Rates: prohibited cost recovery.

The term 'inappropriate cost recovery' was replaced with 'prohibited cost recovery' throughout the bill. This changes the legal standard from one requiring a judgment about whether conduct is inappropriate to one based on clear statutory or regulatory prohibitions.

The definition of 'above-the-line account' (which cross-referenced Section 748.3) was removed from the bill's definitions subsection. The bill now only defines 'utility.'

The self-remediation penalty exemption was clarified: the old language required the utility to have 'remediated it before the matter' was raised, while the new language requires the utility to have 'remediated on its own initiative,' removing the timing reference and emphasizing voluntary action.

Coauthors were added: Assembly Members Berman and Harabedian, and Senators McNerney and Rubio.

The criteria trigger language changed from 'any of the following criteria' to 'any either of the following criteria,' which appears to be a drafting error since three criteria are still listed. If intentional, it would narrow the scope to only two of the three conditions.

The entire provision extending the Transmission Infrastructure Accelerator's public-private partnership plan deadline from July 1, 2027 to December 1, 2027 (amending Government Code Section 12100.112) is removed from the bill.

The state-mandated local program designation changes from 'no' to 'yes,' indicating the bill now carries a local program mandate finding.

The term 'inappropriate cost recovery' is replaced with 'prohibited cost recovery' throughout the bill, signaling a shift in framing from a judgment-based standard to a rule-based one.

Section 748.4(b) is restructured from a direct prohibition on utilities ('A utility shall not engage in...') to a commission finding requirement ('The commission shall find that a utility has engaged in...'), and adds the phrase 'regulator-approved financial account' to clarify which accounts are covered.

A new subsection (e) requires each utility to submit an annual report to the commission identifying all instances of prohibited cost recovery found in the prior year, the actions taken in response, and steps taken to prevent future occurrences.

The self-identification penalty exemption in subsection (c)(2)(A) is tightened: it now explicitly requires that the utility identified the issue 'on its own initiative' and restructures the list of circumstances where the exemption does not apply into a clearer numbered format.

Subsection (c) adds an additional trigger for commission action: recording a prohibited cost to a ratepayer-funded account in violation of a commission rule, tariff, or statute, alongside the existing 'inappropriate cost recovery' determination.

Adds an entirely new Section 748.4 to the Public Utilities Code creating an 'inappropriate cost recovery' prohibition and penalty regime, expanding the bill far beyond its original scope of extending a transmission infrastructure deadline.

Defines 'above-the-line account' (incorporating the definition from Section 748.3) and 'utility' as any electrical, gas, water, sewer system, or telephone corporation.

Prohibits a utility from recording to an above-the-line account any cost that is categorically excluded from ratepayer recovery by statute/commission decision/rule, exceeds the scope of the commission's authorization for that account, or is already authorized for recovery through another ratemaking mechanism.

Requires the commission to disallow recovery of the inappropriate cost and impose a financial penalty. No penalty applies if the utility self-identified and remediated the issue before it was raised by a party, commission staff, or other inquiry. The base penalty equals 1x the amount of inappropriate cost recovery. A 3x multiplier applies if there are two or more separate instances within five years or a sustained practice across multiple reporting periods.

Clarifies that the new section does not limit the commission's existing authority under Sections 2107, 2108, Rule 1.1, or other law to impose additional penalties for the same or related conduct.

The original deadline extension from July 1, 2027 to December 1, 2027 for the Transmission Infrastructure Accelerator's public-private partnership plan submission is retained but is now a secondary provision (Section 3) rather than the sole content of the bill.

Adds a no-reimbursement provision stating that no state reimbursement is required under Article XIII B because the act creates a new crime or infraction, which changes the fiscal analysis from 'no' to 'yes' for state-mandated local program.