California utility regulator approves new, lower investor return rate for PG&E
AI-generated summary reviewed by our newsroom.
- California regulator sets new PG&E return on equity rate.
- The cap was lower than PG&E requested but higher than requests from advocates.
- The decision was closely watched.
California’s utility regulator on Thursday voted to approve the portion of revenue that Pacific Gas and Electric can use to compensate investors, a figure that was lower than what the company originally requested but higher than the amount advocacy groups had called for.
Getting there took most of the year and highlighted the deep frustration many Californians have with PG&E and other major utility companies across the state over their prices, profits and role in sparking major wildfires.
The new rate of return approved by the Public Utilities Commission is what PG&E’s shareholders can earn on infrastructure projects, such as undergrounding power lines, which is a major source of profit for the company. The board also approved rates for Southern California Gas, Southern California Edison and San Diego Gas & Electric.
It is unclear how much Thursday’s move will affect what Californians have to pay for their electricity and gas. Thursday’s decision does not directly set rates, said Alice Reynolds, president of the California Public Utilities Commission, but it does affect people’s bills over time as the new numbers are used to determine future prices companies can use to charge their customers.
“We need to look at how the cost of capital affects all of the factors that impact customer bills,” Reynolds said. “And we have those customers in mind in setting the level where we have set it.”
Return on equity rate is lowest in 20 years
For PG&E the return on equity was set at 9.98%, which is lower than its current rate and the lowest it has been since at least 2006. The company had asked for 11.3% before the final decision was made and said that increase would have raised monthly bills for customers by roughly $5.50 per month. PG&E’s new rate is a cap and not a guarantee of the portion that it will ultimately use. It goes into effect next year.
Roughly 16 million people in northern and central California receive gas and electric service from PG&E, one of the largest utility companies in the country. Last year, the company recorded a $2.47 billion profit after earning $2.24 billion in 2023.
“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,” the company said in a statement. “We will keep working with regulators and state leaders to ensure adequate funding needs and reasonable long-term rates for customers, so we can continue stabilizing our energy prices and funding critical energy system improvements for customers.”
Several environmental and other groups called on the commission to approve lower numbers than the company ultimately was granted. The Sierra Club had requested PG&E receive a 6.22% return on equity.
“While this reduction is better than nothing, in the middle of an affordability crisis, Californians deserve more than a performative gesture—they deserve leadership,” said Julia Dowell, senior organizer at Sierra Club. “The commission failed to provide it today.”
The new figures were approved on a 4-1 vote.
Commissioner Darcie Houck, the lone person to vote against it, said that many Californians were behind on their utility bills and had faced large price increases in recent years.
“While I believe that this decision provides the utilities with a sufficient rate of return to attract capital and that the commission did land on a reasonable range for that return on equity,” Houck said, “I do not think that this decision threads the needle sufficiently to consider the full impact to the customer interest.”
This story was originally published December 18, 2025 at 6:35 PM with the headline "California utility regulator approves new, lower investor return rate for PG&E."
