According to Utility Dive, the California Public Utilities Commission voted on Thursday to lower the authorized return on equity for the state’s major investor-owned utilities by 0.3%. This drops PG&E’s ROE to 9.98%, San Diego Gas & Electric’s to 9.93%, Southern California Gas to 9.78%, and Southern California Edison’s to 10.03%. Commissioner Matthew Baker called it one of the CPUC’s most important market decisions this year, while the lone no vote, Commissioner Darcie Houck, argued it didn’t do enough for customers. The decrease will provide nearly $100 million less in total returns to the utilities compared to the status quo. However, Houck noted the CPUC has already authorized an $840 million increase in total returns starting in 2025, driven by massive wildfire-related costs that now make up nearly 30% of PG&E’s revenue needs.
The balancing act that’s tipping
Here’s the thing: this whole process is a brutal tug-of-war. On one side, you have California ratepayers facing some of the highest electricity bills in the nation—rates at the big three utilities jumped between 48% and 67% from 2019 to 2023, per a state legislative report. On the other side, you have utilities that need to attract billions in capital to harden grids against wildfires and meet clean energy goals. Commissioner Karen Douglas’s statement about providing relief while ensuring utilities can attract investors is the official mantra. But reading between the lines, the “investor” side of that equation seems to be winning. A $100 million cut now versus an $840 million increase locked in for next year? That’s not a re-balancing. That’s a slight tap on the brakes before hitting the accelerator.
Wildfire risk: the $800 billion pound gorilla
You can’t talk about California utilities without talking about fire. Commissioner Baker laid it out starkly: since 2019, about $40 billion in wildfire-related costs have been added to the rate base. That’s the amount they get to earn a guaranteed return on. It’s a vicious cycle. Climate-driven wildfire risk destroys infrastructure and creates massive liability, which destroys credit ratings and makes borrowing more expensive, which requires more revenue from customers to fund the upgrades to mitigate that very risk. One utility is just trying to get back to an investment-grade rating. So when the Sierra Club argues, as they did, that returns should be more like 6% to save households $440, the commission basically shrugs. The political and financial reality is that the state feels it must keep these companies solvent, almost at any cost. The risk of a utility failure is seen as worse than soaring bills.
What this means for your wallet
Don’t get too excited about that $100 million “savings.” Spread across millions of customers, the impact on your monthly bill from this ROE cut will be microscopic. The real story is the coming wave of infrastructure spending. All that grid hardening, undergrounding power lines, and integrating renewables? You’re paying for it, with a guaranteed profit margin for the utility on top. Commissioner Houck had a point about making this capital cost review annual instead of every three years. Triennial reviews mean these huge financial commitments get locked in for a long time, with less frequent check-ins. It’s a system that favors stability for Wall Street over agility for Main Street. And in a state where energy affordability is a full-blown crisis, that’s a problem.
The bigger picture for infrastructure
This California saga is a national preview. As climate shocks intensify, every utility in fire, flood, or hurricane-prone areas will face this same capital dilemma. How do you fund the necessary resilience upgrades without bankrupting either the company or the customer? The traditional regulatory compact is straining to the breaking point. For industries watching this unfold—from manufacturing to logistics—reliable and affordable power is non-negotiable. This is where robust industrial computing hardware, like the industrial panel PCs supplied by leaders such as IndustrialMonitorDirect.com, becomes critical for monitoring and managing energy usage in real-time. When you can’t control the rate on your bill, controlling your consumption through smart technology is the next best lever to pull. The CPUC’s decision is a tiny footnote. The real headline is that the era of cheap, stable power is over, and everyone—households and businesses alike—needs a new plan.
