An act to amend Section 748.5 of the Public Utilities Code, relating to electricity. An act to amend Sections 35560 and 35753 of, and to add Section 35555.5 to, the Education Code, and to add Section 50079.4 to the Government Code, relating to school district reorganization.
AB 745 makes two major changes to California electricity law. First, it changes how the California Climate Credit is delivered to residential customers by requiring the credit to appear on bills in July, August, and September each year, unless the Public Utilities Commission directs otherwise for extreme, unforeseen, temporary circumstances. It also requires the residential credit to be volumetric, meaning it varies with consumption rather than being a flat amount independent of usage. The bill leaves in place the existing framework that credits greenhouse gas allowance revenues to residential, small business, and emissions-intensive trade-exposed customers, and it preserves the commission’s authority to allocate up to 15 percent of those revenues to clean energy and energy efficiency projects.
Second, AB 745 creates a new financing framework in the Public Utilities Code for undergrounding utility infrastructure. It authorizes the Public Utilities Commission, upon application by an electrical corporation and a finding that the costs are just and reasonable, to issue financing orders allowing recovery bonds to finance undergrounding costs. Those costs can be recovered through nonbypassable fixed charges on customers in the utility’s service territory, with periodic true-up adjustments to ensure full repayment. The bill also sets detailed rules for recovery property, security interests, statutory liens, transfers, and bondholder protections, and it bars the commission from allowing large electrical corporations to include undergrounding amounts in equity rate base.
The bill’s impact on state law is significant because it expands the commission’s authority beyond wildfire-related recovery bonds to include undergrounding-related financing, while also creating strong legal protections for the resulting revenue stream and bond instruments. It establishes that recovery bonds are nonrecourse to the utility’s general assets and not debts of the state, and it limits the commission’s ability to alter the financing structure once approved. The bill also excludes customers enrolled in CARE and FERA discount programs from being charged for recovery costs, and it provides that any later insurance proceeds, tax benefits, or similar reimbursements tied to undergrounding costs must be credited back to customers.
Overall, the bill appears to have broad legislative support based on the recorded votes, with multiple committee and floor actions passing by large margins and no recorded floor opposition in the provided history. The absence of committee transcript material limits insight into the policy debate, but the vote pattern suggests the bill was generally viewed favorably as a utility financing and rate-design measure. At the same time, the bill’s complexity and its creation of long-term, nonbypassable customer charges likely make it a policy issue with meaningful fiscal and consumer-protection implications.
The main points of contention are likely to be who pays for undergrounding and how the costs are recovered. The bill shifts undergrounding costs away from utility equity rate base and into a bond-financed surcharge structure, which can lower near-term rates but extends repayment obligations over time to customers in the utility’s service territory. Potential concerns include the breadth of the commission’s authority, the long-term binding nature of the charges, and the extent to which customers, rather than shareholders, bear the cost of undergrounding infrastructure. The climate credit changes are less controversial on their face, but they do alter the timing and structure of customer credits and could affect bill impacts for residential ratepayers.
AB 745 amends Public Utilities Code Section 748.5 and adds a new Article 6.5 to create a statutory framework for financing utility infrastructure undergrounding through PUC-approved recovery bonds and fixed customer charges. It also restricts large electrical corporations from placing undergrounding amounts into equity rate base, instead requiring those costs to be financed through the new bond mechanism if approved. The bill further establishes lien, transfer, perfection, and true-sale rules for recovery property, and it exempts CARE and FERA customers from the undergrounding recovery charges. In addition, it changes how California Climate Credit revenues are delivered to residential customers by specifying summer billing months and a volumetric credit structure.
The available voting history indicates strong support for the bill at each recorded stage, with committee and floor votes passing overwhelmingly and no recorded opposition on the Assembly floor in the provided history. The bill appears to have been treated as a technical but important utility-finance measure, with support likely driven by its promise to spread undergrounding costs over time and reduce immediate rate pressure. No committee transcript was provided, so there is no direct record of debate, but the procedural progress suggests a generally favorable sentiment among legislators.
The central policy tension is between financing utility undergrounding through customer-backed bonds versus recovering those costs through traditional utility ratemaking and shareholder equity. Supporters are likely to favor the bill because it can lower present-value costs and provide a dedicated financing tool for undergrounding, while critics may object to the long-term, nonbypassable charges imposed on customers and the strong statutory protections given to bondholders. Another likely point of concern is the bill’s restriction on including undergrounding amounts in equity rate base, which shifts the financing burden away from utility investors and onto ratepayers. The climate credit provisions may also raise questions about bill timing and whether a volumetric summer credit better serves customers than the existing structure.