The commission vote will slightly decrease the profit margins of Edison and three other big utilities beginning next year. Edison’s rate will fall to 10.03% from 10.3%.

Customers will see little impact in their bills from the decision. Because the utilities are continuing to spend more on wires and other infrastructure — capital costs that they earn profit on — that portion of customer bills is expected to continue to rise.

The vote angered consumer groups that had detailed in filings and hearings at the commission how the utilities’ return on equity — which sets the profit rate that the companies’ shareholders receive — had long been too high.

Among those testifying on behalf of consumers was Mark Ellis, the former chief economist for Sempra, the parent company of San Diego Gas & Electric and Southern California Gas. Ellis estimated that the companies’ profit margin should be closer to 6%.

He argued in a filing that the California commission had for years authorized the utilities to earn an excessive return on equity, resulting in an “unnecessary and unearned wealth transfer” from customers to the companies.

Cutting the return on equity to a little more than 6% would give Edison, Pacific Gas & Electric, SDG&E and SoCalGas a fair return, Ellis said, while saving their customers $6.1 billion a year.

The four commissioners who voted to keep the return on equity at about 10% — the percentage varies slightly for each company — said they believed they had found a balance between the 11% or higher rate that the four utilities had requested and the affordability concerns of utility customers.

Alice Reynolds, the commission’s president, said before the vote that she believed the decision “accurately reflects the evidence.”

Commissioner Darcie Houck disagreed and voted against the proposal. In her remarks, she detailed how California ratepayers were struggling to pay their bills.

“We have a duty to consider the consumer interest in determining what is a just and reasonable rate,” she said.

Consumer groups criticized the commission’s vote.

“For too long, utility companies have been extracting unreasonable profits from Californians just trying to heat or cool their homes or keep the lights on,” said Jenn Engstrom at CALPIRG. “As long as CPUC allows such lofty rates of return, it incentivizes power companies to overspend, increasing energy bills for everyone.”

California now has the nation’s second-highest electric rates after Hawaii.

Edison’s electric rates have risen by more than 40% in the last three years, according to a November analysis by the commission’s Public Advocates Office. More than 830,000 Edison customers are behind in paying their electric bills, the office said, each owing a balance of $835 on average.

The commission’s vote Thursday was in response to a March request from Edison and the three other big for-profit utilities. The companies pointed to the January wildfires in Los Angeles County, saying they needed to provide their shareholders with more profit to get them to continue to invest in their stock because of the threat of utility-caused fires in California.

In its filing, Edison asked for a return on equity of 11.75%, saying that it faced “elevated business risks,” including “the risk of extreme wildfires.”

The company told the commission that its stock had declined after the Jan. 7 Eaton fire and it needed the higher return on equity to attract investors to provide it with money for “wildfire mitigation and supporting California’s clean energy transition.”

Edison is facing hundreds of lawsuits filed by victims of the fire, which killed 19 people and destroyed thousands of homes in Altadena. The company has said the fire may have been sparked by its 100-year-old transmission line in Eaton Canyon, which it kept in place even though it hadn’t served customers since 1971.

Return on equity is crucial for utilities because it determines how much they and their shareholders earn each year on the electric lines, substations, pipelines and the rest of the system they build to serve customers.

Under the state’s system for setting electric rates, investors provide part of the money needed to build the infrastructure and then earn an annual return on that investment over the assets’ life, which can be 30 or 40 years.

In a January report, state legislative analyst Gabriel Petek detailed how electric rates at Edison and the state’s two other biggest investor-owned electric utilities were 50% higher than those charged by public utilities such as the Los Angeles Department of Water and Power. The public utilities don’t have investors or charge customers extra for profit.

Before the vote, dozens of utility customers from across the state wrote to the commission’s five members, who were appointed by Gov. Gavin Newsom, asking them to lower the utilities’ return on equity.

“A profit margin of 10% on infrastructure improvements is far too high and will only continue to increase the cost of living in California,” wrote James Ward, a Rancho Santa Margarita resident. “I just wish I could get a guaranteed profit margin of 10% on my investments.”

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In a unanimous vote, justices told a lower court to revisit a ruling that upheld reduced payments to solar panel owners for selling excess power back to utility companies. Justices did not rule on whether the changes to the solar program were legal, requiring the court of appeals to determine this.

“They basically said the lower court kind of punted on the whole substance of the [solar payments] decision,” Bernadette Del Chiaro, vice president for California at the Environmental Working Group, said. “I do think they’re clearly stating this needs to be reviewed.”

At issue is a 2022 decision by state regulators to reduce by about 75% payments to solar panel owners for excess power. The change was intended to help make bills affordable for all customers while still encouraging the adoption of renewable energy sources. Three environmental groups that brought the lawsuit — the Center for Biological Diversity, The Protect our Communities Foundation, and the Environmental Working Group — argued in the case that the state utilities commission’s decision left out crucial considerations around benefits to customers and disadvantaged communities. 

“We don’t need [to be in] an affordability crisis if we have more local generation,” Roger Lin, senior attorney fro the Center for Biological Diversity, said.

Utilities pay solar panel owners for their excess power under a program known as “net energy metering.” In previous iterations of the program – “NEM 1.0” and “NEM 2.0” – utilities paid solar customers a retail rate for their extra energy, which is the same price the utilities charge other customers when they resell that energy. This was changed under the current iteration of the program – “NEM 3.0” – which instead gives customers the “avoided cost,” which is how much utilities save by not buying that power on the wholesale market. 

Customers who joined the program after mid-April 2023 receive the new rate, while customers under the prior two versions will continue to receive the old rate for the duration of their contracts, which is typically about 20 years.

Utility commissioners ruled in favor of power companies, which argued that older versions of the program created an unfair cost burden on customers. Those without rooftop solar, utilities said, have to pay more than their peers for routine maintenance to the grid. The groups bringing the lawsuit said this idea is overblown.  A court of appeals upheld regulators’ decision, relying on a legal standard that gives significant deference to decisions made by the California Public Utilities Commission.

Thursday’s decision said the court of appeals “erred” by using this standard.

Whether or not the change in how solar panel owners are paid is legal will be left to the lower courts. But the decision this week could have farther-reaching implications for state utility regulators.

“We appreciate the Court’s careful attention to the appropriate standard of deference for reviewing CPUC decisions,” Terrie Prosper, utility commission spokesperson, said. “We are pleased that the CPUC’s decision will remain in effect as an important part of controlling electricity bills.”

Advocates said the decision reinforces that the utilities commission must ensure that its decisions fit squarely within the law.

“For too long, they really have operated in a black box behind a shroud of complexity,” Del Chiaro said. “Consumers and the planet have consistently lost out as a result of that.”

The fallout from the utilities commission’s 2022 net metering decision included an 82% drop in customers requesting connections for rooftop solar installations, and industry groups expected a loss of about 17,000 jobs during the first year of the change. 

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The California Public Utilities Commission on Thursday voted 4-0, with one commissioner recused, to approve a judge’s proposed decision that Aliso Canyon should remain open for the time being, the Southern California News Group reported.

But commissioners said the vote created a pathway to lowering or eliminating reliance on Aliso Canyon in future years by establishing a target for the level of demand for natural gas in Southern California that can be met without the need of the facility.

“This decision puts forward a path to the closure of Aliso Canyon that is achievable, realistic, and protective of families and businesses who are struggling to pay energy bills,” CPUC President Alice Reynolds said in a statement. “Huge progress is underway to bring online clean energy resources and drive down demand for natural gas-fired power plants.”

Opponents of the facility want it closed immediately. Craig Galanti, a Porter Ranch resident living near Aliso Canyon, was unhappy with the commission’s vote.

“Am I surprised? No. Am I disappointed? I’m exceedingly disappointed,” he told the news group. “The CPUC continues to support the best interests of the utilities at the expense of the community’s health and safety.”

The 2015 Aliso Canyon gas leak, which took four months to control, released more than 120,000 metric tons of methane and other gases into the atmosphere over communities in the San Fernando Valley.

Thousands of residents were forced to move out of their homes to escape a sulfurous stench and maladies including headaches, nausea and nosebleeds. SoCalGas and its parent company, Sempra Energy, agreed to pay up to $1.8 billion in settlements to more than 35,000 victims in 2021.

Last year, the company reached another settlement with the utilities commission, agreeing to pay more than $70 million to the Aliso Canyon Recovery Account to address the impacts from the leak on air quality and public health.

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