MONDAY AGGREGATE: PG&E's CARD; ERRA Proposed Decisions; Hydrogen Blending Demo Projects
Today's roundup captures a broad spectrum of items:
- PG&E's gas-system cost allocation is being rebuilt in anticipation of declining throughput;
- Electric utility ERRA forecasts are absorbing large year-end corrections and reshaping 2026 generation and Power Charge Indifference Adjustment rates;
- Gas utilities' hydrogen-blending pilots are being treated as controlled, data-gathering exercises rather than commitments to a new fuel standard; and
- SoCalGas’s woody-biomass proposal highlights the Commission’s continued interest in low-carbon gas pathways, tempered by procedural and cost-reasonableness scrutiny.
PG&E "CARD" FILING
Earlier today we published a first look at PG&E's 2027 Gas Cost Allocation and Rate Design (CARD) application, which for the first time combines PG&E's historically separate Gas Cost Allocation Proceeding (GCAP) and Gas Transmission & Storage (GT&S) CARD into a single, unified framework.
- The proposal recalibrates distribution, transmission, storage, and inventory-management costs using updated 2027–2030 forecasts, a shift to embedded-cost distribution methods, revised backbone path differentials, a new empirical imbalance-cost model, and an increase to the residential minimum monthly charge from $4 to $15.
- While falling backbone and inventory-management costs look to provide short-term relief (especially for residential customers in 2027) projected increases in storage revenue requirements and class rebalancing drive future upward pressure, with small commercial, industrial, and certain wholesale/noncore groups seeing the largest impacts.
INSTANT ANALYSIS: Residential customers get a temporary dip in 2027 due to lower backbone and inventory-management costs, but storage obligations dominate the out-years and will pull rates back upward. Small commercial, industrial, and certain wholesale/noncore groups absorb the brunt of these increases because the new cost-allocation mechanics redistribute a larger share of storage and distribution-related responsibility toward higher load-factor and distribution-tier customers. The revised imbalance methodology, higher minimum monthly charge, and annualized forecasts all point to PG&E preparing for a gas network that is contracting faster and becoming more cost-intensive to maintain.
ERRA PROPOSED DECISIONS for PG&E and SCE
The CPUC issued respective proposed decisions for the 2026 Energy Resource Recovery Account Forecast filings of PG&E and SCE. Both PDs approve the utilities' 2026 ERRA-related forecasts: SCE’s $4.689 billion revenue requirement and PG&E’s $4.511 billion gross requirement.
The PDs also implement updated fuel, purchased-power, Resource Adequacy, greenhouse-gas, and balancing-account true-ups for the January 1, 2026 ratesetting cycle. This includes large year-end overcollections: $700 million for PG&E, and significant ERRA/Portfolio Allocation Balancing Account swings for SCE.
Each PD:
- Affirms the utilities’ updated electric-sales forecasts (SCE at approximately 80,447 GWh; PG&E at approximately 27,101 GWh);
- Incorporates new Resource Adequacy, storage, and reliability-procurement costs; and
- Adopts 2026 California Climate Credit distributions ($36.18 per customer for PG&E; $384 million in returns for SCE).
Both PDs note declining bundled generation rates despite rising procurement-cost revenue requirements: SCE’s system-average ERRA generation rate falls about 11.9%, and PG&E’s bundled residential rate drops by about 11%.
Each PD also updates Power Charge Indifference Adjustment vintages for 2026, resulting in increases for all unbundled customers, and resolves outstanding issues related to Resource Adequacy valuation, Renewable Energy Credit treatment, and Voluntary Allocation Market Offer-related tracking.
INSTANT ANALYSIS: Both ERRA PDs show the same dynamic: higher overall procurement revenue requirements paired with lower bundled-generation rates in 2026, driven mostly by very large year-end balancing-account corrections and significant GHG-credit returns. For both PG&E and SCE, bundled customers benefit from accounting-driven decreases while Direct Access/Community Choice Aggregator customers face higher PCIA charges across all vintages.
In effect, 2026 becomes a cleanup year, absorbing Market Price Benchmark volatility, loading in new Resource Adequacy and and energy storage costs, reconciling GHG proceeds, and unwinding substantial ERRA/PABA imbalances. Bundled rates fall for reasons tied to timing and corrections, not cheaper procurement, and unbundled customers will see noticeable PCIA pressure as a result.
The Commission is scheduled to consider both PDs at its December 18 meeting.(We summarized the pending PD in SDG&E's 2026 ERRA forecast here.)
IOU HYDROGEN BLENDING DEMO PROJECTS
On September 26, 2025 the CPUC convened a Public Participation Hearing in the proceeding where the major gas utilities propose to conduct hydrogen-blending demonstration projects.
CPUC staff opened by summarizing the procedural history: the Commission had previously dismissed a 2020 blending application, then ordered new pilots through a 2022 decision (D.22-12-057) after UC Riverside conducted two major studies:
Those studies concluded that real-world demonstrations were necessary to understand materials compatibility, leakage behavior, and operational impacts before any statewide hydrogen-injection standard could be set.
At the public hearing, utilities (especially SDG&E) highlighted research indicating that blends of up to 20% hydrogen by volume behave similarly to natural gas with respect to flow regime, leakage, and appliance safety. SDG&E also emphasized that it only seeks O&M funding, has reduced its project costs by using renewable hydrogen produced at its Escondido site, and views blending as a cost-effective decarbonization approach consistent with modeling from the California Air Resources Board.
The remainder of the hearing consisted of extensive public comment, with speakers representing community groups, technical experts, and local residents. Their testimony reflected a wide range of views, with some expressing support for controlled demonstrations, others raising concerns about safety, costs, pipeline integrity, environmental impacts, and whether hydrogen blending is an appropriate decarbonization pathway for California’s gas system.
INSTANT ANALYSIS: The CPUC is treating hydrogen blending as a controlled experiment, not a step toward broad deployment. Utilities attempted to position 20% blends as technically safe and operationally manageable, but the Commission’s posture remains careful: it wants real-world data before entertaining anything beyond pilot work. SDG&E’s cost-reduction claims improve the optics, yet public testimony showed unresolved concerns around safety, materials impacts, community risk, and whether hydrogen blending fits California’s long-term gas transition.
SOCALGAS WOODY BIOMASS PROPOSAL
On November 21, 2025 parties responded to SoCalGas's proposed woody-biomass pilot project that would convert almond-orchard residues (such as removed trees, shells, and sticks) into pipeline-quality bio-synthetic natural gas (Bio-SNG).
The project, developed by West Biofuels, would gasify agricultural woody waste to produce biomethane for injection into SoCalGas’s system, funded with up to $19.7 million in previously allocated Cap-and-Trade allowance proceeds under Senate Bill 1440.
- The Bioenergy Association of California (BAC) supports SoCalGas’s proposed pilot, arguing that the project directly advances a long list of state climate, air-quality, wildfire-mitigation, agricultural-waste, and job-creation mandates. BAC emphasizes that converting almond-orchard waste and forest residues into pipeline-grade biomethane will cut short-lived climate pollutants, generate carbon-negative emissions aligned with CARB’s Scoping Plan and Senate Bill 1279, reduce agricultural open-burning and pile-decay emissions, support wildfire-mitigation efforts, and provide durable economic benefits in rural regions. BAC positions the pilot as a crucial test case for future woody-biomass-to-pipeline projects.
- Cal Advocates does not address the merits of the technology but instead protests the application on procedural and substantive sufficiency grounds. Cal Advocates notes that SoCalGas did not provide a detailed cost breakdown, which raises questions about the reasonableness of using Cap-and-Trade funds and whether any remaining funds should be used for applicant-owned infrastructure.
- The Small Business Utility Advocates do not oppose the application but air ratepayer-affordability concerns and emphasize the importance of meaningful participation and job opportunities for small businesses.
INSTANT ANALYSIS: The proposed pilot fits cleanly within California’s climate and waste-reduction goals, but if the CPUC views the application as weak on cost details and CARB-compliance, it will give Cal Advocates some procedural footing to push for a tighter scope and deeper project scrutiny.