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(Bloomberg) — California regulators reduced the profit that utilities are allowed to make on infrastructure investments in an effort to rein in soaring electricity bills.
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The move Thursday by the California Public Utilities Commission underscores its oft-conflicting policy goals: while the state is keen for power providers to fortify a grid that’s sparked catastrophic wildfires, doing so costs billions of dollars. Those expenses are typically passed on by utilities owned by PG&E Corp., Edison International and Sempra to homes and businesses. State regulators are also trying to minimize further inflation of utility bills.
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On a 4-1 vote, returns for PG&E, Southern California Edison and San Diego Gas & Electric — the state’s main investor-owned utilities — were set at a range of 9.78% to 10.03% compared to the national average of about 9.72%.
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The majority of commissioners said they recognized the need for utilities to raise capital but considered the proposed rates a fair return.
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The one dissenting vote came from Commissioner Darcie Houck, who said, “I do not think that the decision threads the needle sufficiently to consider the full impact to the customer interest,” citing an affordability crisis in California and across the country.
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PG&E’s return on equity was lowered to 9.98% from its current 10.28%, SoCal Edison’s was lowered to 10.03% from 10.33%, SDG&E’s was lowered to 9.93% from 10.23% and Southern California Gas was lowered to 9.78% from 10.08%.
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PG&E had asked for 11.3%, SoCal Edison wanted 11.75% and SDG&E called for 11.25%.
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“PG&E is disappointed that the final decision fails to acknowledge current elevated risks to help attract the needed investment for California’s energy systems,” spokesperson Lynsey Paulo said in an emailed statement.
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A spokesperson for Southern California Edison said the company projects a rate decrease in January regardless of Thursday’s decision. A representative for SDG&E said the utility is working to manage costs while reducing wildfire risk.
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Shares of the companies were little changed in late trading.
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(Updates to include comments from utilities and additional details.)
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