Senate Standing Committee on Energy, Utilities and Communications

The Senate Committee on Energy, Utilities and Communications will come to order. Good morning. We will continue to take some precautions to manage ongoing Covid-19 risks. The Senate continues to welcome the public and provide access in both in person and teleconference participation for public comment. For individuals wishing to provide public comment via the teleconference service, the participant toll free number and access code will be posted on the Committee website and displayed on the screen, and I will announce it now.

Today's participant number is 1877-226-8163 that's 877-226-8163 and the access code is 439-8318 that's 439-8318 I will maintain decorum during this hearing as customary, and any individual who is disruptive, even Committee Members, may be removed from the remote meeting and service and have their connections muted. Some of our speakers today will participate remotely. For our remote participants, please mute your phones and computers. This will greatly aid in eliminating any Acoustic feedback.

I ask that every time you wish to be recognized that you use the raise your hand feature on the program. Each time you're recognized to speak, a pop up window will appear asking if you would like to be unmuted. Please select unmute before you begin speaking. Our it personnel will put you back on mute when you are done. Once recognized to speak, please make sure you can be seen on the screen. State your name and then you are ready to address the Committee for Today's hearing.

We'll be hearing all of the panels witnesses on the agenda prior to taking any public comment. This is the second hearing of the 2024 Senate Committee on Energy, Utilities and Communications following last week's hearing on gasoline prices. Next Tuesday, March 7, will be an additional oversight hearing on the state's broadband investments and whether we are making progress in connecting the unserved.

In light of next week's hearing, I'm requesting that Members of the Committee or panelists and the public please Reserve any comments related to broadband to next week's hearing. Now let's back to today's hearing. The inability to afford essential utility services, especially light and heat, can be devastating effects on residents'quality of life. We have all gained a greater appreciation of the importance of essential utility services as we endure the pandemic.

Though California has long experienced high energy rates compared to other states, our utility bills are often averaged lower than other states, largely because of our mild weather and the energy efficiency policies we have implemented. However, energy utility bills now are trending higher and are expected to continue to grow and outpace inflation. We can no longer count on mild weather and energy efficiency alone to limit the impacts of utility bills.

Just this winter, we've seen the effects of skyrocketing natural gas prices, causing utility Bill shock in January and February bills. We have heard from constituents as well as colleagues expressing concerns about their soaring utility bills as a result of the surge in natural gas prices. I sent the PUC a letter and the California Energy Commission a letter supporting the Public Advocates offices calls for an investigation into these causes, including involving the Federal Energy Regulatory Commission, as necessary.

I also urge the PUC to take necessary actions to help alleviate the financial impacts on customers, including advancing the natural gas climate credit. While I'm encouraged the PUC has advanced the climate credit and the Governor has called on the Federal Government to investigate, I don't yet have the confidence that our residents won't be in this situation again. Today. We need to hear what additional steps the CPUC is taking to address the surge in natural gas prices in the near term as well as long term.

Not unlike our discussions last week on gasoline prices, many of our residents will continue to rely on natural gas for likely decades to come to provide space and water heating and fuel for cooking. We cannot leave them stranded with high utility bills. As state policies propose to shift more Californians to switch to electricity as a fuel source, we also need to ensure that electricity remains affordable.

One area that I will protect is the Low income assistance programs, especially the care our California alternative rates for energy and the family electric rate assistance Farrah programs. These are essential lifelines for our most vulnerable residents, and we should do not be experimenting with funding that prove to not be available in the state budget. I do support the efforts to better align the values of distributed energy resources. Affordability, along with reliability, are the bedrock of utility regulations.

It is imperative that we work in partnership with the PUC, the CEC, and others to ensure electricity and natural gas utility bills become and remain affordable for all Californians. Now let's hear from our first presenters. I welcome the PUC Commissioner, President Alice Bush. Reynolds joined at the head table with her CPUC staff Members. We're going to ask that we'll let everybody complete their presentations before following up with questions. So, President Reynolds, when you're ready, you may begin your presentation.

Good morning, Chair Bradford, Vice Chair Dahle, and Committee Members, I'm Alice Reynolds, President of the California Public Utilities Commission. I'm pleased to be here to provide you with an overview of the work we have accomplished over the past year at the Public Utilities Commission. And thank you for the opportunity to provide testimony. Today I'm joined by my colleagues here in person. With me we have Rachel Peterson, the CPUC Executive Director, and Luam Tessfai, deputy Executive Director for energy and climate policy.

We also have two staff Members appearing virtually. We have Forrest Kaser, deputy Executive Director for safety enforcement and safety policy, and Rob Osborne, Director of the Communications division. As you know, the CPUC regulates utility services in California, which brings with it many issues. Central to this regulation is the provision of affordable, safe and reliable services and infrastructure while prioritizing equity and accessibility and furthering the state's climate goals. In 2022, the CPUC continued ongoing proceedings involving energy, water, communications, transportation and rail safety.

The Commission adopted 556 decisions and voted out hundreds of resolutions through CPUC programs, California continues to make a difference in the lives of residents, from the over $2 billion per year in ongoing Low income energy Bill assistance to universal service telecommunications programs, such as providing free specialized equipment through the Deaf and Disabled telecommunications program. I'd like to start with just a few brief highlights of 2022 activities at the CPUC and then focus more directly on energy affordability, which is the focus of this hearing.

First, energy resource planning and procurement at the CPUC we continue to move forward on clean energy resource planning and procurement at a pace that will meet our science based greenhouse gas emission reduction goals while preserving reliability for all customers. This planning and procurement must not only take us to 100% retail sales of clean energy, but also increase available resources to serve the load growth that we expect from electrification of everything from cars to trucks to buildings and ports.

And this must be done at a time of weather instability as the impacts of climate change manifest throughout the year. Just last week, the CPUC made additional progress towards ensuring reliability by ordering an additional 4000 clean energy resource capacity to come online in 2026 and 2027. This procurement order, combined with 2021 procurement orders, represents an unprecedented 15.5 gigawatts of new clean resource procurement that will be coming online over the next five years to meet demand at all hours of the day.

With this new generation, we also need to stay ahead of transmission planning. In 2022, the CPUC provided the California Independent System operator data to authorize necessary transmission to meet the lowest greenhouse gas emission standard ever applied to the transmission planning process, a 30 million metric tons limit for the electricity sector.

These are some of the steps we are taking, but it's also important to note that the path to 100% clean energy is complex, with 40 different load serving entities that need to transition their electric portfolios to reduce reliance on natural gas.

These entities, investor owned utilities, community choice aggregators, and electric service providers are all moving forward with contracts that are competitively bid to keep costs down, and this progress is making our grid cleaner and enabling us to be ready for future increases in energy demand, and that is happening. The state has witnessed an extraordinary pace of new generation development in the past three years. Over 130 new clean energy projects have come online to serve load in the California Kaiso footprint.

The electricity distribution system is also in a State of transition. In recent years, the system has been increasingly stress tested by extreme weather events and wildfires, and as distributed energy resources increase, the utilities must be ready. Distribution system infrastructure investments are needed throughout the state, particularly in areas with existing capacity constraints, aging infrastructure, and load growth driven by economic activity. The CPUC has recently received requests for assistance from communities and customers regarding the lack of available capacity to connect new loads to the utility distribution system.

We are currently developing short, medium, and long term efforts to improve these customer interconnection timelines. In the short term, the CPUC has set up a customer interconnection team to work directly with large customers facing interconnection challenges. The CPUC is also using General rate cases to bring detailed knowledge of the challenges related to the distribution system to inform the General rate case proceedings, and build a strong record to make sure that smart distribution planning is done.

For the longer term, the CPUC is working to create frameworks for the utilities to better plan the electric distribution system to be ready for the future, including new business interconnections, the growing rate of adoption of distributed energy resources, and deployment of electric vehicle charging infrastructure. Another subject that has been elevated to a statewide priority over the last few years is preventing catastrophic wildfires in California. Our tools and policies for mitigating wildfires are rapidly evolving with the use and implementation of the utilities wildfire mitigation plans.

These plans are submitted for review and approval to our sister agency, the Office of Energy Infrastructure Safety, or OES, within the California Natural Resources Agency. Once approved by OES, the OEIS, the utilities then implement their plans for, by example, installing covered conductor, replacing poles, installing cameras and weather stations, and taking other actions to strengthen infrastructure and increase situational awareness of weather conditions.

These investments in electric infrastructure are necessary for safety, but the costs recorded and forecast by the utilities in connection with implementing these wildfire mitigation plans are large and continue to grow at the same time, and because much of this wildfire mitigation work will take time to complete, the electric utilities are also continuing public safety power shutoffs, or psps, where power is preemptively shut off to avoid igniting a wildfire with a big assist from the weather.

Last year, 2022 saw fewer psps events and fewer customers affected by psps than in previous years. Only three events involving deenergization were called, and all were called by just one utility, Southern California Edison.

Now turning specifically to affordability, all of the areas I've been discussing are drivers of increases in electricity bills, and since investments to combat climate change, strengthen infrastructure, and reduce wildfire emissions are absolutely critical and will reduce costs over the long run or avoid increased costs, much of the CPUC's work is focused on minimizing costs of these activities while still ensuring the utilities complete the important work.

But utility rates continue to grow, and even though average bills in California, as the chair mentioned, are around middle of the pack nationwide rate increases that greatly exceed inflations are projected in the future. To more specifically address electricity affordability, I'll add a few actions the CPUC has taken to address affordability for customers more generally.

In 2022, the CPUC adopted a decision that reforms net energy metering by implementing a tariff called the net billing tariff that uses a new solar pricing structure designed to be more affordable for all electric utility customers and control electricity costs. Notably, the new net billing tariff provides Low income customers, customers living in disadvantaged communities and customers living in California Indian country more than double the amount of extra Bill credits during a glide path transition period for the industry.

Paired with this tariff is also our self generation incentive program rulemaking, or SJIP, in which we are also proposing or preparing for a $630,000,000 Fund, a General Fund set aside by Assembly Bill 209 to support installation of rooftop solar paired with battery storage for Low income customers. This program will support our equity goals but also our reliability needs as these customers will be able to adjust their electricity usage to support the net peak in the evening hours as the sun goes down.

Another avenue that CPUC is pursuing to address energy affordability is the income graduated fixed charge. AB 205 requires default residential electric rates to include a fixed charge on an income graduated basis with progressively higher charges for customers with higher incomes. By shifting a portion of the utility's cost recovery to fixed charges, volumetric rates will be lower, which will increase Bill affordability and encourage residential customers to adopt electrification measures at the direction of the Legislature.

We're excited to be the first state to implement this progressive and forward looking rate design concept. In additional win for ratepayers. Last month, the CPUC approved a multiparty settlement agreement which authorizes PG and e to self insure its wildfire liabilities up to $1 billion for three years. This settlement agreement means that PG e customers will not have to pay for commercial insurance for wildfire liability.

The forecast suggests that this will save PG and e customers over $300 million, and it's a good example of a new tool to reduce ratepayer costs. When faced with the realities of increased costs associated with climate driven events, we're also finding opportunities to save ratepayer money in our decarbonization efforts. For example, in 2022, the Commission ended gas distribution line extension subsidies for new natural gas hookups.

This decision will go into effect in July and is expected to save customers $164,000,000 per year and avoid stranded assets as customers increasingly choose to electrify. We are the first state in the nation to take this step as we gradually transition away from fossil fuels. The last effort I would like to highlight on affordability is federal funding and the grant and loan opportunities that are now available through the bipartisan Infrastructure Law and the Inflation Reduction act.

We've been working with the California Energy Commission, Gobiz, and the Department of Finance, and our counterparts at the US Department of Energy to access these funds for California and maximize loan opportunities, as well as direct the utilities to take full advantage of these opportunities. I want to conclude by discussing another topic that the chair raised this morning, the immediate affordability challenge that Californians have faced this winter. Unusually high natural gas bills caused by spikes in the price of wholesale natural gas.

Monthly fossil natural gas commodity prices in December were more than two and a half times higher in the west than at Henry Hub, which is the national benchmark. In January, western monthly prices were seven times higher. February prices dropped slightly, but they were still almost four times higher in the west than the national benchmark.

We know that the price increases have had a huge impact on Californians, and that's why the CPUC has taken actions to provide immediate relief to customers as well as work to understand why these sustained price spikes happened. So, first, an update on the status. Current status of natural gas prices. Between December and February, wholesale prices have dropped 80%, but they still remain 30% to 40% higher than February of last year.

Residential customer bills on average decreased over 50% from January to February in Southern California Edison territory, and they are likely to continue trending in that direction. So we are at the tail end of the sustained high gas prices, but we are continuing to investigate so we can fully identify and pursue mitigation strategies in the future. When purchasing natural gas, utilities use various hedging strategies, which are beneficial to customers when wholesale natural gas prices are high but less beneficial when prices are Low.

These hedging practices have saved customers billions of dollars over the years. Even with these strategies, however, a large percentage of natural gas purchases are made at monthly auctions, where the price varies according to the market forces at the time. We have a team that closely tracks the natural gas markets. As prices started to increase in early December, we directed the investor owned utilities to improve and increase their communications about the situation to their rate payers.

These communications highlighted how to enroll in income qualified programs, how to sign up for Bill forecasting tools that leverage text messages, how to enroll in levelized billing programs to smooth out bills seasonally, how to adjust their natural gas usage without sacrificing comfort and safety. These communications went out to customers via email, social media, phone calls, purchase medias, and through the utility's community based organizations and faith based organization networks. Additionally, last month the CPUC accelerated the receipt of the California Climate credit by residential energy customers.

As the chair also mentioned this morning, the climate credit is funded, as you all know, through the state's cap and trade program, and this year will provide roughly $90 to $120 and that's the combined electric and gas credits. This will automatically show up on customers bills in the next billing cycle, rather than waiting for the usual distribution, which normally starts in April.

I'll add that it is important to note that the spikes and extended elevated prices in the natural gas market did not just affect California, but also the entire western region. Our staff are in touch with states across the west and staff at the Federal Energy Regulatory Commission on this issue. FERC has now announced that it's taking a close look at the issue in response to the governor's letter highlighting the issue.

The CPUC also held an ombong hearing in February in collaboration with the California Energy Commission and the California Independent System operator, where we convene natural gas and electric market experts, as well as experts in natural gas system operations to examine the causes and impacts of high natural gas prices. We're using the insights gained from that hearing to determine our next steps. We continue to monitor this issue closely and will be considering actions within our authority to fully investigate the matter.

So with that, I conclude my remarks by offering my gratitude to chair Bradford and all Committee Members. Thank you again for the invitation to speak today and to allow me to address a subset of the issues the CPUC is currently tackling. Thank you.

Thank you. Does that conclude, or any of your Committee?

That concludes my remarks.

So we'll open it up for questions. Right now. We're going to ask Members to limit your questions to one at this point. Senator Caballero, Senator Mcguire...

I guess I really appreciate the testimony here today. The utilities sector is not an easy sector to understand, and there are different rules depending on the commodity. But part of what I'm hearing from my constituency is everything's going up and it's not just the energy cost, but everything. It's food, it's garbage, it's everything. But what really hit them hard was the natural gas. Is there a way to let people know ahead of time?

It's the fact that you get a Bill in the mail and all of a sudden it's three times what you thought it was going to be. And for many of my residents, they just can't afford the high cost. And so the question becomes, one, is there going to be some relief for them so that over time they can pay this incredibly difficult Bill? And number two, that we won't turn off their energy in the meantime because they just can't pay it all at once.

And three, that to create an obligation that the companies communicate with us somehow, they can do a press release. They can send out text and emails fairly cheaply that says, look, because of the spike in cost to us, the unexpected spike, it's going to cost you more. And so you may want to take some precautions. Here are ideas that might work for you. Turn your energy down during the day when there's nobody home, and that's kind of a no brainer.

But for many of us running out of the door in the morning, we may not think about it. Just things that may be helpful for people.

Absolutely. And those are all good suggestions. And we were thinking along those same lines when we started to notice the possibility of this price spike and notified all of the investor owned utilities that they should start getting the word out to customers so customers could do the things that you're talking about. I think you started with the question of is there any relief for these customers? And I would encourage folks to check out to look at the websites of their utility, their gas utility.

There are programs available, especially for Low income customers, including funds that have been stood up to apply for a credit to provide relief, but certainly spreading out costs over time, accessing Low income programs for subsidies and then payment plans. So rather than, as you say, it would be catastrophic for customers to have utilities cut off, especially in cold weather. And so all of the utilities do have payment plans to spread out the costs over time. The communication issue is a tough one.

The utilities did step up their communications, but they weren't able to reach everyone. I think people receive emails, they don't read them. They maybe get them every month as their Bill comes in. Customers who have signed up for texts were getting text messages, but the utilities don't reach out to customers who haven't signed up for those programs, the text message programs.

So it's probably a good opportunity for the utilities to examine their messaging and see if there are better ways to reach folks because absolutely, it's critical to get the word out early and there are certain things that people can do without sacrificing comfort and safety to adjust their usage.

Thank you for that. And Mr. Chair, it just occurs to me that we're doing a lot of, a number of hearings on housing and the unaffordability of housing and homelessness. And the fastest growing population of individuals that are becoming homeless are seniors and in particular seniors of color. And so the last thing I want to see is these utility bills drive because it's hard to communicate with seniors.

They may not be receiving texts and all that kind of good stuff and they don't get the information that they need sometimes. And we would hate for them to think, I can't pay all these bills. I'm going to have to move out and end up homeless because all of a sudden it's an unexpected Bill for seniors and usually it's medical, but in this instance it may be that it's an energy Bill. So just got to put a real fine point on that.

We don't want to lose people to homelessness because of this. Thank you.

Thank you.

All right, next up is Senator Mcguire.

Thank you so much for Mr. Chair and thank you for hosting this annual forum and want to welcome the President of the PC. And it's good to see you, ma'am, and thank you for all your work. Also want to say thank you to grant Mack in your Gov affairs office as well. He's always incredibly responsive to the team as well. So thank you so much. A few items is one, just want to talk about utilities being able to serve communities.

When it comes to growth, two would like to be able to talk about transmission. And it's something that these two items you mentioned in your comments as well is connecting these new green energy sources with reliable transmission.

So first and foremost, Madam President, I know you've heard this loud and clear, there are several communities throughout the PG E service territory are struggling to be able to look at growth, whether it's to meet their housing mandate by the state and or commercial or industrial activity, and then being served by the utility Pacific Gas and Electric.

What I can say is, in our neck of the woods for humble, there were three incorporated communities, Ferndale, Fortuna and Rio Dell, that were told that they weren't going to be able to expand, literally told they weren't going to be able to expand housing and commercial activity because there was not enough power over the next 10 years to be able to serve what that demand will bring to the grid. That's unacceptable.

And I know that's your feeling as well, so please don't take my words of being crunchy, but here's the piece. I think that there needs to be better communication between local government, Pacific Gas and electric in particular on getting out in front of this to be able to meet demand number one. Number two, I think within the Public Utilities Commission need to be able to get a better understanding of where the weaknesses are when it comes to them being able to serve demand of local communities.

And looking at a SWot analysis on this. So Humboldt County was in the beginning of the year. We get a call from the Litton tribe in Sonoma County building over 500 homes. They were told that they won't be served and they are already in construction. Senator Becker has had this same issue in his district, Senator Wiener in his district. And so this is a growing challenge that I think that needs to be focused in on as we move forward.

And to the credit of PG and E, and I'm pretty extreme critic at times of the utility, their regional Vice President made it work. Right. They're going to put in additional 26 County of Humboldt over the next four years to be able to serve that demand. But this is a growing challenge. The second piece is, and I know that we are limited time is offshore wind and the transmission. So the Bowen project area off of the Humboldt coast.

Moving forward, leases are granted and the transmission line coming from Humboldt over to reading or down to Sonoma county to connect with the rest of the grid is antiquated and simply can't take this new energy load.

So I'd like you to be able to give us a little more in depth, some additional comment if it's all right with the chair on your focus on this, as this is going to be a growing challenge to be able to meet our goals here as a state, but then also being practical about it, taking on this new load and it's going to take decades and multibillions of dollars. So, Madam President, can you comment on that in your focus and the pc's focus?

Sure. Thank you. Senator, you've identified two extremely critical issues that the state will be facing and that the investor owned utilities will be facing in the near term and the long term. Because both distribution planning and transmission planning is a long term effort. We can't start today on a transmission project that is needed in the next year. It takes years to develop these projects.

So just briefly on the distribution issue, we are seeing constraints, capacity constraints in the distribution system throughout the state, which are leading to the problems you've identified. The CPUC does have a process that has been stood up by Director testify to immediately address issues as they come up. So kind of the reactive part, right. So let's try to solve the problems as they arise. But we're also looking at a solution that doesn't just involve waiting and then reacting to problems.

We want to get the utilities to do better distribution system planning, to work with local governments to figure out where the capacity constraints are and make sure those are not in places where development is seen in the future. That process is ongoing both through our General rate case process as well as our distribution system planning process.

And we have a proceeding that is looking kind of out into the future and making sure the utilities are planning differently given the load growth we expect to see and the changes in our distribution system on.

And just a real quick follow up on this, Mr. Chair, quickly, would it be fair to say this is in the initial stages and there's a lot of work to do on this? Because it just seems like we're going county by county, project by project at this point. And there needs to be a lot of work to be able to dig into this issue, to be able to get in front of it for an upstream investment. Would that be fair to say?

I think that's fair to say yes.

And then do you think with the PUC, is this a five year window? What does this look like of being able to get out in front working with the utility? And I know I'm biased because I'm in the PG U service territory, but what does this look like to be able to get a look ahead.

Well, we want to immediately start solving problems, right? And so not say 5 years from now we're going to solve it. So, we want to solve problems along the way. But I do think it will be, I don't know that it will be solved in terms of here's the distribution system. It's planned, appropriate. We know exactly where the development is happening, but that's where we want to get. And that might be a year's long process.

But in the meantime, we need to make sure that the development that is happening is being addressed with upgrades to the distribution system as we go. On the transmission side, with respect to offshore wind, this is also a critical issue. And for Humboldt in particular, agree with you. Transmission needs to be studied and developed in order to fully take advantage of the offshore wind resources that are up in the homebold areas, which are very strong, some of the best in the world probably in that area.

And so it's something that has been a great focus of the CPUC as well as the CEC and other state agencies. There is a process to do a transmission study underway with funding from DOE and to study lines that could be used to access that resource and have it benefit the grid. Additionally, through the CPUC's transmission planning process that we conduct together with the California independent system operator, we've included a sensitivity analysis that has a large amount of offshore wind. So we identify resources.

Kaiso studies transmission in order to access those resources. As part of that process, Kaiso is now looking at our sensitivity analysis on offshore wind, and we'll be identifying transmission for planning purposes in that area. So it is moving forward on solutions for transmission to access offshore wind.

We'll be following up with your office. I think this is absolutely critical to our future, right when it comes to our climate crisis for jobs in a rural area that has been depressed for too long. But it's also the achilles heel of this whole process is transmission. And we need to be able to get out in front of it. And we have some ideas as well. We'd love to follow up. And thank you, Mr. Chair, for being so generous of the time.

Thank you, Senator.

Thank you, Senator Becker.

Thank you. My colleague just touched on two things. I was going to mention transmission interconnection. So just touch on them quickly and then move on to a question. Yeah, I think despite we've heard positive kind of noises from the governor's office and the PUC on transmission, and just, I'm concerned, we've heard that in the new TPP coming out, that there's still only a modest increase in transmission that's slated to be approved. So just want to be very clear.

It's absolutely holding back our ability to bring new energy to the grid and to shut down gas plants and disadvantaged communities. If you have any comments further at this hearing, on average approval time or things that are substantively improving on transmission, I'd love to hear them on interconnection. Just echo the comments of my colleague. And why is PG not doing its basic role of getting interconnection in place despite approving millions in rate cases to exactly do that?

But I like to focus on demand response because that was one of the keys for keeping the grid stable last summer. And I guess my question what are you doing to enroll new customers and expand the capacity of demand response for this upcoming summer?

Okay, thank you, Senator. And just briefly on the transmission question, in your framing of the question, I'll add that the PUC is also working together with Kaiso on clearing the interconnection queue. So you've probably heard that there is a significant backlog in the transmission interconnection queue. Kaiso is looking at creative ways to move more quickly to get projects through the queue that are ready to come online.

And we've recently entered into a memorandum of understanding with the CEC and the Kaiso to work jointly on getting that process moving more smoothly.

Yeah, thank you.

That is critical.

Sure.

And then on demand response, I'll list a few of the things and then Director testify may have a few things to add on demand response. We're working on expanding our emergency programs for this summer. So those programs that kick in when the grid is looking tight on the hot days in the summer, including the emergency load reduction program, the ELRP. So working with utilities to get customers signed up for that.

And there are lots of different varieties of that emergency program, including individual customers who can just go to the website and sign up, residential customers, as well as customers who have batteries or electric vehicles they can participate. It provides compensation just for performance. So there's really no harm in signing up. We're really trying to get the word out on that.

In addition, we're continuing to develop our more traditional demand response programs, which provide assistance throughout the summer, including emergency during emergency events, and working on different types of pilots and ones that have capacity payments versus performance payments. So demand response is something that we want to make sure that we're experimenting with and then using the lessons learned and carrying them forward. Ms. Tessfai, did you want to add some comments? I can just add a little bit more detail.

So we do have a staff level process going on through an advice letter that came in in January. And so from all of the IOUS and those will be focusing on short term enhancements to the emergency load reduction program for the summer. In addition to that, on January 27, the Commission put out a ruling in the demand response proceeding that's focused on investor owned Dr. Programs, but also third party Dr. Programs in order to enhance those programs as we move forward for this summer and beyond.

I also wanted to touch on this February due to a decision the Commission made in December of 2021 related to summer reliability, we were able to approve a contract between PG and E and Sunrun for a virtual power plant. So being able to leverage technologies like solar storage and smart thermostats in order to put together a virtual power plant providing demand response type services.

And then in addition to all of the PUC work, I did want to just mention that we've been doing a lot of work with the California Energy Commission as they enhance their DSGS program, demand side. I'm forgetting the acronym DSGS program, pardon me. In order to help them enhance that program and kind of understand, are there gaps on the IOU side and the utility side that we're able to fill with the CEC program to make sure that all of the bases are covered for demand response?

Yeah, that's great. We're certainly fans of the DSGS program. I guess a couple, just quick follow ups. One, we heard that for the emergency load program that was kind of, the payments were being increased from a dollar kilowatt hour in $21 to $2 per kilowatt hour this year. And I guess the question is what's the reason for the increase? And are there more effective, cost effective ways of getting customers to reduce loads?

Shouldn't we be investing more in grid integrated demand response programs rather than focusing on the emergency programs?

So I'd say that we should be doing both. And we are looking at both of them. I don't think there's been an increase in the payment amount, was there? I thought just maybe you could clarify. Yes, thank you for that. As you were saying in the most recent decision, it was moved to $2. And part of the purpose of that is this is a program that's short term. And so like President Reynolds said, we're working on both.

So we have those enhanced payments for right now as we need the ELRP program. But we are hoping to put in more programs to long term programs and really being able to focus on those grid payments that you were just talking about. So ELRP again is a short term program for these few years as we bridge and build on our demand response programs and continue to enhance them.

Okay, last thing. So again, the focus on grid and graded, to me that makes more sense because we don't want to cannibalize those programs because they were so important. And just lastly, we should make sure we have a level playing field. So for third party providers that are not using any ratepayer money to acquire customers and had success in that and having to compete against, say, IOUS that are using ratepayer money to be able to basically compete against those providers and attract customers into their program.

So if we could have a level playing field and have access to information for the third party providers, that would be preferred. Do you have any comment on that?

So we do have another proceeding that's open related to demand response and it's called our click through proceeding. And it's right now actively working on those data transfer issues in order to enhance them and help more customers be able to enroll in whatever type of program they would like to enroll in.

Great.

May have a follow up on that later. Thank you, chair.

Thank you, Senator Rubio.

Thank you, Mr. Chair. Thank you for this information. This morning. I have a question, and I think it goes back a little bit to Senator Caballero's question, where a lot of our residents were caught off guard. And I heard you say so much right now about all the programs that you offer, how you try to reach out to people in terms of enrolling all these fixed income programs and tax capabilities website. But I'm concerned about our population that doesn't speak English.

And I'm not sure what you do have, and I know it's not necessarily your job, but I was just wondering if there is any way you can create programs where there's webinars in Spanish. I'm as fluent as they come, and I have such a difficult time trying to convey this information to my Spanish speakers and it's not my wheelhouse in Spanish per se. Right.

But can you share a little bit of what you're doing to reach those, not just Spanish, but all these other languages that we have? Because I see that there's great programs, but it's just not reaching those communities. Yeah. Thank you for the question. And we do think it's our job to communicate with customers and all Californians in a way that they can understand and really comprehend what's available to them.

And so at the CPUC, we do make an effort to include translation of documents and information on our website. We also encourage the investor owned utilities to do the same. And I'm wondering if Executive Director Peterson could talk about some specific examples for you. I think there's always a need to improve, and so I appreciate the question.

Yes. Good morning, chair. Nice to be here. Thank you. And honorable Members. Thanks for the question, too, Senator. We are constantly looking at ways that we can improve the translation of our materials into the languages that Californians speak.

We have a program that we've had in place for a dozen years now in which we contract with self help enterprises, which in turn contracts with a couple of dozen community based organizations who are out in the community all the time and in 27 different languages at the moment, are helping people with their utility bills and services and questions that they may have. So I imagine they're having the same struggle that you are with translating utility information into those 27 languages.

But they're at senior centers, at street fairs, et cetera, at booths, really talking to people and on the ground. It's a program that we've sponsored for a dozen years, and we've always heard that it's very helpful to people out in the community, and it's one that we'll continue to have going, safe to say, just as President Reynolds said, it is an area of continuing need for improvement because of the ever changing dynamic California population.

If I may, Mr. Chair, I just want to follow up on that. And specifically, it was my senior centers that were calling me, and I sat with them on the phone quite a bit of time and try to go over the utility bills, trying to find those resources for them. But if we can just look into some of the organizations that you're contracting with that go out into these senior centers, something's happening where they're just not getting the information.

And that was really frustrating for me because, like I said, I tried to find the information on the bills for them so they can use the resources. And this was an entire senior center that I had to sit down with and try to convey the information. So something's happening there. If you can really reassess that and see how we can do better in terms of getting the information out. Thank you. I would appreciate it.

We will do that. Thanks.

Thank you, Senator.

Thank you, Senator Stern.

Thank you, Mr. Chair. And first, want to just commend you for focusing in on utility Bill affordability for this annual meeting. I think we do have lots of not just lofty goals, but very challenging ones. And I appreciated the walkthrough Madam President, for how to hit all those challenges. But, Mr. Chair, affordability will be the make or break for our ability to do any of this stuff.

I think it's smart for not just the Committee to be focused here, but for this Administration and for the Public Utilities Commission to take that lens, especially because the grid itself is going to be the lifeblood of not just one sector of energy in this economy. Right. But of potentially 345 major sectors that are currently not fully electrified. So we didn't spend a lot of time on the sort of future of electric rates and gas.

But I guess the question I was hoping we could hone in on, it pulls a thread through some of the past questions, and underlying a lot of this is access to information, data, whether it's sort of a forward looking perspective on what pain may be coming on your Bill and that sort of forecasting ability, or just a new community that's getting built and trying to figure out how to communicate that load up to the utility or in demand response and the ability for people to act on their information.

I was hoping you could sort of walk through what challenges, you see, what resistance there's been to transparency and that kind of information access on a variety of fronts. I mean, the ones I'll flag for you up front, I guess, have already been flagged by some of the Members. Right. But in addition to that, you talked about oversight of the natural gas spot market, that kind of data, and understanding what utility profits were during this period of Bill spikes.

We heard that sempra, or SoCal gas, giving back some shareholder profit, I guess, to offset the Bill impact. I heard 10 or 20 million. There was a release, I guess, yesterday, but that's not really required. I don't know how much profit was made by the corporation itself, by the parent corporation during that same period of time. So how much were people paying versus how much were shareholders making?

How much utility data do we have access to in the gas system right now to make long term planning decisions? You flagged this as an access pinch point, I think, in your long term proceeding, saying the gas company is telling us we don't really want to share our hydraulic modeling with you.

There's a security risk, or we don't want to talk about where the system could be paired back or maybe aging or where, because whatever argument is made, but that sort of resistance, we're even going all the way up to the Supreme Court, I guess, now on access to information about lobbying expenditures from the gas company and that pr operation to b two es that emerged and protecting that information as some kind of free speech argument.

So what can we do to start to solve some of these issues? Do you see barriers in your statutory authority to go get some of this information? Is it about how litigious it gets when you're trying to access this kind of information? I know there's a lot of different categories of information we're talking about here, but when I think about, for instance, the ability to ramp demand response, there's no way we can do that with the current level of data we've got.

We don't know what the real time market looks like a day or two ahead. Edam is coming up, but that's something the utilities don't share with us and assert control over it. So just, can you talk through that, President Reynolds? And maybe it's a further conversation and something we can sort of more formally seek some feedback on. But what are those barriers to your ability to kind of get various categories of data that are going to ultimately make rates more affordable?

Yeah, absolutely. And there was a lot in your question, so happy to have some follow up as well. But I'll start and then perhaps Ms. Tessfire or Ms. Peterson have some things to add. So the POC does have the ability to access almost pretty much anything from our regulated utilities. So to the extent that it's information that the investor owned utilities have, we can do data requests and request that information. Some of it is proprietary, and then we would keep that confidential.

But we have access to it and can use it for decision making. And I think this is a really important question and you've highlighted kind of a lot of reasons for that going forward into the future. We need to know. The state needs to know, communities need to know, individuals need to know what's happening and where we're going. And so we try to have as much transparency in our proceedings. We do have a lot of proceedings. We publish a lot on our website.

We have ratepayer advocates who are able to actively follow those proceedings and really track the information that's available on behalf of customers. Going to the example of the natural gas price spikes, which I think you highlighted and certainly is a huge consideration, and the question of how much money is being made. So we know the profits of our regulated utilities, they're based on return on investment, right? So it's a capped amount of money that utilities make. Natural gas prices are direct passed through to customers.

We don't regulate suppliers. We don't know how much the suppliers of natural gas were making in this incident. We've been asking questions through our onbonk and our continued investigation to try to figure out what the investor owned utilities can do to manage those costs and whether we can get some visibility into the larger world by using our investor owned utilities to get information from them. But we don't have regulatory authority over suppliers or traders in the market.

We're looking out for our ratepayers and approaching these questions from the perspective of how does it hit the rate payer, how does it impact the rate payer? And with the pass through of prices it absolutely does hit the rate payer. So that's the questions that we would be answering, asking in terms of what other processes need to be in place for protection against the gas price spikes.

But it's not necessarily the profits of the utilities because they're making their set profit based on their investments and rate of return.

So our hands are tied then. In that sense we basically should be passive price takers and sort of is there any recourse under state law that we. I get that there's a FERC role, but could the state do more?

I hate to say our hands are tied and I don't think we know the answer to that question yet because we know. So first of all, they're hedging practices, right? So could there be more done to purchase when prices are Low and store or have firm contracts so that we're protecting against price spikes. So there is an area to explore there and then we're still doing an investigation as to whether there's something else at play.

We know a lot of the factors, but are there any that we've overlooked? There was a cold spell early in the year. There's known storage capacity and the market reacts to all of those things. So we're trying to find out more to see if we can get a better handle on this to avoid the situation in the future. And I think transparency is a big part of know.

So let's be clear on what the factors are to the extent that we can and then be clear on the tools that we have to prevent these types of incidences in the future. Thank you.

Thank you, Mr. Chair.

Thank you, Senator Seyarto.

Thank you very much. And sorry I came in late and I hope I don't repeat any know, given the lofty goals of the state to electrify the entire state. And you already talked a little bit about transmission lines and the need to expand capacity quickly. And one of the issues that we have in regions like mine and I know my good colleague from Napa over there.

The issue with fires and wildland interface areas, if we're expanding transmission lines overhead in an effort to do it quickly and do it economically efficiently, it increases the potential for accidents that create fires, which create lawsuits, which creates massive fines and expenditures by the utility companies who eventually wind up with charging us. I would say in this state already, we have severe ratepayer fatigue. They're sick and tired of it. The $50 that we got sent for our gas thing early, our early present, barely even noticeable.

When you're paying a $700 gas Bill that usually cost 100, you know what? Nobody's going to notice the $50 and trading it from April to now, big deal. They need relief, and they need to know that what we're doing going forward is going to not cost them even more. So my question is, undergrounding in areas where there's fire hazards, like rich brush, areas where there's fire hazards and the potential for massive destruction of homes, et cetera, is probably imperative in that outreach.

But who's going to pay for that? We cannot pass that along to our ratepayers. So who's going to pay for this massive expansion of transmission lines so that we can go all electric? That's my question.

Thank you for the question. And I agree with your identification of the problem that we have areas that are very much prone to wildfire, and we have an aging system, infrastructure system, and then we also have this need to increase capacity and increase supply in order to electrify. So at the PUC, we look for ways to reduce costs overall. So encourage and demand that the utilities do what they need to do in the cheapest way possible for the protection of rate pairs.

There have been conversations driven by this Committee, by others in the Legislature, to look for alternative sources of funding. From our perspective, we do review and work with utilities to apply for federal funding. So to the extent that it's available, federal funding is absolutely a wonderful option for California and something we want to take advantage of with respect to state funding, if it is available. We try to fully take advantage of that to reduce costs overall.

There was the cap program last year and the year before that provided significant relief for customers who are behind on their bills. All of those things reduce costs overall. With respect to wildfire, undergrounding specifically, I can't speak to another pot of money, but that may be something for your panelists that you've called in this Committee hearing and other conversations. But in terms of our ability to regulate the utilities, it's really with respect to reducing costs overall.

Thank you.

Thank you, Vice Chair Dahle.

Thank you, Mr. Chair. Welcome. Good to see you. So I just want to kind of springboard maybe a little bit off of what Senator Mcguire and Senator Becker were talking about when it comes to the grid. The Governor announced that by 2035, we are not going to have the ability to buy an electric or a gas fired vehicle in California.

Now, first of all, I want to say I don't envy your job because there's a lot of policies that come out of here that I don't know how you're going to meet. So to say that we need a five year plan, we definitely need a five year plan, because in 10 to 12 years from now, we're going to be charging a heck of a lot of vehicles in California.

The estimate is that we're going to need 10 power plants the size of Diablo to power these cars. So I just would like to say to you, it's frustrating for me, as somebody who worked in building power plants when I was younger and understanding how hard it is to get through FERC, how hard it is to get through all the hoops you have to. We had the Northern California line when I was a cash supervisor.

We tried to get a line brought in from the east, and people don't want power lines in their backyards. It is very difficult. And the CEC says, we're going to have these micro grids that we're going to put batteries in the community, we're going to have solar there, we're going to charge the batteries, and at night we're going to use batteries, and we don't need all this grid. So the question I have is, do you coordinate with the CEC on how this is going to happen?

Because at the end of the day, we have to have a laid out plan for how we're going to energize this state if we're going to go all electric and at the same time we're going to shut down natural gas, electric, gas plants in California. I don't see how this is going to happen unless we have a really defined plan of how we're going to get there in 10 years, because this Legislature will continue to pass great ideas that have no plan behind them.

And so I'm asking you, we have to have a plan or we're not going to get there. And at the end of the day, a third of Californians are in poverty. We have the highest poverty rate in the nation, and these folks that are getting these bills don't care about anything but getting that Bill down because they're suffering of having to shut off their gas or not heat their house or pay their Bill versus feeding themselves. So what is the long term plan?

Because we're running out of time soon. Yeah, that's question number one. I do have one more, Chairman.

Absolutely. Thank you. And we are coordinating with the CEC. The joint agency process is very important to achieve the things that you're talking about. The CEC prepares the annual load forecast. And so what we're looking at now is high electrification forecasts. So, meaning that CEC takes into account just the things that you're talking about. What about all of this electrification that's happening on our system that goes into the forecast?

We take that forecast and do a planning process together with the 40 load serving entities who are working to get the supply online through contracts. Now, as we speak, they're entering into contracts and developing projects to meet the needs of our system. We had, I think, 130 projects in the past year. Is that right? That came online. And luckily, renewable resources right now are very inexpensive compared to past years. So we have solar and wind projects that can be done pretty cheaply.

We have farmers who are interested in fallowed land, counties that are working on bringing projects to their communities because there's economic development in these projects. So there's a lot of opportunity here. There's also a lot of challenges, and I don't want to minimize it. And absolutely what you're saying, I completely agree with, Senator, that this is going to be a very hard road.

But we have proven ourselves in California and have done a lot of work to bring new resources online as well as the work on transmission needed to accommodate it. And it doesn't necessarily have to be a new transmission line. It could be an upgrade to an existing line. It could be an upgrade to a substation so that we're matching capacity on the system together with the projects that they come. So we're looking at a little bit of everything.

There are out of state wind projects or out of state solar projects. There are projects here in California that we're focusing on. We increased our battery storage capacity numbers by 200% in the past three years from about 200. So we're seeing great progress. I don't want to minimize the challenges. There are supply chain challenges. There are interconnection challenges, but those are being worked through.

And at the same time, we're facing the climate change impacts that will be inevitable and will be even worse if we don't do what we're trying to do. And I know those affect your constituents and your district, Senator. Absolutely, with wildfires and intense heat that we expect to see. But there is a lot of progress. We're trying to be thoughtful about it. I think there are always improvements that can be made and very much appreciate the conversation and hearing your ideas and your concerns.

Well, I would just say that we can dream all we want to dream. We can say we're going to do things, but at the end of the day, we need a plan, and we need a plan for how we're going to actually move this stuff around. And there's a lot of tax credits that go with solar and wind, and that's all back to somebody's paying the Bill.

My last question is, when you do the credits like were mentioned for these folks who are heavily impacted, who pays for that credit? So if somebody gets a $700 Bill and they get, or there's many programs out there that are offsetting costs for disadvantaged folks, who pays for that? Where does that resource come from? Utilities pay it or does it get passed off to other rate payers?

The climate credits. Let me start with various programs. So Low income programs, those are socialized through other customers. So our Low income customers, those programs are spread out among other customers. The climate credit that we mentioned comes from cap and trade revenue. So those are oil companies, emitters of carbon.

So people that are putting gas in their car eventually pay for that because every time you put gas in your car, the refinery has to pay something.

True. Through the cap and trade program, the programs that have been created by the utilities to deal with this situation that we're seeing with the spike in gas prices, there are some programs that have been created using shareholder dollars, so not repair money. So there's a variety of programs.

Thank you. Thank you, Mr. Chairman.

Thank you. And I guess the final question I have in your presentation, first, let me thank you for your presentation and being here this morning. But I guess what I'm taken back by was your presentation and you made reference to Low income folks having solar. Who are these Low income folks? Because the majority of them are renting, if they're lucky, an apartment, let alone a house. So how do the Low income folks benefit from a solar program?

Sure, I'll start and then perhaps Ms. Tessa can add in. We do have programs for distributed energy resources for apartment buildings that could benefit renters. The point on normal, so rooftop solar that benefits the homeowner obviously would not apply to a renter. We have developed and are continuing to develop programs that can provide, that allow for solar on multifamily buildings, as well as storage for multifamily buildings, a little bit different than the net billing tariff that I mentioned.

But Ms. Tessa, could you provide some details on some of our programs? Thank you for that question, Senator Bradford. And so you know, a couple of programs I would highlight, the Soma program, the mash program, the Sash program. All of these are focused on multi unit housing and Low income housing and being able to bring solar to those customers.

And then, of course, highlighting the General funds that we were able to access last year that we're working on creating the program for through our self generation incentive program proceeding, and getting those dollars out the door so that all types of customers, particularly Low income customers, where those dollars are focused, can leverage storage as they install more solar through these programs and others.

And that leads me to my second question. Why wouldn't we prioritize this program versus the Nim program? Again, I don't understand for the life of me how we continue to justify paying wealthy people for a useless electron. We have to have an honest discussion. Anything that's overproduced in the NiM program is useless. No one benefits from that electron. So how do you justify paying someone a retail rate for a useless electron? That which is not used or stored by that customer goes straight to the ground.

That's why all homes are grounded. That excess power goes straight to the ground. It benefits no one. Our grid is not bi directional. So how do we justify a Neil program versus continuing the expansion of the care program, which you're seeing, you're struggling to find ways to Fund poor people, continue to supplement or absorb the cost of. Over a third of the homes with solar are occupied by people three months out the year. How do we justify that?

But we continue on. That's what I'm looking for, pushback from people like yourself who are challenged with managing this situation. Yet it's because of legislative policy that was passed here. I understand that, but it's flawed policy if you're having an honest discussion.

And the changes to the NEM program that we made in December move toward a program that compensates for the value of the solar. And so the compensation is going to vary at different times of the year, different times of the day. And it's exactly what you're talking about, Senator, that we need to make sure that that compensation reflects the value to the grid. We have what's called an avoided cost calculator that really calculates that value.

So transitioning the program to one that allows customers to access rooftop solar if that's what they choose, encourages battery installation paired with the solar, and then compensates to reflect the value of that resource to the grid.

But that's going forward. What about the folks who are benefiting right now that are really draining the system? And again, that's why these spikes in rates poor folks are experiencing is because they're subsidizing, again, wealthy individuals who live in homes of 35 bigger, who, again, have multiple tvs and computers in their home, where poor folks are lucky if they have a TV in their home or computer.

And the other thing that we're working on, with the guidance of the Legislature, is the income graduated fixed charge. And that would apply to all customers and intended to reflect what you're talking about. Thank you.

Great.

Thank you. And again, thank you, President Reynolds, for your presentation and your staff for being here this morning. I thank my colleagues for their. Oh, Senator Skinner, please.

Thank you, Chair Bradford. I was unable to hear all of that. I was listening in a different office, but I did hear most of your presentations. But I just wanted to bring up that while our chair clearly feels very strongly about certain of our programs, I think the issue around rates is much broader than that. And when we really look at how California's rate structure was devised over the last 30 to 40 years, it was devised with trying to incentivize people using less electricity.

So the entire rate structure was about less electricity. And obviously, a house with solar is pulling, when they're producing solar is not pulling from the grid. So that fits that. In the time those policies were developed, it fit that narrative of trying to megawatts, efficiency, conservation, solar, things like that, that would reduce our electricity demand. We are now in a circumstance where we are, due to our policies, around 100% renewables, and our commitment to addressing the climate crisis and our transportation issues.

But we know transportation is still our largest source of greenhouse gas emissions. And one of the primary ways that we're going to address that is through evs, that we now are in a situation where we need people to use electricity. We want them to power their cars with electricity. We want them to eventually power almost every appliance with electricity.

And so when we look at our basic rate structure, and this is something that we haven't yet taken on, we have to think about how do we design it so that we're not necessarily disincentivizing, and yet our prices, our rates are not so expensive as to be prohibitive to our Low income people.

So that's a whole new challenge, and I think it's fair to look at this all in that larger context and not to single out a single program as being the reason why we're either in a circumstance like this or that we have high rates.

Thank you. I believe it's a totality of all those things. So we're looking at all of us. I appreciate that. And again, thank you, President Reynolds and your staff, for your. We were standing trying to. One question. So we want to move this along. So thank you. And thank you for your presentation.

Thank you. Thank you.

Next up, we're going to have Matt Baker, and they're from the public utilities advocates office, so look forward to their presentation.

When you're ready, you may begin.

Ms. Baker, Chairman, Bradford, Vice Chair, Members of the Committee, thank you for the opportunity to be here today. My name is Matt Baker, Director of the Public Advocates office. With me here today are Linda Sir Razawa, our deputy for energy, Chris Unsen, our deputy for water, and Chris Unskin, our deputy for water and communications. The Public Advocates office is an independent consumer advocate at the Public Utilities Commission. We are part of the Commission. We are not the decision makers.

Our job is to represent consumer interests in proceedings before the Commission. Our team of engineers, auditors, lawyers scrutinize every utility application in energy, water and telecommunications. These applications typically request increases to consumer rates or changes to service. My deputy for Energy will provide you with a picture of how we work using the current pg e General rate case. And my deputy for water and telecommunications will discuss the affordability crisis in water and some of our solutions.

First, in the area of energy, I just want to talk a little bit about some of our successes. You should all have received our annual report, which will provide much more detail. In addition, last week we sent around our annual electric rates report, which is just the two pager. We're happy to resend that for anybody who wants it. In the area of energy achievements, the first would be the Commission decision to update the state's main rooftop solar program, net energy metering for new system.

The system makes the program much less costly for households who do not go solar and encourages the adoption of batteries for customers who do go solar. Second highlight I want to just put out there is the Commission's cost of capital decision. Here. They significantly reduce the utility's return on equity by 25 basis points. That's the authorized profit that regulated utilities are allowed to make. This was consistent with our position and advances the CPUC's efforts on affordability.

Next, I'd like to turn it over for a minute to Linda Serizawa, our deputy for Energy, to talk about how we approach one of our most important tasks, representing consumers in a General rate case. Using the GRC from PG E good morning.

As an example of our work on GRCs, I'd like to focus on PG and E's current GRC proposal. We spent the better half of 2022 analyzing this proposal by developing forecasts of costs, preparing testimony, and writing legal briefs. Our advocacy in this GRC is key, as it is one of the largest we've seen in recent history. PG and E requests approval of an almost $4 billion increase over its 2022 authorized revenue requirement of 12.2 billion.

This is almost a 32% increase for just the first year of a four year cycle. For subsequent years, PG and E requests revenue increases of more than 1 billion for 2024860,000,000 for 2025 and 680,000,000 for 2026. We have proposed that the PUC authorize a more reasonable 1.14 billion increase, which is a 9.3% increase over 2022 authorized revenue.

In our evaluation of PG and E's GRC, we have determined that PG and E is attempting to seek approval for projects that the company is not able to deliver at the scale and pace claimed by the utility. As an example, while we recognize and fully support wildfire mitigation efforts because they are paramount to ensuring safety, we also recognize that wildfire mitigation costs are a primary driver to increasing electricity rates.

Since 2020, PG and E has been authorized to recover more than $1.55 billion in rates for wildfire mitigation costs separate and apart from their GRC request. So we need to closely evaluate the utility's forecasted cost to confirm whether they are reasonable. Based on our review, we have determined that PG E's wildfire mitigation forecasted costs are overstated because they are based on historical costs incurred from the worst fire safety failures in PG and E's history.

These forecasts are based on costs for emergency mitigation measures that were at times hastily introduced to address significant management failures. The forecasted costs are far higher than they should be going forward, given that PG e presumably has learned from its past and ongoing wildfire mitigation efforts, and by now should have made great gains in cost reductions and efficient operations. But none of these efficiencies seem to be reflected in its forecasts.

Also, PG and E was allowed to recover from its customers the high cost of learning to implement its 2019 public safety power shutoff program, also referred to as psps. Yet in its GRc request, PG and E uses the historic costs of that early learning and related mistakes as a basis for requesting its future psps program budget.

Our case for almost $3 billion in disallowances is premised on the notion that pg and e should not be allowed to charge customers and earn more than is reasonable to rectify its past failures. Thank you.

Thank you. Next presentation.

Yes, thank you, Linda. And now quickly in water, like in energy, we are seeing dramatic increases in rates for investor owned utilities. For context, the cumulative percentage increase in a class A water utility rates was nearly tripled out of inflation over the past 10 years. Major drivers of this increase include the loss of revenue to cover fixed costs as customer demand decreases, mostly result of drought and the higher cost of water treatment to meet increasingly stringent water quality standards.

Our deputy, Chris Ungson will describe our efforts to reform memorandum and balancing accounts in water as part of our ratepayer relief.

There we go. Good morning. I'd like to highlight the recommendation we made to reform the way class A water utilities recover amounts in memorandum and balancing accounts. These accounts allow utilities to track unbudgeted costs for later recovery through surcharges added to customer water bills. This is why I refer to them as surcharge accounts because surcharge accounts are not included in the budget and rates that result from a Commission decision. In a General rate case, they are not readily transparent to customers or decision makers.

In fact, customers often are surprised and upset by them because they increase water bills unexpectedly. Unlike the financial reality faced by customers, surcharge accounts allow a water utility to operate without the discipline of a budget. Not surprisingly, the use of surcharge accounts has grown in the past decade. At the end of 2020, there were 251 active surcharge accounts totaling $571,000,000 that continues to accumulate with interest.

From 2008 through 2018, surcharge accounts were on average 20% of customers total water Bill, and for some customers, they were as high as 53% of the total water Bill. In the affordability water affordability rulemaking, we asked the Commission to consider a policy that would permit a class A water utility to recover amounts in surcharge accounts only when its actual return on equity is less than its authorized return on equity.

If a utility's actual return on equity exceeds its authorized return on equity, it is not necessary to allow the utility to increase customer bills to recover amounts in surcharge accounts and derive even more profit. It is notable that from 2018 through 2022, most of the class A water utilities exceeded their authorized return on equity by an average of 22%. For one utility in the year 2020, actual return on equity was 156% greater than authorized.

The common sense reform we recommend will help lower customer water bills and help ensure water bills include only recovery of costs that are truly necessary. Utilities should not be permitted to use surcharge accounts to increase their profits beyond the level the Commission has authorized. We look forward to working with the Commission on our reform proposal. Thank you.

Thank you.

Thanks, Chris. I just want to wrap up really quickly on kind of our priorities for next year. I do want to add in 2023. In the area of natural gas, 2023 hit us pretty hard. The recent alarming price spike in natural gas prices has created a crisis.

I do want to say that many of the actions that the Commission has successfully taken, which we think will have an impact on consumers abilities to address this proposal, will help with that were ones that originated from petitions from our office. Also thanks to the chair for his letter, also recommending many of these same remedies. Going beyond some of that, though, we do believe there is enough circumstantial evidence to warrant further investigation by the FERC on whether market manipulation took place.

We do support the governor's request. We do support the chair's letter requesting that FERC investigate this price spike. And if there was market manipulation, that remedies be enacted longer term. I should say on the gas side, we also believe that electrification will help put downward pressure on the electricity rates, ultimately, if done right, and could reduce our exposure to gas price springs on the gas side. In the area of electricity, I just want to lay out three broad themes that we think are important.

First is our office will be reviewing non equity public purpose programs for their cost effectiveness. These are programs that are funded by ratepayers. We're going to be looking at those. We're also going to be identifying new ways to Fund or finance the procurement of utility resources. We think this is an area that has a great deal of potential and is worthy of further study. Third is we will be utilizing rate design to help create more equitable ways to Fund the grid.

Our priority here will be implementing income based fixed rates. And then finally, we will continue to work to protect programs for those consumers who are most in need. We are committed to working with you, the governor's office, the CPUC, and all others in ways to ensure utility services are affordable, safe, and reliable, especially for those in need. And with this, I'd like to conclude my remarks and thank you for the opportunity to speak here today. I'm happy to answer any questions.

Thank you, Mr. Baker, do we have questions from Committee Members? Senator Seyarto thank you.

When you're considering the utility profits, et cetera, are you also taking into consideration some of the reinvestment they have to make to respond to changing legislation, additional requirements like PFAS treatments and things like that, and also for groundwater reinjection, trying to inject water faster into the groundwater to recharge our groundwater supplies for water districts? And the same thing can be applied to utility companies as well.

How much of their profits are being put into the reinvestment part and how much is not being put into it because of the future being kind of grim for them.

So I guess I would answer that question by saying our office really believes that risk and reward should match each other. I mean, that's capitalism 101. But what we don't want to see is we don't want to see a monopoly utility earning more than their authorized rate of return because that's kind of the basis for regulation.

Well, I should say we want to make sure that any efficiencies that are created are captured for consumers in the rate making process, I think would be the best way to.

And a follow up to that, considering outside costs for utilities, sometimes you'll have one year where they have horrendous costs, billions and billions of dollars of costs due to a wildfires like we had two or three years ago versus what we had this last summer. And even then, we have a utility down in our area that's being sued, et cetera. So there's a lot of money that goes into those kind of costs.

Are you looking at it over like a span of time to see what kind of the average is, or are you looking at it as one single year and using that year as the evidence that they are doing this price spiking and things like that?

So I think the way we're looking at it is we're looking at it in its totality and how does it hit a consumer? So if we're doing something that raises the cost of borrowing for the utility, that is something that the consumers ultimately pay for. So we want to make sure that the utilities are taking or mitigating all of their risks, such as with wildfire.

We want to make sure that they are earning a fair return, and we want to make sure that the people who are lending to those utilities have the confidence to be able to do so at a rate that we can afford.

I think one of the things that we are very interested in looking at in the future, I just want to emphasize looking at, is that there may be alternative means of financing some utility investments, particularly at a time where you have companies like PG E who are relatively strapped in their ability to go to Wall street and borrow money.

And this may be a role that an authority like instrument could provide to help do more through revenue bonds that might be paid back by ratepayers for some specific investments where it might make sense. So, for example, wildfire mitigation might be a place where these kind of finance mechanisms might be useful. Right.

But there's a lot more in the mitigation efforts. There's all sorts of regulatory agencies to go through before you can even do it. So there's a lot of costs out there that I think people forget about. That we need to take into consideration when we're talking about relief for the ratepayer because relief for the rate payer might start at maybe we shouldn't have so many layers of regulations so that somebody can allow to do something in a more efficient and effective manner.

And we're spending a lot of money on the other stuff. And that's passed along to the utility company who passed that along to the ratepayer. That's all. Thank you, chair. Mr. Chair.

Senator Stern.

Thank you, Mr. Chair, and appreciate the testimony and your initial tenure here. Director Baker, really drilling down into details at a critical time. You couldn't be under more pressure at this moment. From a ratepayer perspective, people don't notice their utility bills until it becomes catastrophic. And those are the moments where we need sort of good forward thinking leadership. And I want to just note your diligence on the procurement process. And the governor's proposal, I think is well placed.

And I think there's a lot of potential there for containing these sort of higher cost or potentially innovative type projects or other sort of sectors that we can do a smarter job. The Reserve work we did last year, even around dsgs and some of that. So I want to applaud you for that and encourage you to keep proceeding. My question was the follow on to President Reynolds. I did a little homework between her testimony and yours.

So this morning, Bank of America announced that Sempra is actually going to report higher than previously reported profits.

For FY25 based on, quote, a higher than expected contribution from California Public Utilities Commission base operating margin at San Diego Gas and Electric and SoCal gas. That's from a Bank of America report this morning. The upshot seems to me that in this period of spiking bills that somehow is driving increased profits at Sempra. Is that your understanding of how this market works?

And does the state have a role for taking a closer look at a parent company like Sempra and not just sort of saying, not our jurisdiction, we just live in SoCal gas world. We're price takers. Just your thoughts on that.

So in General, there are two components to the gas Bill. One is the commodity price. That's what spiked really in December and then was locked in for January. And then there is the rates for the pipes. And I think what that analysis was pointing to was that in that, and I'll let my deputy here speak more broadly to that. That in their last. Well, there's a current GRC that is before the Commission where we have pretty strong advocacy positions. And I'm going to let my deputy talk a little bit about that.

Actually, we have not yet served our testimony in that proceeding. It's due March, so I can't really speak to it because it's part of litigation that we don't want to reveal before we're ready. But you can be assured that we are taking a very aggressive stance and we are. While the proposed increases by the semper utilities aren't along the scale of what PG and E has proposed, they are still quite large.

And you're referring to the. I think it's a requested 20% increase in that General rate case. So on top of these spikes, people are just going to, they're saying the people of SoCal gas territory, you're just going to eat another 20% on top of the spike. That's the current proposal. As I understand it.

If their proposal goes through without any adjustments or disallowances, but we are going to fight very hard to make sure that doesn't happen.

Understood.

And just to be clear, the 20% is for the base rates, which does not include the commodity charge. So it wouldn't be 20% on top of $700 if you had a $700 Bill, it'd be 20% of the base rate part.

So 350 or $400 still a lot like when people are hurting, they're literally currently asking for more in the long term in the base rate. Very good to make that clear on the public record. Thank you.

Thank you, Senator Durazo.

Thank you. Thank you very much. The people are depending on you, right? You're the public advocate for the people. And I'm not trying to oversimplify. There's a lot of pieces to it, legal and otherwise. But I've gotten so many calls from the people and they just don't know what to do about the fact that their rates grew so fast they were unable to prepare for them. The amounts are just not manageable for them without any kind of notice to them.

My Bill went from an average of $50 to almost $500, but I'm not going to end up on the street. I can pay for that, unfortunately. So what do you say to the people as our public advocate? How do you summarize all these issues? Because we need you to be a fighter.

I would just say I personally take my job very seriously. I started out as a grassroots campaigner, mostly working on issues around toxics and public health. I was a consumer advocate I was a public utility Commissioner in another state. So from a personal perspective, I think this is a very bad situation that we're in right now, particularly with natural gas prices. And so I see our role is basically twofold.

One is we really have to dig deeper into utility applications and really just try to find the places where we can push back on any of these increases. But more importantly, given where we are right now, I think it's our job to really come up with kind of with creative solutions because we frankly are in a hole right now, and we need to look at what we're doing a little bit differently to get out of it.

In the area of natural gas, this recent natural gas spike, which we're hopeful is a temporary phenomenon, but it's still an incredibly painful phenomenon. We would like to see the gas companies automatically enroll people into Bill smoothing programs that would spread this spike out over a number of months so that people who are living paycheck to paycheck have more ability to be able to pay that Bill. And then if anybody wants to opt out of it, they can opt out of it.

Right now, you have to opt into it. Many people don't know these programs exist. I think a second thing that we would really like to see, and these are all learning examples, learning experiences for all of us, but I think we should be looking at something where you've got commodity prices increasing five or six times their historical average, is really, we should apply the kind of communications protocols that we apply to a psps like this is really important.

People need to know that next month we're locked into high prices. And so you should do all that you can to try to conserve for yourself as much as possible.

And then finally, I do just want to know in the last bonk that the Commission sponsored, we heard some really compelling testimony from many of the other gas buyers, like the City of Los Angeles, that this had all the markings of, at the very least, a dysfunctional market and at worst case scenario, a place where there might have been market manipulation at the other end of the pipelines. And so we really need the Federal Government and our federal partners to get to the bottom of that. But I hear you, and we're going to do our best.

Smoothing out the big Bill. They still have to pay for it.

Senator Becker, thank you.

Thanks for the work that you're doing. One question. We talked a lot about rates today and wondering some of your opinion. I mean, one thing that we heard at a recent conference is that only about a third of our electricity rates right now are the cost of generating electricity and two thirds are other things. And care program is heard as part of that. NEM may be a very small part of that. A lot of that is wildfire costs and wildfire mitigation costs.

So besides making rates very expensive, especially for lower income Californians, they also are detrimental to achieving our greenhouse gas goals. If we want people to electrify and then we make rates really high, it's a big, obviously disincentive. So what are your thoughts? Some of the things that could be done are in the income based fixed rates that we discussed. That is happening, I guess, via 205. So that's positive. And we heard some about that today.

There was a proposal last year in the Senate to take the wildfire and some of those other costs out of rates and say, put it into the General Fund, maybe where it more belongs. What is your opinion? What can we do to reduce rates along some of these lines? And then as a last small follow on, since we talked about transmission a lot too, what are your opportunities, do you think, for decreasing costs of transmission?

And if, say, California had an agency that was able to develop high voltage transmission lines, could that save money for ratepayers? So love your thoughts on those two questions.

Yeah. So let me just take a step back. I want to go back to something that Senator Skinner said that I think is absolutely critically important to look at it just from the affordability side, that if we're decarbonizing and electrifying at the same time, if we can look at all of our decisions in that framework, it helps create the discipline to be thinking about Low rates. Because if you can't keep rates Low enough, it's very hard to tell anybody or encourage anyone to decarbonize.

So reframing ourselves in that frame, I think is really important. What we see as the key drivers of rate increases. I think I have to disagree with you a little bit, Senator. We do think particularly legacy NEM costs are a major driver. They focus all of the other costs on non participants, and we think that there is a problem there. We do have solutions for that. And the Commission's decision actually.

Goes a long way to solve that problem on a going forward basis, income based fixed rates. While that's not the reason you should do that, you do need to figure out a way to pay for the grid in an equitable way. And we believe that that's an equitable way. Wildfire is going to continue to be a bigger and bigger part of rates. And it is important. We have to address. We need a safe system, but we also need to be able to be mindful of costs.

And then the third driver has been upgrades to the distribution system, upgrades to transmission, those kinds of infrastructure investments. So I think the things that we think are important is the idea of what can be funded by the General funds is really important. If we could Fund wildfire mitigation from the General funds, I think that would go a long way.

I do think that if the General funds were able to support a $3 billion investment in batteries for existing NEM customers in return for them moving on to the success for tariff, that would provide seven gigawatts of reliability. That would also provide $15 billion in cost savings, which would put lower pressure on rates. So it's an incredibly cost effective investment that the General Fund could make in that area.

I think a third area that really could be important is we could save 20% to 30% in the overall cost of the project with an infrastructure authority type approach that, again, is funded by ratepayers but is paid for with bonds rather than a mixed equity.

You're talking about transmission specifically.

I'm talking about all infrastructure but transmission specifically. You could also use it for wildfire hardening or something like that. That would be something that how that happens, and it could make a difference, I believe.

Got it. Again, so just you're saying if you had a, say, separate infrastructure authority or something funded by ratepayers, but as a sort of state sponsored entity, that could.

Lower costs, you think, yes, you may not need a state sponsored entity, but you could do it through any number of means. But yes.

Okay, well, thank you for that, and I do appreciate that. And I hope we can continue to look at the wildfire costs, as you say, are increasing part and how we can get those out of raids.

Thank you. Thank you, Senator Rubio.

Thank you, Mr. Chair. Director Baker, thank you for the work you do. Clearly, our consumers desperately need your help in these times. And I have a question, and again, I'll say, start off by saying that's not my area of expertise. But you talked about the two components that create the cost, which is a big part, the commodity. And my question is there markers, predictors from past behavior that can predict these particular spikes? So, for example, I know that inflation is really high right now.

We know that the rates are high. I mean, are these sort of indicators that we're going to see a spike? And can we set something up where there's an aggressive campaign prior to, if we're watching these trends that we can inform the public. I heard you say that consumers need to figure out a way to conserve prior to the month of that Bill, but how do they do that?

And so my question to you is, is there predictors that can tell you in advance so then we can kick off an aggressive campaign to let consumers know so they can start conserving ahead of that Bill?

My understanding is much of the commodities price is locked in at the end of the previous month at something called bid week. And that at that point the utilities have and the Commission, and we had a pretty good idea that this was really going to be a big problem. So at the very least we have a week or so to be able to do that. I do think we can look at the lessons from psps where it's similar.

It's a weather event that triggers it and it can happen very quickly and we can get the word out on that. And I think given the magnitude of this spike and the harm that it caused, that's one of the things we should be looking at taking. Just stepping back a little bit, there was two pipelines that were down. We've known about that for at least a big pipeline for over a year. There was cold weather all across the country.

So we had a situation where there were fewer basins we could draw from. The rest of the country was also drawing from those basins and it was cold everywhere. And again, that's a weather event, and we're able to use those to help alert people around psps. I won't repeat myself, except to say I think there are lessons learned that I think we can draw from going forward in the future.

And hopefully we won't see these kinds of events very often, but we do need to have a system to prepare for them.

Well, like I said, right now our consumers are really struggling. And so, yes, so please look into maybe having like psps. But the communication, in my opinion, is going to be key because we love so many people and just in a circumstance that it's unsustainable for them, especially, like Senator Durosso mentioned, going from a certain amount to 500, we can afford it, but there's people that cannot. So please look into that. Thank you.

Thanks, Senator Skinner.

Thank you, Mr. Chair. Appreciate your sharing those thoughts with us. And I think we do, as many of my colleagues have referenced, we do need to look seriously at another source of funding for our wildfire work because when we look at that, while certainly there are wildfires that have been attributed to faulty utility infrastructure or issues like that, we know that wildfires is a statewide problem and affects every utility, whether it's an IOU or municipal or other.

And we may even have worse wildfires as time goes on. And right now it is being borne by ratepayers to a degree, but not all ratepayers. So those who it is being borne by have a greater burden than, say, statewide. So I think the other thing I think is legitimate to raise is we had to make up for a fee that we had on certain properties in high wildfire fire areas that we eliminated.

That was part of the deal around cap and trade, and we're having to make up for that. That's something we need to relook at, as well as just what other way we can take on this issue of wildfire, both prevention and combating it, that isn't based on repayers. So I appreciate that. But I wanted to raise and ask you, you raised the issue of that we should potentially use General Fund to, in effect, support batteries of those who have NEM systems, have rooftop solar distributed generation.

Have you considered, I mean, that's a clearly, that would take pressure off of the grid and potentially have pressure off ratepayers. However, we have a growth right now in electric vehicles. While I've not seen data, it wouldn't surprise me that a large number of those who already have electric vehicles also have rooftop solar. But again, I'd like to see that data.

I'm making an assumption here, but electric vehicles have batteries that have about the same power capacity that those batteries I might buy to put on my house as the backup for my rooftop solar. So there's a part of me that says, why would we make a second investment in more batteries? Why wouldn't we focus on trying to utilize those batteries that these households already have to achieve what you've described? So have you factored that in? Would you, as you think about it.

We would be happy to factor that in. I think our staff has looked at the issue. Just for clarification. Are you referring to two way batteries or are you referring to really just charging during the evening?

I'm referring to the actual use of those batteries. All right, look, the reality is it is rare household that uses their car more than a few hours a day or for a certain number of miles. So this capacity of that battery is just sitting there unused.

And from my point of view, if we're trying to think about how to reduce costs and be smart and there's embedded carbon in batteries, regardless of whether they're in an electric vehicle or stuck on a house, to hold the excess solar that was generated, why we would invest in two batteries for the same household, and why wouldn't we just try to design and devise a way to utilize those batteries that most those households are either currently or going to have?

I do think CEC is looking into this issue in a fair amount of detail, and I would be happy to get back to you. In my experience, it's a pretty complicated...

No more complicated than putting installing a brand new battery onto one's house for that. So anyway, I just challenge you to really look at it because I think we lack imagination if we think we then have to make another 3 billion investment in whole new set of batteries.

Thank you for those questions. Senator Skinner, I totally agree with your assessment there. I will just finish off with my question. It's been alluded to that some of the challenges to increase rates has been derived through well intended policy that has been generated by this legislative body over the last 20 years. What can we do as legislators to engage your Department early at looking at policy before it goes forth, if it's going to have a rate impact?

So I think both in the area of water and electricity, we have an excellent rates team, and I think we would be able to very quickly, formally or informally, provide anyone in anyone's office kind of information on, based on certain assumptions that you want to make, what the rate impacts of any one of the policies that you're looking at would provide. I think it's important right now.

I would also just say, kind of from my opinion, is that we've had a lot of policy over the last 10 years or so, and it would be...the help where we need right now in meeting all of these goals, really is on the implementation side, whether it's something like looking at siding or permitting for transmission, or whether it's looking at financing because utility balance sheets are tight and their financing costs are high, or whether it's how to construct a new program.

I think the challenge right now for the next couple of years is really how do we put our noes to the grindstone and achieve these goals, and implementation is the key to that.

Thank you. And lastly, we talked about water and both all electricity and in gas. It's always been an issue of capacity or storage and things of that nature. Has that been looked at in our water area as well? Building more conveyance, building more storage to help reduce rates and create a greater supply of water.

I participated in a panel this week in LA, and it was called Ground Swell, and it was attended by community leaders and former elected officials all across the state, including former speaker Antonio Vera Rogosa. And one of the things that are impacting rates is the lack of storage. Have we looked at the need for increasing that in conveyance?

I'm going to let my deputy take that question.

Yes, we look at all investments that utilities propose, including storage well, additional wells, other things in terms of water treatment and utilities. Water utilities are never shy about wanting to have more investments because that is the way that they do make money. So the challenge for us is to make sure that those investments are necessary and to determine when they're necessary so that we can control rate increases.

For the most part, in terms of certainly water treatment and certain storage capacity proposals, they are necessary, and we allow those things, and we would support that they be included in rates. But the key question for us is always in all rate cases, is whether they are necessary. And so we look at the engineering, the topography, everything, and water, so that to determine an answer to that question and then everything else follows from that.

I would just add drought considerations, the new water quality standards that are increasingly coming online, they will all make connectivity between basins or between storage or between DSAL and all of these other options more important in the future. And we stand for reliability of supply, and we just want to make sure it's done at an affordable cost.

Got it. Well, thank you, Director Baker and your two deputies for your presentation this morning. Much appreciated. Thank you. And our final group will be made up a subset of stakeholders. We've asked stakeholders to limit their comments to three minutes and provide suggestions to address utility Bill affordability.

We have Sam Harper, consultant for the California League of Energy Consumers Association Adam Smith, principal manager of state public policy, Southern California Edison Nick Chassis, Chief Executive Officer, East Bay Community Energy be and none other than Dr. Mark Tony, the Executive Director of turn, better known as the Utility Reform Network. We were supposed to have a representative from Southern California, I mean, not Edison, Southern California gas, but they were unable to be here this morning. So we will begin with Ms. Harper, please.

Good morning, everyone. Can you hear me okay?

We can hear you. Can you hear us okay?

Yes, sir. Can you see the slide on the screen as well?

We can see the slide.

Perfect. Well, good morning, Mr. Chair and Members of the Committee. My name is Sam Harper. I'm here on behalf of CLECA, the California Large Energy Consumers Association. CLECA is an organization of large customers across a wide array of industries, including cement, steel, industrial gas, medical gas, pipeline beverage, cold storage, and minerals processing. CLECA members' electricity costs comprise a significant portion of their cost of production, thereby impacting their ability to compete across the US and globally. CLECA members are located throughout the state.

Some members are bundled, others are direct access, and some are with CCAs. But all have experienced the tremendous recent increases in both electricity and natural gas prices. I come here today with experience in electricity markets and utility regulation across North America. For 15 years now, I've worked with large manufacturing companies to achieve reliable and competitive energy cost in an increasingly competitive world. I've developed commodity hedging programs, demand response renewables. I was on the board of workout for store MURI and have run wholesale electricity supply operations.

What I can tell you, without a doubt is energy affordability is a significant challenge for CLECA members and should be a priority for state policy. The slide in front of you is from the Energy Information Agency, the EIA. It shows data from 2010 through 2022. And what it shows here is that California industrial energy rates have increased by 74% over that time. As you've heard already today, most of those impacts of procurement and fuel have not yet fully come into rates yet.

Second, you can see the gap between California rates and a regional average has increased dramatically over that period. In fact, it's grown by 139% over that period. And today, California industrial rates are 145% higher than the regional average. So why should policymakers like yourselves focus on competitive industrial rates? The number one reason is high energy rates close facilities. I can tell you as a personal object lesson, I worked with the steel recycling facility in Rancho Cucamonga that produced seismic reinforcing steel.

We worked to achieve competitive energy rates in order to compete with mills outside of the state. However, unfortunately, that mill was sold and ultimately closed in 2020. And to this day, no steel is melted in the entire state. CLECA members produce goods essential for daily life, for critical infrastructure like roads and bridges, oxygen for hospitals, cold food storage, et cetera, et cetera.

Producing these essential goods locally actually reduces carbon emissions. CLECA members contribute to the local economy and provide good paying jobs. CLECA members improve the reliability of the grid by providing demand response during heat waves. In fact, over the last few years, CLECA members have provided hundreds of megawatts of demand reduction when called upon during extreme heat waves, thereby helping to avoid rotating outages.

These benefits can only be achieved if facilities can continue to compete. CLECA has a few recommendations. First, we need to hit the pause button for all discretionary cost increases that are outside of the scope of direct provisioning of energy until 2025. We need to let the dust settle. We support looking at ways to fund policy goals that are outside the scope of direct provisioning of energy using state funds rather than ratepayer funds.

We should look to expand highly reliable and cost effective demand response, which is a zero carbon preferred resource. We should look to improve state level reporting, first on embedded emissions of imported products and second, benchmarking electricity rates for trade exposed sectors.

We should look to unlock investment in clean power through CHP, or combined heat and power by classifying it as energy efficiency. And lastly, we should look for ways to improve the ability of large customers to respond to market signals. On behalf of CLECA, thank you for the opportunity to engage with this Committee on these important topics. Thank you very much.

Thank you. Next up, Mr. Smith.

Hello, Chair and Members of the Committee. Adam Smith, Edison's principal manager of state public policy here, representing an electric perspective or an all electric utility. The electric utilities have a responsibility to serve our customers safely and reliably while keeping bills as low as possible. Affordability is part of our core mission. All electric utilities have similar bill drivers, as we've discussed today, things like energy supply costs and grid investments, wildfire work.

The majority of these investments have been prompted or mandated by state law, as the Chair has noted, and all are implemented with strong agency oversight and public process. The utilities and our regulators are working through a confluence of important state goals right now. I think Senator Stern mentioned some of them, and the electric grid is where many of these things come together.

We are adapting our grid in response to a changing climate and at the same time connecting things, lots of things, electric vehicles, buildings, to the grid is increasingly our state's solution to combating climate change. These investments are transformational for our industry, but more importantly, they're transformational for California's future. But as we've been talking about today, we have to keep the transformation affordable. Making the grid ready to support the recent carbon neutrality law will have costs in the here and now.

But we also know that the impact of those costs to our customers can be lessened by the significant load growth that accompanies electrification and our path to carbon neutrality. According to our analysis, total energy costs for an average household can decrease by about one third by 2045 across all energy sources. So that's thinking about your entire, what we call, the energy share of wallet: gasoline for transportation, heating for houses, and electricity, as well a third decrease.

We think it's important to keep the focus on this total energy picture, the holistic picture for a household, when we have discussions on affordability like this. With that all said, we know that the last few years have been tough for many. The IOUs have focused on keeping electricity affordable for all our customers, but especially those most in need and especially coming out of the pandemic.

Since 2020, when the pandemic started, SCE has enrolled more than 600,000 residential customers in programs that provide monthly bill discounts of up to 30%. That's CARE and FERA, which I know many of the panelists have talked about before. The other IOUs have been reaching out and signing people up in a similar way. In addition to those discounts on the bills, SCE is also providing bill extensions and payment plans for more than 480,000 residential and small business customers, deferring hundreds of millions in charges.

And we know that the other IOUs are doing the same sort of work. That's just a glimpse of what the electric utilities have been doing. But we also know there are important challenges ahead, like we've been mentioning before, and we need to make sure that all of the communities in California can participate in the clean energy transition. For context, about 45% of households homes within SCE service area are located in disadvantaged communities, according to the state maps.

So this is very real for Edison and very real for the people that we serve. That's why SCE and the other utilities are glad to see such a strong legislative focus on affordability. It's coming through in the hearing and in recent legislative action, we were huge supporters of the historic pandemic relief you offered electric customers through the California Arrearage Payment Program and also in the income-based fixed charge you directed the CPUC to develop.

And speaking of legislative action, I'd like to conclude with few ideas that we'd encourage this Committee and the broader Legislature to pursue. First off, the state needs to ensure that the income-based fixed charge is implemented, and that it's implemented on the timeline you set out. The IOUs encourage you to track this proceeding and make your thoughts known. We have got to see this through as a state because it will significantly benefit affordability, especially for our low income customers.

Second, we ask for your support to issue rate stabilization bonds that can fund certain expenses like vegetation management. This could allow for lower customer bills in the near term by spreading PUC approved costs over time. Third, the IOUs support utilizing state and federal funding for public programs very similar to the ideas that you heard Matt Baker talk about. And finally, we should all take a look at old mandates and old programs with fresh eyes.

As I mentioned before, so much of what we do in the utility sector starts in this building. There have been great programs built, great laws passed to guide utility investment. But the challenges before us are very different than those in the past, as I think Senator Skinner was mentioning. And as we focus on keeping electricity affordable, we urge you to keep an open mind about programs or incentives that may have reached the end of their useful life. I'll stop there and thank the chair and this Committee for your commitment to our climate goals and the affordability of electricity for all Californians. Thank you.

Thank you. Next up, Mr. Chassis.

I have some slides I wasn't able to get on time, so let me just pass them out.

My name is Nick Chaset. I'm the CEO of East Bay Community Energy. We are the CCA that serves Alameda County and the County of San Joaquin in the cities of Tracy and Stockton. In those communities, we serve about 550,000 households and 125,000 care households. I'm here to talk about it's really a tool that we, the CCAs, have been starting to use over the last year and a half, but it's something that's well used in public power generally.

And it's this idea of leveraging our tax exempt status to issue clean energy project revenue bonds to reduce the cost of the procurement of clean energy. In the last 18 months, six CCAs have formed and have issued over $5 billion of these clean energy project revenue bonds. We formed a new financing authority, the California Community Choice Financing Authority, to do this work and have put the tools to good use. Through these bonds, we're delivering today $25 million of lower electricity costs.

And we view this as a highly scalable model for public power providers to those customers that are served by CCAs or municipal utilities. We view this as an opportunity over the next handful of years to be able to enhance those savings to north of $100 million a year. So that's starting to be really meaningful cost savings that are going to be appearing on people's bills today and in the future.

So when we think about recommendations, I think first and foremost, it is key for the CCAs to be able to continue to do our job, to go out there and continue to procure the clean energy and reliability that the state has mandated. And that's something that we're doing and very proud to be doing.

And so just as we think about legislative initiatives that could be changing those mandates and putting those mandates onto new entities or onto the investor and utilities for these CCAs, let's just be mindful of the fact that the CCAs have tools that are unique to public power to deliver lower costs. I'm going to leave it at that. We've been here for a good amount of time, so. Mr. Tony.

Mr. Tony thank you.

I'm Mark Tony. I serve as Executive Director of TURN, The Utility Reform Network. Thank you, Chair Bradford, for your leadership in holding CPUC accountable for affordability. Thank you, Senators, for being here today. TURN believes that we can and should live in a society where power, broadband, and phone services are treated as basic human rights for all families.

We believe that the cost of greening the grid should not be cutting off black, brown, or any vulnerable populations from the grid, because the monthly bills are too doggone high. I've got four recommendations for the Legislature and five actions that the PUC can take quickly. First, use your authority to designate the remaining $600 million of the $1.2 billion already allocated for rate relief to help CARE, FERA and LIHEAP customers recently hit by winter rate spikes by extending the dates of that program to March 2023.

Whatever you do, please don't let the governor's budget proposal pull back unspent funds that have already been allocated for ratepayer relief. Another thing you can do is to hold shareholders accountable for covering wildfire caused by negligence, authorize TURN and other groups to fully participate in the Office of Energy Safety Proceedings on Wildfire Safety, similar to the way we're able to participate in CPUC proceedings.

The third thing, this has been mentioned before, but you can adopt a state transmission financing authority to use low-cost public bond financing instead of expensive utility capital financing. Let me go to the CPUC actions. Don't let the sky be the limit for the size of utility requests and for approvals of rate increases, the PUC can limit each utility to submit no more than three rate setting applications per year. In 2022, major utilities submitted over 44 separate applications impacting rates.

The PUC could limit rate increases to the Social Security cost-of-living adjustment. At the very least, they could require utilities to justify every dollar requested over the rate of inflation. The third thing is the PUC could control utility spending by applying the recently updated benefit-cost-ratio tool to every spending proposal submitted by utilities. Applying this cost-benefit-ratio to each utility spending project allows the Commission to assess whether the benefit to ratepayers is worth increasing their bills so that only the most cost-effective projects are approved.

Four, tighten oversight of balancing accounts by requiring that any utility spending that exceeds approved limits be submitted for review. Balancing accounts, especially with a reasonableness band, encourage utility spending beyond forecast, adding to the affordability crisis. And finally, prioritize affordability by supporting the ability of ratepayer, climate, and equity advocates to participate in CPUC proceedings on behalf of their members.

The PUC needs to process the backlog of 225 intervener compensation claims, some of which have languished for months and years, so that advocates can pay their bills. Please contact TURN for additional concrete solutions to energy bill affordability crisis. A lot of stuff I didn't get to talk about today, but I'm happy to answer any questions.

Thank you all for your presentations. And before we move to Members' questions and comments, I would like to invite the public who's waiting to participate to call in now. So please use a toll free number of 1-877-226-8163. Again, that's 877-226-8163. When prompted, please use the access code of 439-8318. Again, 439-8318. Now we can move to Member questions. Members, do you have questions for our presenters? Senator Rubio?

Thank you, Mr. Chair. Real quickly, too, I think Nick from the CCAs, you shared your model. Can you educate me in terms of all the other CCAs, does everyone work differently or is your model something that other CCAs implement just like you?

So this is a model that we have six CCAs that are implementing, including five of them are Northern California and one is Southern California. The Southern California CCA, the Clean Power Alliance, that serves Los Angeles County and Ventura County. It was the most recent issuer of one of these clean energy project revenue bonds. I believe they issued it in the last month.

It was $1.0 billion bond that's going to deliver around $70 million of bill savings to residents of Los Angeles and Ventura County over the next six years. So, yes, it is a very scalable model. Any CCA can participate. There's a certain amount of work that goes into it, and then you have to make sure that the bond markets are ready. But right now, we're actually in a very good time. So we've been really working hard with all of our CCAs and frankly, all public power entities in California to try to leverage this bond to deal with affordability.

Thank you. And if I may, I just want to direct a question to Mark from TURN, just real quickly. First of all, I love your energy. Thank you for that presentation. And I know that there's a lot of things that you didn't get to convey, and I would like to ask if you can put all your recommendations on paper and perhaps share it with the Committee so they can distribute all your ideas to the entire body. Thank you.

Any other questions for Members? Senator Gonzalez.

Thank you very much. Thank you very much for this panel. Also, love the energy, similar to what my colleague Senator Rubio has mentioned. First question is for Mr. Chaset on the 25 million a year in electricity costs that you're currently saving your customers. I mean, can you walk through that for us a bit? And it says here in your presentation, can this tool scale? And so what do you foresee in that scale up, if you will? And how has the program been going so far in terms of the rate relief funds?

Yeah. So the way it works is we issue one of these bonds, and it's tied to our procurement of clean energy. So solar plants, wind energy farms, geothermal projects are put into this revenue bond structure. And what it does is it delivers anywhere between eight to 12% reduction in the cost of buying that power.

So if I'm say, buying solar for $30 a megawatt hour from a big utility scale project somewhere in the State of California, using this tool, I can now structurally reduce the cost of buying that from $30 a megawatt hour to $27 a megawatt hour. That reduction flows as a direct benefit and reduction in a CCA customer's bill. The scalability is really a function of how many megawatt hours of clean energy am I going to buy.

In California we're ratcheting up our goals, and we have to be at least at 60% renewable energy by 2030. In our case, we have a goal of 100% by 2030. Certainly by 2035, it's going to be more. So this is a tool that is only applicable to clean energy, which is good from a climate perspective. We don't want to be reducing the cost of our brown power. We want to really focus on reducing the cost of our green power.

But because we have such aggressive green power goals, it's very scalable. So today at East Bay, I'll give you the example. We've issued two of these bonds that represent only maybe 10 to 15% of our total energy. So we have a lot of headroom, the ability to issue a lot more of these bonds to deliver a lot more savings. I think our estimates are we can annually save just our customers, just our 550,000 accounts, somewhere in the order of $30 to $40 million a year in energy costs as we scale this tool up, and that becomes hundreds of millions for all of California.

That's great. Thank you so much for that. And Mr. Smith, on the low income programs, I know a lot of folks have been taking advantage of that. You said 600,000?

That's right, 600,000 since the pandemic.

Okay, since the pandemic, okay. And how can we-this is always a question-how can we scale that up to ensure that more folks know about these programs? I mean, I talk to folks every single day. You have a population, I think your constituency, if you will, is about 15 million customers. Okay?

Total population.

Total population. So 600,000 is not a lot in that 15 million pot. So what can we do? How can we help to start scaling that up so more folks know about these programs?

Yeah, no, totally great question. I think the one point there is that we have about 5 million customers. And so when we're talking about how many, it's 600,000 to that 5 million. But right, there's more work to do. And I think that part of it is us and the consistent outreach we've been doing during the pandemic and candidly, all the IOUs.

But I think this is another area where maybe we could partner more with legislators and local officials to make sure that people who are out there in the world kind of know that these programs are there, available, and there is relief that they could kind of access.

Okay, thank you. And Dr. Tony, thank you so much for your work. And just sort of building off of that, any other additional thoughts here, and I think the suggestions you provided were fantastic, I think on all fronts. But how else can we help? And I do like the first part you mentioned, the 1.2 billion in rate relief. Only 600 million has been doled out so far. So we've got some more work to do. And ensuring that we're not deferring. That is the hope.

Well, the idea is, why give it back to the state budget when the need is so great, especially with these winter skyrocketing spikes that you've all heard about. I get the calls in my office. If I could just say one word about that particular issue that I didn't address is there's a couple of things. One is simply telling people to spread out the bill or giving them notice is cold comfort because it does not address the bill.

So if we really look at this closely, what we find is that PG&E actually did a better job in managing the price spikes than Sempra. Okay. And what we have to remember is that gas price is based on three factors. One is how much you got in storage or in the pipeline, how much you purchase for delivery in future months. They call that hedging, right? You can buy now for delivery for December of 2023. Okay. And buying on a spot market.

And because we have a situation where every dollar is passed along to the customer, there really is not a strong incentive for active management by the gas companies. So I would suggest we consider this is just a for example. It's not a term, but what if we said something like, let's look at the historical prices month by month for the last 10, 20 years of natural gas in California?

And what if we said, if the price is 20% over that, then shareholders have to pay. Oh my goodness gracious, that is what you call incentive. And maybe we do it the other. If you can get it for 20% less, maybe the shareholders get a little incentive because the ratepayers will have benefited from a 20% decrease. Okay. I just think that we need to come up with mechanisms. We need to think out of the box and keep and stop thinking just about passing along the cost. How about passing along the savings as the top thing that we think about? So thank you.

Thank you, Senator Becker.

Thank you all. A few questions just starting with Nick. Thank you for your presentation and this creative idea and leadership of CCAs in many areas, including getting to 24/7 clean energy and being on that pathway. We were talking earlier with the PUC about demand response and the ELRP program, and I think I've heard from you in the past, you said many people who opted in and participated have not been paid yet by PG E. Can you elaborate on that?

So, you know, we partnered closely with a lot of our customers to sign them up for the ELRP program, particularly in the run up and during the heat storm that we all experienced in September. And one of the challenges we've observed in talking to those customers is they just haven't been compensated yet.

So I think we're concerned that it's going to be really hard to convince a big business to change their operations or even run a diesel generator and burn fuel, incur those costs, if they're just not confident around the timeline or how they're going to get paid for providing those benefits. And so why that is, we're not really sure of yet. But I think it's something that we really do need to prioritize is what is the customer experience of participating in these programs? Because if it isn't good, they're not going to participate.

Good. Well, thank you for that. Well, I'll continue to look into that as well because we're talking about from last summer, and we want people to opt in now for next summer. So they haven't gotten paid. That's a big issue. Have you had concerns on interconnection? We've heard that from others.

Absolutely. We have a handful at East Bay, and we're aware of more utility scale renewables projects that include batteries that we're going to provide reliability for this summer that are facing major delays. So projects that should have come online this spring or before August that are now not planned to come online because of the inability to build the necessary interconnection facilities to connect them to the grid.

And so as we're looking at the dynamic and how tight we are for the summer. We feel like this is a real area of emphasis for the state to say, how do we get this stuff built on time so these projects can support keeping the lights on when we really need them.

Well, thank you. I hope we get those on soon, and certainly an area that we think we hope to tackle with legislation this year as well. And Mr. Tony, thank you also for your remarks, as well. Thank you also for mentioning the state financing authority and anything you care to elaborate on that or as a potential cost saving area?

Well, I think there are a couple of important things. One is that this has been done in other states. So New Mexico, Colorado, so there are models out there for California to learn from. We don't have to be the first on everything. Sometimes we can learn from other states who have done it, and it's a way that you could then consider moving.

One of the things I didn't talk about is some of what's been brought up about some of the cost on the bills that can be considered to be moved. And if you have the public financing authority with the public bond financing, you could also have that paid through a dedicated piece of the general fund. Over time, transmission is absolutely essential.

New transmission to meet California climate goals, getting the power from the wind farms or the wind platforms off of the Humboldt coast to where it's going to be needed. That's billions of dollars, if not tens of billions of dollars of needed for new transmission. We have to do it more affordably. So this is one piece of the solution. We can't stop investing because of affordability, but we can say, how do we make it more affordable?

I'm going to take a moment to do one thing, answer a question that sometimes people ask is, well, the general fund is kind of strapped to. Why do you want to take from that? And what I have to say is, look, it's the same families who are paying, whether they're paying through their income taxes or whether they're paying from their utility bills.

It's the same individuals, okay? But it's a question of equity when we charge things through the utility bills because of the fact that for the most part, poor people pay very close, not exactly the same, but very close to as much as rich people do for energy. Okay, they have high energy bills.

But when you look at the progressive income tax, folks who make more pay a higher percentage. And in fact, low-income people, often through Earned Income Tax Credit, pay negative income tax, okay. It is a more fair way to finance our climate goals than the monthly utility bill. So something that is within the purview of the Legislature to consider.

Thank you very much for that.

Thank you, Senator Stern.

Thank you, Mr. Chair. I wanted to build on the previous point made by Mr. Tony with regard to shareholder profits increasing while people are paying, that you can call it a windfall or you can call it a spike or an increase, but when people are shouldering that burden, my understanding is it's not just going to be on our gas bills, that the 20% being asked for from the gas company overall in the general rate case, as well as some of the shareholder profit spikes we've seen, reported as recently as this morning from Sempra.

That, in these periods of sort of increased price, I'm thinking back to just after Aliso Canyon blew out and the gas company in the subsequent season not only did not have Aliso in operation but also failed to maintain two key pipelines coming into the basin that we had at the time, I think $2 billion, that was, for lack of a better word, pancaked into the rates of electric ratepayers.

And that while the PUC has barred the gas company from rate basing some of the costs associated with the Aliso Canyon, those sort of broader price impacts on the commodity side are not treated as their shareholders' responsibility, but in fact, the gas rates responsibility, but also, in turn, the electric rate base.

So, Mr. Smith, can you sort of either reflect on that, but more importantly, zoom forward to the present and give us a sense of how much is this mismanagement from the gas company going to cost electric ratepayers, and when? Is that sort of tucked in and going to show up later this year, and we're going to get punished twice for this kind of corporate mismanagement.

No, great question. And it is different because the gas prices, the commodity prices pass directly along on the gas side, and it's all electric. You're right. It's baked in through our era accounts, which actually was wonderfully described in the committee analysis, and that will come into rates later. So it could be like in the June timeframe.

I will tell you, we reached out to the Public Utilities Commission the second we started seeing the high gas prices reflected in the procurement costs that we were going to have to bring on board. The gas prices have come down, and we didn't have a gas panelist here to talk about it today, but the gas prices have come down rather significantly.

So to be totally candid, we're not entirely sure there will be a significant electric side, at least for our customers, increase based upon this really high spike because they've dropped dramatically, gas prices have in the near term. So if you're thinking about us averaging that across a few months through our era accounts, there may not be a direct indication or implication there for the electric side. But I don't think that stops for an instant the kind of sticker shock people saw on their gas bills. Again, not our side.

But do you see structural concerns longer term in rising overall rates on the gas side, then being pushed over to the electric side, or sort of, or costs of say, stranded assets making their way not just into a gas bill, but onto you all as customers essentially, of the gas company?

We saw what the Chair did with these gas spikes and what the governor did as well, applauded both efforts. We're wondering what the heck's going on and why we ended up with such a dramatic spike above what anyone kind of saw. So I think in the near term, yes, super focused there. The longer term, more structural aside, I think there is a broader discussion about how are we going to, in a structured and well done way, minimize the gas infrastructure in our state and rely more and more on electricity.

And so if you're thinking about how that flow goes, I think we are very nervous that our customers don't bear the brunt of maybe dismantling a system that the state is trying to move itself off of. Because as we know, we need people to choose electricity, they need to choose electric vehicles. And if we're getting settled with the cost of decommissioning one side here, does that increase the cost of the commodity that we're trying to move people towards? I think that's the structural thing we're trying to keep our eyes on.

Thanks for that. Mr. Chaset, did you have a follow up? Sorry.

Just very quickly, I will say one of the reasons why moving towards renewables is so valuable is we're moving away from volatile price of electricity generated from natural gas, because it's a commodity that fluctuates significantly towards longer term fixed prices.

So when we sign a solar project or a wind or geothermal, we're signing 10, 15, 20 year fixed price contracts. So we're fixing what, an increasing percentage of our electricity supplies? I think that's actually a good thing for customers because we know what the costs are going to be.

Thank you. And my questions for the CCAs, it's often stated that they bring tremendous value. If that's the case, then why aren't we dealing with an opt in versus an opt out? Because if you were to pull the majority of your customers, 80% are totally unaware that they're part of a CCA. They still think they're being served by their incumbent utilities.

So if that were the case, right now, it's not community choice, it's community force. So I'm just curious, why should that be considered? If you're bringing a valued commodity, why shouldn't you compete for those customers? And my second question is dealing with rates. Since the PG does not control CCA rates and the governor is now discussing having the state have a broader role in procuring energy, would a CCA still be needed?

So to your first question, our local governments are the ones who make the decisions. So the City of Stockton just voted. The City Council said, we want to join a CCA. And so they're making that decision for the constituents that voted for them. And so when we think about sort of the efficiency of going door to door, it's already a service that folks don't spend a lot of time thinking about, electricity.

If you pull the average consumer, they spend three minutes a year, three minutes a month thinking about it, unless their bills are really high. So it's really those local governments. Now, from a choice perspective, all consumers have the ability to opt out.

They don't know that. They don't look at their bill. They don't know that insert was in their bill when that choice was provided to them.

Well, we certainly strive to create as much awareness as possible and communicate the fact that we deliver lower costs every single day for our customers. And we're also leveraging these sort of unique tools. To the second question about centralized procurement and sort of the state's actions, I think we just had a new mandate from the California Public Utilities Commission to procure another four gigawatts of new capacity.

The fact is, standing up a new state agency is not a tomorrow thing. These things take a lot of time, but we have to be procuring today. Amongst all of our CCAs, we've procured over 11 gigawatts of new capacity. Every single day our team are signing new contracts. So if we find ourselves in 1, 2, 3, 4 years, in a place where there is a state agency that can go and start doing this work, happy to partner with them for certain kinds of long lead time.

But I think we view that as potentially disruptive to the progress that's being made. As we think about the other option, which are investor owned utilities. Well, let's think about the tools that we have available to us. We have these clean energy revenue bonds that I highlighted that give us a structurally lower cost. There's also a credit factor. At East Bay. We're A-rated. That is not the case for our associated investor owned utilities.

So from a ratings perspective, there's also an advantage that we bring as public entities that don't have some of the liabilities that investor owned utilities have in the ownership of transmission and distribution. But that said, to the degree that there are specific resources that might uniquely benefit from state action, happy to have that conversation.

I think Mr. Tony, though, pointed to a real concrete opportunity here in the near term, which is state development and investment in transmission. We can't build these resources if we don't build the transmission. And having the state take a central role in doing that makes a ton of sense.

Great. I'm not going to belabor the case, but as a former elected official, many of my colleagues were clueless what a CCA did, and many of them still are clueless as to what the benefit of a CCA is. So I don't want to belabor that. But I thank you all for your presentation here today. It's been very helpful and much appreciated. And the dialogue will continue. Now we're going to move on to public comment.

Before we move to individuals here in room 1200 who wish to testify, I would ask that we limit our comments to one minute. And I would ask also that those individuals who are planning to testify over the phone lines, we queue them up right now. And we'll begin now with the witnesses. Can you form a line and state your name and your organization and make your presentations, please?

Good morning, Chair Bradford and Members of the Committee. Mike West here with the State Building and Construction Trades Council of California, the largest statewide coalition of construction workers in the United States with nearly half a million members, 70,000 of which are registered apprentices. Energy affordability is as important to the members of the state building trades as are the rising costs of living in general.

Affordable energy is essential not only in our homes, but also in our employers' businesses, and on the job sites. The state building trades is in opposition to the concept of regionalization. Regionalization will result in the loss of hundreds of thousands of construction jobs in California, which will be outsourced to other states where diversity in the construction trade is lacking and environmental laws are lax.

Ratepayers will lose significant control over the decision making process, ceding some of that control to other states. On the subject of offshore wind and transmission interconnection brought up by the Committee, the state building trade is in full support of multiple forms of renewable energy and transmission interconnection as a solution, working towards the ambitious climate goals of the governor and the state Legislature.

Outsourcing these projects to neighboring states or contractors who don't use graduates of state-approved apprenticeship programs is not an acceptable solution. We need to keep these renewable energy projects and the jobs created by these projects here in California using the skilled and trained workforce of the state building trades. Thank you for the opportunity to speak.

Thank you. Next witness.

Good morning. Hello. I feel like I'm in Las Vegas. I don't know what time it is. Okay. Thank you so much, Mr. Chairman. Valerie Turella of Lajos from PG&E Pacific Gas and Electric Company testifying today. And thank you so much for having this hearing with the focus on affordability. We're here to help our customers manage their energy use. And I don't want to repeat a lot of what has been said here today by my colleagues, by President Reynolds, on the gas price spikes.

We mentioned just so a few statements on gas, and I'm trying to go really fast because we have both gas and electric, but we talked about sources of funding. One of them is a federal program called LIHEAP. We highly encourage and work with community partners and encourage our customers to apply for LIHEAP funding. In January, our customers received a total of 8.6 million in energy bill assistance. That average bill credit was totaling nearly $1,000.

Today, we'll take the criticism and we'll take the compliments, and we'll always be working for ways to continuously improve what we do. Again on gas in the long term, I'm sorry that Senator Stern left. I hope the Committee can look at ways for targeted and strategic methods that we can look for opportunities to decommission gas assets, especially for customers that are least likely to electrify as we manage a little bit of a contraction of our gas assets and look to electrifying.

I just wanted to say on electricity, yes, a lot of the bill drivers, as mentioned today, one of them is investments in wildfire resilience, and they're all coming to light, kind of like right now as we move forward to these once in a generation investments. We've had a 90% overall reduction in wildfire risk at PG&E. So I just wanted to not go without saying that the investments are working. We are looking at our own operations. In 2022, had a $200 million savings.

We're going to need you to rap real quick.

Okay. We're looking both inward and having O&M savings, and we're also looking outward. We're looking at the federal funding. We've had DOE applications, and we strongly support looking at our customers' arrears and look forward to continuing the conversations with this Committee and the Legislature on other creative ways and financing for affordability. Thank you.

Thank you. Anyone else here in room 1200 wishing to testify? All right. Seeing none. Thank you. Now we'll move on to witnesses wanting to provide public comment via the teleconference service. Moderator will you please prompt individuals to provide public comment? And we'll begin. Moderator, just ask them to press one to zero. And once they do that, can you give us the number of callers that are queued up at the time waiting to testify?

Sure. Thank you, Mr. Chair. If you would like to make a public comment, you may do so by pressing one, then zero. An operator will provide you with your line number and you will be called on by your line number when it is your turn. Currently, we have 22 people in queue to give public comment.

All right, thank you, Moderator. Let's begin with our first caller and we'll make this as quick as possible. Thank you.

You're welcome. First we will hear from line 34. Please go ahead.

Hi, am I line 34?

Yes, we can hear you.

Excellent. I thought I'd been given the line 32. And I just want to mention that this topic of power, energy, and utilities is of particular interest to me because I was living in Sonoma County, in the City of Santa Rosa when the Tubbs fire destroyed thousands of homes in the October 17 devastation. As a result of Tubbs, me and my family of six, including my four children, were displaced and were forced to move to Sacramento county.

That is the backdrop against which I have decided to make my comments today. This hearing definitely pertained a great deal to the overall energy crisis here in California, including specific details about convicted felon power monopoly PG&E. And I just want to point out that it seems to be a revolving door on the CEO position on PG&E from Alice Reynolds, Marybel Batjer, and Patricia Pope. So after listening to you, lawmaker.

I'm sorry, caller, we're limiting everybody to one minute.

You're limiting it and you shouldn't limit it.

Well, that's what we are doing. We have one minute comments for our callers. Sorry, next caller.

Next we will hear from line 22.

Hi, this is Jennifer from Temecula. My concern is our natural gas bills are extremely high. We are rarely using our heat, and the bill is still three and a half times higher than before. Plus, us as consumers received an email from SoCal gas regarding the rate increases over the next four years, which has nothing to do with usage and pricing, but instead rate increases due to company investing. Therefore, regardless of our conservation, our bills will continue to rise.

And we're just kind of wondering what we're going to do about that when, here in Riverside County, we cannot add fireplaces or wood burners to our homes because of regulations, and then we're switching to electric when the grid isn't sufficient enough to handle the current demand. So I'm just kind of wondering where we stand as consumers.

Thank you. Next caller.

Next, we will hear from line 26.

Yes, can you hear me?

We can hear you.

Yes. Hi, Jennifer Tanner, Indivisible California Green Team. I'd like to thank the Legislature and the CPUC for rejecting the solar tax, and we're expecting you to ensure that the idea of a solar tax never comes back again. I'd like to join Mike West and the Building Trade supposing regionalization. Thank you, Mike West. But we are asking the CPUC to revisit NEM three because it will devastate rooftop solar. The CEC tells us we need rooftop solar to triple to meet our climate goals.

The NEM three will cause rooftop solar to be cut in half for no good reasons. We are in a climate emergency. We all know that. The CPUC needs to pause NEM three and address the serious problems with NEM three. Rooftop solar has proven itself year after year as the best, quickest, cheapest, cleanest solution to our climate goals, giving us backup energy and addressing the rising costs of climate energy.

With all the need for solar and batteries to solve our issues, this is the worst time to decide to slash its growth. Hundreds of thousands of people and leaders have told you this, and we have proven our facts, and it's against our disadvantaged communities, which we can improve. Please revisit this before the April implementation. Thank you very much for my time.

Thank you. Next caller.

Line 55.

And while the new policy does reflect the glut of power during the middle of the day, supporting that incentive to have battery storage with an incentive for storage would be a much more effective way of managing that price discrepancy rather than simply disincentivizing solar. This is going to slow down our progress that we've been making over the last few years to create distributed clean energy solutions and will create a slowdown that will take years to recover from.

So I would love it if the Commission considered policies that would promote storage in order to address the underlying demand shape issues that the net metering change is addressing rather than disincentivizing solar.

Thank you.

Storage so that the energy can be used when it is more efficient.

Thank you. Next caller.

Next, we'll hear from line 52.

Hello, this is Kent Bullard. I live in Ventura, California. I have a home that's been powered by solar since 1998, providing 100% of my electricity. I know that solar works.

We've been hearing a lot today about the status of our grid. One way we need to continue moving forward is to have distributed solar for both residential and solar. This allows us to provide power to our local communities and not impact the grid substantially. Net metering works. Taxing solar does not. Today I heard the first time about useless electrons being dumped onto the ground. This is not true. My extra electrons are being drawn by Edison when they need it. They are not useless.

They come from my battery and from my solar, providing community energy. Also, I heard that there are 1.5 million solar homes in California and yet there's a third of those homes have 90-day use. That's not true. Solar homes that are being constructed in California.

That is our 1 minute. I'm sorry, we're limiting to 1 minute, so thank you for your call. Next caller, please.

Line 57.

Hi, this is Mark Anisman. This is Mark Anisman. I live in Napa Valley, and thank you very much for rejecting the solar tax from previously. And I just think that the solar tax is one more reason to disincentivize going to green energy, solar energy, and battery storage. And I thank you very much for listening to us.

Thank you. Next caller.

Line 58.

Good morning. I am Dr. Deborah Garvey in San Jose. I'm speaking for myself and as a member of Indivisible San Jose, the Solar Rights Alliance, and other grassroots organizations. I also reiterate the previous callers thanking the Legislature and the CPUC for rejecting the solar tax last year. I'm asking our Legislature and the CPUC to ensure that such a tax is never implemented.

As an economist, I understand that any rooftop solar price increase, no matter how we call it a solar tax, NEM 3.0, or some user fee, is fully passed on to consumers. This raises the cost of solar energy relative to other energy, and raising solar's relative price will reduce quantity demanded. And in concrete terms, that means fewer consumers will newly adopt solar energy installations or choose to expand their existing rooftop solar than in the absence of such price distortions.

So I'm also asking that the NEM 3.0 be repealed. It's a drastic relative price increase for new rooftop solar installation, again because it will reduce such installation as other estimates are about by half. This will thwart our transition to a clean energy economy. We are in a climate emergency and need real solutions to address it. Thank you.

Thank you. Next caller.

Line 60.

My name is Nick Peterson. I'm from Albany, California. As a native Californian who is committed to effectively and quickly addressing climate change, I know that widely installed solar rooftop with battery storage is a foundational step in meeting California's clean energy goals. Monopolistic utility entities, focusing on short-term profits and manipulating the lack of equity in our current energy system, misled regulators and attempted to eliminate rooftop solar as a significant, viable, and competitive source of clean energy.

Lots of Californians like me fought hard to stave off the solar tax collection fee and sought by the large IOUS and the revision of existing solar contracts. I'm grateful to the CPUC and the Legislature for not implementing these measures. Please do not reconsider invoking them as they are grossly unfair and unnecessary, working only to shore up monopolistic profits and punish Californians who have dedicated their own resources to addressing climate change.

We need all resources on deck to fight climate change and end our addiction to fossil fuels. Rooftop solar is a proven, successful crowdsourcing approach and needs more support and encouragement, not less. Thank you very much.

Thank you. Next caller.

Line 65. Line 65, please go ahead. Line 51.

Is it Saunders?

Yes, we can hear you. We can hear you. Please go ahead.

Okay, you gave me 54, so I'd like my time restarted. I'm Sue Saunders from Indivisible Ross Valley. I also want to thank the Legislature and CPUC for rejecting a solar tax and providing funds for lower-income to afford rooftop solar. The grid is failing so much during extreme weather, and it will only intensify due to climate change. It wasn't built to withstand it. A rural healthcare clinic in Gualala saw their patients come in with pre-frostbite conditions due to lack of heat.

In the summer, it will be air conditioning that will be unavailable when the power goes out. This is life and death. Your job is to protect us, not the utilities, and we expect you to do your job. The claim that rooftop solar is raising utility prices is false. It is neglected maintenance, causing costly wildfires and a need now to make up for decades of negligence.

Furthermore, on behalf of the tens of thousands of people, including two Bay Area airports, who lost power during these winter storms, please revisit NEM 3.0 so they can protect themselves. Californians are subject to constant power outages. We need rooftop solar with batteries or electric vehicles to provide backup power to protect ourselves. Thank you.

Thank you. Next caller.

Line 63.

Hi, this is Kathy Carriage from Benicia, California. And I also want to thank the CPUC and the Legislature for rejecting the rooftop solar tax. We need rooftop solar now more than ever to fight the climate emergency that we're rapidly finding ourselves in. But also as a consumer who's had rooftop solar and has changed to a heat pump and an electric water heater, my bills this year have been so much lower than other people. So from a consumer standpoint, rooftop solar saves you money.

A rooftop tax in the future is going to make that more and more difficult. So please don't institute that in the future and recognize that rooftop solar can also protect us in the event of an emergency. If we are able to start using our electric cars and our storage for backup power. If there's too much energy from rooftop solar during the day, the way to address that is through additional storage, not through getting rid of rooftop solar. Thank you very much.

Thank you. Next caller.

Line 37.

Hello, this is Dave Reinerson from Huntington Beach. I want to echo the previous callers and thank you for taking the solar tax off the table. And I think it should never come back. It would have effectively doubled the ROI on my solar system. I encourage you to think about doing all policies in favor of encouraging people to do the right thing. And, for instance, rooftop solar is doing the right thing.

It was an investment on my part, but I was happy to do it because it not only made business sense, but it also was good for the environment. I wanted to make another comment. One of the Senators asked about using electric cars as storage and asked about that investment and one of the challenges with that is that most cars today, most electric cars today do not have a way to deliver power back from the battery to the home. That's called vehicle to load.

Those that do could actually function as the equivalent of storage batteries for a solar system. And so one thing you might consider doing is giving a higher rebate for cars that have vehicle-to-load capability versus those that don't. Thank you for your time.

Thank you. Next caller.

Line 43.

Hello. My name is Jack Eidt, and I'm from Los Angeles. I am a co-founder of SoCal 350 Climate Action, and I want to thank you all for rejecting the solar tax.

Like many have said, I think it's absolutely imperative that we make solar as affordable and easy for everyone to put on their homes or on their business. We have to ramp up clean energy so quickly that we're up against so many difficulties out in the world and so many misinformations about other ways of so-called clean energy. The real clean energy is distributed solar, rooftop solar, and much better than out in the desert. All the impacts from having far away wind projects.

This is right on our homes, and we need it now. We need it inexpensive and quickly. So thank you for letting me comment today.

Thank you. Our next caller.

Line 46.

Hi, my name is Joy Lesser, and I live in Long Beach. And I, too, would like to thank everybody involved for rejecting the solar tax and hope that it never rears its ugly head. I'd also like to pause NEM 3.0, as well as promote storage. It's incredibly important, especially with the resource, the free resource from the sun, that we have to not overcharge everybody for solar paneling. Thank you so much.

Thank you. Next caller.

Line 44.

Good afternoon, Senator Bradford and Members Rebecca Baskins with Kohn Soares and Conway, representing a broad array of agricultural food processing equipment and retail associations. Thank you very much for holding this hearing. Energy affordability is a critical issue for all Californians, including industrial users, while residential users are experiencing sticker shock. It's important to note commercial users, particularly in rural areas, for ag and for ag ratepayers, have been experiencing this for years, as noted by Mr. Harper's testimony.

And unfortunately, as many of you know, these are areas that are traditionally underserved in last service, if at all. As farms and processing facilities transition to renewable energy transmission and distribution inefficiencies, lack of load capacity, and grid reliability have continuously been a challenge, and affordability only adds to this burden. We encourage the Senate and this Committee to continue to work to ensure barriers are removed, including costs to improve connectivity and advancement in urban and rural areas. Thank you.

Thank you. Next caller.

Line 67.

Hello, my name is Sarah Lee and I'm from northeast Los Angeles. And I wanted to thank the Legislature and CPUC for rejecting the solar tax. And please ensure the solar tax never sees the light of day again. Thank you for killing AB 1139. I'm a huge supporter of labor unions, but the building and trade unions and oil gas companies like Sempera should not pressure you from doing the right thing. California is in the forefront of environmental protection, so please be part of the solution. Please.

Chris Holden and Wendy Carillos of the world where they defend the cost shift of these as reasons for having a solar tax. You guys know deep down not really why you do it, so please just stop from being pressured from those corporate monies. Thank you.

Thank you. Our next caller.

Line 39.

Hi, Chair Bradford, Senator Caballero, my Senator, other Senators and those present. My name is Emily Brandt and I live outside of Fresno City by 2 miles in unincorporated area. I am very grateful for the fact that you defeated the idea of the solar tax this year. I had just adopted solar and as soon as that discussion came up, I learned about it through Solar Rights Alliance. I was distraught, thinking, well, was I lied to that solar would be cheaper.

Are we on a trajectory toward just increasing solar rates in ways that mimic our gas and electricity? So to you, my great appreciation extends. Now, I would ask you to never never entertain this idea again, as many of us here live in an area where 79% of residents, as Senator Caballero knows, are living twice below the federal poverty limit. And those types of threats really do strike at the soul.

So it's critical that you be thinking as you've been talking today, which really raises my spirits about increasing the affordability of battery storage and of heat pump because we need these desperately. Thank you for this opportunity to speak.

Thank you. Next caller, please.

Line 41.

Hello, this is Rebecca Elliott from San Jose and I'm a member of Indivisible San Jose and California State Strong Green Team. Everyone has already said pretty much what I was going to say. I'm very appreciative of the Legislature's support in defeating or rejecting the solar tax. And like the previous caller said, I hope another idea like this never sees the light of day. I'm also asking that you please review the NEM 3.0 proposal that is supposed to go into effect in the middle of April.

It will have a negative impact on rooftop solar installations. As you know and I know we are in a climate emergency. California has some pretty strong climate goals on the table. NEM 3.0 will make it harder to reach those climate goals. I don't understand the thinking that went into putting a two-tier system on solar, but it's not going to work.

And I hope that you will take a look at it and give us some support in getting the CPUC to put it on hold for now. Revisit it, and let's see how we can work together to make California reach its climate goal. Thank you.

Thank you. Next caller.

Line 49.

Hello, I'm Margie Ferguson from Davis and a member of Indivisible Yolo. I'm very grateful for this opportunity to speak very briefly because much of what I want to say has been said and I value your time. I'm calling today both to thank you for having rejected the solar tax and to ask that it never come up again for consideration.

I also want to ask that you revisit and pause NEM 3.0 because, as others have said, it will harm rooftop solar and our entire project for getting the climate into a state where our children can benefit from living on the earth. I also think that NEM 3.0 and the solar tax would harm poor people and people of color disproportionately, despite the arguments to the contrary that were made. And it would harm all of California as we try to make the planet livable.

Thank you very much for your time.

Thank you. Next caller.

Line 59.

Adrian Coulter with Crucible Ventura. Once again, thanks for rejecting the solar task and request that it never reoccurs. We'd also like them to revisit the NEM 3.0. We want to triple our solar capacity, but real-life studies have shown where payback periods to consumers increase, solar system installation declines. There's facts on this. We also believe that the upcoming electric vehicle deadline with a discriminatory discrimination two-tier system of rates will cause numerous lawsuits.

PG&E made almost $17 billion in gross profits in 2022 with nine shareholder dividends. High bills to consumers are why we are here. It's way past time to take over all the poles and wires to treat them as a public good, as we do with roads, highways, and bridges. Thank you.

Thank you. Next caller.

Line 56. Line 56, please go ahead.

Hello, can you hear me?

Yes, we can hear you.

Thank you. This is Pam Rood in San Diego. I'm with the Solar Rights Alliance. I want to thank the California Legislature and the CPUC for rejecting the solar tax on solar users. I remain appalled that all five commissioners voted to drastically cut the net metering rate, a huge disincentive to those considering solar panels for their homes and businesses.

And I believe it is the intent of California's three major utility companies to demolish the solar industry and the CPUC, as their apparent lap dog, has actively supported this effort. I am demanding that you not add insult to injury by supporting the solar tax. At any time, should you choose to do so, you will be responsible for putting the final nail in the coffin of the solar industry expansion. Please ensure the solar tax is never considered again. Thank you.

Thank you. Next caller.

Line 64.

Hello, this is Cynthia Shallit and I represent Sacramento Indivisible and Sacramento and also Indivisible Green Team. And I want to join in the others that are saying we appreciate you eliminating the solar tax, and we also hope that it never sees the lightsave again. But I do want you to really think carefully about the NEM rate that I have my solar panels, and it's going to take 17 years for me to get it paid back from my savings and the solar Bill.

I'm not getting rich off of this, and that's like at 0% interest rate. So I don't know how those costs get considered. I can see that in other states where NEM has been canceled, like here in Arizona, I've been traveling around, that the rooftop solar industry has been really cut in half and they're really having a hard time getting anyone to put rooftop solar on. So we don't want to have that in California. We know that rooftop solar will help us reach our climate goals.

It's the fastest and cheapest way to reduce carbon emissions. It is much better for biodiversity and protecting our environment than having huge solar farms.

Thank you for your testimony. Next caller.

Line 61.

Hello? Hello?

Hello. We can hear you.

This is Art Panette, City of Lakewood. Without hashing over and over again the damage to interest in rooftop solar that taxing it will do. I must reiterate our position on it. Speaking as an average middle-class homeowner with an average income, I want to address the desire to purchase solar systems and the affordability to the masses of the people that are interested. But the bottom line, cost is the biggest factor.

Bad enough the 75% cut to future credits has done to scare off future purchases in order to meet our clean energy goals, the middle class, whom are already the most taxed and highest generator of taxes, will need to see savings, not losses. Face it, none of us want to invest in a loser. For us, we really had to crunch the numbers to come to a decision. Incentives, government rebates payback by credit of excess energy to the grid. It all factored into our decision.

If there was an extra tax or any other addition to the bottom line, it would have surely stopped us. Please don't consider now or in the future taxing our rooftop solar. You will certainly put an end to any appreciable uptick in solar purchases and greatly reduce jobs for installers.

Thank you. Thank you for your testimony. Next caller.

Line 47.

Hello, this is Greg Morris of the Green Power Institute, and I wanted to address a couple issues.

First, Mark Tony's number five to the CPUC, in favor of working on the really extreme backlog of intervener compensation requests. We're an intervener, and it makes it really difficult for us to manage our workload. Second, with all the new procurement orders that have come out of the PUC in the past few years, there's a category of generators who have been sort of left out, and that is the existing RPS generators who have expiring contracts.

It's really important that those contracts be renewed for those generators that wish to continue generating. So thank you very much.

Thank you. Next caller.

And line 70. Line 70? Line 70. Yes, it is.

I just want to mention as sort of a logistical comment that if you need to stay until midnight to hear from the people, this is a really important topic. This topic of skyrocketing utility bills. And government is supposed to be about people. It's not supposed to be about lawmakers censoring people. It's not supposed to be about limiting public comment. Because what you people doing today in this hearing was shameful. It was absolutely shameful. You're talking about Bill smoothing programs.

You're talking about life coaching advice by telling us to turn off our lights when we're away from our home, from our homes during the day.

We've heard from this caller already. So I'm just going to be shameful. We're out of time, so we're going to our next caller.

And Mr. Chair. There are no further comments at this time.

Thank you. And for all of those who were able to call in today and participate with your testimony, I appreciate it. If you were not able to testify or didn't feel you had enough time during this teleconference proceeding. Please submit your comments or suggestions in writing.

The Senate Committee on Energy, Utilities and Communications welcomes your comments, and you can also visit our website. Your comments and suggestions are important to us, and we want to include your testimony in our official hearing records. Thank you, and we appreciate your participation. Today, we've heard a lot of valuable testimony to help guide our consideration on issues affecting energy utility bills, which is critically important. We all are committed to ensuring we take the necessary steps to address affordable electricity rates here in California.

Again, I want to thank everyone for your participation. We've concluded today's oversight hearing on utility cost, and the Senate Committee on Energy, Utilities and Communications stands adjourned. Thank you to the staff and everyone who sat through this today. Appreciate it.