GRC or PBR

Mar 9

Here are the California Public Utility Commission’s (CPUC) General Rate Case (GRC) and Performance-Based Ratemaking (PBR) processes:

General Rate Case (GRC) – The Standard Process

What It Is

• The main process the CPUC uses to set utility rates.

• Happens every 3-4 years for each major utility (like PG&E, SCE, SDG&E).

Focuses on:

• How much money the utility needs to operate.

• How to split costs between different types of customers.

• What the actual rates will be.

Key Steps

1. Utility Files a Request – Utility submits a detailed forecast of costs and revenues.

2. Public Input & Hearings – Customers, consumer advocates, and others can weigh in.

3. Evidentiary Hearings – Formal hearings with expert witnesses and cross-examination.

4. Proposed Decision – An administrative law judge (ALJ) issues a draft decision.

5. Final CPUC Vote – The five CPUC commissioners vote to approve, modify, or reject the decision.

What It Decides

• Total money (revenue) the utility can collect.

• Capital projects (like new power lines or safety work).

• How much profit the utility can earn.

• How costs are spread across residential, business, and industrial customers.

• Final customer rates.

Performance-Based Ratemaking (PBR) – Incentive-Based Process

What It Is

• A less common, alternative process to GRC.

• Instead of setting rates based just on utility costs, PBR ties some profits to how well the utility performs.

• The idea is to encourage efficiency, safety, and innovation — not just spending money.

How It Works

1. Set Baseline Rates – Usually starts with GRC-style cost forecasts.

2. Set Performance Targets – CPUC creates goals for things like:

• Safety (fewer outages, faster response times).

• Customer service (faster call response).

• Clean energy goals (adding more renewables).

3. Incentives – Utility earns rewards or penalties depending on how well they hit the targets.

4. Multi-Year System – Rates can be locked in for several years, encouraging the utility to control costs.

How California Uses PBR Today

• Mostly GRC with Some PBR Elements.

• Full PBR (with price/revenue caps) is rare today.

• Instead, CPUC uses targeted Performance Incentive Mechanisms (PIMs) inside GRCs.

• Examples of PIMs in Use:

• Bonuses for faster gas leak repairs.

• Penalties for too many power outages.

• Incentives for adding EV chargers or renewable energy.

Brian Alanis

Committees