The state of California has adopted SB 254, a comprehensive energy bill designed to reform the state’s utility regulation and development of clean energy infrastructure, with the goal of reducing electricity costs, improving wildfire safety, and accelerating the state’s transition to clean energy. The bill establishes a mechanism for state funding of electric transmission projects, authorizes state ownership and development of new electric transmission facilities, and enhances financial stability for the state’s electric utilities by adding $18 billion to California’s wildfire fund.
California Energy Regulatory Framework: FERC, CPUC, and CAISO Jurisdiction
Federal law gives the Federal Energy Regulatory Commission (FERC) exclusive jurisdiction over interstate electricity transmission and sales in the wholesale electricity market. In California, the Public Utilities Commission (CPUC) regulates investor-owned utilities, sets just and reasonable utility rates for service to end-use customers, and oversees wildfire mitigation and safety through the Office of Energy Infrastructure Safety (OEIS). The California Independent System Operator (CAISO) operates the state’s electric FERC-jurisdictional transmission system. The California Energy Commission (CEC) certifies certain energy facilities and administers an optional streamlined permitting process for clean energy projects. State programs and funds support energy infrastructure and wildfire resilience, including the Infrastructure and Economic Development Bank’s Energy Unit, the Wildfire Fund (financed by ratepayers through 2035), and the Dig Safe Board. Environmental review of energy projects is generally required under the California Environmental Quality Act (CEQA), unless exempt. Additionally, California has established extensive clean energy goals, requiring 90% renewable or zero-carbon electricity by 2035, 95% by 2040, and 100% by 2045, alongside a $10 billion bond act (Proposition 4 of 2024) that allocates funding, including $850 million for clean energy projects.
SB 254 Key Provisions: California’s New Energy Infrastructure Law
SB 254 introduces the following changes to California’s energy market:
- Transmission Projects: Creates a Transmission Infrastructure Accelerator within Go-Biz to coordinate state planning and establish financing strategies, to sunset in 2031; establishes a revolving fund, the I-Bank, which is to be manages to finance transmission projects; authorizes the California Consumer Power and Conservation Financing Authority to own or develop projects; and provides a 20% tax credit (2026–2036) for qualifying expenditures.
- Clean Energy Siting and CEQA: Extends the CEC’s AB 205 “opt-in” certification program to 2030; streamlines certification by reducing certain application findings, allowing program-level EIRs, and creating a presumption of local economic benefit; and authorizes the CEC to request more complete application information.
- Wildfire Mitigation Oversight: Revises utility wildfire mitigation plans to include cost-per-avoided ignition estimates and deployment timelines; requires OEIS to act on plans within nine months; clarifies that undergrounding plans are not CEQA projects; and repeals the Wildfire Safety Advisory Board.
- Wildfire Fund: Creates a Continuation Account to cover new wildfire liabilities; requires large utilities to opt-in and agree to new cost recovery terms; extends the ratepayer charge through 2045; authorizes up to $9 billion in bonds; allows an additional $3.9 billion in collections if needed; and requires a 2026 report on long-term catastrophe cost-sharing models.
- Utility Financing and Rate Base Treatment: Bars utilities from including the first $6 billion in fire risk mitigation capital expenditures in their equity rate base through 2035; authorizes the CPUC to approve financing orders backed by recovery bonds; and requires utilities to credit ratepayers if costs included in bonds are later disallowed.
- CPUC Oversight and Accountability: Requires annual CPUC reports to include 10 years of utility asset, rate base, return on equity, and debt data; directs CPUC to establish energization project targets, penalties, and executive compensation incentives by 2027; and requires independent audits of utility energization practices.
- Other Governance Changes: Requires insurers to first offer subrogation rights to local utilities before selling them to third parties; updates Dig Safe Board authority over notification timelines and reporting; and makes legislative findings protecting confidential business information.
- Urgency Clause: Declares this bill an urgency statute, effective immediately, to stabilize utilities, protect ratepayers from higher bills, and ensure reliable and affordable electricity.
Implementation of these changes may have material impacts on utilities, developers, and investors in California’s energy market. Market participants should monitor regulatory developments and prepare for new opportunities in transmission infrastructure development while navigating the evolving landscape of utility cost recovery and wildfire liability protection.
Read more about California’s climate and energy package:
- California’s New Western Regional Electricity Market and Expanded Renewable Market (Sept. 29, 2025)
- California Enacts SB 237 to Streamline New Oil Well Permits in Kern County and Increase Output (Oct. 7, 2025)
* Special thanks to Law Clerk/JD Julia Lopez˘ for contributing to this GT Alert.
˘ Not admitted to the practice of law.