San Francisco, California. — Following an Administrative Law Judge’s proposed decision on the Authorized Cost of Capital for Utility Operations for PG&E, SoCalGas, SCE, and SDG&E for 2026 (“the proposed decision”)—which offers the utilities a combined $4.4 billion in excessive returns—the American Economic Liberties Project and a coalition of eight other organizations today sent a letter calling on the California Public Utility Commission (“the Commission”) to reject the proposed decision.

“For too long, regulators in this state and across the country have fed utility bill inflation by approving excessive returns on equity for investor-owned utilities. Now, the Commission has an opportunity to break the cycle—and Californians literally cannot afford for them to squander it,” said Mark Ellis, Senior Fellow for Utilities at the American Economic Liberties Project. “While a directional improvement compared to the status quo, the proposed decision before the Commission would still result in an overcharge of $4.4 billion, or roughly $340 per year for each household served by the four California investor-owned utilities. Approving this proposed decision amid an acute affordability crisis would be an outrage, especially given its brazen refusal to provide evidence to justify the specific ROE proposed for each utility.”

According to longstanding Supreme Court precedent, a “just and reasonable” return on equity should equal a utility’s true cost of capital—the minimum return necessary to cover its costs and attract investment in the capital markets. As detailed in testimony submitted to the Commission, Economic Liberties’ analysis shows that a reasonable ROE for the four California utilities is 6.1% to 6.2%, reflecting current stock market valuations, investor expectations, and the broad consensus of sophisticated market participants. The proposed decision would authorize ROE of at least 9.73%, resulting in an overcharge of approximately $4.4 billion in 2026.

In addition to being demonstrably unjust and unreasonable, the letter notes that the proposed ROE appears arbitrary and not evidence-based. The proposed decision calls for reducing all four utilities’ ROEs by 0.35%, without explaining how that specific figure was reached, or why all utilities are being treated the same despite their divergent risk profiles. The California Public Utilities Code requires that any decision rendered by the Commission be supported by substantial evidence.

Finally, the letter calls attention to a troubling revelation in the proposed decision. The proposed decision describes the various methods for calculating ROE in cost of capital proceedings, but says that the Commission will not decide among them, as it “has historically indicated that it will not litigate the specific mechanics of each proposed model.” If true, this indicates that the Commission has declined to closely weigh evidence in proceedings for some time. The Commission must break this pattern to avoid perpetrating the utilities’ expectation of excess returns at the expense of their customers.

The letter was co-signed by California Public Interest Research Group (CALPIRG), California Alliance for Community Energy, Center for Biological Diversity, Climate Action Campaign, Economic Security CA Action, Institute for Local Self-Reliance, Sustainable Systems Research Foundation, and Santa Cruz United Domestic Workers CA.

Read the full letter here.

Read Economic Liberties’ whitepaper on reforming utility rate of return here.

Learn more about Economic Liberties here.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.