Senate Standing Committee on Energy, Utilities and Communications

The Senate Committee on Energy, Utilities and Communications will come to order. Good morning. The Senate Committee continues to welcome the public and has provided access to both in person and teleconference participation for public comments. We're experiencing a little bit of technical difficulty, but we're going to still provide the call in numbers for individuals wishing to participate in. The toll free number is 1866-226-8163. That's 866-226-8163. An access code is 736-2832. That's 736-2832 for today's hearing.

We'll be hearing all of our panel witnesses on the agenda prior to taking any public comment. Once we have heard all our witnesses, we will have a public comment period for those who wish to comment on topics of today's agenda. Our hearing today is focused on oversight of the state energy agency's and electric grid operator and a California independent systems operator, Kaisel, who operates a grid for the majority of the state.

We specifically are interested in understanding how we are ensuring electric reliability for Californians and how last year's unprecedented billion dollar budget actions have been implemented. Thus far each summer since 2020, we have experienced challenges to ensuring reliability, particularly in the evening hours, most acutely during extreme heat events. In August 2020, we experienced rotating outages for the first time in about two decades. These controlled outages are an important tool to stave off uncontrolled widespread cascading outages.

Those customers who did experience those rotating outages experienced loss of power for eight minutes to up to 2 hours or so. Generally, these controlled outages are limited to 16 to 20 minutes per affected customer. Nonetheless, the outages raised serious concerns about the ability of our electric grid to maintain reliability, just that we're in the midst of an energy transition to zero carbon future.

An energy transition that requires a more diverse generation mix with increasing renewable energy, some of which is variable and does not produce during the late afternoon and evening hours, retiring traditional resources and simultaneously adopting policies to increase demand for electricity by adopting policies that increase electrification of transportation and building applications. Additionally, in California, we're fragmented the procurement landscape with the expansion of community choice aggregation and electric service providers proportions of the load previously served by our electric investor owned utilities.

Today, there are over 40 entities responsible for procuring the energy resources needed to ensure reliability and reach the state zero carbon energy goals. Folks, we are flying a plane while we're building it, adding additional passengers and changing the fuel mix midair as weather forecasts constantly shift, requiring adjustments to the flight paths. This is one of the certainties and electric utility costs or one of the certainties is increased electric utility costs. Costs are truly rising where we are in our efforts to ensure reliability.

What is our game plan to ensure that reliability remains at the forefront of our efforts, even as we transition to zero carbon energy and work towards ensuring reliability? With that being said, we're going to invite our first witness to the panel. It is Ms. Sarah Cornett from the Legislative Analyst Office.

And I'm joined by my colleague Anthony Simbol. I'll be walking through a handout that you should have in front of you. It's also available on the LAO website for anyone following along. So we were asked to provide an overview of recent state actions and investments on reliability. So, turning to page one of the handout the Budget Act last year established the Strategic Reliability Reserve, which includes three programs. The primary program is the Electricity Supply Strategic Reliability Reserve, or the ESSRP.

The ESSRRP provides backup power in emergency events, and it's administered by the Department of Water Resources, or DWR. So far, activities have included procuring, temporary diesel generators, new storage, and reimbursing utilities for additional imports. DWR also is entering into a new contract to extend the life of three once through cooling gas plants that were scheduled to retire, and 2.1 billion has been committed thus far as part of the Essrrp. The second program is the Distributed Electricity Backup Assets program.

This is still in development by the California Energy Commission and will provide incentives for certain distributed energy resources such as fuel cells or storage to support the grid in extreme events. And then finally, the Demand Side Grid Support Program, also administered by the CEC, this program pays customers to reduce their energy usage during peak hours, and utilities began Enrolling Participants last year. So, taken together, these are three programs that represent pretty unprecedented levels of investment on the part of the state.

And turning to the next page, a couple of additional actions to highlight the Legislature extended operations or authorized an extension of operations for the Diablo Canyon Power plant through SB 846 of last year. Also, that Bill also authorizes state to loan up to 1.4 billion to PG&E to support expanded operations through 2030. The Administration expects 1.1 billion of that loan will be repaid or reimbursed by the federal government. SBA 864 also established the Clean Energy Reliability Investment Plan, or CERIP.

It directed the CEC to develop this plan with the intent to provide 1 billion through 2026, and the recent Budget Act committed the first 100 million of those investments. You can see the fullest of investments here. Some of the larger ones include funding to the CPUC for renewable energy programs and funding to DWR to support a potential new central procurement function. Turning to page three, some other significant initiatives the CPUC increased its Planning Reserve margin for load serving entities earlier this year.

The state has also undertaken various efforts to support offshore wind, including providing resources for multi agency planning and authorizing the CEC to enter into a multi state consortium to develop offshore wind projects. And the Legislature is also considering legislation to give DWR the authority to act as a central procurement entity for large, long lead time resources. And this is still under consideration by the Legislature. And finally, we have on the next page some key issues for your consideration and questions.

So, first, what reliability gaps and risks currently exist? Are there near term, unmet reliability needs, and to what degree will these recent investments fill the gap? Second, how should the Legislature monitor and evaluate reliability programs? Has the state clearly defined its goals around reliability, and does the Legislature have what it needs to monitor success? And third, how effective are these programs? The state has made really unprecedented investments in reliability, and are these investments proving successful, and are these the most cost effective approaches?

Fourth, how should the Legislature balance reliability goals against other state goals? So ensuring near term reliability could mean more greenhouse gas emissions in certain cases and greater impacts on vulnerable communities and higher costs. So what types of trade offs is the Legislature comfortable accepting? And how should the state weigh various impacts and priorities? Fifth, what should the state's role be in ensuring reliability? So what role should the state be playing in assisting utilities?

How should costs be distributed, and how are recent state efforts impacting the energy market and utilities ability to engage in it? And finally, how will reliability efforts affect ratepayers? So does the Administration have estimates for how rates might be impacted by reliability efforts? And are there steps the Legislature may want to take to mitigate those impacts, especially for lower income residents? And happy to take any questions.

Members, are there any questions for the Legislative Office? Vice Chair Dahle.

Thank you, Mr. Chair. So on the central procurement, which you alluded to, there has to be legislation that actually sets that in place, is that correct?

Correct. That's our understanding, yes. And the Clean Energy Reliability Investment Plan, the commitment of 32 million, we believe that is contingent on the proposal actually being adopted. So there is legislation under consideration that would give DWR that authority, but our understanding is that they would need that legislation to be able to do so.

Would that legislation allow them to be able to procure not just through Cal-ISO, but also the other load bearing agencies that are in California and outside of California?

I think that would probably be a better question for DWR.

All right.

Yeah. Thank you.

Well, that's coming. For those of you at DWR.

Members, are there any additional questions for Legislative Analyst Office? No?

Thank you.

Well, I do have a question. I'm just curious. Do you have a sense of what the overall cost for the programs addressing reliability, not just what's funded right now in the state budget?

So your question is not just the budget reliability programs, but the total efforts that's also, I think, maybe a good question to ask the energy agencies. Through the state budget, there was about 3.4 billion committed last year. So, again, that's really unprecedented and significant. But in terms of other cost, I think it can be a little bit harder to assess those, just given that there are so many players in this space.

Got it. All right. Yeah. Senate Grove.

Thank you. You just mentioned the $3.4 billion. Can you identify the projects that dollars, those taxpayer dollars are going to now?

Sure. So on page one of the handout so these include the Strategic Reliability Reserve Programs. So the primary program, again, is the Electricity Supply Strategic Reliability Reserve administered by DWR. The Distributed Electricity Backup Assets program is a second program. It received about 700 million through that 3.4 billion. It's administered by the CEC and is still in development to provide backup energy resources. And then third, the demand side grid support program, also administered by the CEC.

And do we have metrics or goals to see that these programs are working and we're achieving those goals? With the significant investment of taxpayer dollars, is it being successful, not being successful?

Again, I know we're going to hear from the energy agencies, so I think that those could be good questions to ask in terms of how the programs are working. But, again, these are pretty new programs, so we think those are good questions for you all to be considering in terms of what are the highest priority needs for these programs and how are they working thus far?

Seeing no additional questions, I want to thank you. And now we're going to move on to our next panel, and it's going to be the California Energy Commission, California Public Utilities Commission, Department of Water Resources, and California Independent System Operator. Will you all come forward at this time?

Good morning, Chair and senators on the committee. Thank you so much for inviting us today to go through this. We have a slide deck prepared, and we're going to do this collectively between the four of us here. So I want to begin by just doing introductions. I'm Siva Gunda, vice chair for the California Energy Commission. For record.

And we will begin with the CEC Vice Chair Siva Gunda. So when you're ready, you may begin.

Alice Reynolds, President of California Public Utilities Commission.

Elliot Mainzer, President CEO of California. ISO. Good morning.

Delphine Hou, Deputy Director, Department of Water Resources.

Thank you. I will now pass to President Reynolds to just start us for the first two slides.

Good morning, chair Bradford, vice chair Dahle and committee Members. I'm really pleased to be here this morning with my colleagues on the panel. And we do have a slide deck here, it looks like. Yeah, we can go through the slides. Okay. First, I wanted to start with the big picture backdrop. The electric sector, as you know, plays a large role in California's climate change strategy. We're both working to electrify the economy and decarbonizing the grid that serves the needs of the state.

A lot of progress has been made in the electric sector, and in 2021, 59% of the state's electricity was generated by renewable and zero carbon resources. With this momentum, we're now working towards the goals set by the Legislature. 90% clean electricity sales by 2035, 95% by 2040, and 100% by 2045. At the same time, climate change is causing unprecedented stress on our grid.

Extreme heat, drought, flood, and wildfires are increasing in frequency and intensity and threaten reliability as we take action to make our grid more resilient to these threats, our growing reliance on clean energy will also help mitigate one of the main sources of greenhouse gas emissions in California's economy. So the grid of the future is one that's clean, safe, affordable, and reliable. And with clear statutory directives.

It's really not a question of if, but it's a question of how we carry out this transition to our clean energy future. So, clean energy capacity has tripled in the past decade. But to provide 100% clean energy by 2045, California will have to build an unprecedented amount of new clean energy resources. We saw that in the 2021 SB 100 Joint Agency report, a projection of the need for 148,000 resources by 2045.

And for a comparison, the current highest peak load in the Kaiso system was just over 52,000 MW on September 6, 2022. Much of this will be utility scale solar and also battery storage, which automatically increase dramatically increases the amount of clean, firm capacity available to grid operators. Other potential resources include biomass, geothermal, offshore wind, long duration energy storage, and onshore wind. I'll note that last week, the agencies kicked off the joint 2025 SB 100 work to prepare the next report.

Pursuant to that statutory directive, this collaborative work will be exploring how we can continue to advance towards a clean energy goals, while, of course, maintaining a reliable and affordable system. So over the past four years, five years, one of the Cpucs oh, I'm sorry. This is your slide. All right, I am going to, apologies. We're trying to manage this jointly with the four of us. I'm now going to shift to vice chair Gunda.

Thank you, President Reynolds. So I'm going to just walk through the next several slides here. So as President Reynolds was sharing, we are looking at the data here on this slide. That's the latest. We've just received this information this year. So as mentioned, we're at 59% zero carbon in terms of energy usage on the bulk grid. One of the critical resources that we need to add is storage. And we went from about 200 MW in 2019 to 5600 at the start of this summer.

And we continue to add more storage to the system. A few high level stats. Over the last decade, since 2022, the solar generation overall has surged about 20 times. The wind generation has gone up by 63%, and the natural gas usage in terms of the energy has declined by 20%. So before we go into the reliability, just want to kind of set the stage on one of the key themes that we kind of look into, which is the net peak ramping needs.

So what you're seeing here on this chart, and I'm going to situate you on the chart, the green line is the gross demand that the Kaiso system will see. So on any given day, if you go to the Kaiso system, that's how the demand grows hour by hour. So about four to 05:00 P.m. In the middle of the day, you'll have the maximum load that the Kaiso will see typically. And it's kind of moving towards more 06:00 P.m. Time frame.

But right now it's about five to six. So what you see in the purple line underneath that is take that demand that Kaiso system sees and remove all the solar and wind generation. So the purple line is what you have to manage without solar and wind on any given day. And a specific thing that we want to point out is between 12:00 P.m. And that 08:00 P.m., you have this line just kind of going on a slope.

And that slope has to be met with resources other than wind and solar. And that's where the need for ramping resources comes into place. Right now, we have storage playing a critical role on that, but a large amount of that really comes from natural gas. So that goes to the next slide, just providing you a heat map of gas generation, natural gas generation typically on a given day. We're looking at some real data here.

And if you look at the chart here, the Orange Color and the red color is where the gas fleet is burning the most. And the rest of the time. When it's green, it's Low, as you can see. First of all, this is a 365 day plot, right? So you have all the days and all the hours of a day. So on the vertical axis you have the 24 hours, and on the horizontal axis you have 365 days of 2022.

So one, the gas is burnt more in summer, and two, it's burned in the morning hours and the evening hours when you don't have the solar and wind. And that's really what we're looking at solving as we move forward. Next slide. So that kind of sets the stage for some of the support that we received from the Legislature after kind of sharing some of these concerns following 2020.

And at a very high level, we framed it as some of the compounding risks that we were going into. So in 2020, we were relying much on historical data, weather data, so any of our forecasting was really relying on historical data and not taking into account significant climate change impacts.

That's something we needed to correct as we move forward in 2020, we experienced extreme heat and then we quickly had to figure out if we are going to have these extreme events so far outside the norm of planning, what do we do with that? So, as we went into 2021, we started really incorporating some of those high heat scenarios and thinking through increasing planning reserve margin. That's something President Reynolds is going to talk about in a second and improve the RA program.

But then we got hit with the supply chain issues, something that we didn't see. We got hit with drought, we got hit with fire. So on July 19, 2021, we had this incredible catastrophic fire in Bootleg, Oregon, where we got 4000 transmission lines in a knocked out in a second. And we had to deal with that. So, as we learned, in 2020, 2021 and 2022, we continue to evolve our planning processes and then really trying to incorporate future looking planning process. Next slide.

So that then kind of comes to what are we doing then in terms of actions? We can broadly bucket them as three kind of groups. One is improving our grid planning processes at large, so that includes improving forecasting. How do we take into account climate change predictions and bake them into forecasting? Two, how do we make sure we are actually deploying enough procurement? So CPUC is getting ahead of that forecast.

So some of the issues with the forecast is historically by the time CPUC starts their procurement process, and by the time they end, which is about 18 months to two years, there is a new forecast. So PUC is beginning to build some cushion into their procurement process and finally improving the resource adequacy process. That's all happening in the planning processes.

On scaling the supply and demand resources at a high level, we have an interagency groups that tracking procurement and figuring out how to solve some of the challenges. We've got some support on the permitting process. There's improved interconnection that Elliot Mainser could comment on. And also you've provided us with some money, a billion dollars on the setup to kind of set up what could be a way to use a billion dollars we provided earlier this year, what that investment plan could look like.

And finally, going into the third bucket, which was really important, is as we continue to do a traditional planning, how do we also incorporate a new setup, which is the extreme weather planning, and we'll talk about the nuances of that. The reason why we have to do it is the rate payer impacts on affordability, how do we make sure the planning is happening to allow for affordable, clean, reliable power? But then we have additional resources as needed under emergencies.

So here's I'm on slide number ten, just providing you the things that we are beginning to incorporate. Here's a high level chart on the temperature distribution, something you would appreciate. I'll try to set the stage on this one. So what you're looking at is the blue line is a 30 year weather information, and then distribution of temperature versus the orange line is the last 20 years. So all it is, is that it's removing ten years of information.

What you then see there is that the 50th percentile is not moving that much. So overall the median temperature is growing slowly, but the tails are growing incredibly long. And as you see that the distance between the 95th percentile widens a lot. And that's the problem that we are trying to figure out how to solve. And then the other questions that the Legislature has asked us is to think about future electrification loads.

One of the key elements that we did was really looking at the scoping plan and baking some of the scoping plans, electrification targets into the forecasting. So we are adequately planning that. So to just kind of show you there in 2021, the orange stack there is the 2021 forecast, and then the blue one is the 2022. And you can see a significant increase in the electrified vehicles, light duty vehicles in terms of the number.

That's because we are looking forward planning, working with PUC, working with CARB to make sure we're adequately planning for increased electrification. Next slide. So what that translates to on a winter day. So what I showed you before was a summer day, and I just want to show you that winter electric loads are coming. So what you see here are two things. One, the peak load, this is 2035. The peak load now in winter is going to go up to 50,000 MW, right?

So that's an important element. Right now it's about 35 and 30, sometimes even 25. So you're really adding 25 load because of the heating load from the building electrification as well as charging. So you're looking at early morning peak as well as evening peak. So it's just a changing system. And what the last two slides are here to show you is that we are actively looking at all the information and planning it preemptively. So finally, what that led to? Slide number 13.

This is something that the Legislature asked us to look into, really like looking at. How are you going to bake into all these uncertainties? What you're seeing here is the vintages of different demand forecasts that the CEC has developed. You're seeing 20, 18, 20, 19, 20, 20. These are different vintages. Every year we develop a forecast. As you can see, it continues to really shift up and slope up. So with all the electrification loads that we now baked in, 2022 is our most robust forecast.

That takes into account both weather issues, climate driven, long term issues, as well as electrification overall for the economy. So I just wanted to set that that we are taking into account all those issues. With that, I'll pass it on back to President Reynolds to talk about. Now that we've done the forecasting, the next step is to make sure we actually procure for that forecasting and then do adequate tracking of that.

Great. Thank you, vice Chair Gunda so, over the past five years, one of the CPUC's top priorities has been to order the load serving entities. So these are all the retail providers of electricity, the IOUs, the CCAs, and the electric service providers.

So to order them to quickly bring new clean electricity resources online in the near and long term, these are the resources that we need to meet the demand that Vice Chair Gunda described, to meet increasing demand from changing weather patterns and also handle integration of large quantities of variable energy resources like solar and wind. So between 2019 and today, the CPUC has ordered a total of 18,800 capacity to come online by 2028. This is the largest requirement for new clean energy resources in the state's history.

And again, for a sense of scale or peak, as I described, the highest load we've seen, 52,000 normal hot summer day, about 40,000 MW. So as the table in the slide shows, we ordered 3300 MW in November of 2019, 11,500 MW in June of 2021, and 4000 MW in February 2023. Next slide, please. So all of these resources I was just describing are the result of CPUC procurement orders in our integrated Resource planning proceeding, which is the primary driver of getting new steel in the ground.

So while that proceeding serves to identify, plan for, and potentially require procurement of future resource needs for reliability and greenhouse gas emission reductions, the CPUC's Resource Adequacy program is a program that ensures that these new resources combined with existing resources. And those imports that we can get through the Westwide system are being made available to Kaiso's energy markets every day at sufficient levels to meet our peak demand.

So the Resource Adequacy Program, or RA, as we call it, requires all of the CPUC's jurisdictional load serving entities, again CCAs, ESPS and IOUs to have under contract resources to meet their share of the peak load based on? The CEC's demand forecast again, which you heard from Vice Chair Gunda, plus a planning reserve margin or a PRM of additional resources that is set to achieve the industry standard for reliability known as the loss of load expectation.

So, until recently, modeling had consistently shown that a 15% PRM was sufficient. It took us through many years without reliability problems. Now though, weather patterns and our resource mix have changed, and recent modeling indicates a need for a higher PRM. So to that end, we've increased the PRM to 16% for this year and increased the PRM to 17% for 2024 and 2025. And then we'll be evaluating, we're constantly evaluating. So we're looking for those planning standards that we need to meet.

And we'll be looking at 2026 and beyond in the resource adequacy program at the POC. Recognizing that this might not be enough for those extreme events that you heard about, those tail events that are getting more extreme each year. We've also ordered investor owned utilities to procure an additional 1700 to 3200 resources, which represent an additional four to six and a half percent of an incremental PRM. So this is we're calling an effective PRM, which brings us to roughly 21 to 23 and a half percent.

And that's for the years of 2023, 24 and 25. So getting up to a higher level with that effective PRM. These resources include both supply side generation and demand response, such as the Emergency Load Reduction Program. So really try and take advantage of everything incremental that we can add to the existing PRM to cover extreme events. We've also made several modifications to strengthen the program.

Again, we're continuing to evaluate, but recently we have implemented some central procurement for locally constrained areas to make sure we have reliability in local areas. We're adopting a penalty structure for fines on load serving entities who have deficiencies in meeting their resource adequacy requirements. And we're developing a new slice of day paradigm which really focuses on making sure that resource adequacy meets every hour of every day and not just one level for each day.

So we intend to that all these changes result in better forecasting, planning and procurement outcomes. So really trying to stay ahead of what we expect for the future. Next slide. Okay, our load serving entities have already begun bringing online a significant number of new resources in compliance with the orders that I discussed on the previous slide. So this table shows a breakdown of the new resources we expect to come online between now and 2026.

So contracts are being executed and the online dates are shown in this slide. So this is based on what all of the load serving entities have been reporting to us on their updates. We're constantly tracking the contracting and construction and online dates. So the main takeaway here is that most of this new capacity is going to be standalone storage and then hybrid solar with storage resources. So, again, storage is very important with all the resources.

And while all of these resources do contribute to our electric grid needs at different hours of the day, batteries again contribute to near term reliability needs in the evening peak. When the grid is most stressed, demand is the highest, and when solar output has waned. So the solar we're using to charge the battery storage during the day, and that shared storage energy just goes right back into the grid at those critical times. Next slide, please.

The pace of this clean energy development is something that we're tracking to make sure that we're moving quickly. We do have an interagency task force that's tracking constantly these new projects. It's called the Tracking Energy Development Task Force, or Ted, dedicated to tracking progress project by project. And there are many projects. So based on cumulative tracking, we've seen over 5000 qualifying capacity. So that's the value to the grid of the clean energy resources from nearly 200 projects since January 2020.

Looking ahead at the remainder of 2023, the load serving entities are reporting to us that we'll bring over 3000 qualifying capacity during this calendar year. And next year we're expecting an even bigger build out with 6000 qualifying capacity by 2024. So, pace is increasing. And then I want to make it clear, I think we've been really encouraged to see the pace of development of new projects. But this is unprecedented and challenging. And so, as the chair mentioned, it's about building the airplane as we're flying it.

So we're really trying to watch this carefully and do everything we can from a joint agency perspective to make sure that we're getting projects that meet the needs of the grid. Those projects are built quickly and don't suffer delays. So that's taking a lot of cross agency collaboration and work with developers and one on one work with those developers and local agencies to make sure the projects are moving quickly. With that, I will pass it along to the next speaker.

Thank you.

So that's the first step that we wanted to do. So now what we'll talk about here is, even if we were to meet the planning standards, what do we do with the extreme events? And I want to go through that just in a minute here. So this is what you're seeing here. In terms of long term need for contingencies, this is basically when we have events like last September, September 6, that are so outside the realm of regular planning.

So, for example, last year on September, the month of September, the average load that was predicted was about 45,000. On any given day, we would say, okay, it might deviate by 3000 MW. We'll plan for 48 that day. We had 52 on the way to 53 before the actual alert went out. So we're talking about 7000 8000 MW departure on the Kaiso system, which is essentially adding two ladwps on the top of Kaisa system. That's what we're looking at for just a few days.

And outside of that, it was completely normal. So what do we do? So what this table is showing you is those extreme events. The first thing is, under planning standards, we have no shortfalls based on what CPU has already procured. And it actually isn't surplus in many of the years because they've built in a lot of cushion.

But once you start hitting a 2020 equivalent event, which was a Westwide heat, or a 2022 equivalent event, which was more California, it was Westwide, but more California, a historically high heat, you're talking about significant shortfalls. Even with all the procurement we're doing, it's about 3000 MW in 2030. And that's what we need to build a cushion for from now to 2030. So that then goes into, okay, what contingencies does the state have? So we have roughly three buckets of contingencies right now.

The first one, thanks to the Legislature and the Administration for providing us the money to develop this new bucket of resources, which we're calling the Strategic reserve. It has broadly three parts. My colleague Delphine Ho from DWR is going to talk about the first one. The next two are on CEC. And then you have CPUC supporting reliability programs on ratepayer money. And that's an important element. And finally, we can do some voluntary reduction. So, for example, DWR, if it is possible, can change their pumping load.

And that's significant amount of pumping load that they could change on any given day. So that kind of takes us into the Strategic Reserve. I'll just cover the first two and then pass it to my colleague here. On the Demand Side Grid Support Program, which was put in last year, it was 295,000,000. It came in in July, and then we were able to bring about 315 support last summer.

Very quickly for the September event, we expect that to continue to grow and we are continuing to change the guidelines to really make demand response become a significant part of that portfolio. And then the distributed energy backup assets. This was another 595 million. The reason it's going to be launching in October 2023 doesn't mean that we haven't been doing anything on that. We have done four workshops, including staff presentations that really talk through with the developers what are some of the best ideas.

So in October 2023, we'll be finalizing our guidelines and coming out with our first solicitations. With that, I'll pass it to Delphine.

Thank you, vice Chair Gunda. Delphine Hou, Department of Water Resources. So, as Vice Chair Gunda explained, there are three programs under the Strategic Reliability Reserve. And just to maybe separate the landscape, the CC's program is largely focused on demand side or distributed resources, whereas DWR's program is much more focused on transmission connected or supply side resources.

So just to give you a little bit layout of the differences between the three programs and how they do work together so DWR's Electricity Supply Strategic Reliability Reserve Program provides additional energy above and beyond the traditional planning standards to address these extreme events that we have been discussing.

In addition, the Water Code requires that DWR prioritize these investments so that we are not competing with the electric generating facilities that are already planned and under development from load serving entities such as those at the CPUC or local publicly owned electric utilities. And that's very critical because they have a very heavy lift in trying to meet those planning standards and we want to make sure that we're not simultaneously competing with their procurement.

Lastly, these utilities have been running into several delays in terms of supply chain delays or weathered related delays, most recently in early 2023. So to support the clean energy transition but maintain electric reliability DWR's program, we've invested in four broad categories of electric resources that balance electric grid reliability.

So, starting from the first column, in 2022, there was 120 emergency and temporary natural gas fueled resources that were originally commissioned in 2021, but were used and useful during September 2022 to address that significant record breaking heat wave. In addition, DWR worked very collaboratively with our colleagues at the CPUC to Fund above market costs for imports. We had in total, in aggregate of contracts over 3300 imports, and of those, approximately half came in Low or zero GHG emission resources.

DWR, as was mentioned by LAO, we also temporarily leased diesel fueled electric generators. Those were used back in September 2022 to address that significant heat wave. But even though in the Water Co we were allowed to use that up to July 31, 2023, we voluntarily declined to do so, and we closed out that program in October 2022. Instead, DWR is looking at investing in new electric generators with lower GHG emissions profiles that don't use water.

There was a similar model that was used and then provided to the Air Resources Board that achieved certification in their distributed generation program. And what that means is that the generator has Low enough emissions to be exempt from air district permit requirements. So for 2023, moving into the second column, we have online already 148 existing resources. We expect another 144 coming online, for a total of up to 291 for this year.

In addition, as was mentioned after the passage of the Budget Act of 2023, during this legislative session, DWR is authorized again to support the above market cost for imports. And again, we're working very closely with our CPUC colleagues doing so and paying for these above market costs really reduces the cost to ratepayers for these imports.

Thus far, the DRVs program, in collaboration with the CPUC staff, we've been able to support approximately 200 imports in June, 300 in July, 900 in August, and another 800 for September, with more being procured as well. So we think that is a very successful program that is in progress. Moving on to 2024, in the last column, we've also been authorized through the Water Code to extend the operations of retiring facilities.

And as was mentioned, in 2024, DWR contracted with 2860 electric generation sources that would have otherwise retired because of compliance with the state Water Boards once through cooling policy. So DWR took the step to contract with these resources at the Behest and recommendation of the Statewide Advisory Committee on Cooling Water Intake Structures, which includes the CEC, the PUC, as well as the Caliso.

And importantly, the recommendation not only asks that these resources are contracted by DWR for this strategic reserve, but very importantly, that these resources not be considered resource adequacy resources. I do want to put a finer point on that distinction, because that is quite critical. Removing these resources from resource adequacy changes their operations drastically. So let me explain it this way. In the resource adequacy program and participants in the Kaisen market, they have something called a must offer obligation.

So they must offer their capacity to the market 24 hours a day, seven days a week. And if the Kaiso needs the resource, these resources will be run. That is the state of affairs today. Right now, with those resources, starting in 2024, when they come to DWR, they will be held in the reserve and they will be default off. So they will be off unless and until Kaiso believes there's an event that would warrant turning these resources on to address an extreme event.

So that is a very different set of operating procedures for these resources. And in doing. So we believe that that reduces the use of ones through cooling water as well as emissions for those assets. So I wanted to highlight that. In addition, I didn't mention this, but we are rolling over the 291 MW from this year as well. So that is what we're looking forward to in 2024. So with that, I'll turn this back to Vice chair gunda.

Thank you, Delphine. So then just we want to end with the last section, which is how is the rest of the summer looking? We've gone through pretty well this year. We've had a couple of tight conditions this year, but we were able to manage really well with both the Intragency coordination, but Kaiso's leadership on that. So just for the rest of the summer, we are looking at September numbers here.

Just going to direct your attention to that negative 2000 number and negative 7000 number at the bottom of the table. Last year when we were going into summer, given the conditions we were experiencing, we were predicting up to 7000 megawatt of potential shortfall. And that's what we've realized on September 6 this year.

Even if we were to kind of come in the same conditions, given how much new energy we've been able to add to the system, it'll be about 2000 and those 2000 then what do we do with the 2000? We do have contingencies in excess of that number at this point and we're continuing to build that into our contingency plans. So with that, I will pass on to Preston Mainzer here to close us off.

Thank you very much. Chair Bradford and vice chair Dahle and Members of committee. It's a pleasure to see you. I'm Elliot Mainzer with the ISO. And just a couple of observations. First of all, I think, as you're aware, our responsibility at the ISO is to maintain the real time reliability of the system for about 80% of California.

And the actions that have been described earlier this morning, the core improvements to the resource adequacy program, the strategic reserve, these actions have made a major positive difference in our ability to maintain reliability on the grid. So I really have appreciated all the teamwork and collaborative activity here and we're going to keep our focus, I think, into the future. But it certainly made a positive difference this year.

Going into the summer, one of the things that we do at the ISO is we actually do a check on the amount of capacity that's being shown going into these critical summer months. And for August this year, we actually saw just a very small deficit of about 186 MW. We actually have a mechanism in our transmission tariff known as the Capacity Procurement mechanism that allows us to do some light procurement if necessary. We are able to do that and cure the deficit.

And we went into August actually in a pretty good shape. And actually throughout the summer, we were feeling really quite good. One of the things I wanted to sort of contextualize is at the Kaiso we are part, of course, maintaining reliability inside the state of California, but we also operate an energy market that spans a big portion of the west. If you think how it's kind of amazing to think how rapidly conditions have changed just in this last year.

If you think back to last September, particular September 6 of 2022, that was a day where California hit its all time record demand of 52,061 MW. Actually the entire Western interconnection that day hit a record. At the time, as you recall, we were in the middle of a very sort of record setting drought in California and we were able to import a significant amount of energy from other parts of the west, particularly the Pacific Northwest and the desert Southwest.

The Northwest was having a very strong water year that year and temperatures were hot but not extreme down in the desert Southwest. This July, amazingly, just a year later, conditions have changed dramatically. The Pacific Northwest actually having a well below average water year. A lot of Canada's water was sort of redirected into the Sierra Nevada this year.

Of course, California record setting snow pack here in California, I think 244% of average and temperatures across the course of the summer so far have been relatively modest here in California. But in the desert Southwest it's sort of been the flip side. They had a 30 days of above 110 degree temperatures and of course a bad water year in the Northwest which has impacted the broader supply in the west.

And actually on the evening of July 20, the aggregate demand for electricity in the west was roughly equivalent to maybe about 96% of what we saw last September. Just the tables were turned, we were in much better position. So our control center operators on the evening of July 20, actually notwithstanding the demand and the high demand of the market, went into that evening feeling quite confident about the setup. We felt that we were looking good.

But inside the hours, particularly between about seven and 08:00 p.m. Remember that's the portion of the net peak that you've heard my colleagues talk about where we're experiencing sometimes as much as 5000 solar ramping off the system at that particular hour, that's that peak net demand period. At that time we experienced a series of sort of cumulative supply uncertainties that happened across the course of that hour. We had a few of the batteries kind of off their dispatch.

We had lower renewable resource production than had been forecast. We had a little bit of transmission congestion on the system and just some of the imports that we would have normally seen under those conditions were not available because of the high demand outside of California. So we ended up actually inside the hour having to lean on our operating reserves for a short period of time. That triggered an EEA one. An Energy Emergency Alert one.

We were able to access some RDRR capacity, reliability, demand response and some emergency load reduction program and within an hour we were able to work our way through those conditions. But it certainly pointed out that the grid overall was in a fairly stressed condition. There was quite a bit of uncertainty on the system. So for the next several days we increased our supply margins just to make sure we had some additional imports and full access to the resource adequacy capacity into California.

On July 25 and 26th we had some additional contingencies that materialized. Things were a little bit better. We actually declared EEA watches for both of the evenings of the 25th and 26th, again relied on some of our backup resources which performed perfectly and we were able to get through these events without any supply disturbances and reliability and really appreciated the coordination collaboration both inside California.

And of course we had to stay quite connected with the folks outside of California who were at that time struggling through some difficult supply conditions. Just quickly a few of the lessons learned coming out of July that I think are really important and some of the measures that we've taken just to continue fortifying reliability as we move through the balance of the summer. As we've discussed, we have more variable generation on our system, loads are behaving in new and different ways, it's a different system.

This year we have important to remember. We're going to have almost 7000 additional resources on our grid and every year we're changing our grid, the operating environment is changing. We have new patterns of load and resource volatility and so we're just having to make sure that we have a little bit more of a buffer or margin for uncertainty when we operate the grid each hour and just making sure that we have full access to the resource adequacy capacity that the state has paid so much for.

It's very important.

We've been doing a lot of communication and coordination with the adjacent utilities to make sure that they're not placing unnecessary demands on our system during our net peak period when we've just got a limited and finite amount of capability and just generally making sure that the coordination, communication and access to flexible supply and capacity inside California is as solid as it possibly can be and that that coordination with the adjacent utilities across the west is as strong as possible so we can maintain reliability in California and also support the broader interconnection with which we have significant interdependence.

So again really have appreciated the opportunity to be here today and all the work that's going underway to support reliability. I'm going to turn it back to President Reynolds for some closing comments.

Great, thank you. So just to briefly summarize what you've heard, you've heard about California's increasing drive to power the economy with clean energy resources but also some of the challenges that we've seen. We're scaling up clean energy resources, we're retiring fossil fuel resources and we're also maintaining grid reliability during climate change induced extreme events. So as you've heard, this is a work in progress and also takes a lot of creativity and collaboration and of course, partnership with the Legislature.

And we've seen many instances of that in the past and expected in the future. So we do have new investments and tools, some of which we've talked about today. This is really a comprehensive and focused strategy and we're going to continue our efforts, so continuing to work on constant improvement. And with that, I'll conclude my remarks. And that concludes the panel remarks and we really look forward to questions. Thank you.

Great. I want to thank all of presenters for the information that's been shared with us today. But before we go to Members questions, I want to invite our callers who wants to participate, to call in. And I want to note we have a new call in number different from what was reported earlier this morning. The new call in number is 877-226-8163. That's 877-226-8163. And participation code again is 736-2832. That's 736-2832. Now we'll bring the discussion back to our Members. Members, do you have any questions? Senator Dodd.

Yeah I have a couple of questions. I'll start just doing one at a time here and see if I can get a response to the first one and then move on. So doesn't requiring the IOUs, the CCAs, the ESPS to procure all this energy result in competition for those resources? And doesn't that increase the cost of it? It sounds like I'm right, but have you found it out that's true? Where are we going with this?

Yeah. It's a really great question, Senator, and it's something that it's one of the balances that we have to achieve and it's part of why we have both the integrated resource plan process and then the resource adequacy process. So when we're looking at the procurement that we need to do, that's about building new projects. And so we actually want to have competition because we rely on private generators to supply the power here, right? And so we don't regulate those generators.

We need to have competition to make sure that we're getting the most cost effective projects. So those projects compete for contracts they're built and then they're there to supply energy and they're available for resource adequacy, which you're right, all of the ESPS, the CCAs and the IOUs are competing for those resource adequacy contracts. But the concept is if you get the balance right, there's enough available. And so the competition actually can help to suppress prices because the generators are all competing for those contracts.

So there's an issue with market power and we have to be very careful about that because the ratepayers, of course, are captive consumers. And so this balance between not moving too quickly because if we build resources that just sit around and don't do anything. We have investments that we've made that aren't needed. But getting that balance right is why this process is so challenge. Takes a lot of modeling and forecasting, but really great question. So if it works well, that competition is helpful to us.

Good. Thank you very much. Second question is, Madam President, Mr. Vice Chair, you were signatories on a letter on regionalization earlier this summer. I'm interested in what's going on there. How was the reception to that letter? I happen to be a supporter of that concept and what you have in mind. And I'm just kind of a timeline, follow up, stakeholders, what's the process going to end up looking like.

Yeah, thank you. I'll start and then I'll turn to Vice Chair Gunda. And just for background, a letter was sent to a regional group of regulators in the west by a group of regulators from various states in the western region to encourage a discussion and a working group to explore options for greater coordination of market coordination and consideration of models, and an entity to serve as a regional transmission operator.

This was not a commitment to do anything except to form a working group to have discussions, but it was well received, I think, in response to your comment, in that I think there's a lot of interest and shared interest among the Western states in reliability and affordability. And so we approached it as regulators here in California. We're part of as Mr. Mainzer indicated, we're already part of a Western market. We're part of a connected grid.

How can we work together on those shared goals to get a more reliable system Westwide and to keep rates down? We've seen rate savings from the expanded market that's already in place, the energy imbalance market. So we have seen results for ratepayers. Our investor owned utilities and our CCAs and ESPS have made investments in the Kaiso market.

And joining and being a part of that, we want to continue to see the benefits and not see those investments go to waste, but also figure out a smart way to expand. And if we see opportunities to then join a broader market for regional transmission operation services, we can then evaluate that on behalf of California and explore it. But this is early. There have been a lot of regional grid. This is related to regional grid conversations. There have been a lot of conversations.

This is to create a forum to look at how can we design a new entity and then take a look at that entity and figure out what's right for California. I do want to say that of course, this would be a partnership with the Legislature. There are statutes in place with respect to the Kaiso and we do would like to continue to collaborate with you in the effort. So early stages, but promising discussions.

Fantastic. Thank you. Thank you, Chair.

Senator Dahle.

Thank you, Mr. Chairman. So first I want to just go to Slide. I believe it's the second page. And you have biomass battery storage, geothermal, offshore wind, long duration energy storage, utility scale storage, and wind. I don't see hydroelectric in there. So this is new build on purpose.

Or this is new build. So we're not building any more new hydro. This is what this is showing. But we have existing almost ten gigs of hydro.

So when SB 100 was passed, I was in the Assembly and that was one of the questions I asked. Because 30 under are considered renewable, 30 above are not considered renewable. And they at that time said, look, it's all going to be on the table to be counted. So when you look at your RPS, if you can't count 30 above, the utilities are forced to go somewhere else to get their power, which is a lot more efficient and drives the cost down, if you count those. So is there anybody looking at those megawatts to make them green power above 30 MW so that they're actually accessible to the utilities to purchase as green.

So SB 100, as you note, recognize, set the new renewable portfolio standard at 60%. There's still the additional 40% to get to 100% retail sales, which is designated as zero carbon resources. So that would include hydroelectric and eating.

Well, I guess my point is, does there need to be legislation that says, hey, we're going to include 30 above as green? Because if we don't actually say that and there's no policy set, even though it's available and SB 100 did not identify that. It said, yes, everything's on the table, but it didn't identify 30 above. So I'm asking, is the agency going to count that as green or not? Because that's really the question.

That's counted in the baseline. And then this chart is above and beyond. So that's counted in what, 59% clean energy that we already have achieved. Adding to that baseline, are these additional. I'm trying to answer your question.

All right, well, I want to make sure we're on the same page. So you are counting 30 above as green in your analysis right now for SB 100?

Yes, sir. The SB 100 has coined the term zero carbon. So we started off with all RPS resources are eligible for that. And then we added nuclear and large hydro as a part of the system.

So those utilities that have those facilities are counting those as green energy now?

Yes.

Okay, great, thank you. I'm glad to hear that. I wanted to then go to I just made a few notes here on the slide. So one of the questions I had about the battery storage that's coming online and that is available now, what is the duration? So if you have 6000 MW, is that for how long? Is it for an hour? Is it for 20 minutes? What's the time frame?

Most of it today is 4 hours.

So you're preparing for 6000 at 4 hours. Yes. So that's really 24,000. Okay, if that would be helpful for us, if you put that in there. So we know that how long because at the end of the day, when we're storing that energy, we need to know how long it's going to last us when we don't have the sun.

Absolutely.

So appreciate that. Thank you. And then one of the last things I wanted to ask about is my central procurement with DWR and the rate. So in all this information that we've seen here, we haven't seen any estimates on what the actual rate is going to be. And we know it's going to go up, or we assume it's going to go up, but has anybody did an analysis on what the rate payers are going to pay?

We have analysis of what the General Fund is putting in. Three and a half billion dollars, I believe is the first presentation. But at the end of the day it's what are the rates going to be in California long term? And then the follow up question to that is when we do reliability and we do central procurement, which I believe will happen, I know that folks are pushing for that.

I'm not sold on it yet 100%, because I'm concerned about California has set the bar really high. By 2045, we're going to be 100% renewable. Other states haven't. So I'm concerned about the fact of leakage. Are they supplying gas powered plants for their renewable, for their customers and then selling us their green renewables and we're actually paying a higher price, but we're not helping the environment at the same time.

So there has to be some accountability in if we're going to procure green energy from Utah and they're running power plants to serve their load by selling us the green, we're not really getting where we want to go. At the end of the day, we want to drive down emissions. That's the total goal. But California is a market for all them to sell into as we lose jobs and the workforce here in our state. So I want that to be addressed as well.

I think we can turn to others as well. But also to add to that, and you're right, it's Westwide system and we have to think about the supply of power back and forth between our borders. We have a lot of solar that we're selling to other states, and so we'll continue to do that in the middle of the day, as we talked about on most days, California has excess resources and we're selling that solar cheap, you know, very in the market. It does well. But I'll turn to other panelists.

Yeah, thank you very much. Appreciate your question, Vice Chair Dahle. So in terms of the rate and those considerations, what's been expressed in the trailer Bill, is that certainly if DWR were to be asked to do central procurement, anything DWR would do, would be back in collaboration with the Public Utilities Commission and in fact would have to pass the just and reasonable expectations of the commission.

So if there was a solicitation and the bids came back and they were not what was expected, they did not meet the requirements CPUC set forth, or was not just and reasonable pursuant to the rates, then there is no obligation for the CPUC to take that on. But the whole point of that being that we do want to work in partnership. We do want to understand that price discovery so that we can move our energy goals forward.

But it doesn't bind California in any way to have to take on a project that it doesn't feel would serve California appropriately.

So one last follow up comment in the future. I'll have one more year here, and so hopefully we'll see you back again next year. We talk about cheap solar, but there's a reason that solar is cheap. It's really not cheap, but we subsidize it through tax credits and those different types of programs and the ratepayer and the taxpayer are one and the same.

So if possible, I would love when you come back to report again that you take into account the tax credits that are being put forth. For example, the federal government is going to assuming that they give the 1.1 billion for Diablo Canyon, it's still coming from a taxpayer. This is the federal side. So I think in your calculations, when you talk about, hey, we have abundance of solar in California, there's a reason for that because there's great tax credits that go with it.

So there's incentive, but it's still being supplemented by a federal taxpayer because those resources are not coming into the federal pot. So I know this is complicated and not easy to do, but it would be helpful for the public to understand that, yeah, if you have three cent solar, it's really not three cent because there's five cent tax credit going along with it that the whole nation is paying for.

So we want to incentivize those goals to get to green energy, but we have to take into account that we have a major federal deficit and we also are making winners and losers out of different types of energy. That needs to be taken into account.

Thank you, Mr. Chairman. Senator Grove.

Thank you, Mr. Chair. Thank you all for being here. Vice Chair, nice to see you again. I do have several questions I'd like to follow up a little bit on what Senator Dodd and Senator Dahle asked. Number one, Senator Dahle explains about the actual cost of solar. I represent a county out of 58 counties in the state that produces over 50% of the renewable energy that this state uses.

We have the benefit of having land mass where 6000 acres of solar can take place and 2 million solar plants, you can't put that on Santa Monica Beach or in Gardena or anywhere else, but we have the benefit of having that land. And then there's bills passed that solar tax exclusions. So we can't even get revenue for our state libraries and things like that when we access our land and our resources.

Which I know is not under your purview, but it leads to the question of above market funds. Madam President, you kept addressing above market funds and the cost of reducing the cost and making it equitable for taxpayers or excuse me, ratepayers. And can you give me the dollar amount that's funded through the above market funds?

And what I want the public to understand is that like Senator Dahle said, when you estimate the cost of producing solar and the megawatts that gives California under what is considered green technology or green energy, there is above market funds that pay that cost down. That comes from ratepayers and taxpayers which are one and the same. So ratepayers and taxpayers at the end have a reduced cost but they're front loading it in the beginning.

So can you give me the total dollar amount expended for above market funds? And there used to be an above market funds account you could go to to find out how much money was actually being subsidized for green, green energy or solar or wind. But that account is no longer available. So how do we find out or how does the public find out how much money is actually being front loaded to reduce the cost of their rates? Because we're bringing on solar and wind or green technology.

We'll have to get back to you with that information and I guess I'll try to address it as much as I can. We're setting procurement order based on attributes of the energy that we need. And so when the load serving entities go out with solicitations, they set those parameters and then they get bids in and they will select the lowest cost and we work on the most cost effective portfolios. So kind of what's the optimal portfolio of resources? And then all of the load serving entities work to procure clean energy to meet those needs, resource needs. Does anyone else want to comment on that?

But it's far more expensive than natural gas and oil. So you're subsidizing with taxpayer dollars and that's the number I'm looking for. I realize that you're trying to get the cheapest or the lowest cost of the production and the procurement, but it's still being subsidized by taxpayer dollars because that's where the above market funds money comes from. Correct?

So I'll have to get back to you with those details. There may have been some changes and updates, so we'll make sure we get you the most recent information.

Okay. Just based on general knowledge, is there another way money gets subsidized other than taxpayers?

As you heard from Senator Dahle, there are federal tax credits still taxpayer dollars. Right? So taxpayer dollars from federal tax incentives, and then the resources are competing with each other. We have seen costs decrease significantly since we started this effort. And ten years ago, 15 years ago, these projects were expensive and not competitive, and now they are. Costs have come down quite a bit.

Okay. I'd really like that information, and I'd like it specifically for California. Not really interested in the federal piece of it, but just about California taxpayers and what their contribution is to the above market fund dollars, if that makes sense. Okay. I'd like to go through your presentation, if you don't mind. I did have a question on the hydro piece on the slide number three, I guess it is. I was curious again, but my colleague asked that question, why it wasn't there.

And I am still curious because it's all about the reduction of emissions. And there's a new facility in our airport. Again, not under your purview, but it does allow hydro planes to be able to fly short distances, 500 miles. But even if you take the regular fuel that comes off of a plane and it reduces the emissions and use this hydro new technology, and it reduces emissions because it's zero emissions, why aren't we investing in looking at hydro? And why is that not part of the portfolio?

Thank you. Senator Grove, nice to see you as well. Just kind of setting the stage on the slide. So this is just incremental to what we have already in clean energy resources. So the way the SP 100, the first SP 100 report was done was purely cost based. So we looked at the different attributes. So this includes all RPS eligible technologies, pumped hydro, large scale hydro. And we did not include nuclear because we have that constraint in California.

So when you put that and then you say, this is the demand I want to meet with the least cost resources, this is the portfolio that we get at the end of the day. So to your point, specifically, if we look at the brown one in there, which is the long duration energy storage, that is also a proxy for pumped hydro. So we modeled pumped hydro as a part of that long duration energy storage.

So we do have some hydro resources here in terms of pumped hydro, but large scale hydro projects have not been picked up on cost basis.

Thank you. When you talk about your battery storage and Senator Dahle asked that question, and it sustains a four hour charge, when you talk about battery storage, are you guys considering the ethical source of battery storage? You don't consider the ethical source?

Thank you. Senator Grove, you raised this previously as well. So as a part of the 2025 SB 100 report, one of the things we have been asked both by the Legislature like you, but also the environmental justice communities, is looking at some of those qualitative non energy benefits impacts, and that's something we're going to try and do in the 2025 more qualitatively.

So the reason why I asked that question, obviously, it's important to me and it's also important to the chair of this committee as a resolution to consider ethical sources of cobalt that comes from the Republic of Congo, Dominican Republic of the Congo, and slave labor, child labor. But they're promoting green technology here in California.

So I just want to make sure that agencies and I do plan on bringing it up on additional anytime I can bring it up that we can't pursue green technology and move forward as fast as we are by destroying other countries, specifically third world countries, that we have to secure an ethical source of energy, whether it's oil and gas or cobalt battery storage. Those things. And then I'm very interested in the end of life procedures of those things as well. So thank you for that.

Mr. Mainzer, is it? Mainzer? Yes. I have had the honor of going to the Cal ISO. I do not envy you in 1 oz. I think it's an incredible operation that you have there. I think your job is so immensely under-appreciated. And the reason why I say that is because all these procurements and everything that goes on, it's actually you that has to make sure that when somebody in California flips their switch, the lights show up and distributing that power and making sure that it's there.

It's everybody's job to bring the power to you, but you have to monitor it to where it works on a 24/7 scale for every person in the state of California so that we don't look like North Korea at night. So I guess my question to you is I have an article here, Cal Matters, on March 2, where federal regulators granted the exemption to allow Diablo Canyon nuclear plant to stay operating. And we made an emergency situation happen last, I think it was last year or the year before to keep it open. Can you operate and provide power without Diablo Canyon?

I think that the decision to extend Diablo is very important. I think the General principle of trying to make sure that we have replacement capacity in the ground before we're retiring is very important, and we are certainly appreciative of that. And we think that Diablo today still plays a very critical role in reliability in California. So I think the short answer is no. It would certainly put us in much greater distress not having that capacity. So we've appreciated the move to maintain its operation for a period of time.

What about the original gas plants? I believe there's four of them in the state of California that provide how much energy do those plants, including Diablo, provide for you to provide power? Well, for them to secure it and you to provide power to the state of California?

Yeah, it's over 5000 MW. These are significant pieces. And I think, as you heard earlier today, the decision to place some of the OTC units into the strategic reserve I think will be very important. I think all of us understand the consequences of those decisions and certainly on local communities. And I think there's efforts being made very diligently to replace them, but certainly maintaining reliability, certainly game number one for us, job number one for us.

And certainly we know for all of us in California it's absolutely essential. So taking the necessary steps while also working very diligently on the transition.

Thank you. Still have the duck curve? Is that what it's called? The duck curve.

Yes.

Yes. Okay, thank you. And then I appreciate that answer and I do applaud you for I hope they pay you a lot of money. I do. I really do. Going back, Mr. Vice Chair, we talked about Senator Dodd brought up this letter that was signed by you and I believe, several other people.

I was curious I mean, I appreciate the fact that you guys are looking to the western United States, but I was curious why all states like Idaho, Wyoming, Nevada and Colorado were not included in that. For example, is there a possibility you're going to expand? And the only reason I ask that it doesn't mean that it's because it's a Republican or Democrat issue.

I just think that when you operate in silos and you only get one side of the situation and then it's what I call I don't want to say a race to the bottom, but there's no one saying, hey, wait, maybe we need natural gas, until it's almost too late. Because you can't just fire up those power plants and then expect them to operate and then shut them down instantly. It should be a reliable source of energy.

I just am curious if there's going to be an expansion of states to include into the ones that you've already contacted. And if so, why weren't they on this letter to begin with?

Yeah, so one of the main purposes of the letter was to really provide an open invitation to all states in the west to join the dialogue. So to put a concept out and then open it up for everyone. So it has been a very open process. We have been in dialogue with all of the states in the west. Oh, good. Yeah. So absolutely. And I very much agree that this should be inclusive of all of the states.

I think the answer to the question of why they weren't on is some states were not ready to sign the invitation and we do more coordination in General with the West Coast states Washington, Oregon, California. And so we started there. But it is absolutely meant to be an invitation to Wyoming, Idaho, all of the states in the west.

Thank you.

And just to kind of add also to Senator Dodd's earlier question just kind of the phasing of this. So we started I think the letter came out of a meeting we had on June 30 and I want to just be mindful here which is this is a California idea. The California put this idea on how can we continue to reap the benefits of the market and move towards potential principles and ideas on how we can create a Westwide largest footprint?

I think the Westward market, having California in it would provide the maximum benefit for all of the west. So the idea then would be how do we all continue to work? And as President Reynolds mentioned, the initial group that met was like oh, this is a good idea, we would like to sign on. And I think since then we are in this phase called the discussion phase. That's kind of what we're informally saying.

We're talking to all commissioners in the west trying to think through what their interest is whether they would like to lead this effort or they want to follow this effort. And once we have that discussion phase done then we'll go into more of an implementation in a phase where we convene the table setting.

Thank you. I do really appreciate your leadership in the position that you're at and I've had the opportunity to have you in my district again the number one state producing oil and gas county but the number one green energy county as well where we provide green neutrons to my colleague from Los Angeles so they can have green do.

On this heat map generation slide that you brought, is that this bar that is over here to the right where it says that from like gold to red is fossil fuels and gas that provides energy to the grid. Correct or not?

Yes. So it's basically green is about two gigs of gases running on the system and the red is almost 30 gigs of gases running on the system. So you have gas running on the system typically for inertia frequency management. So you always have some level that's running but generally all those resources ramp up in the middle of the day in summer.

Okay, I just want to make sure that we're pursuing this. I realize it's the governor's objective to do this but it needs to be pursued in an ethical way, a cost effective way. And I think the taxpayers need to understand that they're either paying on the front end or the back end. So you're reducing costs on the ratepayers for their PG&E bills but you're charging them an abundance amount of money in the beginning to offset the cost of green energy.

And I'd like that information but again just your job alone I can't even imagine and I appreciate your leadership sir, at the CEC and your openness to at least have a dialogue on some of the issues that concern individuals like me. So thank you. Thank you Mr. Chair for your time.

Thank you, Senator Becker.

I want to thank you all for being here and apologize, being in and out. We have a number of things going on today but a lot of these same topics we've discussed in our budget Subcommittee and great to get the update. So one, number one, add my thank you. This is a classic role where if nothing goes down you get our thanks.

But the public at large just they're going about their lives but if we don't have reliability everybody knows about it, everybody feels it. But again not the case if it's just everything's going well people just don't notice it. That's our job is to make sure it just goes smoothly. But I want to thank you all for your work here. And second, this presentation is excellent. And when you talk about the peak and the focus on the peak I think that's critical.

It's going to focus a lot of my legislation, try to focus on that peak and try to get us to 24/7 clean energy and appreciate getting that focus here and showing that that's really where we're still going to really struggle. But again, particularly in the winter that evening peak as we continue to electrify transportation and buildings. Just three or four things on the question front. Number one, demand response.

We've spoken to all of you about demand response but the reason to spend so much time on it, it's one of the critical near term clean resources that we can add to the grid by taking load off the grid. Right. I think we can add to reliability and although we made investments into PUC paid programs for demand response, we haven't really improved access for private sector DR programs.

And I think believe the pros to decision recently released in the click through proceeding which has gone on for about six years now does not fix the problems that are causing large numbers of interested consumers to drop out before completing the sign up process for third party demand response programs.

So I'm just wondering what other alternatives is the PUC looking at to enable third party demand response aggregators who are again not spending ratepayer money, they're spending their own money, investor money, not ratepayer money and have proven to be I think an important part of the solution here. So what all terms are we looking, is the PUC looking for to enable third party demand response aggregators.

Sure. I'll start and then Vice Chair Gundam may have some additional comments. And I think you started out recognizing that we're looking at all types of demand response and load management. We're looking at time variant rates. We're looking at programs. We're looking at programs that work in emergencies and then programs that are integrated into the market. We're looking at providing resource adequacy and capacity payments and the programs are developed.

Even the third party programs are funded by ratepayers, of course, because they get contracts and they depend on resource adequacy payments and they integrate their administrative cost into those programs in the same way that the IOU programs do.

And so we've been yeah, there's ultimately but for example, buying a million Nest thermostats and giving them out, that was done with their own capital that they raised, for example, not with the ratepayer money.

Absolutely. And that is a big part of the suite of demand response programs. And what they're interested in, of course, is a return on the investment. And so we're looking at ways that are cost effective to ratepayers so that we can have rate payer funded returns on investment that are still cost effective to ratepayers and provide a need to the grid.

And so we want to make sure that we're continuing to look for performance results so that we can compensate for performance of the resources and showing up when we need them. So it's really a work in progress. And we have pilots and we have programs that have been ongoing that we're evaluating and trying to make sure that we're putting ratepayer money in the right places to compensate for those private investments that have been made.

But Vice Chair Gunda has also we've been working together collaboratively with the CEC on demand response programs.

Thank you. President Reynolds. Senator Becker. Nice to see you. So I think one critical piece of the equation thanks for raising this issue around demand flexibility per 846. We did adopt a goal this year of 7000 demand flexibility by the end of the end of the decade. So what that really provides is an opportunity for DRPS or the third party aggregators to not only think about RA capacity as an income stream, but also the strategic reserve and the emergency programs.

And so we are right now with the money that the Legislature provided testing models to have DRPS provide those emergency resources starting this year. And I think that would really kind of put a framework for us to begin to expand them. I think one thing that I would like to offer for consideration is as you think about the Dr resources at large, we are broadly thinking about three attributes of those resources. One, how long can they perform?

Is it a half an hour resource, four hour resource, five hour resource, and what is obviously the magnitude of the resource. And third is the cost of that resource. So what we are trying to figure out is within the resource adequacy framework we typically like resources performing at least 4 hours. So what that does for somebody like a third party demand response program doesn't necessarily allow for a large participation but now under 4 hours being a part of the Strategic Reserve will provide additional opportunities.

And in terms of the design of the payments, we are essentially paying the same levels. So whether we are talking about OTC power plant extension which is about $100 a kilowatt month, or the DSGs payments which are about $100 a kilowatt month, or an RDR reliability Dr that CPUC pays is also $100 a kilowatt month, I think kilowatt year, sorry, $100 a kilowatt a year. We're kind of essentially trying the same level of incentives to see if they perform.

Great. Thank you for that. That's a tremendous goal and I appreciate it and I know you have been working towards that, which is excellent. I guess for my part we'd like to see some more progress on the data sharing, just that we can enable that one part of the picture. So I think that's where we probably still have work to do.

But I appreciate that and appreciate you say, Commissioner, about again looking broadly speaking at a range of DR resources which are enabled here, which is excellent. Just a couple of things. Apologize. This was brought up. I was not here, but we talked about the strategic reserve and we've talked a lot about that in our budget Subcommittee and there's some here, but it does seem that a lot of the spending has overwhelmingly gone to fossil fuel assets.

Extra gas turbines at two of our gas plants, extending the life of the three once through cooling plants, paying end customers to run their backup generators in order to reduce their demand for the grid. That definitely buys us insurance but it's really throwing away money ultimately to temporarily support older assets that we don't want it to run in the long term rather than investing in new clean assets.

So could that same money give us more long term value by accelerating deployment of storage and clean resources rather than being continually thrown at these dirty assets? And one thing I know we've been working on from a legislative standpoint, we want to make sure that you certainly feel CWR that you can spend money on that money on these clean assets, on battery backup, which overall, as we've seen here, thanks to all of your work, has been growing tremendously. But just that focus for the reserve itself.

Thank you very much, Senator Becker, and really absolutely appreciate the efforts that you and the Senate have made towards that goal. I think from our perspective there is a challenge and I spoke about this during my presentation, which is we completely understand that we need to deploy assets very quickly into the reserve for reliability. But at the same time we want to be careful not to compete with the load serving entities.

And I think there is the tension that you spoke of, which is they are getting those assets which are durable, which are going to meet our longer term clean energy goals as well as reliability. And DWR in particular wants to be very careful that we're not playing in that same space and exacerbating the challenges that they might be seeing. In terms of supply chain. President Reynolds talked about there being fairly robust competition amongst the load serving entities to get those resources.

So that has been a challenge, and we appreciate that. We do want to think broadly to the extent that there are additional resources that DWR can procure. We're very interested in doing so. But I guess in the near term space, what we are seeing is still a lot of interest from load serving entities on sort of more traditional lithiumion storage, four hour batteries, as well as wind, solar, et cetera, to meet their RPS requirements, actually slightly further beyond. Did you want to...?

Thank you. Just to add to that, I think the short answer for us really is around the timeliness of the resource. So we are looking at very quickly coming off of the 2022 heat wave ramping several thousand megawatts and sustaining that through the end of the decade.

So as we build the resources through the DSGs and DEBA program which allow these clean resources and we've requested additional budget on that and the CIRRP plan that we provided earlier this year has almost half a billion for demand side resources in it. The hope is we continue to push the clean and our preliminary internal analysis suggests to build about 3000 demand site resources, including all the resources you mentioned. Demand flexibility, community, solar and storage takes about a billion and a half dollars over five years.

So we are talking about if we get the money tomorrow and then start deploying, you would need up until 29 to really realize those levels of resources. So while that is happening and we are building, if we were to get that kind of budget, we still need to do something immediately. And that's really where the hard decision came from.

Yeah, good, well, I appreciate that. I was trying to do that in a thoughtful way and to build up the investment, build up those assets. And I'm sure we'll keep discussing this issue, but it's one that my colleagues and I are quite focused on to keep an eye on as we go forward. Just two other points. We recently had a gathering here on the Inflation Reduction Act and I think there's another lunch tomorrow and it authorized DOE's loan programs to provide billions in loans, as you know. But part of that focus is large scale clean energy reliability building efforts such as virtual power plants.

And these loans only make sense for very large efforts, right. Hundreds of millions of dollars, which is large for one LSE or Demand response company to tackle. And you maybe alluded to this, but is there an effort in a coordinated way by any state agency to leverage that federal funding to Fund large scale build out of these kinds of distributed assets that can be used to reduce demand and balance grid needs?

Yeah, absolutely sir. As the CEC is playing a critical role in coordinating around the federal dollars, we are using the existing monies that you provided us to test models on VPPs, including the DSGs program which will be launching a VPP model this summer. And then moving forward, how do we coordinate the federal money to support programs like that and there is coordination. We could absolutely set up a briefing on that.

Yeah, great. Lastly, we provided millions of the SERAP money for solar and storage that could be integrated to merit Swans or VPPs and there's money in the solar for all federal program. But the application is closed September of this year and our understanding is that maybe the PUC hasn't stood up its community solar tariff required from the Assemblyman Wards Bill last year, 2013. So I just want to say, what are we doing to ensure that we meet the timelines to be competitive for that program?

So the PUC does have an open proceeding on community solar, and we're tracking and taking into account the federal timelines. We also have other programs that could be used, like the Sjip program, that could be used to leverage the federal funds. So we are tracking that solar for all funding program from the federal government.

And also just the Ibank is leading the solar for all effort for the state.

Yeah, okay, excellent. Well, good. That takes care. And I may have one quick one at the end. I know Senator Stern want to try to get what he's been doing hearing at the same time. So I'll defer for the moment, but thank you.

Senator Seyarto. All right, are you ready for your question?

Yeah. Thank you. So I'm going to talk in terms of what I hear from the people that I represent, and they come from all walks of life. And part of the problem is we have our demand side, and we're increasing that as fast as we possibly can. We're putting in more housing. We're building more things.

And then on the other side, we have the part where we generate, and that generation is being constrained while we try to take offline the things that we say are bad and bring online other things that we hope or will replace that. But in the middle, we have the distribution part. And in the distribution part is the efforts by the utility companies and everybody to be able to get that to that. And it's all imbalanced.

And at the end of the day, what we have is a bunch of people that used to pay $250 a month for the electricity Bill during the summer, using their energy inefficient equipment, paying $800 a month now. And we're not even close to being where we think we're going to be in 2045. One of my questions is these are very lofty goals.

What happens if in the middle of this, we realize that we're not going to hit our goals and we've taken stuff offline permanently that we can't put back in? What are we going to tell people when their electricity Bill in the summertime is $2,000 instead of $800? Because we've gone down this path that's unrealistic.

So my question to you is, do you think there's some feasibility or some advantage to us maybe not having goals based on timelines, but maybe having goals based on what we can support, what the market actually supports? You can't demand that people you can't put the square peg in the round hole. And that's what we're kind of doing from the market perspective. But also technology right now, there's tremendous pressure to put lines in everywhere.

You know where those lines are going they're going over areas that are brush fire pump. And when we have the brush fire, guess what? All of those climate advantages go away in just in one good year of brush fires that we've built up for ten years. So we're putting all that out there. When do all of our responsible people that we're given more and more balls to juggle in the air finally say, hey, we have enough balls in the air right now.

We need to slow this down so that we can actually achieve something in the future that will be beneficial to everybody without putting mom and Pop out of business, because that's what's happening to people out there. They can't afford to pay $800 a month for electricity, and yet we're going to make that even more expensive. So I'm very skeptical that we're going to get there, especially when I'm looking at this huge utility scale solar expectation for 2045. Where are all those going?

Are these going to cover all of our landscape? Go out to the desert, all we see is windmills. I don't understand how we can go forward and not address these things for people, because at the end, 2045, if we get to 100%, you know, people here out there that'll make a 1% difference in what's going on in climate in the world, 1%. So is the cost that we're doing worth the benefit? Maybe we ought to slow down, and maybe that's what we should be talking about.

Instead of trying desperately to keep all the balls in the air, let's take a few out and maybe get someplace realistically so that we can reduce our footprint that we are leaving here in the environment. But not it's never going to be what they think, what some people have come up with, because we're never going to be able to erase the atmosphere that is surrounding the Earth and us just be in our own little silo. And Californians shouldn't be paying for every bit of that.

And that's what's happening right now. So that's just kind of how I feel about it. I hope that the people that are charged with being the brains behind trying to do this can someday say, you know what? No, it's not going to work that way. We're going to have to slow down. We're going to have to do this in a more realistic way, because right now, there's so much frustration out there on all sides.

It's the utilities, the builders, and more than that, the citizens that are just paying for it all in one way or another anyway. What if we don't make this goal? What's our plan? What's our plan B? If we don't get to 183 MW by 2045, what happens to us?

I'm happy to respond, and all of the points that you're making are things that we're absolutely thinking about. Those are the challenges we face, right? How do we do all of this in a way that is responsible so that we're not letting resources go too quickly, that those investments have been made. And even though we make sure that we have replacement resources before we let resources go too quickly, how do we control costs?

How do we deal with land use so that we're building projects in California but we're doing it at the right place? And then how do we drive change in other states and across the so all of those things are being taken into account and we're thinking through 1.0, is that there's also a lot of opportunity here. There are a lot of green jobs that are being created and I don't even like using that word.

There are a lot of jobs that are being created through this. And you heard from Senator Grove about projects in her district. And there's a lot of economic opportunity and investment that is leading to projects that become cost competitive and have a spillover impact into other jurisdictions. We've seen a lot of coal retirements based on economic forces so that has an impact and if we don't make those changes, the cost of climate change becomes much higher and that hits our taxpayer and ratepayers. But you're right, it's not easy. So we're balancing all of those factors as we think through how to do the best we can and control costs on ratepayers and on taxpayers.

All right, thank you for your answer.

Thank you.

All right, in the interest of time, I have a couple questions. Do you have a question, Senator Durazo?

Yeah, actually just a suggestion that I need.

Yeah, go ahead.

I'm sorry. Also this was addressed earlier and thank you for all of your work. If you would guide me as to how all of this translates into our very poor communities affordability reliability, because reliability matters. I mean, affordability is a big part of reliability. It was a very long article in the LA Times about farm workers just a few days ago. A week ago, 113 degrees at work. They come home, they have no electric AC, they can't afford to pay it.

And we're asking them to pay peak rates when they need it the most, which is when they come home. So you don't have to answer all that now, but I would like from you is where and how are you addressing that as part of our reliability? Thank you.

Would you like us to respond now or as a follow up respect to the chair?

If you can just get back to me on that.

If you want to answer now, we can. I just want to afford the public opportunity to ask their questions too, because I know we have a hard stop at twelve, but I'll stay beyond twelve for those folks.

That's okay, Mr. Chair, just they could follow up with me.

All right. I had a series of questions as well. But I also want to afford those individuals in the public that pose their questions. So are you guys going to be here while the public asks their questions? All right, so do we have folks here in 1200 who would have a question or comment? And we're going to ask you to keep it to 1 minute, please.

Thank you. Julia Levin with the Bioenergy Association of California. I just wanted to comment as Vice Chair Gunda and President Reynolds have heard me say before, one of the best ways to maintain reliability and contain costs is to increase the portfolio of firm renewables bioenergy, geothermal and renewable hydrogen.

We know we're going to need tens of thousands of megawatts of firm renewables and we also know from studies by Environmental Defense Fund, the Clean Air Task Force and others that that is the best cost containment mechanism we have. It can reduce overall system costs by two thirds. It is time to establish a portfolio standard for firm renewables the same as we have for energy storage and for distributed generation and for broader renewables.

We need procurement targets now for firm renewables because they are long lead time resources. Nothing will maintain reliability or contain costs better than firm renewables. Thank you.

Thank you. Next witness.

Thank you. I'm Adam Stern, Executive Director of Offshore Wind California, a Trade Group. I just want to emphasize in the context of grid reliability, the value that offshore wind can bring to the renewable portfolio that California is in the process of developing. Offshore wind is strongest at late in the afternoon and in the early evening, just at the time when the peak loads that were described earlier in this hearing occur.

And so you should look at offshore wind as one of the options that's being considered as something that can strengthen long term grid reliability. It also points to the importance of central procurement, which came up earlier in this discussion, discussions that are happening today and in the coming days between the Legislature and the Governor. We're very hopeful that central procurement will pass to enable offshore wind and other long lead time resources to be purchased and brought enable this clean energy to come into the grid.

Thank you very much. Next witness.

Thank you. Mr. Chairman. Members. I'm Bill Julian, I'm a Member of the public. I've passed out comments, written comments. I just want to say in the 1 minute that the issue of affordability and the issue of reliability are inextricably intertwined and the affordability question really goes to the pricing of energy and electricity driven by the Cal-ISO algorithm. And I think you need to understand that clearly as you move forward.

Second, the elephant in the room is how we manage the legacy gas fleet over time. The NERC, the National Electricity Reliability Council has said that uncoordinated retirements of gas plants is a major threat to reliability. Strategic behavior by seller side drive prices in California to astronomical levels and the recurrent shortages that we see have to do with both the operation and the progressive retirement of the gas fleet. Management of the gas fleet. That's your time. 1 minute. Thank you.

Good morning, Chair Bradford and Senate Energy Committee Members. My name is Allison Hilliard, here on behalf of Reimagined Power and the microgrid resources coalition. Thank you for hosting this oversight hearing on reliability challenges and prioritizing these issues at the Legislature. We support the creation of DEBA and DSGs programs to incentivize distributed energy resources that can enhance reliability and provide grid support services when needed during emergencies. We encourage the Legislature to more closely consider microgrids as a solution to help meet immediate customer energy needs.

Given our interconnection challenges and the capacity limitations of the grid, microgrids can be deployed quickly across the state to support building and transportation electrification efforts, provide capacity, and reduce load on demand. Thank you for your consideration and your leadership on this important issue.

Thank you. Excellent.

Mr. Chair and Members, Beth Olhasso on behalf of the Agricultural Energy Consumers Association. We really appreciate this very important conversation. We are very, very concerned about rates, as ratepayers are absorbing the very high costs of wildfire mitigation. What we have to do to fortify our grid. We want to make sure that the Legislature continues to invest in helping keep some of those costs out of rates.

We're pushing our agricultural businesses who don't have ability to charge customers more to just absorb these costs, pushing them out of the state. So anything we can do as a Legislature to help keep rates Low and take some of these reliability issues into the state funds and out of rates is going to be critically important. So we thank you for your work on this. Thanks.

Hi, thank you, Members of the committee. I'm here to represent the California Environmental Justice Alliance. My name is Alexis and wanted to express opposition and concerns we've had with many of the recent actions the state has taken in the name of electric reliability. We want to emphasize that we cannot solve our reliability crisis by intensifying our climate and air quality crises, especially as this comes at the expense of working class communities of color.

We've been greatly concerned with the state's decisions to extend the life of the once through cooling gas plants that it promised EJ communities to retire, given that our communities already suffer the worst impacts from heat waves and air pollution. We also wanted to express that instead of putting billions of dollars into polluting fossil fuel infrastructure, we urged the state to invest in clean and reliable energy solutions that prioritize access and benefits to frontline communities.

So definitely agree with some of what others have been speaking about in terms of using strategic reliability reserve funding exclusively for clean, reliable solutions such as community solar and storage, community based microgrids, energy efficiency and demand response. Saha urges the agencies to do this. Thank you.

Thank you. Let's witness.

Thank you, Mr. Chair and Members Megan Loper on behalf of Western Freedom want to acknowledge the committee and the committee staff for this focus on electric reliability. Also want to congratulate Cal-ISO on the filing of the tariff with FERC for the extended day ahead.

Market think that all of these developments are really positive in getting us to reliability and also want to acknowledge Commissioner Gunda and President Reynolds for the letter that was mentioned in the Q&A I think that the collaboration and coordination with our Western state colleagues is going to be very important as we look forward to what else we need to be doing to ensure greater reliability and affordability and look forward to participating in those discussions. Moving on. Thank you.

Next witness.

Good morning, chair Members. Rebecca Marcus on behalf of the Union of Concerned Scientists. As recently as this month, the state once again chose to extend the lives of three antiquated and dirty gas power plants in the name of extra insurance for grid reliability. In our view, there is such a thing as too much insurance and the state must start a concerted effort to close gas power plants as soon as possible.

Looking forward, there are actions we can take to make the grid cleaner, more reliable, and more resilient. We know we need to bring more renewables and storage online. We agree that expanding cooperation and energy sharing among the Western states could bolster our grid reliability and streamline the clean electricity transition for tens and millions of people. We appreciate the steps the state has taken recently towards this and look forward to continued conversations.

Further, by deploying distributed energy resources like rooftop solar, community scale solar and biodirectional electric cars and school buses, we can reduce the need for additional utility grid infrastructure and bolster local grid resilience, which is needed to close down many of the gas power plants still online in the state. Thank you.

Patrick Welch, California Municipal Utilities Association represent public power agencies that provide power to 25% of the state. First, just want to thank the Chair and the committee for holding this hearing. I think this is really part of a series of hearings and focuses on reliability and also affordability. We think this is an ongoing conversation and think that's important to keep front of mind, so we appreciate that. Also want to appreciate the panelists.

Today, CMA is working with each of these agencies in a number of different areas related to what Mr. Ciarto said. There are a lot of balls in the air. It is difficult to manage, but I think there's a lot of collaboration going on and I just wanted to highlight that for the committee as well. The resources that the Legislature provided through the budget over the past couple of years. We are working with the agencies to implement those resources where we can.

And also want to highlight that we think the SB 100 process that the CEC, the PUC ARB kicked off last week is going to be an important planning process. We're going to learn a lot from that. We're hiring consultants to engage with that as well. And then finally, just want to say what Mr. Mainzer said about the grid changing on a yearly basis. Our Members see that too. Many of our Members are in the Cal-ISO system.

Many of Members operate their own systems, and they have their own grid ops centers, and they see that too. And that's something. We're trying to build the plane as we fly, and we're also trying to power all the cars in the next ten to 20 years. So we're really doing two huge transitions at the same time. And really just want to emphasize that and highlight that for the committee. Thank you for your time.

Thank you. Good morning, Chair and Members. Meredith Alexander here on behalf of Microsoft. As a significant component of their business platform, Microsoft Constructs owns and operates data centers around the world with a growing presence in California, and therefore, ensuring reliable resilient and Low carbon energy supply is a critical priority. Therefore, we believe it's really important for California agencies to use a transparent planning standard for reliability assessments, as discussed today.

And we have commented at the Public Utilities Commission that we think it's very important to use a one in ten loss of load analysis as a widely adopted and well established method to ensure acceptable standards without overburdening ratepayers. Consistent with your discussion today. And we just wanted to highlight that that is what we've been requesting at the Public Utilities Commission, but we have not yet seen a policy change adopted. And thank you so much for your consideration.

Thank you. Seeing no more witnesses here. Moderator can we get those phone lines real quick? And for those individuals who have queued up, the opportunity to call in.

Thank you. Mr. Chair, ladies and gentlemen, the phone lines. If you do wish to make public comment today, please press one followed by zero. One, followed by zero. Yes. One moment. We have two queued up. They should be with us momentarily with an operator. Anybody else? Please take this opportunity and press one followed by $0. And let's go to line 31. You are open. Line 31, please. Go ahead.

Can you hear me? Yes. Okay. Matt Baker, Director of the Public Advocates Office. We're an independent state entity out of house at the PUC with a mission of making utility bills affordable. I have three quick points. First, grid reliability is, inequity public health and economic imperative, super important that we not lose power.

Two, the state has made big strides in reliability, and legislative support for reliability has been good for ratepayers. We appreciate the recent legislation and budgets that support reliability programs, with notable General Fund support for complementary CPUC, DWR, and CEC reliability programs. These programs help reduce energy burdens. And I should just note, energy rates have risen 75% to 100% across California's large IOUs. I also believe we should support the legislature's recent focus on permitting reform and believe there's merit to a central procurement authority.

My last point is the clean energy transition is difficult, and improved reliability helps our transition. We're a global leader. We're moving into uncharted territory. We're not sitting idle. The state has directed historic clean energy procurement, and these investments in reliability allow for decarbonization and help make it faster and less costly. Thank you for the opportunity to speak. Thank you. We'll give one more reminder, one followed by zero. If you would like to testify for public comment at this time and please go ahead. Line 38.

Good morning, Mr. Chair. Members Taylor Triffo with Kahn, Soares, and Conway. We represent a host of agricultural and business interests across the state, predominantly in rural communities. We'd like to echo many of the comments heard today and ask the Legislature and Administration be attentive and responsive to regional challenges, reliability, and ultimately cost to ratepayers. Many of our agricultural providers in the state have repeatedly seen issues with power provisions and expect to continue to do so.

These facilities support local jobs, economic opportunity, and broader benefits to predominantly disadvantaged communities. Therefore, we encourage the Senate, the Assembly, to continue to monitor the issue semiannually and course correct, including through incentives and cost offsets as needed to lead a transition without leaving behind. Thank you.

Thank you. And Mr. Chair, we have no other participants queuing up at this time.

All right, well, I'll bring it back to the panel real quick. At least three of my colleagues made reference to the regionalization letter. And I just want to go on record in stating that I think it's imperative that we have a clear understanding of what the administration's intentions are going forward and making sure that the public's engaged with this process and be clear that we have stakeholders involvement and hear their voices and also include the Legislature. And I just want to be blunt. We don't want to be blindsided at the last minute and jammed with a proposal that we haven't seen or had opportunity to participate in. So what is the policy for public engagement and what's the timeline?

Yeah. Thank you, Chair. So at this point, as we tried to mention earlier, so we are right now just kind of talking to our Western commissioner colleagues on what this could look like. So I think the next significant step would be once we have an agreement across the Western commissioners that this is a good idea, then we will have a process to set the table for stakeholders to flesh out the idea more.

And I think we would imagine that we will come to some sort of an informational hearing with you to provide you an update on where we are. And we expect to brief you fully as things progress. And last month we had an outage explain what was the cause of that alert, I should say emergency alerts. And did you see that coming and what have you found out since then? Yes, sir.

Bottom line is that back on the evening of July 20, referenced a little bit earlier, we ran into actually felt as though the system was set up well that evening there was a lot of external demand on the system. It was very hot outside of California, and there was quite a bit happening on the grid as we were right in the middle of the net peak.

But we just had a series of uncertainties that sort of pooled together as and some higher, less imports available to us than expected. Some congestion on the transmission system, and generally some of the batteries slightly off their dispatch. So those things compounded to put us into slightly distressed conditions. We hit our reserves for about an hour. We're able to access some reliability, demand response capability.

We really appreciate the industrial customers that made that capability available to us during that period of time, and we're able to get out of those conditions within about an hour. So no broader disruptions to service. But it really showed us that the grid at that point, as we mentioned, every year we're dealing with different conditions both across the west and within California.

We just needed to put a little bit more of a margin on the system, a little bit more buffer, and we're able to get to those subsequent events. And all the way through August, through some would have generally been relatively tough conditions around the west. We've been able to move through those without any significant reliability events and broader interconnection reliability. So, thank you for asking.

And by the way, we are in the process of producing a fully comprehensive report on all of the very detailed full report that will be available right in the early part of September. We'll make that available to you. And also we'll be holding a stakeholder call just to make sure that there's maximum transparency about what happened there on the 20th.

And there's been much talk about shutting down traditional generation. I'm not an electrical engineer, but I know enough to know that solar produces no inertia. Why is it ever any discussion that you need those generation plants to move that solar electron down the wire? Why aren't we having that honest discussion?

Well, you're correct, sir, that it certainly doesn't provide any of the traditional inertia. There is a lot of work, though, I will say, to be looking at inverter based resources in General like solar, and trying to understand how they can make additional contributions to reliability, whether it's through efficient conturtailments or actually pooling together to help support grid reliability in local areas. Grid forming inverters a lot of research we're involved in actually an international consortium with utilities across the world who are looking at the challenges. And the potential technological innovations associated with solar and other inverter based resources. So you're exactly right. We're watching it. Some of the traditional resources are still providing that.

But we'll continue to push that discussion needs to be continued because you continue to have folks say, shut them down, and you're talking about reliability. We need to talk about what's needed in order to provide that reliability. And we're not having that discussion because those plants are still needed. If you want to keep the lights, no ifs, ands, and buts about it.

And people even talk about when we shut down San Onofre, and it says, oh, it was no loss in power. San Onofre was never for baseload. It was for moving electrons down the wire to get it to San Diego, have the inertia to move those electrons down the wire. But nobody has that discussion as well. So we need to have honest discussions about why these plants existed and what they do.

And again, renewable energy is not dispatchable, so you're going to still need traditional generation until it becomes a dispatchable. It's intermittent at best. And we just are not having those honest conversations when we talk about reliability. So I would just love to hear a little bit more about that. Any comments on that?

Well, I think you're putting your finger on a very important point. And I think one of the reasons we've talked today about the fact that we're in the middle, California is in the middle of a very significant transition and still, honestly, still kind of in the relatively early stages of that transition when you think out to 2045. And so our traditional thermal resources in California are still playing a critical role in reliability. And they're on the system.

And as we've heard some of them, very difficult decisions to place them into the strategic reserve, but to have them to your exact point so that we can keep the lights on for Californians, because we recognize how essential that is. So we will continue that dialogue. But at the same time, I think we've also heard the commitment to trying to get to that clean energy future, and it's going to require a tremendous amount of technological innovation. And so to your point, we will make sure to keep these issues squarely on the radar screen, be intellectually honest about them, and talk about both the upsides and the challenges.

And also mention the fact that two years ago we would have not met our climate goals if it wasn't for those traditional gas powered plants. When we took coal offline, it was because of those gas powered plants that America met its climate goals. But nobody wants to have that conversation as well.

So they're still needed, they still play a key role in moving to this clean environment that we want. I mean, I was a science major, so I understand the sciences, I'm not denying that. But far too often we're picking winners or losers here when we talk about energy here in California, and that's the part that troubles me. And when we talk about reliability, we still need those resources and they helped us meet our climate goals here in the United States. Please.

Actually, Chair, if you may allow me, I just wanted to actually emphasize some excellent work that the Kaiso does in their annual transmission planning process and they do look at issues of inertia and other grid reliability requirements on the grid. So I think that detailed work is being done, but I think what Elliot has spoke to was really kind of the looking out into the future thinking that we need to have as well. Thank you.

And my final question is, help me understand how over 40 load serving entities help in reliability when we're all sticking our straw into the same pool of resources. There's no greater resources for an ESP or CCA than it is for the investor owned utilities. So wasn't it better controlled when it was the public utilities, public owned utilities, and investor owned utilities? Now we have 40 different entities you're seeing out here buying the same resources. It's no more available to anyone else than what was available to the utility initially. So am I right or wrong about that?

That's right. We do have over 40 load serving entities and yes, they're all out there procuring, but we also have hundreds of projects. And so there are a lot of projects for those load serving entities to.

What the utility could bring online purchase from those same projects as well. That's what we did for almost 100 years.

And I think we're seeing a lot of innovation from the CCAs and they're also subject to the same process to provide a cost effective portfolio. And so we have the standards that apply to the CCAs and also for resource adequacy. So they step forward and meet those standards and provide their portfolios. They're part of the clean energy transition and again, they're developing programs through PUC programs as well as the investor owned utilities.

Good, okay, well, I want to thank you guys for your testimony today and all the great information and also the public who had opportunity to speak here in room 1200, as well as the individuals who called. And there's a lot of work ahead of us when we talk about reliability. And one thing that wasn't mentioned during this discussion was the need to build even greater transmission. Because if you're going to continue to build these resources, you have to get it to the source.

And nowhere in there have we had the discussion about transmission and distribution. And that's critically a part of reliability as well. So I hope that's in the plan and I know it is, but I just want to have greater conversation because that's what we're hearing from our constituents. That's what we're hearing from a lot of my colleagues who are not on this committee know how do you get it?

And I work for a utility and I know one of the biggest challenges is when we built solar building the Tahatchabee power lines and Sunrise power lines and the same folks who were asking for the renewables were the same ones that said, don't put those poles in my backyard. So you can't have it both ways. So either you're truly about wanting this to be built, but you can't say put it in somebody else's backyard.

So those are some of the discussions that need to be had too. So I'll just close. California has ambitious climate goals and it's for all the right reasons. But we cannot forget the impact and the policies that have directly on our constituents. And the cost of these projects has been mentioned as well. So your panel, you've shown great understanding of those concerns. And I know each and every one of you are very much committed to getting this right.

But I think we need to, like I say, not be as aspirational and be more thoughtful as we heard from my colleagues there to make sure that we do get it right. And it's one thing to set goals, but we got to make sure that those goals can be achieved. So I want to thank everybody who participated here today.

You have my commitment as chair of this committee to continue to work and having discussions and having oversight hearings such as this to allow us to get it right. Because we as legislators don't know it all. And many times we think we're experts in these subject areas and we're not. So we need to depend on folks that do it on a daily basis in order to get it right. But we also have to be kept informed.

As I stated on the regionalization, we want to be partners on all of this in order to get it right. So I want to thank everybody for their participation today. I want to thank the callers and those individuals who might not been able to testify today. So that's going to conclude, conclude our hearing. And I appreciate everybody again for your presentation. Thank you and we stand adjourned.