SCE Rates for January 1, 2026: $444 Million Reset -- Rates Down Now, System Costs Up Long-Term

SCE submitted Advice Letter 5725-E (available here) to implement its full, consolidated set of CPUC- and FERC-authorized electric revenue requirement and rate changes effective January 1, 2026.

How to read this filing: Advice Letter 5725-E implements a $444 million increase in SCE’s authorized system revenue requirement, but that figure should not be read as a one-for-one increase in January 1 customer rates. The consolidated year-end filing blends new base costs with the amortization of large prior-year balancing account over- and under-collections. In this case, refunds and timing credits (particularly in procurement and public purpose accounts) temporarily offset rising delivery, transmission, wildfire, and non-bypassable costs. Consequently, some customer classes see near-term rate declines even as the underlying cost structure continues to expand.

What SCE is Revealing

AL 5725-E shows that the largest upward rate pressure comes from delivery-side and non-energy components rather than commodity energy alone. Distribution revenue requirements increase significantly due to:

• General Rate Case-authorized capital and O&M;
• Wildfire mitigation and vegetation management costs;
• Pension and medical balancing account true-ups; and
• Updated uncollectibles.

Transmission costs will also rise following FERC-jurisdictional base transmission updates and transmission balancing account adjustments. On the procurement side, the adopted 2026 Energy Resource Recovery Account forecast increases fuel and purchased power revenue requirements, even as large ERRA and other balancing account amortizations partially offset that increase in rate levels.

The updated 2026 Cost of Capital decision (summarized here) modestly lowers SCE’s authorized rate of return and reduces the base revenue requirement compared to preliminary filings, while flowing through to capital-heavy balancing and memorandum accounts.

In parallel, AL 5725-E incorporates fixed recovery charges associated with multiple wildfire-related securitizations, including new Thomas Fire and Montecito Debris Flow recovery bonds, along with ongoing Wildfire Fund non-bypassable charges.

Last, the advice letter updates the Diablo Canyon extended-operations non-bypassable charge, reflecting SCE’s share of statewide costs allocated on a coincident-peak basis and adjusted for the first true-up year. Protests are due January 20.

INSTANT ANALYSIS: Advice 5725-E functions as a year-end ratemaking reset that adds $444 million to system revenue requirements while framing the change as a routine consolidation. Rate pressure comes overwhelmingly from delivery-side and non-bypassable costs (distribution capital, wildfire mitigation and securitization, transmission revenue updates, and pension and medical true-ups) rather than from energy procurement.

ERRA shifts still matter, but mainly as timing adjustments layered on top of a much larger cost base. The filing reinforces a clear direction of travel: customer bills are increasingly driven by the cost of maintaining a hardened, financeable, always-available system. For bundled, Direct Access, and Community Choice Aggregator customers, this means procurement choices alone offer diminishing insulation from rising charges as access to the system (not energy usage) becomes the primary object of cost recovery.

As alluded to above, large balancing account amortizations will produce net rate reductions for most customer classes in the near term, despite the increased revenue requirement (see table below).