California Regulators Suggest Small Decrease in Utility Returns, But Consumers Need Lasting Solutions

San Francisco, SC - Last Friday, the California Public Utilities Commission (CPUC) issued a proposed decisionon how much profit the state's largest monopoly corporate utilities can extract from their ratepayers.

This initial conclusion of this year's Cost of Capitalproceeding suggests the CPUC is likely to award utilities a return on equity between 9.73 and 9.98 despite evidence presented by Sierra Club and Protect Our Communities Foundation that returns on equity between 6.11 and 6.22would better balance consumer and utility needs, saving California customers $6.1 billion each year.

"While it's good to see the CPUC reject the excessive requests of the utilities, they still continue to lean more on the side of corporate profits than Californians who are struggling with ever increasing electric rates," said Julia Dowell, Senior Organizer with Sierra Club. "Regulators need to address the rising inequality that is partially driven by high utility bills that saddle businesses and families with unnecessarily high costs."

According to analysisfrom Sierra Club and other groups, utilities only need around six percent returns on equity to attract capital investment. Utilities, who sought up to 11.75 percent returns in their filings, used rejected models and inflating cost assumptions to inflate their profit needs, meaning that even a "compromise" rate can still be extremely favorable to their shareholders.

In response, the CPUC reduced every utility's return on equity by exactly 0.35 percentage points from 2025 levels, meaning identical reductions for PG&E, SoCalGas, SCE, and SDG&E despite their different risk profiles, capital structures, and credit ratings. The proposed decision does not explain how the CPUC arrived at these new rates.

"We presented detailed evidence showing how utilities methodically inflate their cost projections, and the Commission landed in an arbitrary compromise position rather than an evidence-based solution. The Commission's job is to protect the public and give them the reasonable prices they deserve-not just land in the middle. It needs to reject the utilities' inflated proposals and identify the return that reflects the actual cost of capital," said Katie Ramsey, Senior Attorney for Sierra Club.

As Californians face some of the nation's highest energy costs, PG&E made an unprecedented $2.47 billionin profits in 2024 with six approved rate increases from the CPUC. SoCalEdison also made record profits of about $1.6 billion, almost a 10% increase from the previous year while San Diego Gas and Electric (SDG&E) made near-record profits of $891 million. According to a recent analysisby Lawrence Berkeley National Laboratory, investor-owned utility rates are rising faster than that of publicly-owned utilities.

"These are for-profit monopolies, not normal corporations who have to actually compete for customers in a normal marketplace," continued Ms. Ramsey."The Commission has a legal and moral obligation to place consumer interests on even footing with corporate utility interests. It needs to step up and protect consumers from excessive utility profits."

Parties will be submitting comments on the proposed decision on Dec 4, 2025 and reply comments on Dec. 9, 2025. The CPUC is likely to vote on the proposed decision at its December 18, 2025 voting meeting.

About the Sierra Club

The Sierra Club is America's largest and most influential grassroots environmental organization, with millions of members and supporters. In addition to protecting every person's right to get outdoors and access the healing power of nature, the Sierra Club works to promote clean energy, safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and legal action. For more information, visit https://www.sierraclub.org.