The CPUC Considers New Advanced Electric Rate Design Policies
On September 22, 2026, the California Public Utilities Commission (“CPUC”) issued a Scoping Memo outlining a variety of changes to the CPUC’s rate design program intended to modernize the regulated electric rate structure. The proceeding was opened by the CPUC on April 9, 2026, and is docketed as Rulemaking 26-04-009, “Order Instituting Rulemaking on California Advanced Electric Rate Design.” The Scoping Memo also addresses the proceeding’s schedule for workshops, party and staff proposals, hearings, and ultimately a final decision for each tranche of the proceeding.
Rate design is a critical component of California’s electricity grid and market. At particular issue where rate design is concerned, the state’s investor-owned utilities subject to CPUC regulation operate and invest in this system to maintain state-wide reliability and meet energy demand. Utilities then recoup costs via utility bills. Rate design is a regulatory tool that ensures sufficient revenue to operate the state’s energy infrastructure while allocating costs to ratepayers by customer class and tariff schedule.
The Scoping Memo proposes breaking the rate design proceeding into four distinct tracks. Track 1 of the proceeding will address whether the CPUC should consider a rate design methodology specifically for data centers, and if so, how that methodology would consider customer classifications, ratepayer protections, and more. As parties have identified potential contested material facts, evidentiary hearings will likely be requested and may be necessary for the CPUC to come to a decision on Track 1 issues. The CPUC will host a workshop in October of 2026 on Senate Bill 57 (2025), which allows the CPUC to study how the proliferation of data centers’ power use will affect other electricity customers and examine for shifted costs on the same. The CPUC will issue a ruling with its staff proposal on a tariff for data centers in the first quarter of 2027.
Following Track 1, Track 2 will explore whether residential rate designs should be adjusted, which will broadly encompass the varying aspects that make up residential rates. Residential rates include, and are not limited to, baseline tiers in time-of-use and electrification rates, income verification processes, and potential third-party consultant services on these issues.
Track 3 considers whether the CPUC will adjust non-residential rates, and what other elements of the utilities’ revenue requirement as authorized should be classified as fixed costs for non-residential customers. Track 3 will open with a joint proposal by Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric, which will propose the implementation of Assembly Bill 2109’s (2024) exemption for industrial process heat recovery technology customers subject to requirements yet to be established by the CPUC.
Finally, Track 4 will be occupied with the frameworks for transmission revenue requirements, marginal costs, and any additional rate design requirements for dynamic rates. Generally speaking, dynamic rates include a portion of energy rate elements that are reflective of the larger California Independent System Operator day-ahead costs. The CPUC determined there are no disputed material facts for Tracks 2-4, and so there is no need for evidentiary hearings on those tracks.
The Scoping Memo proposes that the proceeding will be resolved within the next 24 months, and includes instructions for public comment, information on the CPUC’s Public Advisor, as well as information for parties to file and serve documents on the record in the proceeding.
For more information, contact Andy Brown or Clarissa Maloney