AMENDED IN ASSEMBLY JUNE 15, 2026

AMENDED IN ASSEMBLY MAY 27, 2026

AMENDED IN SENATE MARCH 23, 2026

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

96

Introduced by Senator Becker

(Coauthor: Senator Stern)

February 2, 2026

An act to add Sections 351, 756, and 759 to the Public Utilities Code, relating to public utilities.

Vote: majority   Appropriation: no   Fiscal committee: yes   Local program: yes

LEGISLATIVE COUNSEL’S DIGEST

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical 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.

This bill would require each electrical corporation to obtain the commission’s approval for the terms of its retail transmission rates. rates, as specified.

This bill would authorize the commission to direct an electrical corporation with more than 100,000 service connections in California, when billing a large commercial or industrial customer for separately metered new load to provide industrial heat, to apply an adjustment factor to the per kilowatthour rate for each volumetrically determined surcharge on energy use to limit the surcharge ratio, as defined, to no more than 25% or an alternative maximum ratio determined by the commission to be just and reasonable and in furtherance of facilitating electrification of industrial energy use. The bill would prohibit an eligible industrial transition customer that pays a reduced surcharge from receiving an incentive funded by that surcharge in an amount that exceeds the amount of the surcharge paid by the eligible industrial transition customer. The bill would require the commission, on or before January 1, 2032, and every 5 years thereafter, to evaluate and report to the Legislature on the adjustment factor, as specified.

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 provision would be part of the act and a violation of a commission action implementing that provision would be a crime, this bill would impose a state-mandated local program.

Existing law establishes the Independent System Operator as a nonprofit, public benefit corporation and requires the Independent System Operator, among other duties, to ensure the efficient use and reliable operation of the electrical transmission grid consistent with the achievement of planning and operating reserve criteria, as provided.

This bill would establish as a policy of the state that allocation of costs to ratepayers for transmission and distribution resources should follow cost causation principles. The bill would require the commission, on or before January 1, 2028, to request the Independent System Operator to reconsider issues raised in its transmission access charge structure enhancements proceeding as potential reforms to its high-voltage transmission access charges. The bill would require the commission to develop recommendations for changes to high voltage transmission access charges that would improve consistency with the commission’s causation principles, and to submit the recommendations to the Independent System Operator within a proceeding considering changes to the high-voltage transmission access charge structure.

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) Many regions of the state have consistently failed to meet National Ambient Air Quality Standards, with negative impacts on the health of people in those communities, and emissions of criteria air pollutants from industrial firms are one of the significant contributors to the state’s air quality challenges.

(2) The state also has ambitious targets to reduce greenhouse gas emissions by 85 percent and achieve zero net emissions of greenhouse gas by 2045, and emissions from industrial sources accounted for 18.6 percent of emissions of the state’s 2023 greenhouse gas inventory.

(3) While the state’s climate laws direct the State Air Resources Board to “achieve the maximum technologically feasible and cost-effective reductions in greenhouse gas emissions,” they also require the State Air Resources Board to minimize “leakage,” which means attempting to achieve emissions reductions without just causing the underlying economic activity to leave the state and emit elsewhere.

(4) To reduce air pollution and greenhouse gas emissions from the industrial sector while retaining and growing industrial activity and jobs in the state, it will be important for the state to support cost-effective pathways for industrial firms to adopt lower emissions solutions.

(5) One pathway with proven zero-emission solutions for some industrial use cases is electrification, including electric boilers, industrial heat pumps, and thermal energy storage systems, but their economic feasibility depends critically on the cost of electricity.

(6) The Public Utilities Commission has been developing approaches to electricity rates to encourage demand flexibility, such as hourly dynamic rates linked to wholesale market prices, that could make electrification more cost effective, particularly for industrial loads that can be flexible, and avoid usage during peak time periods.

(7) However, two large components of industrial electricity bills, volumetric surcharges and transmission access charges, do not vary by time of use, which reduces the incentive for industrial customers to shift usage to off-peak times and makes it difficult for electrification solutions to be cost competitive with traditional energy sources, even when they focus on using electricity only during off-peak times.

(8) Rather than the Independent System Operator’s approach of spreading transmission costs equally across all usage, grid operators managing most other regions of the country, including PJM Interconnection LLC, Electric Reliability Council of Texas, Inc., Midcontinent Independent System Operator, Inc., Southwest Power Pool, ISO New England, Inc., and the New York Independent System Operator, allocate more of the cost of transmission to usage that occurs during peak times, which supports lower electricity prices during off-peak times to encourage shifting demand away from the times when the grid is most strained.

(9) A significant shift of industrial energy usage from traditional energy sources to electricity would represent large new demand for the electrical system that would contribute to paying for the fixed costs of the grid and could reduce rates for all ratepayers, as long as the new load pays more than its marginal cost of service.

(b) It is the intent of the Legislature to retain and expand industrial firms and jobs in the state while also encouraging and supporting, where economically feasible, a shift in industrial energy usage toward zero-emission options, including electrification, in order to reduce greenhouse gas emissions, cut air pollution, and lower electricity rates.

SEC. 2.

Section 351 is added to the Public Utilities Code, to read:

351.

(a) On or before January 1, 2028, the commission shall request the Independent System Operator to reconsider the issues raised in its transmission access charge structure enhancements proceeding as potential reforms to its high-voltage transmission access charges.

(b) The commission shall develop recommendations for changes to high-voltage transmission access charges that would improve consistency with the commission’s cost causation principles and shall submit these recommendations to the Independent System Operator within a proceeding considering changes to transmission access charge structures.

SEC. 3.

Section 756 is added to the Public Utilities Code, to read:

756.

Each electrical corporation shall obtain the commission’s approval for the terms of its retail transmission rates. This section does not grant the commission authority to determine or disallow rates approved by the Federal Energy Regulatory Commission for wholesale transmission. The commission may determine how those federally approved wholesale transmission rates are allocated among the electrical corporations’ retail ratepayers.

SEC. 4.

Section 759 is added to the Public Utilities Code, to read:

759.

(a) For purposes of this section, all of the following definitions apply:

(1) “Eligible industrial transition customer” means a large commercial or industrial customer with new load on or after January 1, 2027, that is metered separately from any previously existing loads and that consists solely of eligible industrial transition usage.

(2) “Eligible industrial transition usage” means using electricity to provide industrial heat, including through the use of a thermal energy storage system, and may include de minimis consumption of electricity necessary for management and control of that usage.

(3) “Industrial heat” includes any of the following:

(A) Heat used directly as process heat in an industrial facility.

(B) Heat used for a thermal energy network that provides heat from a central source to multiple buildings connected to the thermal energy network.

(C) Heat used for both industrial heat and behind-the-meter cogeneration of electricity.

(4) “Large electrical corporation” has the same meaning as defined in Section 2827.

(5) “Surcharge ratio” means the sum of all volumetrically determined surcharges on energy use for a billing period, including volumetrically determined nonbypassable charges, divided by the sum of all volumetric energy and delivery charges for a billing period.

(b) The commission may direct each large electrical corporation, when billing an eligible industrial transition customer for eligible industrial transition usage, to apply an adjustment factor to the per kilowatthour rate for each volumetrically determined surcharge on energy use to limit the surcharge ratio to no more than 25 percent or an alternative maximum ratio determined by the commission to be just and reasonable and in furtherance of facilitating electrification of industrial energy use to improve air quality and reduce emissions of greenhouse gases.

SEC. 5.

No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution.