AB2710 - Public utilities: electrical and gas corporations: financial distress: reporting.

Amended IN Assembly April 16, 2026 Amended IN Assembly March 19, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 2710 Introduced by Assembly Member Bauer-Kahan February 20, 2026 An act to add Section 720 to the Public Utilities Code, relating to public utilities. LEGISLATIVE COUNSEL'S DIGEST AB 2710, as amended, Bauer-Kahan. Public utilities: electrical and gas corporations: financial distress: public assistance. reporting. Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations and gas corporations. This bill would prohibit an electrical corporation or gas corporation from receiving public assistance, as defined, to avoid or recover from financial distress, as defined, unless the commission finds that the corporation has agreed to certain terms and conditions, including a requirement that shareholders contribute equity capital equal to not less than 25% of the total amount of public assistance provided. The bill would require an electrical corporation or gas corporation receiving public assistance to provide quarterly public reports detailing compliance with the terms and conditions for the public assistance, as specified. The bill would require the commission, before approving the public assistance, to make certain findings, including a finding that the public assistance is necessary to maintain safe and reliable utility service to California residents and businesses. The bill would require the commission to continuously monitor compliance with all terms and conditions on the public assistance and would authorize the commission to take certain enforcement actions, as specified. This bill would require an electrical corporation or gas corporation to submit a financial condition report to the Legislature, as provided, if the corporation’s credit rating reaches a near-distress rating level, as defined, or if the commission issues a cost-of-capital decision, as defined, affecting the corporation. The bill would specify information required to be included in the report, including information determined by the commission to be relevant to the Legislature’s understanding of the corporation’s financial condition. Under existing law, a violation of the Public Utilities Act or an order, decision, rule, direction, demand, or requirement of the commission is a crime. Because the above provisions would be part of the act and a violation of a commission action implementing the bill’s requirements would be a crime, this bill would impose a state-mandated local program. Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest. This bill would make legislative findings to that effect. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YES Bill Text The people of the State of California do enact as follows: SECTION 1. The Legislature finds and declares all of the following: (a) Investor-owned utilities provide essential services to millions of California residents and businesses, making their financial stability a matter of public concern. (b) When an investor-owned utility’s credit rating approaches non-investment-grade status, the probability of financial distress rises substantially, and the risk that the state or ratepayers may be called upon to provide financial assistance increases. (c) Decisions by the Public Utilities Commission setting an investor-owned utility’s authorized cost of capital directly affect the utility’s ability to attract investment, service its debt, and maintain financial stability. (d) The Legislature has an interest in receiving timely and accessible financial information from investor-owned utilities before distress reaches a crisis stage, to evaluate whether state action may be warranted. (e) Investor-owned utilities that are reporting companies under the federal Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) already disclose extensive financial information through filings with the United States Securities and Exchange Commission. Requiring that information to be presented in a plain language format for the Legislature imposes minimal additional burden while improving legislative oversight. SEC. 2. Section 720 is added to the Public Utilities Code, to read: 720. (a) For purpose of this section, all of the following definitions apply: (1) “Cost-of-capital decision” means a final decision or order issued by the commission in which the commission determines the authorized cost of capital for an electrical corporation or gas corporation, including the authorized return on equity, the cost of long-term debt, and the capital structure, and including any decision that establishes or modifies an automatic adjustment mechanism applicable to a component of the authorized cost of capital. (2) “Credit rating agency” means a nationally recognized statistical rating organization that is a credit agency registered with the United States Securities and Exchange Commission, including, but not limited to, S&P Global Ratings, Moody’s Ratings, and Fitch Ratings, to the extent those entities are registered with the United States Security and Exchange Commission. (3) “Near-distress rating” means a long-term issuer credit rating, assigned by a credit rating agency, of BBB by S&P Global Ratings or Fitch Ratings, or of Baa2 by Moody’s, the rating one notch above the minimum investment-grade threshold, or an equivalent successor designation. A corporation shall also be deemed to have a near-distress rating if a credit rating agency assigns a negative outlook, negative watch, or equivalent designation to the corporation’s long-term issuer credit rating immediately above the near-distress rating level. (b) (1) An electrical corporation or gas corporation shall submit a financial condition report to the Legislature in accordance with Section 9795 of the Government Code under either of the following circumstances: (A) (i) No later than 30 days after the end of each calendar quarter in which the corporation holds a near-distress rating, as assigned by a credit rating agency. (ii) The corporation’s compliance with clause (i) shall begin in the calendar quarter immediately following the quarter in which the rating first reaches the near-distress rating level and end when all credit rating agencies that have assigned a credit rating for the corporation have upgraded the credit rating to at least two notches above the near-distress rating level and no credit rating agency has assigned a negative outlook or watch. (B) Within 45 days of the commission issuing a cost-of-capital decision affecting the corporation, regardless of the corporation’s credit rating at the time of the decision. (2) Each financial condition report shall be based on the corporation’s most recent annual report on Form 10-K, quarterly report on Form 10-Q, or current report on Form 8-K filed with the United States Securities and Exchange Commission, and shall include all of the following: (A) The current long-term credit rating from each credit rating agency, including any outlook or watch designation, and a description of any rating changes since the prior report. (B) Total compensation paid or accrued during the quarter for each executive officer and director, including all salary, bonuses, equity awards, and severance. (C) Total dividends paid to shareholders during the quarter and the total amount of any share repurchases. (D) The number of directors currently serving on the board and the number of unfilled board vacancies. (E) The corporation’s participation in any state-approved wildfire fund, including contributions made during the quarter, the balance of any internal catastrophic event reserve, and any changes to wildfire or catastrophe insurance coverage since the prior report. (F) Net income or loss for the quarter and year to date compared to the same period in the prior year, cash generated from operations, the corporation’s debt-to-equity and interest-coverage ratios, total long-term debt outstanding, debt due within the next 12 months, and available liquidity, including cash on hand and unused borrowing capacity. (G) The total amount of pending legal claims and liabilities, including those related to wildfires or other catastrophic events, the insurance coverage available to offset those liabilities, and any material gaps in that coverage. (H) Any significant events the corporation was required to disclose to the United States Securities and Exchange Commission during the quarter, including debt defaults, covenant violations, leadership departures, or similar developments. (I) Whether the corporation’s independent auditor or management has raised doubt about the corporation’s ability to continue operating as a going concern. (J) A plain language executive summary, not to exceed two pages, describing the corporation’s current financial condition, and steps management is taking to improve it. (K) Any other information the commission determines is relevant to the Legislature’s understanding of the corporation’s financial condition. (c) This section does not create any entitlement to public financial assistance. SEC. 3. The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application. SEC. 4. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution. SECTION 1. This act shall be known, and may be cited, as the Leading with Love Act. SEC. 2. The Legislature finds and declares all of the following: (a) Investor-owned utilities provide essential services to millions of California residents and businesses, making their financial stability a matter of public concern. (b) When investor-owned utilities face bankruptcy or severe financial distress, ratepayers may be called upon to provide financial assistance through rates, bonds, or other mechanisms authorized by the state. (c) Previous instances of financial distress have resulted in costs being borne by ratepayers without adequate protection of ratepayer interests or adequate accountability for utility management and shareholders. (d) In the future, public financial assistance to an investor-owned utility should not be used to insulate shareholders from the consequences of mismanagement, imprudence, or excessive risk-taking. (e) Any public assistance provided to prevent or recover from utility bankruptcy must include strong protections for ratepayers and accountability measures for utility management and investors. (f) No public financial assistance should be approved unless the Public Utilities Commission finds that shareholders have borne, and will continue to bear, material financial consequences proportional to the assistance provided. (g) The receipt of public financial assistance should not create any expectation, entitlement, or presumption of future assistance. (h) Conditioning public financial assistance on accountability, governance, and ratepayer protections is a valid exercise of the state’s police power over public utilities. SEC. 3. Section 720 is added to the Public Utilities Code , to read: 720. (a) For purpose of this section, all of the following definitions apply: (1) “Financial distress” means either of the following: (A) A utility has filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code (11 U.S.C. Sec. 1101 et seq.). (B) A utility is at imminent risk of bankruptcy as determined by the commission based on one or more of the following indicators: (i) A credit rating below investment grade. (ii) Inability to access private capital markets on reasonable terms. (iii) Projected insolvency within 12 months absent extraordinary relief. (2) “Public assistance” means an action, authorization, or approval by the state or the commission that has the effect of transferring financial risk, costs, or liabilities from a utility or its shareholders to ratepayers or taxpayers, or that provides extraordinary financial support to a utility to avoid, mitigate, or recover from financial distress, including, but not limited to, any of the following: (A) Authorization to recover through rates any costs, losses, liabilities, or expenses arising from bankruptcy proceedings, financial restructuring, catastrophic events, or the conduct that precipitated financial distress. (B) State-backed or ratepayer-backed financing, loans, loan guarantees, credit support, liquidity facilities, or other forms of financial backstop. (C) Issuance of rate reduction bonds, recovery bonds, securitization, or similar financing mechanisms supported directly or indirectly by ratepayers. (D) Creation, expansion, or use of a state-administered or state-approved fund, insurance mechanism, or risk-pooling arrangement that limits or displaces shareholder exposure to losses. (E) A deferral, amortization, refinancing, or restructuring of costs or liabilities that would not be available to the utility on a purely private-market basis absent state action. (F) Other mechanisms, whether denominated as regulatory relief, financial assistance, or cost recovery, that the commission or the state authorizes for the purpose or with the effect of stabilizing a utility’s financial condition by shifting risk away from shareholders. (3) “Utility” means an electrical corporation or gas corporation. (b) (1) Public financial assistance to a utility is an extraordinary remedy and shall be disfavored absent a clear showing of ratepayer benefit and shareholder accountability. (2) Public financial assistance shall not be used to preserve private investment value at public expense. (c) A utility shall not receive public assistance to avoid or recover from financial distress unless the commission, after notice and hearing, makes findings that the utility has agreed to all of the following mandatory terms and conditions: (1) (A) Shareholders sh [Text truncated for display. Full text available on Congress.gov.]