Governor Signs Irwin’s AB 2589 to Stop the Utility Payday and Return Savings to Ratepayers

SACRAMENTO, CA - Governor Gavin Newsom has signed Assembly Bill (AB) 2589, authored by Assemblymember Jacqui Irwin (D-Thousand Oaks), to ensure that savings investor-owned utilities receive from changes in federal tax law are returned to ratepayers. The new law will take effect January 1, 2027.

"Californians should not pay utility rates based on tax expenses that a utility no longer has to pay," said Assemblymember Irwin. "AB 2589 establishes a straightforward principle: when a change in federal law reduces a utility's tax liability, those savings should be returned to the ratepayers who funded them in the first place."

Under current California law, if any federal law reduces the taxes owed by an investor-owned utility, there is no requirement that those savings be returned to ratepayers. This bill requires the California Public Utilities Commission (CPUC) to evaluate changes in an investor-owned utility's federal tax liability and adjust rates, when appropriate, so that any tax savings are returned to ratepayers[JP1] rather than retained by the utility.

AB 2589 builds on the success of SB 1028, authored by Senator Jerry Hill in 2018, which successfully returned more than $1 billion to California ratepayers.

AB 2589 received bipartisan support throughout the legislative process and did not receive a single "no" vote.

"With the Governor's signature, we are making sure that if utilities pay less in taxes because of a federal tax cut, California ratepayers, not utility shareholders, receive the benefits of those savings," said Assemblymember Irwin.