicable, to encourage the utility to rely less on the account.
(C) Assigning an expiration date to the memorandum account or balancing account.
(d) Each memorandum account or balancing account authorized by statute or by the commission before January 1, 2027, shall be included and reviewed in the subsequent general rate case proceeding cycle, or at a similar cyclical review interval to the general rate case proceeding. As part of its review, the commission shall close any memorandum account or balancing account if the commission determines that the account is no longer necessary, including, but not limited to, accounts established to record costs related to wildfire mitigation, system hardening, undergrounding, or emergency response, because the tracked costs can be adequately addressed through the general rate case.
(e) The commission may establish exceptions to the principles and requirements of subdivision (c) for categories of costs not reviewed pursuant to subdivision (d), including, but not limited to, low-income rate discounts, or if the explicit purpose of the balancing account or memorandum account is to reduce the utility’s incentive to disconnect customers for nonpayment.
(f) As part of its cyclical review process, the commission shall prepare a report to post on its public website about the process and outcome of the review of each utility’s memorandum accounts and balancing accounts.
(g) This section does not limit the commission’s authority to ensure just and reasonable rates pursuant to Section 451 or to implement a memorandum account or balancing account expressly required by statute.
(h) The ratemaking treatment of a memorandum account or balancing account that is in effect on January 1, 2027, shall remain unchanged until the commission reviews the memorandum account or balancing account pursuant to subdivision (d).
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 SB 1098 as chaptered, from the official record. Connect Plus keeps every version and highlights what changed.Compare versions