SACRAMENTO, Calif. — Reports have long shown that Southern California Gas wrongfully spent millions of customer dollars in recent years to oppose California’s growing electrification policies.

SoCalGas, the nation’s largest gas utility, has repeatedly denied those findings.

Now the utility’s regulator acknowledges that SoCalGas inappropriately used ratepayer funds to promote natural gas through lobbying, legal fees and other efforts. The agency also issued new transparency measures to monitor the company’s future political activities.

In a proposed decision on the utility’s rate hike request Friday, the Public Utilities Commission issued new reporting requirements for the SoCalGas’ political expenses and instructed the company to justify billing them to customers with federal regulators.

Advocates celebrated the preliminary decision as a condemnation of what they see as a widespread practice at SoCalGas and other gas companies nationwide: the use of customer money to undermine policies combatting climate change.

“This is long overdue scrutiny and accountability for their misuse of customer money to further their interests in maintaining dependency on gas,” said Matt Vespa, senior attorney with Earth Justice. “Historically it’s been a black box, and they’re fed up.”

The CPUC approved a nearly 15% increase in spending for SoCalGas, lower than what the utility requested but is expected to result in a 5.8%, or $4.12, average increase in monthly bills. The company did not respond to request for comment.

The 1,000-page document delivered a strong rebuke: “Historically, SoCalGas misclassified political activities costs to ratepayer accounts due to non-compliance and lack of accountability and monitoring, and the record shows a repeat pattern of non-compliance leading up to the GRC filing,” it wrote.

To provide oversight and prevent future inappropriate spending, it went on, “the Commission will now require annual reporting and attestation mechanisms for SoCalGas to demonstrate its compliance and governance activities to monitor proper accounting for political activities costs.”

Under the new requirements, the company must identify employees involved in political lobbying and ensure proper classification of related expenses as above or below the line — i.e. billed to ratepayers or drawn from corporate profits.

The proposed decision also prevents SoCalGas from using customer funds to pay for its membership to the American Gas Association, a trade group known for fighting electrification policies at all levels of government.

Finally, the company must justify to regulators at the Federal Energy Regulatory Commission any inclusion of politically motivated consulting or legal work in future ratepayer-funded forecasts.

Certain expenditures, such as donations and advertising, will be excluded from ratepayer charges, and lobbying on alternative fuel projects like hydrogen will face increased scrutiny.

“They’re making them show their work,” said Vespa. “If you don’t explain to use why you need this and why it relates to costs that are appropriately borne by customers, you’re not going to get the money.”

California aims to reduce reliance on natural gas for electricity generation, and has been incentivizing a shift from natural gas heating and appliances to electric alternatives as part of its broader climate goals.

To fend off those policies, gas utilities such as SoCalGas ramped up lobbying efforts in recent years to influence legislation and regulations in favor of natural gas, renewable natural gas and hydrogen — efforts that have faced growing scrutiny.

By law, utilities are prohibited from charging ratepayers for political expenses, including lobbying and campaign contributions. Such expenses must be clearly classified as “below the line,” meaning they cannot be recovered through customer rates.

But since 2019, a Sacramento Bee investigation found, SoCalGas charged at least $36 million to ratepayers for political activities aimed at countering electrification policies, exploiting ambiguities in the rate recovery process.

Political activities charged to customers included legal expenses tied to a successful challenge of Berkeley’s gas ban, lawsuits against state climate policies, driving business owners to CPUC meetings, misleading marketing campaigns, and creating the front group Californians for Fair and Balanced Energy.

More than $1.4 million in legal fees were initially billed to customers and only rescinded after questions raised by The Bee.

These fees were connected to firms like Reichman Jorgensen, which represented the California Restaurant Association in a lawsuit against Berkeley’s gas ban, and Holland & Knight, which challenged laws passed by the state Energy Commission.

At the time, SoCalGas denied spending money on political lobbying but refused to provide spending details, citing attorney-client privilege.

In response to The Bee’s investigation last year, the company said it had First Amendment rights to keep its books closed and reiterated its ambition to reach net-zero emissions by 2045.

The investigation followed a report from the CPUC’s watchdog, the Public Advocates Office, which cited an “ongoing and historic misuse of ratepayer funds for political activities” and urged the Commission to cut SoCalGas’s rate hike request by $80 million.

The utility was fined $10 million for similar behavior in 2022.

Last March, state senator David Min introduced a bill, SB 938, to prohibit investor-owned utilities to recover political expenses from customer bills. It soon died in the Energy and Utilities Committee by a single vote after facing opposition from Pacific Gas & Electric.

Energy affordability is taking center stage across several branches of California government this year, with Gov. Gavin Newsom attempting to curb gasoline price spikes after scuttling his draft plan to curb electric bills.

The proposed decision is now open for comment by concerned parties and has not yet been finalized by commissioners.

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