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CITY COUNCIL AGENDA REPORT
City of Anaheim
PUBLIC UTILITIES DEPARTMENT
DATE: SEPTEMBER 29, 2026
FROM: PUBLIC UTILITIES DEPARTMENT
SUBJECT: NEW ELECTRIC RULE NO. 27 — FINANCIAL ASSURANCE
STANDARDS FOR LARGE ELECTRIC LOAD
ATTACHMENT (Y/N): YES ITEM # 13
GOVERNMENT CODE § 84308 APPLIES: NO
RECOMMENDATION:
That the City Council, by Resolution:
1. Adopt Electric Rule No. 27 of the Electric Rates, Rules and Regulations (Electric Rule 27), which does not increase rates or fees, effective October 1, 2026; and
2. Determine that the adoption of Electric Rule No. 27 is not subject to the California Environmental Quality Act (CEQA) because the action does not constitute a “project” within the meaning of CEQA Guidelines (Cal. Code Regs., title 14, ch. 3) sections 15060(c)(2)-(3) and 15378 in that it constitutes a regulatory and administrative action and general procedure making and does not approve, commit Anaheim to, or result in any physical changes to the environment, and that, to the extent the action could be considered a “project,” it is exempt from CEQA pursuant to CEQA Guidelines section 15061(b)(3).
BACKGROUND:
At its meeting on August 26, 2026, the Public Utilities Board recommended that the City Council approve these actions.
APU regularly reviews its utility rules to align with evolving industry conditions and to ensure that service to all customers remains reliable and affordable. Over the past several years, rapid growth in large-scale data center development, driven by demand for artificial intelligence, cloud computing, and high-performance computing, has introduced a category of customer whose electric service requirements far exceed those of typical commercial and industrial customers. If a customer of this type requested electric service, APU has an obligation to serve them. This requirement-to-serve obligation goes for any customer type: APU cannot preclude service based on the type of legitimate business the customer operates.
New Electric Rule No. 27 — Financial Assurance Standards for Large Electric Load September 29, 2026
This category of customers is narrow: principally large-scale data centers, where proposed service would dwarf that of a typical commercial or industrial customer and would require utilities to make new, long-term commitments to serve them, such as additional power supply contracts. Many of these large-scale projects are backed by relatively new market entrants whose financial track record has not yet caught up to the scale of the infrastructure commitments they are requesting, and the pace of this industry's growth, combined with the speculative nature of much of the underlying investment, creates a meaningful risk that some operators may consolidate, restructure, or exit the market before the utilities serving them have recovered the costs incurred to do so.
As a not-for-profit agency, APU charges customers what it costs to provide them service. If a customer bill goes unpaid, rates would naturally increase on the balance of customers to recover that unpaid balance. APU proposes the establishment and approval of Electric Rule 27 to ensure, should a customer of this scale terminate service, default on its obligations, or otherwise fail to perform as anticipated, APU recovers the cost of the commitments it made to serve that customer, and that those costs are borne by the customer responsible for them, not by other ratepayers.
DISCUSSION:
Electric Rule 27 applies only to a new application for electric service or to an existing customer's material load expansion. It does not apply retroactively to an existing customer's current electric use.
Within that scope, the rule applies only where a customer meets three criteria together. First, the customer's proposed demand equals or exceeds 15 megawatts, an amount of power equivalent to serving nearly 21,000 typical residential homes in Anaheim monthly. Second, the customer would sustain that level of energy use nearly around the clock and all year round, rather than fluctuating with the daily and seasonal patterns common to most customers. Third, serving the customer requires APU to undertake or materially increase a power supply, capacity, transmission, or other commitment that APU would not otherwise need to make. A customer must meet all three criteria for this rule to apply.
Most customers who apply for new electric service or request a load expansion fall well below these criteria. An ordinary commercial or residential customer, for example, falls far below the 15-megawatt threshold, so this proposed rule would not affect them. For context, some APU customers, such as telecommunication companies and grocery stores with 24/7 refrigeration needs, consume energy around the clock consistently, meeting the second criterion, but require much less energy (e.g., 1 megawatt or less) than the 15-megawatt threshold this rule proposes.
Because these customers do not meet the demand criterion, Electric Rule 27 would not apply to them.
For a customer that meets these criteria, the rule requires the customer to fund 100% of the cost of any infrastructure built specifically to serve it, such as line extensions, substation expansion, or high voltage service, paid in advance. This ensures that existing customers bear none of the cost of that infrastructure.
New Electric Rule No. 27 — Financial Assurance Standards for Large Electric Load September 29, 2026
The rule also requires the customer to maintain ongoing financial protection, including a prepayment account for service and additional financial security such as a letter of credit or comparable financial guarantee, administered through an independent third-party trustee. A customer of this size and scale would likely require APU to source and procure new renewable power generation, such as solar or wind farms, to continue to comply with existing California renewable energy mandates. Accordingly, the financial assurance requirements proposed in this rule protect existing customers from stranded power supply costs if a customer served under this rule defaults or leaves APU's service territory.
Summary
The proposed rule serves two purposes: it ensures that APU recovers, from this narrow category of large customers, the costs of serving them, rather than APU's existing ratepayers; and it establishes a clear, predictable framework so that any customer whose proposed service meets this rule's criteria knows in advance what conditions will apply. Together, this proposal protects APU's existing customers while supporting continued economic development in Anaheim.
The proposed rule reflects APU's careful study of protective frameworks adopted or in development by other utilities nationwide, calibrated to Anaheim's specific circumstances, including APU's size, customer composition, and existing power supply portfolio. The rule does not establish or affect any fees or rate adjustments, and its adoption does not commit APU to any specific procurement or service arrangement.
ENVIRONMENTAL DETERMINATION:
APU recommends that City Council determine that the adoption of the Resolution is not subject to CEQA pursuant to sections 15060(c)(2)-(3) and 15378 of the CEQA Guidelines in that it constitutes a regulatory and administrative action and general procedure making and does not approve, commit Anaheim to, or result in any physical changes to the environment.
IMPACT ON BUDGET:
The proposed adoption of Electric Rule 27 is administrative and regulatory in nature and does not result in any fee increases or direct budget impacts. Costs of administering this rule, when applicable to specific customers, are funded by those customers as the rule requires.
Respectfully submitted,
Brian Beelner
Acting Public Utilities General Manager
Attachment:
1. Resolution adopting Rule No. 27 of the Electric Rates, Rules and Regulations