AB 1774

AB1774:v96#DOCUMENT

Bill Start

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

Assembly Bill

No. 1774

An act to add Section 8386.11 to the Public Utilities Code, relating to electrical corporations.

LEGISLATIVE COUNSEL'S DIGEST

AB 1774, as amended, Boerner. Electrical corporations: wildfire mitigation plans: expenditures.

Existing law requires an electrical corporation to submit to the Office of Energy Infrastructure Safety a wildfire mitigation plan at least once every 4 years for review. Existing law requires the office to approve or deny each wildfire mitigation plan within 9 months of its submission. Existing law requires the Public Utilities Commission to assess a penalty on an electrical corporation that fails to substantially comply with its wildfire mitigation plan.

Existing law prohibits a large electrical corporation from including in its equity rate base its share for the first $5,000,000,000 expended in aggregate by large electrical corporations on fire risk mitigation capital expenditure, as provided, and authorizes those expenditures to be financed through a financing order, as described. Existing law requires the commission, in addition to the $5,000,000,000, to prohibit a large electrical corporation from including in its equity rate base its share of the first $6,000,000,000 expended in aggregate by large electrical corporations on fire risk mitigation capital expenditures approved by the commission on or after January 1, 2026, and authorizes the electrical corporation’s share of the fire risk mitigation capital expenditures and the debt financing cost of these fire risk mitigation capital expenditures to be financed through a financing order, as provided.

This bill would require the commission, before an electrical corporation is authorized to recover, collect, or expend ratepayer funds for new or ongoing wildfire mitigation programs, to require an independent audit of the electrical corporation’s wildfire mitigation expenditures incurred during the preceding 5 calendar years, on or before June 30, 2027, to complete a one-time independent audit of all wildfire mitigation expenditures incurred by each electrical corporation between January 1, 2021, and January 1, 2027, as provided. The bill would require that the audit be conducted by an independent third-party auditor. The bill would require the commission to prescribe books, records, and accounting procedures for wildfire mitigation programs that support and enable the independent audit. The bill would require the commission to take certain actions, including disallowing recovery of the wildfire mitigation expenditures, if the commission determines that those expenditures are unreasonable, imprudent, or improperly incurred. The bill would require the commission, in the next appropriate proceeding following the audit, to consider the findings of the audit in determining the terms and conditions under which an electrical corporation’s requested cost recovery may be authorized, as provided. The bill would require the commission to establish a schedule for conducting future independent audits of each electrical corporation’s wildfire mitigation expenditures incurred during the preceding 4 calendar years. The bill would require the commission, pursuant to that schedule, to conduct an independent audit of an electrical corporation’s prior wildfire mitigation expenditures before any proceeding in which the electrical corporation seeks to recover, collect, or expend ratepayer funds for wildfire mitigation programs, including, but not limited to, expenditures authorized pursuant to an approved wildfire mitigation plan.

Under existing law, a violation of an order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because a violation of a commission action implementing the bill’s requirements would be a crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Digest Key

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YES

Bill Text

The people of the State of California do enact as follows:

SECTION 1.

It is the intent of the Legislature to enact legislation that would reduce utility rates by 25 percent.

SEC. 2.SECTION 1.

Section 8386.11 is added to the Public Utilities Code, to read:

8386.11.

(a)Before an electrical corporation may recover, collect, or expend ratepayer funds for new or ongoing wildfire mitigation programs, including, but not limited to, expenditures authorized pursuant to an approved wildfire mitigation plan or amounts sought for recovery through rates, the commission shall require an independent audit of the electrical corporation’s prior wildfire mitigation expenditures.

(b)The audit required pursuant to subdivision (a) shall, at a minimum, examine all wildfire mitigation expenditures incurred during the preceding five calendar years and shall determine all of the following:

8386.11.

(a) (1) On or before June 30, 2027, the commission shall complete a one-time independent audit of all wildfire mitigation expenditures incurred by each electrical corporation between January 1, 2021, and January 1, 2027. The audit shall, at a minimum, examine and make findings on all of the following:

(1)

(A) Whether the expenditures were reasonable, prudent, and cost effective.

(2)

(B) Whether the expenditures were used for their authorized wildfire mitigation purposes.

(3)

(C) Whether the expenditures resulted in measurable risk reductions or safety benefits.

(4)

(D) Whether any expenditures were duplicative, excessive, misallocated, or improperly charged to ratepayers.

(5)

(E) Whether any expenditures should be disallowed or subject to refund. disallowed.

(c)(1)If an electrical corporation fails to prepare and maintain records sufficient to enable the commission to conduct the audit required pursuant to subdivision (a), the commission shall disallow those expenses for purposes of establishing rates for the electrical corporation.

(2)With respect to expenditures made before January 1, 2027, that are the subject of the audit required pursuant to subdivision (a), if an electrical corporation has failed to prepare or maintain records sufficient to enable the commission to completely evaluate any relevant, or potentially relevant, issue related to the reasonableness and prudence of an expense subject to the audit, the commission shall disallow that expense for purposes of establishing rates for the corporation.

(3)This subdivision does not apply if the commission determines that a reasonable person could not have anticipated either the relevance, or potential relevance, to an evaluation of costs incurred on the project of preparing or maintaining the records or the extent of recordkeeping required to adequately evaluate those costs.

(2) (A) If the commission determines that it cannot complete the audit required by paragraph (1) on or before June 30, 2027, it shall make a publicly available written determination including findings as to the reasons that it cannot do so.(B) Notwithstanding subparagraph (A), the commission shall complete the audit on or before December 31, 2027.

(d)

(3) The audit audit required by paragraph (1) shall be conducted by an independent third-party auditor selected by the commission and who has no financial or contractual relationship with the electrical corporation being audited. shall comply with any applicable professional independence standards, including those standards governing conflicts of interest. The reasonable costs of compliance with the audit may be recovered by the electrical corporation only upon a finding by the commission that the electrical corporation maintained its records in accordance with the commission’s requirements established pursuant to subdivision (g).

(e)If the commission determines that a wildfire mitigation expenditure is unreasonable, imprudent, or improperly incurred, the commission shall any of the following:

(1)Disallow recovery of those amounts from ratepayers.

(2)Order refunds or bill credits as appropriate.

(3)Impose additional conditions, reporting requirements, or limitations on future wildfire mitigation funding.

(b) (1) In the next appropriate proceeding following the audit, the commission shall consider the findings of the audit in determining the terms and conditions under which an electrical corporation’s requested cost recovery may be authorized.(2) If the commission determines, based on its consideration of the audit, that a wildfire mitigation expenditure was unreasonable, imprudent, or improperly incurred, or if the electrical corporation failed to prepare and maintain records sufficient to enable the audit, the commission shall disallow that wildfire mitigation expenditure pursuant to Section 463, consistent with Section 747.(3) If the commission departs from the findings of the audit, it shall make express findings explaining its basis for doing so.(c) (1) The commission shall establish a schedule for conducting future independent audits of each electrical corporation’s wildfire mitigation expenditures incurred during the preceding four calendar years.(2) An audit conducted pursuant to this subdivision shall be subject to the same requirements as the audit conducted pursuant to subdivision (a).(3) The findings of an audit conducted pursuant to this subdivision shall be made available for consideration in any proceeding at which the electrical corporation seeks to recover, collect, or expend ratepayer funds for wildfire mitigation programs.(4) The commission shall not require more than one audit of any single electrical corporation in any calendar year.(d) The commission shall conduct, pursuant to the schedule established by subdivision (c), an independent audit of an electrical corporation’s prior wildfire mitigation expenditures before any proceeding in which the electrical corporation seeks to recover, collect, or expend ratepayer funds for wildfire mitigation programs, including, but not limited to, expenditures authorized pursuant to an approved wildfire mitigation plan.(e) (1) The commission shall consult with the office and shall enable its selected independent third-party auditor to use data generated by the existing independent evaluator assessments or audits, if feasible and appropriate in the judgment of the auditor.(2) Notwithstanding paragraph (1), an audit required pursuant to subdivision (a) or (c) shall cover the full scope of information required by subdivision (a).

(f) Audit reports and commission determinations made pursuant to this section shall be public records, except for information lawfully protected as confidential. The commission shall make audit findings available on its internet website.

(g) The Consistent with its authority under law, including, but not limited to, Sections 701, 792, and 794, the commission shall prescribe books, records, and accounting procedures for wildfire mitigation programs required by law that support and enable the independent audit required by this section.

(h) This section does not limit the commission’s authority to conduct audits, investigations, or enforcement actions pursuant to this code or limit its remediation authority.

SEC. 3.SEC. 2.

No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.