Determining Costs

General Rate Cases are proceedings used to address the costs of operating and maintaining the utility system and the allocation of those costs among customer classes. For California’s three large investor-owned utilities (IOUs), the GRCs are split into two phases. Phase I of a GRC determines the total amount the utility is authorized to collect, while Phase II determines the share of the cost each customer class is responsible for and the rate schedules for each class.  Each large electric utility files a GRC application every three years.  For smaller utilities, authorized costs and allocation of costs are done in just one phase.

Revenue Allocation

Once a large utility's revenue requirement is set in the first phase, that amount must be allocated among the different customer classes; residential, commercial, agricultural and street lighting. The revenue is allocated to each class based on the costs the utility incurs when serving that class. For time-of-use rates, revenue is also allocated to hours based on the costs of providing electricity during those hours. In a General Rate Case Phase II, methods for determining costs and allocating revenues are proposed by the utilities and debated by parties for fairness and economic efficiency.

Rate Design

Once the revenue has been allocated to classes, utilities propose rates with which to collect the revenue from customers. Setting rates involves balancing various goals such as stable revenue collection, incentives to conserve electricity and affordability. Utilities may propose new rates or close old rates, change applicability or rules for current rates or make any other changes to the design of rates at this time.

Rate design elements may include fixed charges ($/month) as well as energy charges ($/kWh). For larger non-residential customers, demand charges ($/kW) may apply as well.


A utility's GRC Phase II application will contain it's proposals for calculating marginal costs, it's proposals for revenue allocation as well as it's proposed rates based on the proposed costs and allocations. A utility submits testimony containing background documentation for all of it's proposals and arguments for their adoption. The state's ratepayer advocate (Office of Ratepayer Advocates), as well as other parties including consumer advocates, environmental advocates, various energy user groups and others review the testimony and submit comments, briefs and/or protests to the utility proposals. In lieu of litigating the proposals through the Commission, all parties to a case can get together and work out differences by submitting a settlement agreement. The Commission will review a settlement agreement and approve or reject it based on whether it is in the public interest.

Visit the following links to see information on recent large utility GRC Phase II Proceedings:

  • PG&E 
  • SCE 
  • SDG&E