AB 1117 directs the California Public Utilities Commission to open or use an existing proceeding to create optional dynamic rate tariffs for each large electrical corporation. The law sets phased deadlines: tariffs for medium and large commercial and industrial customers by July 1, 2028, and tariffs for residential and small commercial customers by July 1, 2030.
Each tariff must include time‑varying components for distribution and generation (and conditionally for transmission), plus nonbypassable charges.
Beyond rates, the bill prescribes customer protections and ratemaking mechanics: the same time‑varying transmission and distribution rates must be available to bundled and unbundled customers in the same area; the CPUC must monitor and mitigate cost shifts; any over‑ or undercollections tied to participating customers are to be reconciled with those same customers; customers with smart meters must receive direct access to interval usage data; and the CPUC must consider special conditions for vulnerable residential customers. The statute also preserves Commission limits on regulating community choice aggregators and electric service providers while specifying interactions with resource adequacy and demand response programs.
At a Glance
What It Does
The bill requires the CPUC to develop optional, time‑varying tariffs for different customer segments with distribution, generation, and potentially transmission components, and to phase them in by 2028 and 2030. Tariffs must include nonbypassable charges and mechanisms to prevent cost shifting among customer classes.
Who It Affects
Large electrical corporations (utilities with >100,000 connections) and their customers across four segments (residential, small commercial, medium commercial, large commercial/industrial), load‑serving entities, CCAs and electric service providers, demand‑response providers, and vendors that supply interval data and energy management tools.
Why It Matters
This creates a statutory pathway for price signals tied to distribution constraints and wholesale conditions, forces integration of load‑shift effects into ratemaking, and expands direct customer access to interval data—altering how revenues, resource adequacy, and customer protections interact with dynamic pricing in California.
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What This Bill Actually Does
AB 1117 tasks the California Public Utilities Commission with designing optional dynamic rate tariffs for customers of every large electrical corporation in the state. The CPUC must produce at least one tariff for medium and large commercial and industrial customers by July 1, 2028, and at least one for residential and small commercial customers by July 1, 2030.
The idea is to let customers opt into pricing that varies by hour to reflect real‑time grid conditions rather than facing a single flat price.
Each tariff must include a time‑varying distribution charge tied to distribution‑level constraints and a time‑varying generation charge for bundled customers tied to day‑ahead wholesale market conditions; the statute also contemplates a time‑varying transmission charge where doing so complies with Federal Energy Regulatory Commission rules. Tariffs will carry nonbypassable charges as well.
The bill requires that the same transmission and distribution time‑varying rates be offered to bundled and unbundled customers within the same geographic area and for the same level of service, preventing differential pricing simply because a customer is served by a CCA or an ESP.To address redistributional risks, the CPUC must periodically evaluate and mitigate cost shifting that dynamic tariffs could cause for nonparticipating customers. The statute requires that any overcollections or undercollections of transmission, distribution, or generation revenue from participating bundled customers be returned to or borne by those same customers; parallel rules apply to unbundled customers.
The CPUC must also account for expected load shifts and load reductions from adoption of dynamic rates when it sets revenue requirements—so lower costs from participants are reflected in utility ratemaking.On customer tools and protections, the bill gives customers with smart meters a right to their own interval usage data directly from the meter as it is produced, aims to ensure residential and small business customers get clear bill‑comparison information before opting in, and directs the CPUC to consider protections for vulnerable residential customers (including those on specific low‑income or life‑support rates). The law leaves generation pricing and terms from CCAs and electric service providers outside the CPUC’s rate regulation authority but requires load‑serving entities to set generation rate options consistent with market conditions.Finally, the bill addresses program interactions: the CPUC will decide whether medium and large C&I customers on dynamic tariffs can still participate in supply‑side demand response programs that count toward resource adequacy, but only if demand response baselines are adjusted to prevent double‑counting of shifted load.
It also creates an eligibility pathway for certain C&I customers energized after July 1, 2028 to receive generation service from an electric service provider despite existing kilowatt‑hour limits, provided the ESP meets statutory obligations.
The Five Things You Need to Know
Deadlines: utilities must offer at least one optional dynamic tariff for medium and large C&I customers by July 1, 2028, and for residential and small commercial customers by July 1, 2030.
Tariff components: every optional tariff must include a time‑varying distribution charge, a time‑varying generation charge for bundled customers, and nonbypassable charges; a time‑varying transmission charge is permitted only if consistent with FERC rules.
Parity rule: the CPUC must make the same time‑varying transmission and distribution rates available to bundled and unbundled customers in the same geographic area and for the same level of service.
Revenue reconciliation: any overcollection or undercollection of transmission, distribution, or generation revenue tied to participating customers must be returned to or borne by those same customers, and the CPUC must account for load‑shift effects in revenue requirement proceedings.
Data access and consumer information: customers with smart meters who opt into a dynamic tariff must get direct access to their interval usage data as it is generated, and residential/small business customers must receive bill comparison information and protections for vulnerable customers.
Section-by-Section Breakdown
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CPUC directive and phased deadlines for optional tariffs
This subsection requires the CPUC, via a new or existing proceeding, to develop optional dynamic rate tariffs for each large electrical corporation and sets firm deadlines: medium and large commercial/industrial tariffs by July 1, 2028, and residential and small commercial tariffs by July 1, 2030. Practically, this forces utilities and the CPUC to prioritize tariff design, pilot plans, and operational readiness on a fixed schedule rather than an open, indefinite policy process.
Minimum components of an optional dynamic tariff
This provision lists mandatory tariff elements: a time‑varying distribution rate tied to distribution constraints, a time‑varying generation rate for bundled customers reflecting day‑ahead wholesale conditions, and nonbypassable charges; a time‑varying transmission rate is also included in earlier text but elsewhere limited by FERC compliance. For compliance officers this paragraph defines the technical attributes tariffs must capture, which has implications for metering, settlement, and tariff design.
Availability parity and cost‑shift protections
The CPUC must ensure identical time‑varying transmission and distribution rates are offered to both bundled and unbundled customers in the same geographic area for comparable service levels—this addresses cross‑jurisdictional competitiveness between utilities and CCAs. The subsection also establishes an ongoing CPUC role to evaluate and mitigate cost shifting, requires that overcollections be returned and undercollections borne by the same class of participating (or unbundled) customers, and mandates that load‑shift effects be reflected in revenue requirement proceedings to reduce risk to participating customers.
Customer data, consumer information, and vulnerable customer considerations
The bill requires utilities to provide customers with smart meters direct access to their interval usage data as it is generated, and it compels load‑serving entities to provide bill comparison information to residential and small business customers considering dynamic tariffs. It also directs the CPUC to consider rules limiting participation or adding protections for vulnerable households—those on specific low‑income or medical‑need rates—recognizing higher relative price risk for these groups.
Interaction with demand response, resource adequacy, and supplier eligibility
The CPUC must decide whether medium and large C&I customers on dynamic tariffs can also enroll in supply‑side demand response programs that qualify for resource adequacy, but only if baselines are adjusted to avoid double‑counting load reductions. The statute also carves out an exception to the kilowatt‑hour limit in Section 365.1 for certain C&I customers energized after July 1, 2028, allowing them to take generation service from an electric service provider if the provider meets existing statutory obligations—this changes eligibility rules for some new large customers.
Definitions and scope
The section defines key terms: large electrical corporation (>100,000 service connections), smart meter (capable of interval recording and communicating data to both the utility system and directly to an onsite device), and references existing statutory definitions for electric service provider, eligible customer‑generator, energize, and load‑serving entity. These definitions set the perimeter for who must comply and what technical capabilities are required of metering equipment.
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Explore Energy in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Flexible commercial and industrial customers that can shift load: They gain access to price signals that can lower energy costs during peak pricing periods if they have flexibility or automation to respond.
- Energy management, DER and metering vendors: Increased demand for interval data access, customer‑side automation, and software to optimize participation makes these providers early beneficiaries.
- Grid operators and planners (ISO/CPUC): Dynamic tariffs tied to distribution and wholesale conditions provide a new tool to reduce peak demand, improve visibility of load behavior, and integrate distributed resources into operational planning.
Who Bears the Cost
- Large electrical corporations (utilities): Utilities must design tariffs, update billing/settlement systems, implement data access interfaces, and possibly modify distribution planning—capital and administrative costs that will need ratemaking paths.
- Load‑serving entities, CCAs and electric service providers: LSEs bear responsibility for setting generation rate options and, where applicable, for adjusting RA baselines and documenting the effects of dynamic tariffs on capacity claims.
- Nonparticipating customers and vulnerable households: Despite protections, customers that do not or cannot participate may face residual cost shifting or rate effects, and low‑income or medically dependent customers may face heightened price risk without robust safeguards; the CPUC is instructed to consider but not mandated to adopt specific protections.
Key Issues
The Core Tension
The bill aims to use more granular, cost‑reflective price signals to improve grid efficiency and reward flexible customers, but doing so risks exposing less flexible or vulnerable customers to higher price volatility and creates complex measurement and cost‑allocation challenges; the central dilemma is how to capture the benefits of dynamic pricing without shifting undue risk or costs onto those least able to respond.
Implementing distribution‑level time‑varying rates is technically and administratively complex. Utilities must define distribution constraints at sufficient granularity, upgrade metering and billing systems to settle at new time intervals, and coordinate with the ISO and CCAs on geographic delineations.
Those upgrades create upfront costs and timing risks that may affect the feasibility of the 2028 and 2030 deadlines unless the CPUC establishes clear implementation timelines and cost recovery mechanisms.
Measuring and preventing double‑counting between dynamic tariffs and resource adequacy or demand response programs is another thorny issue. Adjusting demand response baselines to reflect load shift requires robust counterfactuals and ongoing measurement; errors in baseline adjustments can distort RA counts or create perverse incentives for gaming.
The statutory requirement that over‑ and undercollections be reconciled with the same participating or unbundled customers simplifies accountability but raises practical questions about timing, settlement windows, and who bears short‑term cash‑flow volatility while reconciliations proceed.
Data access raises privacy, cybersecurity, and interoperability concerns. Granting customers direct, real‑time access to interval data will increase demand for third‑party energy services but also creates new attack surfaces and consent management challenges.
Finally, the bill preserves the CPUC’s limited authority to regulate CCA and ESP retail rates, which could leave gaps where CCAs’ own dynamic pricing strategies diverge from utility tariffs—creating potential competitive or equity frictions across providers.
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