AB 1677 California Assembly · 2025-2026 Regular Session

Public utilities: electrical and gas corporations: return on equity.

Summary

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.

Bill status in committee 1 of 4 stages cleared

Introduction

Feb 2026

Committee Review

Floor Vote

Governor

Introduced Feb 2, 2026 Last action Mar 23, 2026

Maddy AI version diff · 3 comparisons

What changed between versions

03/10/26 - Amended Assembly → 03/19/26 - Amended Assembly · 5 edits · Mar 19, 2026

MODERATE

AB 1677 was amended to add a co-author (Assembly Member Harabedian), remove the standalone Section 1 that stated legislative intent to reduce utility rates by 25 percent (though similar language remains as a subsection within another section), and change fiscal committee and state-mandated local program designations from 'no' to 'yes,' indicating the bill now carries recognized fiscal implications. The word 'affordability' was also dropped from the digest heading.

SCOPE

Assembly Member Harabedian added as co-author and Assembly Member Gallagher listed as coauthor, broadening legislative sponsorship beyond the original sole author Boerner.

REQUIREMENT

Standalone Section 1 stating 'It is the intent of the Legislature to enact future legislation to require electrical corporations and gas corporations to reduce ratepayer bills by 25 percent' was removed from the operative text. Similar 25 percent reduction language remains as subsection (b) within another section, so the policy goal persists but is no longer a freestanding declaration.

FISCAL

Fiscal committee designation changed from 'no' to 'yes,' indicating the bill now has recognized fiscal implications requiring fiscal committee review.

State-mandated local program designation changed from 'no' to 'yes,' meaning the bill is now classified as imposing state-mandated costs on local agencies or school districts, which triggers reimbursement analysis under Article XIII B of the California Constitution.

DEFINITION

The word 'affordability' was removed from the legislative counsel's digest heading, narrowing the stated policy framing of the bill.

02/02/26 - Introduced → 03/10/26 - Amended Assembly · 5 edits · Mar 10, 2026

MODERATE

AB 1677 was transformed from a non-operative intent statement into an operative bill that imposes binding requirements on electrical and gas corporations seeking rate increases based on return on invested capital. The amendment adds a new Public Utilities Code section (454.05) requiring utilities to submit detailed studies justifying their capital structure and capping authorized return on equity at no more than 400 basis points above the long-term federal government debt rate. It also adds extensive legislative findings arguing that excess ROE constitutes a form of confiscation of ratepayer funds, reframing the constitutional anti-confiscation principle as an upper bound on utility rates.

Scope change

The bill changed from a non-operative sense bill (stating only legislative intent) to an operative bill adding a new section to the Public Utilities Code with binding requirements on both utilities and the commission, plus criminal penalties for violations of implementing orders.

REQUIREMENT

New Section 454.05(a) requires electrical and gas corporations proposing rate changes based on return on invested capital to submit two studies: one showing internally generated cash available to self-fund investments (including deferred taxes, depreciation, and amortization) and the extent of need for external investment, and another showing that the capital structure and ROE relationship is optimized from the ratepayer perspective and minimizes overall revenue requirement including taxes.

New Section 454.05(c) prohibits the Public Utilities Commission from authorizing a return on equity for an electrical or gas corporation that exceeds the rate on long-term debt issued by the federal government by more than 400 basis points.

DEFINITION

New Section 1 adds detailed legislative findings declaring that excess ROE harms ratepayers through immediate costs, incremental taxes, unnecessary investment costs, surplus shareholder profits, and associated taxes. It also asserts that the constitutional limitation on confiscation applies equally to establish an upper bound on public utility rates to prevent confiscation of ratepayer funds for excessive profits.

ENFORCEMENT

Because the new provisions are part of the Public Utilities Act, violations of commission actions implementing the bill become crimes under existing law. This triggers a state-mandated local program designation (changed from 'no' to 'yes') and a fiscal committee review requirement (changed from 'no' to 'yes').

SCOPE

The bill's scope expanded from a purely aspirational statement of legislative intent to include binding regulatory requirements with enforcement consequences. The digest was updated to reflect the new operative provisions regarding return on equity.

Floor votes

How they voted

No floor votes recorded yet.

Full legislative history

Actions timeline

Total actions

Key actions

Committee

Amendments

Mar 23, 2026

Lower · Passed

In committee: Hearing postponed by committee.

lower

Mar 23, 2026

Committee

Re-referred to Com. on U. & E.

lower

Mar 19, 2026

Introduced

From committee chair, with author's amendments: Amend, and re-refer to Com. on U. & E. Read second time and amended.

lower

Mar 11, 2026

Committee

Re-referred to Com. on U. & E.

lower

Mar 10, 2026

Introduced

From committee chair, with author's amendments: Amend, and re-refer to Com. on U. & E. Read second time and amended.

lower

Mar 9, 2026

Committee

Referred to Com. on U. & E.

lower

Feb 3, 2026

Lower · Passed

From printer. May be heard in committee March 5.

lower

1 primary · 2 co-sponsors