FRIDAY AGGREGATE: Looming 2026 Electric Rate Battles; SoCalGas Transmission Integrity Work; Diablo Canyon Cost Disputes

Below is our end-of-week roundup.

• Cal Advocates proposes expanding the income-graduated fixed charge.
• SoCalGas announces major transmission line capacity reduction.
• Nuclear opponents challenge PG&E's Diablo Canyon cost recovery.
• Commissioner John Reynolds questions PG&E rate-increase justifications at public participation hearings.

For a full summary of yesterday's voting meeting, go here.

INCOME-GRADUATED FIXED CHARGE

In a recent series of ex parte meetings with Commission personnel, the Public Advocates Office at the CPUC (Cal Advocates) argued for expanding and improving the "Base Services Charge," which was previously known as the Income-Graduated Fixed Charge.

Cal Advocates offered that, while the Base Services Charge (adopted in a 2024 decision, D.24-05-028) was intended to lower volumetric rates, rapid increases in utility rates since 2022 have offset those reductions, leaving customers with net increases in bills.

To meet affordability and electrification goals, Cal Advocates urged the CPUC to begin a new rulemaking to revise the Base Services Charge, expanding eligible fixed costs (e.g., non-marginal distribution costs), redefining income tiers, improving the income verification process, and adjusting rate design.

Cal Advocates also noted that utilities like SDG&E already include most eligible fixed costs, while PG&E currently includes only about 12% of its revenue requirement in the Base Services Charge, though this could grow to over 30% if the rules expand.

Finally, Cal Advocates emphasized that higher fixed charges would still preserve conservation signals because volumetric rates remain high.

INSTANT ANALYSIS: Cal Advocates wants a new rulemaking to expand the Base Services Charge to cover more fixed utility costs and to reset the income tiers that determine who pays what. Their message is that the Base Services Charge barely made a dent in rising rates, and without a larger fixed charge, California risks missing its social and electrification goals. This could be the first indication that the CPUC may reopen rate-design battles in 2026, potentially reshaping how utilities recover billions in distribution costs and how much customers see in per-kWh charges.

SOCALGAS TRANSMISSION INTEGRITY

SoCalGas provided notice on its Envoy messaging system that it will reduce operating pressure on its Line 4000 pipeline from November 1, 2025 to December 18, 2025 as part of its Transmission Integrity Management Program.

This unplanned pressure reduction is required for safety compliance after a Pipeline and Hazardous Materials Safety Administration (PHMSA) inspection found conditions requiring immediate repair. To fully assess and address the issues, SoCalGas must perform direct pipeline examinations, including excavation, coating removal, pipe body inspection, and engineering evaluation. Any remediation identified during this process could extend the duration.

Because of this reduced pressure, Northern Zone capacity will drop by 620 million cubic feet per day during this period.

INSTANT ANALYSIS: A 620 MMcf/d capacity cut on Line 4000 directly tightens supply into SoCalGas’s Northern Zone during early winter 2025 and coincides with higher seasonal demand. While safety-driven and in proper compliance with PHMSA, it introduces operational and price risk for gas-fired generators, storage operators, and large end-users reliant on Northern Zone deliveries. Because the work window extends through mid-December, the timing could intersect with winter reliability planning, Aliso Canyon withdrawal protocols, and Gas Cost Incentive Mechanism performance metrics. If inspections uncover more serious integrity issues, the outage could last longer than planned.

DIABLO CANYON COST RECOVERY

The Alliance for Nuclear Responsibility filed a petition for modification of a 2024 CPUC decision (D.24-12-033), which authorized $723 million in cost recovery for PG&E to support extended operations of the Diablo Canyon Power Plant from 2023-2025.

The Alliance argues that D.24-12-033 was based on now-invalid Resource Adequacy Market Price Benchmark values. After D.24-12-033, the Commission adopted D.25-06-049 in the ERRA/PCIA Reform docket, which found the prior Market Price Benchmark methodology flawed and vulnerable to manipulation and replaced it with a much lower 2025 Market Price Benchmark of $11.21/kW-month instead of the $42.54 used in the Diablo Canyon cost forecast.

Because the Public Utilities Code shields PG&E's costs from reasonableness review if they stay within a 115% forecast, the Alliance says using the outdated, inflated Market Price Benchmark would improperly protect more than $160 million from scrutiny. The Alliance adds further that the 2024 final Market Price Benchmark used in D.24-12-033 was incorrect and should be replaced with Energy Division's updated figure of $26.26/kW-month.

The Alliance proposes reducing PG&E's approved revenue requirement to approximately $582 million.

INSTANT ANALYSIS: If this petition succeeds, PG&E could see more than $160 million brought back under reasonableness review, perhaps opening the door for broader challenges to Diablo Canyon cost recovery in 2026 General Rate Case and Energy Resource Recovery Account proceedings. If the petition fails, utilities might claim precedential authority to use market-price benchmarks (even discredited ones) to shield their revenue requirements from scrutiny.

PG&E GENERAL RATE CASE

The CPUC convened public participation hearings this month to gather feedback on PG&E's request to increase rates, starting in 2027. Commissioner John Reynolds, ALJs Elizabeth Fox and John Larsen presided over the first day and were joined on the second day by Commissioner Matt Baker.

They outlined PG&E's request to fund its operations and infrastructure needs from 2027-2030, which would lead to increases in electric rates (5% in 2027 and 6.1% annually thereafter). Natural gas rates are projected to decline slightly in 2027.

Commissioner Reynolds stressed that, while wildfire mitigation and modernization of the grid are essential, not every dollar PG&E proposes is justified. He questioned how PG&E could simultaneously claim rapid growth of its rate base (over 50% in five years) yet also promise that rates will grow more slowly than inflation.

He added:

I'm...mindful that when PG&E pledges that rates will remain stable for years to come, that rates are currently unaffordable for many residents of this state.· Stable rates will not offer respite to those who are struggling to pay their bills.

The floor opened to dozens of speakers: residents, small business owners, and ratepayers across PG&E's service territory spoke on issues spanning wildfire concerns, slow grid upgrades, and power shutoffs. Full transcripts are available here and here.