A new state law will require Southern California Edison and other investor-owned utilities to return federal tax savings to ratepayers in Thousand Oaks, Westlake Village and across California.

Gov. Gavin Newsom signed Assembly Bill 2589 on Thursday, Oct. 1, according to a press release from the bill's author, Assemblymember Jacqui Irwin. Irwin represents Thousand Oaks, Westlake Village and surrounding communities in the 42nd Assembly District. The law takes effect Jan. 1, 2027.

The bill passed the Legislature with bipartisan support and did not receive a single "no" vote.

The law addresses a gap in how utility rates are set. Investor-owned utilities establish customer rates through general rate cases before the California Public Utilities Commission (CPUC). Those rates are based partly on projections of the utility's expected federal tax bills.

When Congress changes the tax code mid-cycle and lowers a utility's tax burden, customers can end up paying rates that reflect costs the utility no longer owes. Under prior law, nothing required utilities to return those savings.

AB 2589 changes that by directing the CPUC to evaluate shifts in a utility's federal tax liability during an ongoing rate case and, when appropriate, adjust rates so the savings flow back to customers.

"Californians should not pay utility rates based on tax expenses that a utility no longer has to pay," Irwin said in the Oct. 1 announcement. "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."

The measure builds on Senate Bill 1028, authored by former state Sen. Jerry Hill in 2018, which returned more than $1 billion to California ratepayers after federal tax changes that year.

Irwin's earlier press release from Aug. 28, when the bill cleared the Legislature, cited the 2017 federal tax overhaul known as H.R. 1 as an example of the kind of change AB 2589 addresses.

Edison serves Thousand Oaks, Westlake Village, Agoura Hills, Calabasas and Hidden Hills, according to the utility's service territory records. Any CPUC rate adjustment under the new law would apply across Edison's full service area and other investor-owned utilities statewide.

Neither Edison nor the CPUC has issued a public statement on the new law. The CPUC's timeline for implementing the measure has not been announced.