Here is a rundown of some notable recent activity at the California Public Utilities Commission.
COST OF CAPITAL
PG&E filed an advice letter to implement the Yield Spread Adjustment authorized in the CPUC's 2026 Cost of Capital decision, establishing how interest will be calculated on balancing and memorandum accounts beginning January 1, 2026. The YSA is designed to reflect the difference between PG&E’s actual short-term borrowing costs and the three-month Commercial Paper rate historically used for regulatory interest. For 2026, the YSA is set at 125 basis points, based on a 12-month average spread.
By adding a 125-basis-point Yield Spread Adjustment to the Commercial Paper rate, the CPUC is recognizing that PG&E’s actual short-term borrowing costs are higher than the proxy rate long used for balancing and memorandum accounts. And though PG&E's advice letter does not change rates today, it increases the interest accruing on large, long-lived accounts, expanding the eventual revenue requirement tied to wildfire costs, procurement balances, ERRA, and other major tracking mechanisms if balances persist.
NATURAL GAS RATEMAKING
On January 16, multiple parties responded to a petition for modification filed by SoCalGas/SDG&E (the Sempra Utilities) seeking changes to the post-Test-Year ratemaking mechanism adopted by the CPUC in a 2024 decision, D.24-12-074.
The Sempra Utilities claim the adopted mechanism leaves approximately $5 billion in capital-related revenue requirements unfunded over the 2025–2027 post-Test-Year period. Opposing parties (Indicated Shippers/Environmental Defense Fund, TURN/Southern California Generation Coalition, Cal Advocates, and the Protect Our Communities Foundation) argue that the petition is procedurally improper and substantively deficient.
By contrast, PG&E and SCE support the petition and align with the Sempra Utilities' central argument that the CPUC's adoption of a one-part post-Test-Year mechanism rests on a misconception of how capital costs affect revenue requirements.
The CPUC's treatment of this issue will demonstrate how firmly it intends to hold the line on post-Test-Year moderation in the face of renewed utility pressure.
ERRA/PCIA REFORM
SCE and other parties filed a joint prehearing conference statement in the CPUC’s ERRA/PCIA reform docket, outlining positions for Track 2, which is narrowly focused on whether Renewable Energy Credits generated before January 1, 2019 should carry a ratemaking value.
The investor-owned utilities argue that pre-2019 banked RECs were fully valued under the former Power Charge Indifference Adjustment methodology and that assigning a new value now would violate statutory indifference and impose retroactive cost shifts on bundled customers. CalCCA, the Alliance for Retail Energy Markets, and the Direct Access Customer Coalition argue that customers who later departed bundled service may be entitled to credits when those RECs are used for current Renewables Portfolio Standard compliance.
If the Commission adopts a non-zero value, that could affect ERRA forecast mechanics, PCIA calculations, and future REC market behavior. Maintaining a zero-dollar value would reinforce the post-2019 framework and limit further challenges to legacy REC treatment.
PROVIDER OF LAST RESORT
At its first voting meeting of the year, the CPUC adopted a decision establishing a procedural framework for how non–investor-owned utilities may seek designation as a Provider of Last Resort (POLR) under Senate Bill 520, while declining to resolve hypothetical policy questions in the absence of a concrete applicant.
The decision finds that no non-IOU entities currently intend to assume full POLR responsibilities for all customer classes within a geographic area, and that interest expressed by some parties is conditional and fact-specific. Consequently, the decision adopts a case-by-case application approach rather than a generalized rulemaking.
The decision requires any non-IOU applicant to submit a comprehensive application demonstrating financial, technical, and legal capability; compliance with procurement, reliability, and disconnection rules; and protections against cost shifting. The decision clarifies that POLR obligations may not be divided by customer class, affirms that applications must be jointly filed with the incumbent IOU (without granting the IOU veto power), and requires IOUs to be named as respondents.
"POLR is a serious responsibility," said Commissioner John Reynolds. "At present, the electric investor-owned utilities act as Providers of Last Resort — the backstop in case an alternative provider fails financially.
"For example, when Western Community Energy went bankrupt, Southern California Edison had to take 100,000 customers back and provide them electricity service with only four weeks of notice. Southern California Edison, as the Provider of Last Resort, had to be ready for this type of event. So this is a serious responsibility with serious requirements."
More coverage of these items --and important new developments in the Commission's IRP proceeding -- are available at California Regulatory Intelligence.
