Assembly Standing Committee on Utilities and Energy

Good afternoon. I am calling to order this hearing of the Assembly Committee on Utilities and Energy. We're here for an oversight hearing to discuss affordability in the electric sector and specifically to explore solutions and opportunities to bend down the curve on escalating rates. Before we begin and jump into the hearing, I've got a few housekeeping items to go over.

First, I will maintain decorum during the hearing, as is customary in order to hear from the public within the limits of our time, we will not permit conduct that disrupts or otherwise impedes legislative proceedings. Any individual who is disruptive may be removed from the room. Public comment today is welcome in person. Otherwise, it can be submitted online via the committee's website.

For today's agenda, all panelists will be invited to the dais at the same time, and all have been asked to present opening remarks prior to turning to member questions. As I've shared with our committee members, both CPUC President Reynolds and State Auditor Parks have commitments this afternoon and will need to step out at 3:00 p.m. So I will ask my colleagues to withhold questions until the end of the presentations so that we can ensure we've got time to hear from all panelists before we dig in.

Also want to note that this hearing serves as the annual legislative update of the Public Utilities Commission and Public Advocates office, as required by law. While the breadth of both organizations' work is large, the focus of today's hearing is on electric bill affordability. Subsequent hearings of this committee will focus on other aspects of their portfolios, so I invite my colleagues to save questions on those topics for those later discussions. In the meantime, both the CPUC and PAO annual reports are available online.

So with that, let's turn to today's topic, which is energy affordability. And as anyone in the room who has opened their electricity bill recently can testify, rates are skyrocketing in California. California rates, as noted in today's background paper, are the highest in the nation. The harsh reality is that millions of Californian families are at the breaking point right now.

High energy prices are also a major challenge for California businesses, particularly our small businesses who are struggling to keep their doors open and quite literally keep their lights on. Our constituents want to know what's going on, and more importantly, they want to know what we, as their elected representatives, are doing to address this issue and to contain costs. So that's the topic for today's hearing. Really looking forward to our conversations.

Our first panel is going to outline how we got here, what's contributing to these astronomical rates and precipitous growth. And then the second panel is going to dig into opportunities and looking forward, particularly to that discussion of what we can do to bend the cost curve. So with that, let's go ahead and welcome our panelists onto the dais. Let's see. I'll also note. Sorry. Before we begin, we have invited some guests to join us today. Assemblymember Hart is going to be joining us.

I think he's on a flight that's been delayed. But as the Chair of our JLAC committee, he'll be joining us today, as will Assemblymember Boerner, when her flight arrives. So with that, sorry, panelists, if you can, please come to the dais, we'll go ahead and pull up the presentations. Let's see. We are welcoming President Alice Reynolds of the California Public Utilities Commission.

We are welcoming Grant Parks, who is our California State Auditor, Linda Serizawa the deputy director of energy from the California Public Advocates Office. And then as we jump into our second panel discussion, I'll introduce the other panelists. I know it's a little bit of a tight squeeze, but we're welcoming all of our panelists together so that we can hopefully engage in some back-and-forth discussion as the hearing proceeds. So, as noticed, we'll ask that all panelists provide their opening statements, and then we'll turn to the committee for questions. Thank you. And President Reynolds will go ahead and begin with you. Thanks for being here.

Can you hear me? Good afternoon, Chair Petrie-Norris, Vice Chair, Patterson, and committee members, I'm Alice Reynolds, President of the California Public Utilities Commission, and I appreciate the opportunity to appear before you today. As you know, the CPUC regulates utilities that deliver essential services throughout California, including energy, water, communications, transportation, and rail. Our energy sector jurisdiction includes investor-owned electricity and natural gas utilities. And the electric utilities that we regulate cover 75% of the electrical load in California.

I want to start by recognizing the importance of the subject of this hearing. Affordability is a main focus of what we do at the commission. Our staff of analysts, technical experts, administrative law judges, lawyers, and more are focused on decision-making that minimizes costs. But the context for this work that we're doing to oversee utilities recognizes that we're supporting work that is fundamental to what we are doing in California. The utility system is generally egalitarian.

Utilities provide electricity to all Californians in urban areas and remote rural areas, hot climates, mountainous areas, and cool coastal cities. But we also focus on equity, and where we can, the commission is more and more targeting subsidies, which are paid through everyone's electricity bills to those who need it most. We ask people who can to do a little more for their neighbors who need it most. And we push the utilities to improve reliability.

This work has become even harder in California as it is on the front line facing the impacts of climate change. We push utilities to improve safety. And lately, the greatest focus has been a concerted effort to do everything the utilities can to prevent catastrophic wildfires. So at the core of this discussion today is recognition that our utilities need to provide all customers in every part of their territories with safe and reliable services, at least cost and in an equitable manner. But we're also doing something else.

In California, we recognize the climate emergency. We recognize that the impacts of climate bring ever increasing costs. As we work to adapt, we recognize the health impacts to communities that come with fossil fuels. In the energy sector, at the Commission, this means electricity generation. How do we preserve reliability of supply, meaning that we have sufficient electricity on hand so that people and businesses are served where they need it and when they need it, while reducing the need to keep fossil fuel power plants on hand.

All of the retail sellers of electricity are working on this. So this is not just the three large investor-owned IOUs, this is also the community choice aggregators and the direct access providers. We have 43 of these retail sellers. We also recognize that investments in infrastructure must be made to make sure the system is resilient. And utilities, more and more, are part of the response to emergency events. Men and women technicians are on the front line during storms and heat waves and more.

And this also means that the distribution and transmission system needs to be ready and needs to facilitate transportation, electrification, and building electrification. Decarbonization of the transportation and building sector is critical to meet the state's climate goals, and the utilities play a part in that. So our electricity system needs to be updated to meet the new needs of the way we expect to use electricity now and in the future and to withstand the worsening impacts of climate change.

So this means that we're really not looking for bargain basement utility services, but we are looking for cost-effectiveness. The benefit has to match the costs. And this is California, and we attract investment in new technologies and we create programs that really meet the needs of the future. And as you know, this all comes at a cost. Any investment in clean energy technology and any grid support needed for these technologies is funded through electricity bills. And that's the reason that we're here today.

So as a final framing point, I also note that we're seeing these costs increase at a time when the cost of living is increasing overall, which makes it even more imperative that we continue to work to make electricity services generation and the infrastructure to support it, make sure that they are provided as cost effectively as possible. So I do have one slide, just one. I don't know if that can be put up. If you have copies, there it is.

Okay, so this slide represents the categories of costs that make up electricity bills and the increases over time. You can see there's an increase in distribution costs. This is the red section at the bottom. And I'll note that the single largest source of distribution cost growth has been a sharp increase in spending on wildfire mitigation, mostly vegetation management, inspections, maintenance, and insurance for wildfire mitigation related to wildfires.

These costs are collected by the utilities both through their general rate cases, but also through processes mandated by SB 901 and AB 1054, which required the PUC to allow utilities to spend to seek additional rate increases through memorandum accounts to collect costs of wildfire mitigation included in wildfire mitigation plans. These expenditures were made over several years, but they're hitting bills now, especially in PG&E territory. Distribution costs, for example, have grown 45% from 2016 to 2022.

And in addition to the welfare mitigation costs that I mentioned, this also includes maintaining poles and transformers, sending out repair crews after a storm, everything related to the distribution system. The blue section is generation costs. Generation costs go up and down because of trends in the market, and these are all passed-through costs not financed by utilities. So no return on capital, but also collected right away. They hit bills right away.

And one thing to note is that recently we've seen some macroeconomic forces affecting generation costs. We're seeing energy contracts being renegotiated by generation developers because of high inflation, affecting labor and material costs and supply chain constraints. Transmission costs are next in the green section. They've gone up slightly in recent years. This is primarily due to costs of self-approved transmission projects. These are projects that are local and regional that the utilities undertake.

They don't expand the capacity of the grid, but they're used to repair and replace things like old substation equipment. Public purpose programs is next in the purple section. This is another cost category that's growing. Ratepayers subsidize 2.8 billion to support critical low-income discount programs such as CARE and FERA, and that's reflected in this cost category. Public purpose programs also include energy efficiency program costs, which are also increasing.

I wanted to emphasize that as part of the PUC's work and I'll talk briefly about a couple of the actions that we undertake. We do work to be transparent. All of our decisions are done through proceedings. The books of the IOUs are open, and we make decisions in a public process. We use adjudicatory processes with strict procedures, including requirements for veracity and evidentiary standards. And using this process, one way we scrutinize forecasted costs is through general rate case applications.

We have general rate cases for each utility on four-year cycles, and in these applications the utilities forecast costs, and then we ultimately approve what is often a reduced portion of the forecasted costs. We recently approved PG&E's general rate case at the end of last year, and the new forecasted costs that were incorporated into rates are beginning to show up on customer bills at the beginning of this year.

And the work proposed by PG&E does reflect an increase over prior years, and the costs are higher. But what we approved was also approximately $2 billion less than the original request from PG&E. In addition to the GRCs, I mentioned earlier that the utilities can record costs in various memorandum accounts, so that's what happens outside of the GRC process.

These are costs that are more difficult to forecast or unforeseeable, such as costs associated with responding to catastrophic events and, as I mentioned, wildfire mitigation costs. In addition to overall system costs, there are also a variety of additional mandated programs which are used to achieve specific policy goals through the use of ratepayer subsidies. I wanted to note a few, but also point out that these are beneficial programs.

They serve a purpose, and these are good things that you get from your electricity bills, but they're also above and beyond the basic electricity services. Some examples, in 2020, AB 841, which partially in response to the COVID pandemic, IOUs were directed to use ratepayer funds to subsidize ventilation and plumbing upgrades in schools. This program incurred a total ratepayer subsidy of $1.0 billion over three years.

The bill also included a shift of some of the costs of energization of charging infrastructure from the charging station companies to ratepayers which are socialized over bills. Again, there's a larger policy goal here, and electric vehicle chargers in IOU territory have been increasing rapidly. IOUs were also directed to implement a charge to subsidize procurement of biomass resources, and this had the purpose of focusing on forest biomass, eliminating high-hazard zone fuel as designated by Cal Fire. So again, a strong public purpose.

The latest extension of the program is expected to require a total ratepayer subsidy of 780,000,000. Another example is the Self Generation Incentive program, which started in 2001, so has had annual expenditures of ratepayer funding recently. I know the Legislature shifted some of these costs from the ratepayers to a budget item of 630,000,000 over a period of years to fund solar and storage projects for low-income and tribal customers. And again, all of these programs, they're examples. They're used to achieve policy goals.

Each one of them has minimal impact on bills, but cumulatively they have an impact and the programs add up. Just a couple of notes on ways that things that we're looking at now that put downward pressure on rates, and I do have to be careful about talking about our open proceedings. I'll touch on them briefly, but I don't want to talk about facts that are at issue in proceedings that are open before the commission. I mentioned electrification.

Electrification of buildings and transportation will help in the long run. As we start adding spreading costs among a greater amount of megawatt hours costs, the rates will go down, but we're in a period now where we haven't seen the downward trajectory on rates. So that's on transportation, electrification, transportation electrification, building electrification. We also look at cost-effective ways to generate clean energy.

We have a program that does long term planning and includes requirements for each of our retail sellers, all of the load serving entities to do lease cost, best fit selections for generation. And that's through our integrated resource plan program. Last year we eliminated subsidies for the extension of gas lines. This decision is expected to save ratepayers about 480,000,000 annually in the near term.

We modernized our tariff for self-generated solar, and that will help to control costs on electricity bills going forward, we're looking at implementing a reasonable flat rate component to bills, again an open proceeding. And that flat rate is being developed at the same time that we're exploring ways to develop dynamic variable rates to encourage customers to use energy at times that complement the grid, complement the large amount of variable renewable resources on the grid.

I also wanted to note just two programs that also provide some relief to ratepayers. One is the Legislature's action in improving the California Arrearage Management Program, or CAP, which provided bill relief to customers in arrearages due to the COVID-19 pandemic. The IOUs distributed 1.5 billion in state funding to customers with arrearages between 2021 and 2022. I will conclude there.

Thank you for allowing me the time to do an opening statement, and I'll just say that at the PUC we continue to focus on cost-effective programs where we can to enhance equity and reduce costs, and we will continue to improve price signals to incentivize demand response, encourage energy usage when the grid is operating, at least stress and with the highest penetration of clean energy. We'll also continue to plan for the transformation and hardening of the distribution and transmission system to enhance resilience and prepare for higher load and higher adoption of electric vehicles and electric appliances. I'm really grateful to have had the opportunity to speak with you today. Thank you very much. I look forward to your questions.

Thank you, President Reynolds, and I'm sure folks have a number of questions for you, but I think we'll hear opening comments from all of our panelists before we jump into those. So with that, let's go ahead and turn to Linda Serizawa, deputy director of energy from the California Public Advocates Office. Thank you for being here.

Thank you. Good afternoon, Chair Petrie-Norris, Vice Chair Patterson, and members of the committee. And thank you for the opportunity to present today on the very important topic of electricity rates and affordability. I am Linda Serizawa and the deputy director of energy and just recently designated as the interim director over the Public Advocates Office. I'm here in place of Matt Baker, who was our director up until yesterday when he was sworn in to be a CPUC commissioner.

So before I talk about the topic at hand today, I just wanted to give you a little bit of information about who we are and what we do. The Public Advocates Office has a statutory mandate or obligation to represent ratepayers with affordability as our North Star. We do this through scrutinizing every utility proposal that could raise costs to customers.

Today in this presentation, I will focus on how we got to where we are with high electricity rates and what could be done about them to ensure that electricity is provided reliably, safely and affordably, and consistent with the state's climate goals. Moving to slide three. Excuse me. So, rates and bills.

My apologies for interrupting. Just so committee members know, these slides are also available in your background materials if that's easier for folks to see. Thank you.

Rates and bills have been increasing unsustainably, especially since 2020, when I appeared before this very committee to raise concerns about the scope and scale of electricity rate increases. Today, the number of customers who are in arrears is over one in five. This means that over one in five customers are late in paying their energy bills. Moving to the next slide. In addition to threatening affordability, these rate increases are inequitable and also challenge our electrification goals.

I'd also like to note with respect to this slide the line for SDG&E rates, San Diego Gas and Electric rates, you'll see that there's a downward tick at the end of 2023. We expect that to be very short-lived when the commission will likely issue a final decision in the SDG&E general rate case this year, at which point we'll see an upward tick. Moving on to slide five.

So President Reynolds has spoken to the information on this slide, and I won't go into it in great detail. It looks a little different, but it's basically the same information. What I do want to emphasize is that the major cost drivers that we're seeing today are related to wildfire mitigation costs, as well as the utility work to recover service after climate disasters, floods, mudslides, wildfires, et cetera. And we also are seeing cost drivers, a major cost driver, as transmission and distribution, maintenance, expansion, and upgrades.

So this ranges from replacing old poles to expanding the distribution system to accommodate more electric vehicles. These costs have also been exacerbated with higher interest rates, and unfortunately, unless there's intervention, these cost drivers will continue. So moving to slide six. I touched on this a little bit. Every year, based on our thorough review of dozens of utility requests, we propose more affordable alternatives for the CPUC to consider. This particular slide highlights the PG&E general rate case, which the PUC decided last year.

PG&E's request was the largest we'd ever seen in terms of a proposed budget. We recommended over a $3 billion downward adjustment based on our analysis and recommendations of more affordable alternatives. And as an example, we placed more emphasis on covered conductor versus undergrounding, which tends to be more expensive. Moving to slide seven.

I do want to mention, though, that the utilities are able to request cost recovery outside of the general rate case process for costs incurred specifically for wildfire mitigation and restoring service after catastrophic events, these kinds of requests are becoming much more frequent and significant in their amounts. I provide this information to emphasize that requests made outside of the utility's primary general rate case process makes it very difficult to anticipate the pace and scale of rate increases.

Put another way, proposals to raise rates outside of the general rate case proceeding make it difficult to require the utilities to stick to their authorized budgets and maintain rate and bill stability. Moving to slide eight. Also, the price most ratepayers pay is increasing even faster than utilities are spending. This is for two reasons. First, certain subsidies concentrate costs on fewer ratepayers and drive up volumetric rates for example, rooftop solar programs continue to shift costs to those who do not have solar.

In 2024, we estimate this cost shift to be $6.5 billion. The second reason is ratepayers are also paying for programs that are not cost-effective. In fact, over $1.0 billion statewide, it's spent annually for programs that do not cost-effectively achieve the state's energy goals. Moving to slide nine. So what can we do? Our objectives in the Public Advocates Office is to try to bend the cost curve down so rate increases are lower than the rate of inflation.

This will take a combination of immediate rate relief measures and long-term reforms. We look at solutions through three lens first, hold utilities accountable to their authorized budgets. This means returning to basic budgeting and cost control measures and also includes not authorizing new balancing accounts for basic service, keeping in mind that balancing accounts provide the utility guaranteed cost recovery from ratepayers. The second lens is to make the clean energy transition more affordable for all customers.

In the short term, we should take out all the fat in the utility bills. This means eliminating cost-ineffective programs. In the longer term, we need to design electrification in a way that provides downward pressure on rates. And third, we need to adapt to increasing wildfire mitigation and disaster recovery costs. Right now, these specific costs are being borne on ratepayers immediately. We need to figure out a way to spread these costs over a longer period of time.

In conclusion, I want to acknowledge that some very difficult decisions lie ahead in order to prioritize affordability and achieve the state's climate goals. We, the Public Advocates Office, are here to be a resource to you and to support you as you consider these challenges and options to address them. Thank you.

And thank you. And I really appreciate the way that you framed these opportunities, and I know we want to dig into some of these in more detail, and when we do, I think President Reynolds will be really interested in your perspective on these opportunities. But before we do that, we will go ahead and turn to our next speaker, Grant Parks, our California State Auditor. Thank you for being here.

Good afternoon, Chairman Petrie-Norris, Chairman Hart, members of the committee. Grant Parks, State Auditor. The committee asked me to provide an overview of an audit we issued last August on electricity rates, and it stemmed from a request from Member Boerner, who had requested the audit after seeing utility rates quickly rise in our district in early 2022.

As the first slide shows in my presentation, electricity rates have increased by more than 50% during the last seven years, and the audit request asked that we review the general rate case and other proceedings for SDG&E, and other similar investor-owned utilities such as PG&E and SCE. To understand the cost drivers behind some of those higher rates, our audit looked at other areas, but for the purposes of today's presentation, I was asked to focus primarily on cost drivers.

So with respect to cost drivers, as has been mentioned, CPUC allows utilities to charge electrical rates through various mechanisms, and there's no single go-to document that explains in detail why electricity rates are increasing. The rate-setting process begins with the general rate case every four years, where utility rates are based on forecasted costs and expected expenses, along with an authorized rate of return.

And there are other mechanisms, as mentioned, such as cost recovery applications and other mechanisms that further increase rates and also raise rates pursuant to prior CPUC orders. Regardless, the electricity rate setting process begins with the GRC process, and that's where our audit began. Reviewing the most recent and the previous general rate cases for the three utilities that we looked at, and we found that CPUC has consistently been approving higher operating expenses for all three utilities.

For example, SCE's approved operating cost increased by 37% from 2018 to 2021, PG&E's approved operating at costs increased by 15%, and SDG&E's increases were a little more modest at 5%. And when we look at those increases in operating expenses, they're spread over various categories, and we were trying to figure out what were some of those categories where we saw the most dramatic increases. Among those included administrative costs for functions like accounting, finance, legal services.

For example, SCE's approved administrative costs went up 77%, an increase of 468,000,000 from 608,000,000 in 2018 to over $1.0 billion in 2021. We also see large increases in distribution costs, as has been previously mentioned. These include the costs for building and maintaining substations, poles, circuits, and above and below-ground systems. PG&E's approved distribution costs increased by 49% between the two rate cases we reviewed, and the largest increase that we saw for PNG pertained to its wildfire mitigation efforts, such as through its tree trimming operations.

And then also as utilities replace aging infrastructure, their plant property, and equipment, they spread these new costs over their useful lives, and they pass those costs on to consumers. So, not surprisingly, we saw CPUC approve higher depreciation costs for each of the three utilities that we looked at, where those costs increased by around 13% to 21% between the various rate cases that we reviewed. So we move on to my next slide.

But the General rate case and the operating costs that I've just described aren't giving the full picture of why rate increases are happening. There was a significant increase in electricity rates between 2022 and 2023, and we focused on that to understand some of the cost drivers for why. And it turned out, based on our analysis, that planned increases from the general rate case only appeared to explain 10 to 30% of that increase.

Some of the other key cost drivers not talked about already in my presentation include the recovery of higher-than-expected costs for fuel and purchased power. A significant portion of the electricity produced in the state uses natural gas, and utilities also procure electricity for delivery to consumers. We noted that SDG&E, for example, needed an additional 107,000,000 for higher-than-expected fuel and energy costs in 2022.

When we looked at PG&E and SC&E, both of them needed hundreds of millions of dollars in extra revenue to cover unanticipated costs in 2022. And we saw the CPUC authorizing, I believe, more than $1.0 billion each for unanticipated or expected higher than expected costs in 2023. Beyond higher than expected fuel and purchase power costs, we also saw increased costs for transmission. We see increased costs for also as well energy efficiency programs.

Beyond the next slide, beyond the information that I just shared and has already been mentioned, wildfire mitigation costs continue to be a significant cost factor for the three utilities we looked at. They reported that wildfire mitigation efforts make up between seven and a half to 18 and a half percent of their total revenue requirement in 2021, and that trend appears to be increasing.

And I'll end my comments in the interest of time where when we look at potential solutions and accountability for raising electricity rates, we think there's an opportunity for CPUC and Cal Advocates to play a closer role in focusing on the rates of return that utilities are earning. Investor-owned utilities are entitled to earn a rate of return that is reasonable and sufficient to attract capital, and an actual rate of return may be higher or lower based on how well a utility does at managing its costs.

But given that a lot of these costs are forecasted costs, in our view, it creates a potential incentive for utilities to overstate what their forecasted costs are. And when actual costs come in under that amount later, they can claim it as cost efficiencies and pass it off as higher rates of return for their investors. So we think there's an opportunity for Cal Advocates and the CPUC to make sure that we're following a standard methodology on how we're monitoring the rates of return earned by utilities.

Table four I think my last slide shows that, for example, San Diego Gas and Electric, I think for 14 out of 17 years beat the authorized rate of return that the CPUC authorized, which was incredibly different from the experience of PG&E and SCE. And so again, I'm not saying that utilities aren't entitled to earn a reasonable rate of return, but when we have outcomes like that, I think it raises some questions about what are we doing when we're setting the revenue bar.

And is there opportunities to go back at the subsequent GRC process to make sure both Cal Advocates and CPUC can identify these efficiencies and make sure they're not continuing to be passed off as more profit in subsequent years? So with that, those are my comments.

Thank you. Thanks for joining us today. We appreciate that. All right, we'll go ahead and now turn to Michael Wara, who is the director of the Climate and Energy Policy Program and the senior director for policy of the Sustainability Accelerator from Stanford University. Thanks for being here.

Thank you very much for having me. Oh, I should talk to the mic. Thank you very much for having me, Chairman Petrie-Norris, Chairman Hart, and members of the committee. I'm going to spend most of my time talking about what I see as potential solutions on this issue and a little bit less time talking about the cost drivers. I would just say I endorse essentially everything that's been said this morning, and I see the key cost drivers as wildfire.

The need to invest in the system to achieve our climate goals and the cost shift due to NEM 1 and NEM 2, especially the surge of rooftop solar customers that got in under the wire on NEM 2 as the transition to the new rate structure was occurring. I would just add, I think it's really important to recognize the human impacts of this affordability crisis that it is now, it is not something in the future.

And that at least the best evidence for how higher electricity rates affect low-income consumption actually comes from Arizona, where studies have been done to look at low and moderate-income usage of air conditioning during very hot events. And of course, we have hot places in California too.

And the evidence strongly suggests that low-income Arizona residents do not use their air conditioning because they cannot afford to pay their electricity bills in ways that are dangerous to public health and that when rates go up, those low-income people are affected most. So we really need to be thinking about this as a crisis that is now and where helping people to afford that minimum level of electricity is especially important. So options, how could we address this situation?

How could we take constructive, incremental steps to make the situation better? At the highest level, I think it is very important to think about getting non-essential services as good as they are, out of rates and into the general fund or the GGRF. I realize this year in particular that is a very difficult thing to suggest to all of you. You face a very challenging budget situation, but the practices of the past of kind of putting things into rates.

I've heard someone refer to electricity rates as taxation without representation. With all due respect to the commission, it is a different politics than the politics of revenue and spending in this building. But we need to think about how to move nonessential things, services, investments out of rates. We also need to think very hard about how to spend cost-effectively to provide the energy services we need maintain.

And I guess lastly, I'd say I think there is real value and we've lived it over the last several years in ensuring that whatever we do, we maintain healthy investor-owned utilities so that they can finance the needed infrastructure we have to build in this state cost-effectively. No one wins when California IOUs are not investment grade. So what might we do? I'm just going to go through five ideas.

The first one is to do more and better wildfire spending to reduce the consequences of ignitions rather than trying to prevent all utility ignitions. The utilities in California are essentially the insurers or the reinsurers of all utility ignitions because of inverse condemnation. That means that they are willing to spend whatever it takes to reduce ignitions to zero. That is not cost-effective for the state.

We need to be spending to increase landscape resilience to wildfires so that when wildfires occur, it is less likely that they will turn into catastrophic conflagrations that destroy communities and not incidentally for many of us, destroy our ability to get homeowners insurance coverage. So I would commend a bill that Senator Dodd introduced, SB 1014, that seeks to create a strategic spending framework that is very similar to the wildfire mitigation planning that utilities do, but for the entire state, for all hands and all lands.

And we really need that. We need to increase the amount of money. We spend approximately $10 billion on utility wildfire mitigation. We spend less than $1 billion on all other kinds of wildfire mitigation in California. That is highly cost ineffective and it needs to change. Second idea, and I should just say that's not something that's going to fix rates right away. That is a long-term fix, but it could create important long-term downward pressure on rates.

Second suggestion, we need to find ways to reduce the cross subsidy that exists for rooftop solar customers. And I would argue that the approaches taken to date create a lot of political pushback. I don't think that's a controversial thing to say, and I would suggest that there are other alternatives that may create less pushback but could reduce that cross-subsidy substantially. Specifically, too many NEM 2 and NEM 1 customers do not have stationary storage associated with their rooftop solar installations.

If we were to create a program that provided batteries to rooftop solar customers, some sort of subsidy, not paying for the whole thing, but paying for an increment and trying to push batteries onto those systems, and in exchange for that subsidy, creating a significant degree of controllability for the grid operator or for the load serving entities during energy times of shortage on the grid, those hot August afternoons, I think there could be a cost-effective program both for society and for the customers, and it would not create the political pushback associated with an attempt to renegotiate the deal.

And I think there's a sense that a deal is a deal for the people that have NEM 2. And the repeated attempts to change that deal in various ways create the pushback. We need to come with something more that is cost-effective for the state. Societally cost-effective doesn't give those customers too much money, but that can change how the systems are used to reduce the netting and to increase the grid services that those systems have at least the potential to provide, but do not today.

I would argue that any subsidy like that should be paid for out of GGRF, not from rates. Right? Take it from the climate programs, not from electricity ratepayers. Speaking of GGRF, this is also. I'm going to be the person that says, I mean, maybe these are not polite things to say in this room, but we do not spend GGRF in a way that is strategically aligned with the broad success that we are having in our climate policies in California.

We need to be spending GGRF to do two things. First thing, zero-carbon electricity system. Second thing, electrify the uses that we can today. Right? So that's the 80% of the problem. And what I really mean by that is transport. GGRF is spent for a wide variety of priorities. And I think it is time, particularly as the cap and trade allowance dollars are growing quite dramatically. Right? We just had an auction close at $42 a ton.

That's up 10% from the Q4 auction in 23, and we are on a 10% per auction sort of trajectory. The modeling suggests that prices are going to go even higher than that over the next couple of years. So we should be thinking strategically. How can we use those resources to help the PUC and the utilities accomplish the climate goals that we have laid out? SB 350, SB 100, SB 32. How do we invest in the system?

And this will mean investing public dollars that will not generate a ratepayer return. But I think there's plenty of ratepayer return to go around at this point. So I would argue that we need to think strategically about that. You all are going to probably have an opportunity to think strategically about that as, as we approach the expiration of the current AB 398 enabled cap and trade program and.

I would also argue thinking about extending this sort of thinking along. Where are there other pots of money every three months? My wife, who pays our bills, is profoundly confused by our electric Bill because we get a giant credit from PG&E. Thank you, PG&E. That reflects the value of allowances sold at an auction and is rebated to customers. The climate credit. Now, I am a high income Californian. I do not deserve that credit at this point.

I think, I think there is flexibility to use that money to support low and moderate income rates and to do that on a monthly basis rather than a quarterly basis. Recognizing the liquidity constraints, the fact that the people that really need lower electricity rates are not me, but are people who are struggling to make their monthly rent payment, to buy food for their kids at the end of the month, and to pay their utility bills, as we saw in the evidence earlier.

So I think refocusing that climate credit on the people that need it most is an important consideration for the next few years, and that could make a real difference to those people today. Lastly, as has been discussed, we're spending a lot of money in the distribution and transmission system right now, and we're going to need to spend more money.

If you look at the ISO 20 year, look ahead, the transmission, the sort of longest time frame transmission planning that the ISO does, it's really clear that we need to build a lot of things. We need to put steel in the ground over the next few decades if we're going to achieve our climate goals. I personally think those goals are very important.

They are critical policy goals for California and frankly, for demonstrating a proof of concept of a prosperous low carbon society at the scale of 40 million people, they are also not going to be free.

And as I said, looking at rates where they are now and where they may go in the future, I do think that it is worth considering whether we should evaluate some kind of an alternative financing mechanism outside of the normal rate process, more akin to securitization, to finance some increment of that build out. And we could put some boundaries around that idea, right?

An idea that would be limited so that the basic business model of the investor owned utilities is preserved and maintained and protected, but also recognizes that we face a historic investment and that sometimes you have to do different things to get over that transition process. And so I think it's worth evaluating whether we could make that kind of a programmatic investment as a state and finance it outside of the normal GRC process. Thank you very much for the opportunity to present these ideas. And I look forward to your questions.

And thank you, Professor Wara. And I'm going to reverse what I earlier said because I know President Reynolds and State Auditor Parks are going to need to leave at three. So I want to give Members of the Committee an opportunity to ask them questions before they go. And then we'll turn to our other panelists and dig into those presentations.

And I guess I'll start, I'm going to pick up President Reynolds on what the point that Mr. Wara closed on, which is, given the magnitude of this transition, do we need to think about the way that we are financing the cost of our clean energy transition differently? Do we need to make some programmatic changes? So the way that I've been kind of thinking about it, it feels like right now we've got this enormous egg that the snake is trying to digest.

Does that really make sense, or do we need to take a step back and think through alternative financing models? What are the opportunities associated with that as you see them?

I think it's a really good question, and I think it is helpful to be clear on whether we're talking about a different financing model that would still be funded through rates. So you can finance through federal loan programs, as we've seen done historically, but those loans are repaid by ratepayers, or are we talking about different sources for the repayment? So would the repayment be done through some program outside of rates? I think that that part is a lot harder.

If you're going to look for some kind of bonding, some kind of part of climate bond, something like that is different and not something that I can really comment on because it's not outside of the scope of what I do.

I have control over what and how ratepayers pay for things. From a perspective of rates, it absolutely is better to do the latter, to have some kind of other source of funding with respect to the former. And I think it is important to think about cheaper financing.

Right.

Right.

So capital projects by the utilities are financed. The utilities raise capital through equity and debt, and they are allowed to have a rate of return on those investments that are made, again, all repaid by ratepayers. Funding things in that way spreads out the costs over time, which is helpful for immediate impacts for ratepayers. But we have encouraged all of the investor owned utilities to seek financing from federal opportunities.

So look for ways to take advantage of any kind of loan programs or grant programs as well, to the extent those are available to utilities. And we would continue to encourage the utility to do that. If it is done in a way that doesn't actually add costs, but seeks to displace, we really want to supplant the rate pair funding versus add new costs to the system. So I think it is a really important thing to look at.

I guess maybe the other thing I'll say is that we have more and more seen private investment in transmission development. So historically, the utilities have been the ones who have built and maintained transmission infrastructure. We have a process now where, as Professor Wara mentioned, CalISO does 10 year planning. They've done a 20 year outlook, and then they do competitive solicitations for transmission projects. What we're seeing is some private developers who have started to build transmission. That's part that's also paid for by ratepayers. But that competition can be helpful.

And I guess to your question about whether or not I think your initial response is, are we talking about changes to the way that rates are financed, but it's still passed on as rates? Are we talking about alternative financing? I don't know what other Committee Members perspective is. I think that in order for this transition to be tenable for Californians and affordable, I think we need to be talking about both.

And I think we've got to be really clear eyed and honest about the cost of our climate transition and how we're going to finance that. And I think we all recognize that those are vitally important and critical goals, but they're not free. And I think that too often we've kind of thought that we could set these goals, wave the magic wand and make it happen, and that's not happening right now.

So I think we need to be really honest with ourselves about that, honest about those tradeoffs, and potentially open up some conversations which Mr. Wara, to use your phrase, maybe are politically uncomfortable. Right. Because there's no easy answer. It's not that there's an easy answer, and we're just missing it.

If I may add one more point. We are now implementing SB 884, which is a requirement that we consider utilities a 10 year wildfire undergrounding plan. And so normally we would do four years through General rate case, but through SB 884, we are accepting applications from utilities for 10 year approvals for undergrounding plans. We have developed the rules for that program. We're also working with the Office of Energy Infrastructure Safety OeIs, who also will be reviewing these 10 year plans.

So we make sure that the plans and the undergrounding is targeted to the most risky areas. But as part of our approval, we've directed the utilities to, before they come to rate payers, to seek other sources of funding. And so that's been an important thing and something that we will be looking for when they Fund those undergrounding plans.

Okay, I've got like pages of questions, but in the interest of time, I will open it up to Committee Members. Assembly Member Wood, thank you.

And thank you to the witnesses here today. And I'll be brief, which is hard for me, but I'll work real hard at heard, I think President Reynolds, I've heard variety of times about increasing costs of transmission and so on. And I know there's a lot of factors that probably go into that I do want. A question I asked at the hearing before last was about where we are in the 131 D hearing, which is supposed to help streamline that process.

When do we expect to conclude that hearing so that we can actually get to the point? And then as a follow up to that, knowing that transmission can take up to a decade to complete or more, as we saw in the last does the CPUC plan to implement the 270 day time online that other interested parties have agreed to, to resolve disputes related to environmental impact reports?

So let's see. There are a couple of parts to that question. I'll make sure I try to get to all of them. So on 131 D, it is an open proceeding. We just finished the first phase of that to implement statutory direction, to do kind of the first part of streamlining. We're now in the process of looking for additional ways to streamline. I need to get you the dates. We have a schedule set out, and so I can follow up with your office on that.

It is a proceeding that's open now that we're actively working on. We're also coordinating with CalISO, the CEC, looking for ways to really try to streamline and think about transmission differently to the extent that we do approvals, because we know we're going to have more work coming in than we typically have.

Right.

We need to act faster. We'll have more projects to look at. And we don't have the luxury of time since we need to move forward quickly. And with respect to the timeline, I think that's a judicial review schedule, is that right? The 270 days?

Yeah.

Okay. Our decisions go directly to the Supreme Court. And so I think that we are on a different timeline to start with, but I can get you the details of that as well. And I don't think we could do that ourselves. I think we would need legislative changes to make. Any changes to you.

There was a multiparty agreement on that. I think the CPUC was a part of that agreement.

Are you talking about the SGC process to select projects that would be expedited? That might be, yeah. Okay. All right. I think transmission projects could go into that process. So I think they qualify because it's.

Not clear that you're adopting that. So that's what I'm asking.

Okay. I think that's a certified process that the projects have to be certified by the Strategic Growth Council. And some clean energy projects have gone through that project. I don't think any transmission projects have yet.

And the reason, and I'll have just a follow up comment. And then one question to the Auditor. The reason I keep asking about this is that we hear about the time it takes to do this. And so that time translates to money, which translates to increased cost to consumers. So there are ways to improve these efficiencies. ... asked, okay, what are we looking for as our goals to improve these efficiencies?

Because honestly, 10 years, a dozen years, doesn't reflect the urgency I think we should be showing as we are trying to get to a point where we can actually make an impact in our climate goals, which are very important to me as well. So I'm looking for the urgency and that's what I'm looking for in timelines, and that's why I keep pushing on it, quite frankly.

Absolutely.

That's more of a statement. So thank you to the Auditor. Real quickly. Two little things we're seeing, obviously, operating cost increases throughout and a lot of different factors. How does that compare to other states, or is California unique to these significant cost increases for operating?

The direct answer to your question is we primarily focused on the three investor owned utilities that we focused on during the scope of the audit. So we don't really look at other states as part of our work.

Okay. And then the final piece of that is that your chart is fascinating about the realized returns and rates of returns. And obviously, it's difficult year to year to predict. One year a company might have a greater than authorized return and then the next year they might show a loss.

But when you see some companies actually doing quite well, and then you look at their rates and their rates are higher than everybody else's as well, is there no obligation to rebate that in any way to the consumer? If they're getting more than they're authorized for a return, is there no obligation to reflect that in the rates or something to help offset the cost for consumers? I mean, they're doing well, they're getting more than they're asking for. Are they just banking that?

So when we were looking at the rate of return process, it appeared to us that the concept of rate of return and earning on the weighted average cost of capital, debt and equity, that was primarily a revenue setting exercise for the purpose of a GRC case. It's a separate related proceeding, but we didn't see any follow through on the tail end of the process. Okay, what did the actuals look like?

And so what we do in our recommendation to both CPUC and NCal advocates is they need to be looking at what utilities are actually earning relative to the authorized rate of return. Because if CPUC is authorizing certain rates and they're consistently beating it year after year, it may be okay, but at a minimum deserves inquiry about how are they achieving these efficiencies. And let's make sure that we're capturing that information when Cal advocates is applying the same level of scrutiny in the following rate case.

So your finding is that that isn't really happening.

Correct.

Thank you.

Assembly Member Boerner.

So thank you for the great tee up, Assembly Member Wood. I obviously requested this audit. And for those of you who don't know, I was in the middle of a divorce and this is the one thing that my ex husband asked me to do. Most people argue about houses and cars, whatever. He said, you have to do something about the utility. What? And also not just me personally.

Sorry, I always throw out my funny stories, but when gas prices were so high in California, we got more calls into my office about SDG&E, utility and water prices than any calls about gas prices. This is a real cost of living problem for real Californians.

And so when I look specifically at what somebody remember Wood was referencing page 37 and the rates of return from SDG&E, I want to know what the safeguards are for CPUC and Cal advocates, who in my mind, should be advocating for lower rates. Because you're watching this from 2006, you're watching this steady increase every year in our rates. And it's untenable for Californians, not just low income Californians.

When we look at the chart that we have of the number of people in arrears, we're not talking about just those people anymore, those people in our arrears for many different reasons. We're talking about middle class, and that's underinvesting in our future.

So my question really for the CPUC and for the Cal advocates office is what are you doing that you're not checking what I look at and I calculated is even if you look at SDG&E, I'm San Diego, county, so that's the one I'm concerned about. But you look at it them year over year, of all the years here, only three years did they not meet their rate of return. And most years it was over 1% that they were on under.

And so I do think there's a perverse incentive. And at what point does the CPUC commissioners sit and watch year after year them overestimating what they're going to do? So they're increasing rates. And at what point does Cal advocates not step in and say, people can't pay these rates?

If I may, let me just start and say that you're right. We should be looking at this issue, this very issue. And I do think that the State Auditor's framing of the issues is correct. But I also want to say that, and I mentioned it in my presentation, that there is a proliferation of mechanisms that the utility can use that makes it very difficult to track as to whether the utility is sticking to its authorized budget. And I'll say that those are called balancing accounts.

Those are regulatory mechanisms. They allow the utility to record costs in accounts outside of the general rate case process. Now they were not intended to be regularly used mechanisms, and they are every single one of one of the slides that I have, and I can't remember what slide number it is, but there's a waterfall of red bars. Those are accounts, a combination of balancing accounts and memo accounts where the utilities are requesting cost recovery on specific activities, mostly related to wildfire mitigation.

But those are outside of the general rate case process. And most corporations need to propose a budget to their boards and stick to it. Having these other kinds of mechanisms allowing the utility to request cost recovery outside of the major budgeting process makes it very difficult to keep tabs on them.

And then following up on that, why didn't you, as the Cal advocates, ask them for the full balancing counts and all of these things? Because that would, in my mind, and I think in a regular californian's mind, that's your role, is to advocate for us to have lower rates. Right. In my mind, you should always be saying, no, do we really need this? No. Do we really need this? No. Look at how it's gone up.

So it should have taken a state audit requested by me and my colleagues in JLAC to get at this information, because it must be something you guys have been seeing.

So I'd like to emphasize that our focus, given our resources, our focus is on utility requests for balancing accounts, meaning we focus on the issues beforehand where the utility is requesting authority to establish a balancing account. That's where we fight most before they get to a balancing account. And we also focus on the other regulatory mechanism, which is called a memorandum account. And a memorandum account is another regulatory mechanism where the utilities can record costs, but they're not guaranteed recovery.

They have to come back and there needs to be a reasonableness review. Looking at whether the proposal makes sense, they were cost effective, et cetera. So just to be very clear, if we had the resources, we would look at every single balancing account. But given our resources, we're going to focus our battle on the proposals where there isn't yet a balancing account. And should there be, that's where we're going to focus our effort on.

It's determining whether there should be a balancing account, whether the utilities should get guaranteed cost recovery.

Thank you. And for the commissioner, in addition to answering the other questions, the one thing that also is, is it not such a glaring thing when you read reports in the newspaper about the record profits that the IOUS are making and then you see the struggle that Californians have, like as a legislator who is accountable to the people? I see that. And how do I explain that to somebody? That's your job, to explain it to somebody.

So maybe you could explain it to the public right now.

Yeah. Thank you, Assembly Member. And no, you're absolutely right. This is a very critical issue. And I'll note that a third of the customers in IOU territory are on Low income programs. People are struggling. And I appreciated the PUC. We appreciated the findings of the Auditor, and we have accepted all of them and are implementing all of them. So we appreciated the audit and the report. We do look at spending through a risk spend accountability report, and we're going to continue to do that.

And we'll be taking a closer look and coming up with new mechanisms to monitor and address anything that we see as a problem. What the Auditor's report shows is that the forecasts, these are GRC forecasts, and if the utilities are under the forecast, then that's where they show that there's an overage. And so we will be taking a look at that. On the balancing account issue. I don't disagree at all with the Public Advocates comments.

I'll note that we're increasingly being directed to use memorandum accounts or balancing accounts by the Legislature and most recently received direction because of increased need for energization. So distribution system energization. Why aren't the utilities showing up to energize new customers? It's a very big problem, is not incorporated into grcs. And so we've been instructed to allow the utilities, if they apply, to set up some kind of cost recovery mechanism, and we have a pending application now to do that.

So those kind of accounts, I agree, they're not good for ratepayers. Rates are electricity. The collection of socialization of costs through electricity rates is regressive compared to taxes. But this is the system that we have. And looking at the basic utility services such as energization of customers, we're seeing increasing costs. The good thing about balancing accounts and memorandum accounts is you don't have to worry about getting a forecast right. You pay only what is spent.

But that's not ideal when it's on top of everything that has been forecast. So there are different mechanisms to do different things.

Assemblymember Hart.

Thank you, Madam Chair. It's very clear from the testimony and from everything that we're hearing from our constituents that they're angry and confused and struggling to pay these utility bills. And they're really confused because they don't have the information that they need about what's happening and what these trends are going and how to get a handle on that.

And I think state auditors report really calls this out clearly and saying that that's a responsibility of the public advocates and the CPUC to help utility customers understand what's going on so that they can make better decisions for themselves. And your response to the audit kind of says that's not our job. And I take issuance with that and really think that that is a fundamental responsibility because you are the only consumer watchdogs in this system.

And providing the information that consumers need to understand to be able to deal with this at the family level is really fundamental to your job. So I'd really like to hear more about why it is that you think that, that it's not your primary responsibility and what you can do to better address that issue.

Certainly I don't think that we meant to communicate that it wasn't our job to inform the public. It may be that we saw the utilities as better. The utilities need to communicate with our customers and we see part of the obligation being on the utilities. You have these customers that you serve. You need to be communicating with them and be honest with them about what's happening with rates.

And so part of our plan to implement the auditors findings on communications is to provide requirements for the utilities to communicate rate increases when they're happening, why they're happening, what the components of those rate increases are. We also publish annual reports on rates. And so we make an effort of kind of compiling everything and putting it together for the public to see and trying to be as clear as possible. The PG&E rate case is 1000 pages long.

These are things that are not easily digestible to the public. And we can't expect people to come to our website and pull up the report and go through all of it. And so we've done more and more. We've tried to create fact sheets. So 12 pages on what's happening here and post that on our website. We also have a public branch, communications branch that takes all customer inquiries. And so if anyone is having a problem reaching the utility, they can come to us.

We have buttons on our website, and we have folks who are available to answer questions and provide information to the public. So we are trying. It's not something historically that I think the commission has been that good at or really had, maybe didn't need to as much as now. But I think now more than ever, we need to talk to the public about what we're doing. So I definitely take that to heart, and we'll make an effort to continue to improve the way we communicate.

Thank you.

I would also like to add that the Public Advocates Office has expanded its website to provide more transparency in terms of the positions we're taking, why we're taking them, how much we're arguing for in terms of ratepayer savings. We have blogs that our staff are writing to present the ideas that we are proposing before the commission and in other forums. I also want to emphasize that we are mostly complete in terms of achieving our objective in implementing the recommendations from the State Auditor.

So we appreciate those recommendations and we're close to completion.

Well, thank you. I appreciate you answering the questions, and I just think this is something that's only going to become more critical as time goes on, as these issues are not going away. As we heard, the trend lines are very difficult, and this is very complicated, and it's going to require consistent communications to help people understand exactly what we're facing.

Vice Chair Patterson.

Thank you, Madam Chairman. I appreciate being here and being a part of this. You are all talking about something that is very, very complex, difficult to understand, difficult to figure out. You're telling us where the increases are happening. It's almost as if they're on autopilot. They're going to happen no matter what. And then we're talking about communicating with the general public. You're communicating with the general public already. You know where that is? In their bills. In their bills.

And the noise is so loud with respect to the unaffordability. And you looked at all of these arrears cases. What do you think the general population thinks about what is going on here? They just feel like over and over again they're getting stuck and we're creating, I think, an expectation. And as the Chair mentioned, all of these goals that the state has set up are going to be very expensive and somebody's going to have to pay.

There's been suggestions that you're going to do a variety of different kinds of financing. The fact of the matter is, this is going to be very expensive, all right? And whether you get it from the feds, whether you get it from some other kind of capital instrument, whether you figure out how to go take GGRF funds and parcel them around, the fact is the cost drivers of this are just going to go on and on and on.

And so I think that for me, this is about the constituents that I represent in Central California in a PG&E area. I know that other members have said they receive a whole lot of info from their constituents. You ought to see my inbox. Okay.

So what I'm trying to say is until the people see serious relief, until essentially the rate gouging stops, or at least flattens, if not comes down, any communication is going to be bureaucratic nonsense, blah, blah, blah, blah, blah, because they're receiving a bill that says PG&E or SDG&E, you're going to have to pony up. And so when I hear alternative ways of financing and all of that, the bottom line is somebody's going to pay.

If you offload the cost of the aspiration with respect to the state's plans to the general fund or to other funds over here that are being used for other things, the fact remains that somebody's going to pay. Because if we're going to lighten or change the finance mechanisms that are being discussed here, and some of that is going to end up being maybe the State of California, then we're going to have to say no to other things for people in the State of California.

So my big concern is that I think the aspiration is way out over our skis. And I think that the aspiration is so expensive and so long incoming that we're going to see these rate increases for as far out as the eye can see, and to suggest that there are real substantial and significant mechanisms to reduce the cost. When you see all the cost, drivers are part of the IOUS, putting together electricity and sending it out.

And so I appreciate the fact that we're sitting here commiserating about this, but I'm not sure that I see an end to this. I've been here 11 years. This is my 12th year now Vice Chair of une that whole entire time. And I have seen the grid become less and less reliable, more and more expensive, and rates that nobody would have envisioned 10 years ago and bills that are really, in my judgment, excessive.

And so if we're not going to try to change the direction, change some of the requirements that legislation have put forward, we're going to try to decarbonize the fifth largest economy in the planet. And while we're doing that, we're putting millions of Californians into poverty. And I'm just not hearing solutions here that make a lot of sense because the bottom line is State of California wants to buy a whole lot of stuff and do a whole lot of aspirational things.

They're going to have to figure out how you pay for it. If you bond it, you got to pay the interest. If you borrow it, you got to pay the interest. If the ratepayers have to pick up, it's going to show up on their bills. So you talk about alternative instruments of finance. Finance instruments come with interest and come with payback, and somebody's going to have to pay for that.

And Vice Chair Patterson, I apologize for interrupting, but we only have the PUC President here for five more minutes. So did you want her to respond to mean?

Isn't anybody else on this panel frustrated that we're hearing all of the bureaucratic language, we're hearing about an audit and all of that, and everything just seems to be on autopilot.

And I honestly think that that's why we're here, is to try stop that autopilot and do everything in our power to respond to the concerns of your constituents, the concerns of Assemblymember Boerner's constituents, the concerns of all of our constituents who are feeling an incredible burden every time they open their bill. So that's why we're here and look forward to partnering with you so that we can actually find real solutions again. Bend this cost curve.

And if you're trying to find answers to how you're going to finance all this, but the bottom line is all this is going to have to be paid for somebody, either the state's going to have to pay for it, you're going to have to borrow the money. You're going to have to bond the money. You can't do this for nothing. And if you put a big price tag on some big aspiration about electrification and you put millions of Californians into poverty.

I'm sorry, I just think the aspiration is misguided. And until we readjust the aspiration, we're not going to be able to readjust the price tag and the burden that we're asking our ratepayers to pay.

Thank you, Assemblymember Calderon.

Yes, thank you. Well, I appreciate you being here. And since we were talking about balancing accounts, I have a question for the Public Advocates. As of December 2021, the major utilities were collectively tracking roughly about $11 billion in undercollected cost in their balancing accounts. And so we know that this could result in higher rates for our constituents. But by the end of 2022, Public Advocates had, I think, reviewed maybe 18% of the total balances.

And so I know you mentioned that there's a resource issue, but what process are you engaging in to improve the review of these accounts? And, yeah, if you could just speak to that.

And I am so sorry to interrupt, but can we pause on that question and just see if anyone else has a question for President Reynolds or the Auditor before they've got to leave? Assemblymember Zabur was next in our queue. Is that a question for. Okay, we're going to come back to that one. And then Assemblymember Ting and Chen. Ok, perfect. And Assemblymember Reyes. I feel like an auctioneer.

Yes. Thank you, Madam Chair. Just want to jump off on my colleague from Fresno's points. I mean, two things, right. I'm just looking at, madam President, the chart regarding the utility operating costs, revenue requirements, just according to. Just looking at your own chart here, between 2016-2021 and I could be misreading it, but it looked like the revenue requirements are relatively flat. But yet at the same time, during that time 2016-2021 according to the Public Advocates chart, the rates are going up significantly.

So I just want to understand, if the revenue requirements are relatively flat, why the rates are going up. The other piece of it is, we appreciate you being here talking about what the issues are. Can you share with us sort of what you would advise us? Do you need greater authority from us? What do you need to take a greater role to help reduce this cost? Because the challenge for us is you're set up like a quasi judicial operation.

So you take in both sides, all sides, trying to get information, and you're trying to come up with a product. Right now, as my colleagues and professionals, very complex, very complicated, a lot of information. So we obviously are not equipped to handle that. Right. What we do need to know is, what are you suggesting that needs to be done to sort of lower this?

We got a clear idea of what the problems are, but it wasn't very clear from, from your vantage point what the solutions should be.

Okay, sure. And the first question is on the chart, that maybe it's the way that the escalation isn't very clear from the chart. I think partly in 2020 were there was a big increase, especially for PG&E.

Which isn't reflected on the chart. And I'll ask the public advocate. I think our charts are consistent. So it might just be the perspective of the chart. We can give you the actual numbers too. But also I think that 2024 increase from the general rate case not in there, and the memorandum accounts for wildfire hardening are starting to hit rates now that I don't think are reflected in the chart, at least not.

No, I understand. I'm just saying why between 16 to 21, when things look fairly flat between those years, why the rates are going up? Right. Because the revenue requirements are. Is it because the rates are going up because it's for future revenue requirements?

They should reflect the increase in rates. So the revenue requirements should reflect increase in rates. Rates have been rising. They started to rise more quickly now, especially in 2024. They have been rising.

Just looking from your own chart, it looks like there's a slight increase from 16 to 18. Then they come down in 19. They go up a little bit, but they're pretty flat. And that's not reflective of the. Yeah, so if the revenue requirements flat, I'm not sure why the rates are going up. You can answer that. Why don't we hold off?

Okay.

Why don't we hold off and let the President answer so then she can answer the other questions and we can come back to that from the advocates side.

Okay. And then you ask also for kind of ideas? I think one thing to think about is just the process to make sure that, as we're procuring new resources and California is looking at clean resources to meet increasing load, that we all support efforts to do it in the most cost-effective way possible. And in particular, the community choice aggregators are doing a lot of procurement and they have competitive solicitations out for battery storage projects, hybrid projects, solar and storage and wind.

And we have offshore wind resources. So we try to put in place processes that encourage competition and cost effectiveness in the choice of the portfolio that we need for reliability and to meet our increasing load. So I think support for that process that really helps to control costs, knowing that we do need more resources in the future. And the solar projects, wind projects, they are cost competitive. They've come down in price.

We still have long-term contracts that California has entered into that helped to drive, to build the market and drive prices down. So Californians are paying for that. But the future is better. The future contracts are cheaper and they will help bring costs down. The other point is responding to the impacts of climate change is expensive. And part of that is going to be felt by the utilities because it involves their work.

And so anything that we can do to mitigate climate change while also having to respond to that, helps with prevention of further costs. So I appreciate it.

Assemblymember Schiavo.

So I was just curious if, President Reynolds, you could respond to Professor Wara's suggestions and the suggestions from others here today around ways to reduce costs, whether it's the five points, more and better wildfire mitigation, addressing the power storage for NEM customers, and the balancing accounts, and really kind of trying to dial down on those. But what are your reactions to some of the ideas that have been brought forward today?

And what do you think could make sense to really make an impact of bringing the cost down, the climate credit that be kind of shifted to lower-income folks, those ideas that were brought forward today, I just would love to hear your thoughts.

I am supportive of the ideas. I think they're all good ones. I think just to talk about the climate credit and shifting it to low-income customers. And I'm not sure if that's in statute, that allocation, or if we could change it. But the concept originally, as I understand it, was that that climate credit would be used by customers for energy efficiency and other mechanisms to reduce load, and so use this climate credit to pay for other things.

I think most people are using it, just they're happy their bill isn't as high and they're already struggling. But that was the concept of everybody should have funding to reduce load and do things that help the system. And so we do, as I mentioned in my opening statement, we are trying to target subsidies to lower-income customers. We still have to keep in mind middle-income Californians and the cost of living increasing overall.

But I think in general, that's a good place to focus, those customers who need it most. The idea about storage for existing NEM customers, Professor Wara is right. The legacy costs of NEM customers is large. I had 6 billion per year, and apparently it's higher now. It's 6.5 billion per year. And so it would be interesting to take a look at storage. The Legislature did approve funding for storage for existing solar customers, targeted towards low-income customers. And that's the 630,000,000 that was recently approved.

And we just issued a decision in our Self-Generation Incentive Program proceeding, the SGIP proceeding, to allocate those funds, the first tranche, and that includes publicly owned utilities as well. So the funding will be focused on storage or solar plus storage for low-income customers. And then with respect to battery use and thinking about how to use batteries when we need them the most, for those heat events.

That's something that we're looking at too, including emergency programs that help with load shifting and any type of generation that's available for emergencies. So definitely a lot of work to do there, and exploration. We'd need to look at costs and how the cost of the benefit and then the costs that are paid by ratepayers in designing any program like that.

And I know the costs around wildfire mitigation have been large. Undergrounding is very expensive and so on. The idea of kind of being strategic, it sounds like you're doing some of that analysis now about making sure that it's strategic in terms of where the wildfire mitigation is happening and ways to bring down the cost of that.

We are, and it's a work in progress. And the utilities are all being, they themselves with our oversight and also with wildfire safety, the Office of Wildfire Safety, OEIS, they're overseeing an effort to get the utilities to be more targeted in risk reduction activities. So are you going to the most risky places? Are you using the most effective measures? We have staff that also does that kind of evaluation. We did it as part of our GRC case.

We received testimony from many parties about ideas about the best mitigation measures and took that into account through the wildfire mitigation plan process that's meant to continually improve the risk reduction that all the utilities do.

Just last question, and I share my colleagues concerns. We all got the same phone calls at our office too, and people really are struggling with this, and I think we have to figure this out. One of the ideas that was brought to our office by the public advocates when we had a meeting was around different ways that utilities may have a little too much flexibility on kind of padding the books, for lack of a better term.

For example, if there's trucks that haven't been used for years, but they're still being charged as currently being used, or are there ways like what is kind of the oversight? Are there ways for you to really dig into, are all of these costs real? Or are some of them just kind of carried over from the year before, as this is an annual cost that we have and they could actually be, those trucks that are not used, could be written off and off the books.

Are there ways in which there can be a little more scrutiny on what's included in the costs? We know stuff like that happens all the time. Right. And so how can we find ways to really bring those costs down?

That's a good question. We do do oversight and inspections on things like are you being efficient in the way you inspect your infrastructure? And have you done the inspections you said you're going to do in order for safety. For things like your operations and use of trucks, I'll have to see if there's a way that we provide oversight of that. Mainly it is looking at the end of the year whether expenditures have been made.

And we expect the utilities to manage their systems efficiently and then use each general rate case as a way to get information from parties like the Public Advocate's Office on, tell us what inefficiencies you see, and we take that into account. And so that's the opportunity to have information on, are there better ways to do this? Are the utilities not being efficient in the way that they manage their operations, whether it's trucks or inspections or other types of IT systems?

And we can also do information requests and so we can ask about pretty much anything that they do for their operations. So we do have the ability to do that and could do it either as part of a GRC or off-cycle.

Assemblymember Reyes.

Thank you, Madam Chair. President Reynolds, it's good to see you. I wanted to ask a question specifically about the undergrounding. The background paper cites that last year the CPUC approved $13.5 billion for PG&E's 2023 revenue requirement. That was almost an 11% increase compared to the previous year, making them the most expensive power provider in California. The reason given by the Commission was inflation and electric line undergrounding.

The cost difference between undergrounding the lines, 5 million per mile for Edison and 4.3 million for PG&E. But the difference between that and other measures such as "fast trip," which costs 5600 miles for PG&E, are tremendous. My question is, given that there are significant cost differences between wildfire mitigation measures, what is the Commission doing to control for the high cost of undergrounding versus more effective approaches such as vegetation management, covered conductors, or operational settings like fast trip?

Thank you for the question. And in the general rate case, the Commission looked at a range of mitigation measures that were proposed to reach risk reduction metrics. And I think that on the public advocate side there was more, covered conductor suggested PG&E had proposed more undergrounding. The Commission ended up somewhere in between, and we'll continue to monitor effectiveness. When you think about fast trip, fast trip is effective and has been shown, PG&E has started to use it and started to monitor its success.

It has shown a reduction in ignitions. It does have an impact on ratepayers, because when the line is tripped, the power goes out. And so from that perspective, it is not without impact. So it's lower cost, but higher impact on customers. For vegetation management, vegetation management will be done with no end into the future unless we're able to find different mechanisms to strengthen the system. Undergrounding can be permanent if we're able to do it. And so all of these measures have benefits and drawbacks.

So I think it's a matter of continuing to monitor the utilities to make sure they're achieving the risk reduction metric that we want them to achieve, and continuing to drive costs down for all of these measures and use them the most effective way possible. We do have the Office of Energy Infrastructure Safety looking at these questions as well, and they do oversight and reporting of all of the utility's wildfire mitigation plans.

And that's something that we look at also in terms of finding the best way to reduce utility-caused ignitions. That's a great question and a difficult analysis.

And I think it goes to the heart of what we're trying to figure out is something that is cost-effective, lower-risk, but still, we have to be concerned about everything that has been talked about, and that is the calls from our constituents. It's untenable now. It's unsustainable to expect our constituents to expect the users to continue to pay increased rates.

Another question, that seems that a large portion of rate costs from transmission, that comes from transmission, distribution and wildfire mitigation updates. Some of these seem difficult to minimize, but how much equity is returned may be a way of lowering costs. Setting reasonable returns on equity has been identified as a way to improve rate affordability. How will the Commission address it this year?

The Commission has periodic cost of capital proceedings where it attempts to drive down the cost of capital and considers what is expected to attract capital. So the utilities finance their infrastructure projects through equity and debt. In order to attract capital, they need to have a certain rate of return. Our utilities have been affected by wildfire risk and liability risk, but we have been able to get the cost of capital down over time, and we hope to continue to do that.

Okay, thank you. Thank you, Madam Chair.

All right, Assemblymember Connolly.

Thank you, Chair, and to all the participants. Probably re-treading a little bit of ground at this point, so we'll try to minimize that. But definitely wanted to reiterate the big picture about the impacts that really these untenable rate levels are having on our constituents, on utility customers.

And taking it from a Northern California lens, could not help but note the recent headline of PG&E reporting more than $2.2 billion in profits in 2023, an increase of about 25% from 2022. Obviously, and we're talking about it today, it's an ongoing discussion around increases in legitimate costs being passed on to rate payers vis-à-vis something we need to continue to look at, but are somewhat explained by some other efforts we're doing.

But please, you know, really we just want an explanation as to why PG&E's profits are increasing by a full quarter year over year at the same time that energy rates Californians are paying are spiking. So that's just a different way of asking or demanding answers that you've heard, I think, across the dais and certainly from the public. I don't know if you have anything to add at this point, but I wanted to get that out on the record as well.

A similar issue, and good to see that it's virtually on everyone's mind, is kind of cost approaches that we're using. On one hand, we know that, and I'm glad to see SDG&E here, for example, one strategy calls for approximately 1500 miles of undergrounding between 2022 and 2032, but that's at approximately $3 million per mile for undergrounding. So that is a tremendous cost to ratepayers.

So again, for discussion purposes, could using a combination of other approaches in a cost-effective way make a difference in wildfire risk mitigation while avoiding some of the costs associated with some of the more expensive solutions? So additionally, just wanted to add my voice to that. Question for President Reynolds and perhaps Professor Wara: How are we evaluating the need for costly new transmission, compared to other approaches like grid enhancing technologies, to better leverage existing lines, or increasing distributed generation? Professor, your testimony talked about rooftop solar.

Customer-side solutions are a big part of what we want to do and in effect could result in cost savings if it reduces the need for expensive transmission projects in certain instances. But has there been a discussion or evaluation of cost benefit or opportunity cost around expensive new transmission compared to other approaches?

Sure. I'll start. Just for background: So, for instance, Marin Clean Energy in your district, Assemblymember, puts together an integrated resources plan, which essentially is least-cost, best-fit procurement, including transmission costs. And so each load-serving entity will look at what it needs to cover its proportion of the load, and planning ahead for forecasts of increased load, and then puts together a proposal of what does it look like now for short term procurement, and what do we need over the long term?

Those plans all are compiled and run for reliability and then sent to CAISO for transmission planning. CAISO then has a cost-effectiveness component, because it does solicitations for transmission solutions that are needed to accommodate the buildout, and one of the potential solutions is grid-enhancing technology. So has seen some responses that include new types of technologies to be more efficient. They work in some places and they don't work in other places. And reconductoring sometimes works. So there are a variety of options.

And using a competitive process, the least-cost solutions will come up. And so it is a very important aspect of the planning for the future that we do. We don't regulate generators. So generators are not part of, most generation is done outside of utilities. They're not rate-regulated. We don't see their books. And so we need competition. We need these solicitations to ensure that we're getting the least-cost solutions.

The new technology is really exciting and I think it's great to see that build and try to get the most out of the existing system that we can. So I appreciate the question.

Just one more. The background document also cites a 43% increase in distribution costs from 2020 through 2023. What is driving that rapid increase? Is it the utilities deciding on the scale of these distribution investments? Are the costs signed off on by CPUC? And if so, has there been any pushback on those costs? And do we expect distribution costs to continue to increase at that pace? We'd like to see the costs contained, if possible.

Yeah, another great question. So the cost increases that we're seeing now mostly related to wildfire mitigation. So those distribution system costs, large component of that is wildfire mitigation. And in PG&E's case, they're catching up in rates. So if you look at the same report that you've seen from SDG&E, PG&E was actually significantly under in collecting for a number of years.

It's now collecting those costs through our process, through memorandum accounts that take a while for us to review and scrutinize, get information from Public Advocates account. We don't approve everything, so they have to essentially not recover for some of the costs that they've spent for some portion of these costs. But a lot of them are necessary for wildfire mitigation. And so that's where a large part of the increases that we're seeing now are.

I do anticipate seeing increases for other types of distribution system upgrades and for instance, energization requests. And we've talked a little bit about that. We do have a request from PG&E to increase costs for system upgrades needed for new energization. The distribution system is at capacity in many places, and we are seeing significant delays in energization, which we're also addressing.

And the Legislature has given us direction to really look hard at what timelines we should expect the utilities to meet for this basic service that they provide. But some capacity constraints involve upgrades to substations, things that involve permitting processes that do take time. So we'll be looking at all of that, at all of that. We'll appreciate information from parties to make sure that we're minimizing costs as much as possible.

All right. Thank you. And thank you for joining us, President Reynolds. I believe you've got some subject matter experts that can join us on the dais if Members have additional questions.

Director Rachel Peterson is here for any questions. Thank you very much, Chair and Committee Members. All right.

Look forward to following up with you on a number of these topics. Thanks. Okay. What we'll do is take the questions that Assemblymember Calderon and Zbur had for the advocate, then we will hear from our remaining panelists--thank you so much for your patience--and dig into additional questions. So, Assemblymember Calderon. Go ahead.

I believe you were asking about what we were doing to review balancing accounts, basically. So let me just say that we prioritize our review on balancing accounts, again, given our resources. So we're going to look at balancing accounts that have the highest amounts in them. For example, there's a purchase gas account. That's a balancing account that contains more than 50% of the costs that come under review before the Commission by a gas company.

So we're going to look at that account before any other account, and that's how we have to prioritize our efforts. I also want to say balancing accounts, there could be hundreds of line items in a balancing account. And so sifting through that information is laborious. So that's why my emphasis on resources. It's like looking for a needle in a haystack. It takes a long time. I have been an Auditor. I've done auditing. I know the work. It is very challenging.

And then we have to ask the utility for the information if they haven't provided enough information to review, and that takes time. So all this is to say that we do prioritize our efforts based on the resources that we have.

Assemblymember Zbur,

Good afternoon, this is a question for Deputy Director Serizawa. So I hear a lot from my constituents concerns about the NEM program and rooftop solar. Some folks worried that the incentives embedded in the rate structure are going to go away and unfairly reduce necessary incentives for distributed solar. And then folks on the other side.

Worried that folks without rooftop solar are unfairly burdened, the Public Advocates office released an updated analysis citing an estimated in 2024 cost shift of about $6.5 billion that non solar customers pay to subsidize rooftop solar customers. I was wondering if you could talk a little bit about how much you think the CPUC's current rate reform efforts are changing that $6.5 billion estimate on a going forward basis.

Thank you for that question. The $6.5 billion already takes into consideration the reforms on the rooftop solar program. So that's unfortunate. We do believe that the Commission's decision last year was very helpful in terms of decreasing the cost shift. But there is more to be done, and I'm specifically referring to those customers. I think Michael Warra referred to legacy NEM customers who got into the program early on. They are still enjoying a lot of incentives, and also the payoff for their investments are sometimes three to four years. That's quite a great payoff. And under reforms that we've proposed, we're looking at seven to eight years, which is still pretty good. And I also want to emphasize that the Public Advocates office sees a valuable role for rooftop solar, but we think those incentives are just too burdensome right now.

Thank you.

All right. And then, Assembly Member Ting, I think you had another quick question.

Oh, it was just coming back to that question that you were able to, you said you could answer, but I cut you off.

Yeah. Actually, this is somewhat related to what we were just talking about. So at least more recently, utility. What we're finding is that utility spend is lower than the actual rate that you're seeing, which does raise questions. And earlier in my presentation, I pointed to two reasons. The first has to do with subsidy programs like Rooftop solar, where customers who are not able to participate in the program are bearing more of the cost burden. And so their rates, rates are higher, their bills are higher. And the other reason is that there are cost and effective programs that repairs are paying for, and we're suggesting to eliminate those from rates. We're not suggesting that they're not valuable programs, but we're saying that perhaps they should be funded a different way, not through electricity rates.

But then if they don't need that rate increase, why do the rate increases keep getting approved? Maybe I'm asking that question incorrectly.

The public advocate's office is trying to point out where programs are not cost effective. We, I think, have a long track record of pointing those issues out, and we will continue to and advocate for eliminating them from the rate.

Got it. So you're saying it's because of some of these programs being embedded in the rate. Is that sort of what you're.

Yes. Programs that are not cost effective and also don't help to achieve the state's energy policy.

And then do you have a list of some of these? I'm sure you've highlighted them, so maybe you could give us.

They're in the presentation in very tiny print because you couldn't actually fit it on one page.

That's why I have my reading glasses here, but.

I'm happy to provide that information to you in a more readable format.

Right. But could you just, since we're here, maybe say one or two?

Sure. There's a lot of energy efficiency programs, frankly, that are not cost effective. Some demand response programs are also not cost effective, frankly. We would like to see an evaluation of these programs comprehensively and also to make sure that these programs are achieving the state's energization goals and climate goals.

Yeah, I couldn't agree with you. I know with one pot of energy efficiency money I've been looking at for years, oftentimes it just sort of just sits there. So the ratepayers pay into it. It just sits there trying to get the Commission or the utilities to move the money. Seems impossible. Then when we try to move it, they get very offended. So it's just sort of. I understand what you're saying. So that's something that you could provide to us in a list that is legible.

It's not your eyesight, Phil. It really is that tiny.

I agree. Even with my reading glasses, they're very hard to read.

I'd be happy to provide that information to you.

Thank you.

Okay, so with that, we are going to go ahead and turn to our remaining panelists for their comments and appreciate your patience. We are going to hear from Adam Pierce. He's the Vice President of energy procurement and rates from San Diego Gas and Electric. And I would say, I think if, as part of your comments, I think it would be really helpful for you to address the question that Assembly Member Berner and Assembly Member Connolly raised, which is that we're watching this split screen play out where on the one hand we're looking at skyrocketing rates and on the other we're reading news stories about record profits for the IOUs. So if you could, as part of your comments, address that and help us understand how that's possible.

Yeah, definitely. And thank you, Madam Chair and Members of the Assembly, really appreciate you all putting this important hearing on today. It's a very important topic here at SDG&E and one that we take very seriously. And affordability is really at the top of mind as we're thinking about providing safe and reliable energy for our customers as well as helping the state meet its climate goals. So I thought I would walk through a few slides with you all today and just highlight a few things first looking at and if we can go to the next slide please. I don't know what some of the rate impacts we've been seeing over the last few years and I thought I'd start with what makes up our rates today. As you saw from some of the other presentations earlier, we saw about a 14% decrease in our system average rate as of 31 2024 and it's really composed of three main buckets here that I'll talk about here on the slide. You can see really the core of our business. The transmission and distribution rates make up just under 50% of that average rate. So this is things like substations, poles, wires bringing electricity into the San Diego region and into our business and our homes. The next bucket you'll see here is state mandates, that teal bucket and that's really driven by two bigger ones, our public purpose programs, our PPP and our renewable portfolio standards. Those make up just under about 20% or so of our average rate. And there's a few other reliability and other state mandates that are included in that. And that makes up just under 25% of our current average rates today. And the last piece you could see here is on the commodity side and there's two pieces I wanted to highlight there on commodity, one of which I think we've talked about before. But in the State of California, electric utilities cannot earn any return on the sale of electricity to its consumers. So to the extent we're buying an electron in the market for a dollar, that same dollar is then passed along to our customers and those costs are tracked and then they're trued up at the end of each year and go into rate the following year. The other thing that's a little more unique to SDG&E service territory is that about 80% of our customers in San Diego County are currently getting this service from another provider, most notably the two community choice aggregators in our service territory. Moving to the next slide, we wanted to expand this a little bit more and take about a two decade or so. Look at what the rate trajectory has seen for San Diego and others across the state. And really starting in 2007, it's no surprise to anyone San Diego County in particular, our service territory has a history of wildfires. We have about 4100 square mile service territory. Roughly two thirds of that is covered in elevated high fire threat districts. And so after the wildfires of 2007, we really made a concerted effort and conscious effort as a company that that wasn't going to happen again. And really, over the last two decades, we've been investing across our backcountry, hiring meteorologists, putting cameras up, looking at other ways of predictive modeling to help design our system to be able to stand this extreme weather that we're seeing. And we're happy to say, since those 2007 wildfires, we have not seen a catastrophic utility caused wildfire in San Diego. And over the same time period, 18 years in a row, San Diego Gas and electric has been recognized as the most reliable utility in the west, something we're very, very proud of for our constituents and our customers. Moving over to the slide, you can see the next thing I've called out here is, zero, I'm sorry, we're still on the same slide. Declining sales. This gets to a little bit of what Assembly Member Ting was highlighting and looking at revenue requirements staying flat, but rates going up. So if you think the majority of the utilities cost are fixed, those really outside of that electric generation, and what we've seen, at least at SDG&E, from about 2014 to 2021, about a 2% or so annual decrease in our average sales. So even if we didn't spend another dollar, which we knew we were hardening our system for wildfire, we'd see our rates increase about 2%. So that's the phenomenon you're seeing a bit there with those fixed costs being recovered over a smaller base.

Could you restate that again? You said one more time, please?

Sure. Sorry. So the majority of our cost, sort of outside of the electricity generation, is related to fixed cost. So those don't change as sales change. So what we've seen from 2014 to 2021, especially in SDG&E service territory, as things like rooftop solar and energy efficiency continue to make its way into our service territory, we've seen those sales decline pretty regularly, on average. So you're seeing the same fixed cost being absorbed by fewer sales, causing the rates to ultimately increase.

And besides, just the poles, the infrastructure, which obviously fixed costs. Are you talking about labor as well?

Yeah, this is things like poles, wires, substation, those state mandates that we talked about, things that aren't dependent on the actual use of electricity.

Okay, thank you.

And so, to put it in perspective, SDG&E on average, their bundled customers use about 400 kilowatt hours a month. The national average is roughly double that. So if you took our same revenue requirement and put it into one of those average service territories across the US, our 33 cent rate would cut in half. And so again, I think that's what we've talked a little bit today about what we can do around encouraging electrification around the state. Having clean vehicles, electric space heating, electric water heating, all those things are going to use more electricity. And as we have more electricity, we're going to have more electrons to spread those costs across. Moving on, we have rooftop solar on here, and I'll get to that on the next slide. But really wanted to highlight here is really the proliferation of rooftop solar, what we're seeing in our service territory. In 2006, about 0.3% of our customers had rooftop solar. Residential customers had rooftop solar that had grown to about 5% by 2015. And by 2017-2018 we'd seen it double to 10%. And now we've seen it double again to about 24%-23% right now today. So again, really large proliferation of rooftop solar that's helping contribute to some of that sales phenomenon that I just talked about. And the last thing that I wanted to highlight on this chart was from 2021 to 2023. I think the State Auditor talked a little bit about this, but we really saw a lot of volatility in the commodity markets as we saw natural gas prices really ramping up due to a lot of factors, weather, storage, pipeline constraints coming into Southern California. So as those natural gas costs increase, so did the power price. So between 2021 and 2023, our average rates went up about 12 cents. Nine of that $0.12 was related to our commodity rates. So you could see today we're just at just over, little bit below PG&E at 36.6 and a little bit above SE at 27.2. And the last thing that I'd point out is if you look at on the top left of this chart, you could see the typical residential Bill for our customers. And you can see SDG&E has the lowest bills of the three large electrical utilities in California. So moving to the next slide, I know I mentioned, I talk a little bit about the cost shift and we've heard a lot about the 6.5 billion statewide that the Public Advocates office just recently published. So what we did is we actually looked at this specifically in SDG&E service territory over the last decade. And what we've seen is we try to put this in real customer dollars and real impact of those, roughly 80% of our customers that don't have rooftop solar today. And you can see back in 2013, the cost shift that non solar customers were paying on an annual basis was about $20 a year. What we saw now at the end of 2023, that's gone up to $450 a year. And just to put this into perspective, we looked at the state cost shift of the six and a half $1.0 billion across and compared that to the subsidy for the care program, our Low income discount program in California, the subsidy for rooftop solar is over three times that of the subsidy for Low income programs, with roughly half the. Again, you know, we agree with exactly what public advocate's office said, that solar is going to be a big part of our energy future. As electrification comes in, more energy is needed, but we need to make sure that those customers that can't afford it aren't allowed to or can't put rooftop solar on the roof, aren't the ones paying for it. So as we look to the future, wanted to highlight some of the challenges that we've talked about today, and I don't think any of those are any news to anybody as we've had this discussion today. But if we go to the next slide, please. So extreme weather is not going away. We've seen 2020 and 2021 be some of the worst fire seasons we've seen on record. We've seen warmer and warmer summers, increased air conditioning load for our customers. In San Diego. In 2023, we actually saw a tropical storm come through San Diego. county. It was luckily much milder than originally anticipated, but still 80 miles an hour winds going across our backcountry. So making sure our system is resilient and reliable and providing that electricity to our customers when they need it most is going to be paramount for us in the future. State climate policy. We talked about electrification being a big driver of that EVs by 2035, heat pump water heaters by 2030. These are all going to increase usage and load on the grid. So making sure that grid is ready and able to handle that is going to be a necessary investment that we're going to have to look forward and challenge, that we're going to have to manage in high volumetric rates. We know that rates in California are too high. We need to look at solutions. What we were talking about today to help reduce those rates. And as we're thinking about the affordability challenges it's causing today, it's also creating a disincentive for us to electrify those technologies that we're going to need to implement and actually go faster than we've had over the last several decades to meet our climate goals. So as we think about how can we do this? And looking at through the utility lens, I think first and foremost we have to continue to ensure we're operating as efficiently, effectively as possible. You'll see on the next slide, the auto report actually looked at the operating cost over the last few General rate case cycles. And you could see that over the last nine to 10 years, those three General rate case cycles, we've gone up about 6% per year, excuse me, 6% total, little under 1% per year on average on operating costs. But we need to continue to do better leveraging things like automation and other technologies to continue to help make sure we're providing safe and affordable service. I think next we talked a little bit about that, but supporting residential rate reform to help provide additional Bill stability and avoid those price spikes that we see in the summer months when usage doubles due to air conditioning load, pursuing securitization of some of these wildfire costs to help extend the repayment of those costs and avoid some of the Bill shocks for our customers and really have some benefits for our Low income customers as well. Continuing the discussions, I know the last few years we sponsored legislation around looking at PPP, those public purpose program costs and potentially taking those out of rates. Last year those were nearly $500 million worth of cost in our rates. Taking those out would have saved our annual customer about $120 or so a year. So a real cost saving. So again, I know that has been held in appropriations the last few years, and I think it's still worthwhile going through and looking at maybe taking a more sort of thoughtful approach and looking at some of the programs that are listed on that slide that potentially are no longer effective and potentially need to be sunset or pulled out of rates. And last but not least, wanting to look at other dollars available, federal dollars such as ITC IIJA, we applied for $100 million of wildfire cost recovery in tribal land. So again, looking at all funds available because we know there's a lot to do and it can't all be done on the backs of our ratepayers. And the last slide I wanted to highlight again from the audit report, I talked a little bit about the ONM already, but just looking at the audit report highlighted a lot of the things we've been saying over the last several years of things that are causing upward pressure on rates, net energy metering, wildfire cost of natural gas these public purpose program costs, declining sales. So, again, really appreciative of the Auditor and the work that they've done on that. So thank you for the time, and I definitely look forward to your questions and discussion.

All right. And we will hear from our other two panelists and then come back to you for questions. But I do want you to address the question that's already been asked. How do you justify skyrocketing rates alongside record profits?

Would you like me to do it now? Yes. Okay. So affordability, as I said, remains, continues to be top of mind. We know that with the cost of goods and services going up across the board, gasoline, groceries, housing, everything is becoming more expensive, especially in San Diego, which is one of the most expensive places to live. So making sure our customers are hearing from us early and often about those rate changes and so that they can plan accordingly is important. Making sure they are taking advantage of the Low income programs, the neighbor to neighbor program that we were able to double last year. Making sure that they are aware of all those is extremely important. But looking at what our responsibility is as well for our ratepayers, is continuing to make sure they are having safe and reliable service for our customers, and that requires continued investment in our system. I'm very proud of the fact that we haven't had a wildfire in over 16 years. I'm proud of the fact that we've had the most reliable electric utility over the last 18 years. So continuing to make that investment and ensuring that we're having a financially healthy utility also helps attract that capital needed at the lowest cost to be able to invest in that infrastructure that is needed for our customers, not only to maintain their safety, but also to maintain the climate policies that we all need to hit as we work towards our goals of 2045.

Got it. And I think I certainly recognize, I think we all certainly recognize that utilities need to have a good rate of return in order to attract that investment, and certainly in order to attract that investment at a reasonable rate. I think that profits that go up, I don't think this was you, I think it was someone else. Profits that go up 79% over a two year period really seems excessive. And I would just offer that because I think as we look at ways to decrease rates, we don't want to get in a situation where you have our customers accusing you of price gouging in order to make record profits, because then we end up in a situation that is damaging for everyone and unravels very quickly.

No, I appreciate the comment. And again, something that we take extremely serious, and affordability is top of mind because we know our customers are struggling.

Okay, thank you. And, yeah, we'll come back for more questions from the Committee. We're going to turn to Matthew Friedman, who is joining us from the Utility Reform Network. Thank you for being here.

Thank you. Madam Chair, Members of the Committee, my name is Matt Friedman. I'm a Staff Attorney with the Utility Reform Network, or TURN. For 50 years, TURN has been fighting for lower bills and rates to hold utilities accountable and to protect consumers. And for the last 25 years, I've been employed by TURN, fighting in the trenches both at the PUC and here in this building on these very same issues. My first slide that I'd like to take a look at looks very similar to many of the slides you've seen. What's different about my slide that you haven't seen already? That shows historic rates? These are the undiscounted residential rates. So what you've been seeing in the other slides are blended average rates. This is the rate that customers that are not residential customers, not on the care discount program, are looking at. And the trends get a little bit more stark. I'll just point out a couple of things which will reinforce everything you've already heard today. PG&E. Since 2019, for these customers, rates have more than doubled since 2022, up 53% last year alone, a 33% rate increase in a single year. The trends are scary. They're unacceptable, and we need to do things differently to bend that curve. And I agree with the other panelists regarding the drivers of spending, but we have a couple of other ideas about things we might do to have different results in the future. So next slide, please. This shows the percent of customers that are in arrearages on paying their Bill, basically late in paying their Bill, that are running up balances with the utility. And you heard, I think, one of the presenters mention that one in five customers are behind on their bills. But if you look at Low income customers, it's more like one in three. And the total amount of arrearages, I looked at the latest data, this is from January of 2024, which is pretty recent, is $1.75 billion. For the three IOUs, that's the amount that people are behind on their bills. And of that amount, a little over 40% is owed by Low income care customers. And Low income customers are much more likely to be late on their bills than non Low income customers. That's what this chart shows. Next slide, please. One of the phenomena that hasn't really gotten much attention is the difference between customers who live in coastal areas versus inland areas. This chart shows average bills for a care customer living in a coastal zone versus a hot inland zone of the three major investor owned utilities. So what you notice is pretty stark, which is in the summertime, Low income customers living in hot inland areas are paying bills that sometimes are three to four times the Bill of their counterparts living in a coastal zone. I guess this isn't surprising, but we don't talk about it much. And why it matters is because customers in hot inland areas are facing much larger burdens in terms of the bills that they pay. And they're also much more susceptible to Bill spikes when there are heat waves coming through. So these correlations are also similar for non care customers. But the care customer example is stark. And of course, the reason that we're seeing high summer bills is air conditioning. Now, is air conditioning a luxury? Is it a wasteful use of electricity when it's over 100 degrees outside? I don't think so. I think it's a necessity. Basically, it's a basic human right for people to be able to have a comfortable interior space that supports their ability to live. And so we need to think about how all of our choices affect customers in the hot zones, who typically pay higher average bills and specifically much higher bills in the summertime. So next slide, please. This gets to another extremely controversial topic, which I know you've heard a lot about, which is income graduated residential fixed charges. Why would we do this? Well, I can tell you that my organization spent a long time opposing any residential fixed charge. And if you had been in this exact same hearing room about a decade ago, you would have probably seen me a little bit younger making an argument against fixed charges. And we spent a lot of time arguing against residential fixed charges here and at the PUC. So why have we changed our views on this? Why is turn in a different posture today than we were 10 years ago? Well, it's because of changed circumstances. The world is very different now than it was back in 2012 or 2013. Rates have skyrocketed. I don't need to make that point anymore. We've all talked about it already, and existing rate levels provide plenty of incentives for energy efficiency and conservation. The two issues that we had that were really driving our opposition to fixed charges historically were impacts on energy efficiency and conservation and impacts on Low income customers. Well, rates are so high now, I think we're at punishment levels. We're not really concerned that rates aren't providing enough of an incentive for people to reduce their usage, and none of the fixed charge proposals under consideration would materially change that incentive. A decade ago, our top priorities were conservation and efficiency. Today we're talking about electrification. It's a total paradigm shift. We're not talking about how to design a rate structure that is placing its top priority on reducing usage, but designing a rate structure that is trying to rationalize the way people use electricity and to promote efficient electricity usage, including switching from natural gas and gasoline to electricity. Additionally, a much greater portion of the costs and rates are no longer tied to customer usage. As you've heard, we're seeing a real delinking of what the utilities are spending money on and any relationship between that and what customers are using. And then we've seen dramatic growth in net metering, which has also been discussed. I'll also point out that the data for 2023 shows that it was the biggest year on record for customer applications. For rooftop solar, applications were up 32% in terms of the number of customers applying in '23 versus 2022. So we have a very large population of solar customers, and we need to rationalize our rate design to make sure that the next wave of rooftop solar and storage adoption doesn't drive much higher rates for everybody else. And we need rates that are going to encourage and accommodate much higher penetration levels without breaking the bank. And then finally we have an opportunity now to income differentiate these charges. We always have had income differentiated rates. There's a lot of income differentiation in the way people pay for services in a place like California. So it's an opportunity to look at how we fairly spread the burden for some of these social policy and fixed grid costs that really aren't related to usage. We also think that an income graduated fixed charge can promote equity by reducing bills for Low income customers, promoting electrification, and better aligning the usage rates that are applicable with the actual costs that are incurred to serve that customer. Finally, I'll just say this. The fixed charge, contrary to what you might have heard, it's not a tax and it doesn't have any impact on utility profits. It is not a vehicle to increase the amount of money the utilities get to collect. If it was any of those three things, we would be dead set opposed to this proposal, and so would the other consumer groups. So you need to understand that rate design is a zero sum game. You give to one customer, you take from another customer, you take money out of a fixed charge and it becomes a reduction in usage based rates. Next slide, please. So what other affordability proposals do we have well, we have a package of ideas, a ratepayer relief act that would have several components. First, we want utilities to identify, apply for, and include non ratepayer funding streams in their spending plans. Does this sound familiar? You're hearing it from multiple people today to be able to find other ways to finance wildfire mitigation and climate initiatives. Second, we want to make sure utilities are required to use the most cost effective measures to achieve the greatest grid benefits at lowest cost to ratepayers. The utilities are not motivated to find the least cost solutions. This is the not so dirty, not so secret truth, right? Utilities are motivated.

Their primary business is to increase their profits for their shareholders, and that is a result of increased capital investment in rate based assets on their system. So when there's a choice between a cheaper alternative and a more expensive alternative that involves higher utility capital investment, the utilities almost always choose the higher cost one. We need to force them to make different choices. Third, we need to establish benchmarks based on the existing PUC Bill affordability metrics that are integrated into the evaluation of utility spending plans.

When a spending plan is simply going to break the bank and become unaffordable, that needs to be something that the PUC actually uses to make a decision, not simply takes note of when they make their decision, which is what happens today. And if that doesn't work, we support a cap on future rate increases that would be tied to the Social Security cost of living adjustment. Might sound radical, but maybe radical solutions are what are needed.

The second category is using external funding to reduce rates, and we talked about that, too. We were supportive of the climate Equity trust proposal that was in Senator Laird's Bill two years ago, SB 1020. We're hoping it's going to make a reappearance this year. It's a long term mechanism and structure for channeling sources of external funding to cover costs unrelated to the provision of electricity services that would otherwise be recovered in rates.

Sources of money, cap and trade funds, climate bond if we come up with one, and federal support as well. The next category is alternative financing and ownership options. There's been a lot of talk. I'm very happy to see everybody talking about financing here. It's not a very exciting topic normally. But the thing to understand is that utilities are a very expensive way to finance investments in infrastructure. Everybody knows that interest rates also have gone up.

If you've taken out a home mortgage recently, you've noticed those rates have skyrocketed. That's also true for a variety of infrastructure investments that we're seeing, and that's why there was, I think one of the panelists talked about the fact that these higher costs are driving up rates for clean energy projects. This is of concern.

We need to think about ways to make available Low interest financing that takes advantage of the state's borrowing capacity and its ability to issue tax exempt debt to provide meaningful reductions in the costs paid by ratepayers. And just let me give you an example. If you substituted the state's cost of debt for what it costs the utility to invest in, say, a large transmission project, what would be the savings to ratepayers just from that savings in the financing cost?

Assuming the state didn't kick in $1 of subsidy, but just we piggybacked on the state's lower cost of borrowing. It's about a 30% savings to ratepayers net net, not on the cost of capital, but on the total money that customers would pay over time. There are huge savings.

One thing that people also don't know is that when the utilities collect a dollar in profit that is authorized by the PUC, they collect an additional, usually $40 to top of that dollar to pay for the taxes on their profit. So to give the utility a dollar for PG&E, for example, you have to pay a dollar 42 to get a dollar into PG&E shareholders pockets.

There's a cheaper way, and we need to think about options for using state financing that would not put taxpayers on the hook, but could take advantage of the state's capacity to get money at a cheaper rate, given the huge amount of investment that's needed in the system, and even a more ambitious proposal, Senator Becker had a Bill, SB 1032, back in 2022, to establish an infrastructure authority where the state could finance and own some of these assets at its much lower cost of capital.

Finally, Low income customer Bill relief. I talked about the income graduated fixed charge, which, by the way, would produce lower bills for Low income customers across the state. We also were interested in looking at increasing the discount for care customers of gas companies. So natural gas service right now that discount is 20%. We think it could be increased to match the 30% to 35% discount that's on the electric side. There's also. I'll just put in a plug for community solar implementation.

One of your colleagues, Assembly Member Ward, had a great Bill that we supported last year, AB 20316 to make available low cost community shared solar, which would be much cheaper than rooftop solar. Unfortunately, the PUC issued a proposed decision just on Monday that essentially guts that Bill and declines to implement it and would instead adopt a pretty meaningless alternative program. So that's a pretty disappointing outcome. A bunch of us are not done fighting on that, but that's a missed opportunity.

And then finally strengthening disconnection protections for customers who are behind on their bills. So I just put out a large menu if folks are interested. We're happy to talk more about this and I appreciate the opportunity to share some of my thoughts today.

Wonderful. Thank you. Yes, I think we appreciate the large menu. That's good. And I'll note it's four, which was the official, I think published end time of our hearing. We are going to carry on. I know that there's a number of questions that I and other Committee Members have, so hopefully our panelists are able to stick around with that. We'll hear from Stephanie Doyle, who is the California State affairs Director for the Solar Energy Industries Association.

Thank you chair. Thank you Members. I will try to be quick with my comments. We can get to questions. Thanks for inviting me to speak today on the future trends and opportunities California has to address its affordability issues. I'm Stephanie Doyle. I'm the California Director for the Solar Energy Industries Association. We're the National Trade Association for the Solar and Storage industry, representing over 1200 companies from utility scale, distributed generation, manufacturing, recycling and everything in between.

So solar and storage can and does contribute to affordability, provided that our state reduces barriers to deployment and incentivizes technology and rates alongside to ensure projects provide the most benefit to the grid. The State of California, in its most recent preferred system plan as part of the Integrated Resources plan, shows that 14.8 gigawatts of solar by 2030 and 57.5 gigawatts by 2045 are needed to meet our clean energy goals.

To do this, we're going to need a diverse portfolio of solar resources, including utility scale, community and rooftop. Diversity of the market will help reduce costs by allowing the right resource to be applied to the right need. With passage of the Inflation Reduction act, the state also has billions of dollars in funding available to tap into to reduce costs.

We can achieve our goals and keep costs down, but we will need to fix the way we plan and deploy the technology, processes and rate design to do so. Next slide please. So, however, clean energy deployment cannot provide benefits to ratepayers and the grid if it cannot be deployed in a cost effective way. California is currently facing extreme timeline delays for projects from utility scale all the way down to residential systems.

On the utility scale side, projects continue to face delays due to long interconnection queues and new and upgraded transmission, lagging far behind our needed capacity for clean energy projects. Time equals risk equals money, and increasingly difficult timelines. Upwards of eight to 10 years in some cases, are creating a backlog of delays and cancellations of projects.

We can address these long timelines with grid enhancing technologies, improving interconnection processes, and ensuring permitting and siding and unreasonable timelines that provide certainty to developers and financers on the residential and commercial side. Through SB 410, legislation that was passed last year, we hope to see reasonable energization timelines that hold the IOUS accountable when those timelines are not met. Enabling more load to connect to the grid will help spread the cost for ratepayers and put downward pressure on our rates. Next slide, please.

Continuing on those proven models, supporting a western ISO will enable even more efficiency and sharing of resources and reduce costs by eliminating redundancies in needed capacity and transmission across our neighboring states. Next slide, please. And then on the distributed resources side, the continued growth of virtual power plants and demand response programs that pay customers directly for reducing energy use when the grid is constrained can reduce cost for ratepayers by tapping into customer investment and reducing pressure on peak load.

A leading driver for increased rates by utilities, VPPs use software to aggregate the output of hundreds or thousands of small scale solar and battery systems to act like power plants and can defer high cost upgrades and capex, such as generation and transmission and distribution lines. VPPs can also be scaled up quickly since they rely on already existing systems on the grid.

California already has in place many smaller programs to support these types of systems, but by scaling these up, we can really tap into resources that are already on the grid, aggregate them, and leverage them to reduce future utility asset buildout that leads to those increased rates. Finally, load flexibility will be critical to the successful transition to an electrified economy that is run on clean energy resources.

We need time of use rates, dynamic pricing, and other flexible rate structures readily available for customers in order to meet new loads, respond to system conditions, and provide resilience and reliability to individual customers and the grid.

Flexible rate structures can go a long way in encouraging electrification, provided they are complemented with upfront incentives for those who cannot afford ders, as well as protections for those who cannot respond to time of use rates, ensuring those who can make the transition to electrify are incentivized to do so, while also ensuring that those least able to afford the transition are helped and protected through specific rate structures. High upfront incentives and direct assistance programs are needed.

Our processes to approve new programs and rates in the IOUs are notoriously slow, and once approved, they're often subject to delayed implementation by the same IOUs. Implementing these rate structures in a thoughtful and timely way can go a long way to reducing our costs. I would like to close with a reminder that slowing down the transition to renewables means communities living near dirty gas peaker plants will continue to be exposed to harmful air pollution and carbon dioxide.

We need to ensure affordability as we make this transition, particularly for those least able to afford it. But we cannot forget that slowing down decarbonization is also not an equitable solution. Keeping fossil fuel plants online is already costing us billions, both directly through payments to utilities to keep them running and from the climate impacts they continue to cause. California cannot afford to ignore our affordability crisis or our climate crisis, and solutions exist for both.

Thank you. All right. With that, we'll open it up for another round of questions from Committee Members. Family Member Ting. Thanks.

Madam Chair, I just wanted to go back to Mr. Friedman. You had talked about fixed charge. Do you have a sense of how large or what kind of fixed charge you would be sort of interested in? And I don't know, maybe this is oversimplifying it, but is there a way to, in your mind, would the fixed charge apply to the fixed cost that our SDG e representative talked about?

Sure. Thank you for the question. I appreciate it. Well, turn has its own fixed charge proposal in the PUC proceeding. Mostly what I think Members here have been hearing about is the utility proposals, which we are not supportive of. Turn has a proposal that we partnered with the Natural Resources Defense Council, and our proposal is very similar to what the Public Advocates has put into the proceeding, which would be a $5 charge for low income customers and a $30 charge for non-low income customers.

That's where we believe the appropriate starting point is. It ends up with a blended cost of about 2350 a month, which, by the way, is about the same charge that the Sacramento utility district has for its customers, its fixed charge. The utility charges are much higher. We're basically the tweener in the proceeding between the utilities and the solar industry.

So we think that's the part that makes sense in terms of the costs that you collect through that type of a fixed charge, or sort of where do you need the levels to be? I'll just give you some benchmarks. If you just want to collect the costs of a customer connecting to the system, meaning like the service drop and the transformer and the meter. So literally the hardware that a customer needs to be a customer, you're at about $10 right there a month.

If you want to include public purpose costs and low income discounts, you're in the range. If you want to include a fraction of distribution costs, let's just say 25%, which would include some but not all the wildfire costs, you're in the mid $30 range. And if you want to go to include more of those costs, then you end up probably in the $40 to $50 range. That's kind of ways to think about what do you want to include in the fixed charge?

We're not getting into anything like generation or purchase power or anything of that type. So we think that's a good place to start. We think it will help dampen volatility and it would reduce bills for low income customers across the state in every climate area.

And how would that $30 fixed charge for non care customers impact their rates?

Let's say it would reduce their usage based rates. I think the number that we have is something like it's about five cents a kilowatt hour, four or five cents. It depends by utility. So every dollar that would be collected through a fixed charge comes out of the usage charge. So it's not an increment, it's just a reorganization of how the costs are collected and how customers are affected would depend upon their usage and particularly their average usage within each climate area.

Rates are kind of divided up, using the baseline system into different climate zones across the state. So higher usage customers within each given area would tend to fare better, lower usage would tend to fare less well. But the net impact we estimate in the range of about it could be like five to $7 a month for a non-low income customer. But nobody's the average. Everybody is their own unique customer. And any customer that wants to electrify, of course, ends up being a bigger consumer.

So what customers might see their overall, because these debates are all fine, but at the end of the day, the customer just sees one number, which is what they're paying the utility, and that's all they care about. So which customers would actually see their bills go up and what customers would actually see some relief? I guess.

Well, on average, the lowest usage customers would see their bills go up, but they start from a lower base. They have lower bills to begin with. The highest usage customers have the highest bills to begin with. They would see the most relief. Customers who live in the hot inland zones that are facing extreme bills in the summer would see more relief.

But low income customers across all climate areas would see lower bills because the way we're setting it up is a much lower charge for low income customers. $5. That's our proposal, and $30 for non-low income. And the statute actually requires that the average low income customer in every part of the state see benefits.

So in essence, you're trying to increase the floor of that cost, but also try to bring that ceiling down.

That would be one way to say it, yeah. I mean, these are all hard choices. There's no free money here that we have available to us in this exercise. It's just a question of reallocating how we pay for these system costs.

Why are you okay now with this type of charge that you weren't, say, 10 years ago, you'd mentioned it a little bit, but maybe you could be a little more specific.

Sure. Well, the much higher rates that we're seeing now, we're past the boiling point in terms of the impact on customers. The fact that you're all getting calls right now from your districts, from mad constituents, that wasn't happening 10 years ago. People are furious with what's going on. And people, especially who live in hotter areas are going to see bills this summer that are going to make their eyes fall out of their head right as you see these heat waves.

So we're recognizing the fact that we need to do something to deal with volatility of the bills. We've got plenty of incentives for conservation, which, again, was our number one issue 10-12 years ago was like, we can't jeopardize energy efficiency or conservation. We support energy efficiency and conservation. But is there any price that's too high? There is a price that's too high. There's a level at which you're not incentivizing, you're just punishing.

I think that the growth of distributed resources and the fraction of customers that are now adopting behind the meter technologies and the growth in micro grids means we have to think of a better way to assign costs across all customers. This is a game changer when we're looking at the fraction of customers that have adopted these technologies. And I think as SDG and e pointed out, there were very few before.

PG&E has almost 20% of its non-low income residential customers right now that have rooftop solar. So we have to think about a way to rationalize this. And then the other thing is the income graduated element allows us to use this charge to provide specific discounts to low income customers. And that's what we're really interested in is moving the needle. Also for the low income customer group.

You didn't mention in any proposals, demand response. Do you have some thoughts on.

Mostly because I don't work on demand response personally, not because I don't think it's an important issue.

Okay, thank you.

Thank you for your candor. And I would just say on the fixed rate debate that continues to rage, we will be hearing a number of bills related to that. Having additional conversations on that topic as a Committee, certainly. I think from my perspective, a fight about how we reallocate. So the pie is way too big and growing in a way that we've all acknowledged is untenable.

A fight about how we change the size of those slices obscures the fact that what we really need to be talking about is how do we shrink that pie? All right, Mr. Zbur, sorry to get.

Back to rooftop solar again, but I assume that implicit in the views that you expressed and that Mr. Pierce expressed is the fact that we've got rates increasing, so the need for incentives based in the rate structure are declining. In terms of us having more distribution of rooftop solar out in the community. I assume that's some of what's happening.

I guess the follow on question that I had is, if we didn't have this additional $6.5 billion embedded in the structure, and we're relying on existing rate structures, what is the rough number time period that we would need for someone to recoup their investment? That's one question.

And then the second question I had only because I've got to leave quick soon, is who in California State government is responsible for, and looking at the extent to which there is federal funding available to subsidize rooftop solar and sort of aggregate it for customers, is that being done well or at all? I guess. And I just wanted to see if any of you have a perspective on that.

Thank you, Assembly Member, for the question. Looking at the specific rooftop solar question, there was a pretty extensive proceeding at the CPUC a year or so ago that looked at reallocating how excess generation from rooftop solar was actually going to be implemented here. And we actually implemented that in December of 2023. And what that actually does is it looks at the avoided cost or what's the actual value that solar providing to the system, largely driven by the generation that is offset.

And so now that tariff has been delinked from the residential rate and now is based on that market rate again. So that was one piece of the puzzle. I think we're looking at the other piece through the ongoing proceeding around the residential fixed charge. And I think that's another piece to ultimately help solve that $450 annual Bill cost shift that you saw.

Regard to your question around what we're seeing in terms of paybacks, if this were all to be fixed, based on some of the analysis that we have done sort of on our first version proposal, we are seeing paybacks with systems paired with storage around that six year or so time range in solar standalone, just under nine years. And if you recall back in the proceeding, the Commission really looked at that nine year horizon as sort of that ceiling of what they were trying to stay under.

So even under the rate reform proposal we're looking at right now, at least SDG E's first version, we've looked at a few numbers that there are still Bill savings for those customers to incentivize, that it's just not burdening the other customers as much as they have.

I just want to make a point about that. Those were the numbers that were from the proceeding that was decided in December.

Since then, there's been some issues with implementation that has come up that we've seen basing has to do with the way that the generation and delivery credits are split for customers on their bills that we think is actually going to make those timelines a lot longer, unless that is addressed to get us back to the numbers that we had all agreed on in the proceeding. So we're trying to look into fixes for that.

But I would just call out that those numbers may be longer based on the fact that this wonky implementation issue has come up after the proceeding was sort of slipped in at the end.

Interested in more information on that?

Yeah, I'd be happy to follow up. I would also to the question about the Ira, I can only speak on the community solar side of things, but Gobiz has been running the application for solar for all. I'm not sure about the rest.

An Assembly Member just on that point. I think it's a huge missed opportunity for the state not to be prioritizing these federal dollars. And what I'm seeing is mostly chaotic efforts rather than organized efforts. The PUC says to the utilities, go find all the federal money you can. Utilities are only modestly motivated to find federal money, especially if it offsets their capital investment. So they're interested. But they might not also be the best entities to be in charge of that search process.

I think the Administration should have somebody on point whose job it is every day to wake up and think about how can I get more federal dollars to support California? Because the adoption, the enactment of the Inflation Reduction act and the Infrastructure act are once in a generation opportunities for us to get support from the Federal Government for our state clean energy priorities, and we should be entirely focused on getting maximum value from the Federal Government. I'm not seeing it.

I just want to mean, I agree with mean. I hear things that are happening in other states and I'm not hearing about similar kinds of efforts in California yet. And so that was the reason why I asked the question. So thank you for that.

Yeah, appreciate the question. And again, I appreciate your response. I think certainly at this moment, we recognize we have some unprecedented challenges. It's also an unprecedented opportunity with the hundreds of billions of dollars that are on the table. So we certainly need to do everything in our power to bring as many of those dollars to California as possible. And I think it's the only way that we actually can deliver on our goals in a way that is actually cost effective.

Assembly Member Hart.

Mr. Ware, you previously served as a wildfire Commissioner and also on the California Catastrophe Council.

And I am sorry to interrupt you, Assembly Member Hart. We're just going to let our Executive Director from the PC has a response to that question before Assembly Member Zbur leaves. She's rushed up to answer your question.

Thank you, chair. I appreciate it. Rachel Peterson, Executive Director of the CPUC. And we're also, as you're headed out the door, we're happy to follow up with your office. I'm happy to correct the record.

There is, in fact, a major state effort going on to pull in as many federal dollars as possible. Gobiz is the lead, and a number of agencies have been very active in pursuing federal dollars. We have not seen unalloyed success, but we have seen some success. And in fact, the CPUC is in charge of the solar for all application, and we are anticipating a response on that somewhere in the next month. Very happy to follow up more with your office.

I would appreciate that.

Thank you so much. All right. Thank you for that. And I think perhaps you can share that information and follow up with all of us. That would be helpful. Thank you. Assembly Member thank you.

I'm just interested in your experience and insight into future wildfire mitigation costs and trends. And what do you see? Are we reaching a plateau with the investments that the utilities have made, or are things just going to get incrementally and exponentially more? Well, I think it depends. It's utilities specific, and it depends on the maturity of the utilities mitigation activities, where San Diego started first and is ahead. And I think Edison is a little bit further along.

And PG&E has also, because of the strategies that PG&E has adopted, is less, I'd say. I think that we really need to move away from the idea that the right approach to wildfire mitigation is to reduce utility ignitions to zero. That is an incredibly expensive proposition. We are encountering the results of that proposition.

Now, I don't blame the IOUs for adopting that approach, given the liability regime that they confront, the outcomes of that liability regime for them, and also given the relative. We've done a lot to invest in. And I want to give the Legislature and the Governor a ton of credit over the last few years to try to invest in wildfire mitigation, it is still dwarfed by what the utilities do. It is not enough.

We are seeing that impact not just from the impacts on utility rates, distribution system investment, but also the fact that basically none of the large insurers are writing new policies in California. You want to talk about a huge impact on a homeowner's costs, go from $2,000 on an admitted lines policy to eight maybe if you're on the fair plan plus difference in conditions policy. So there are very large impacts from our failure to do as much as we should be doing on wildfire.

And that's a huge challenge right now because there's not money raining from the sky anymore. But I think it's a challenge we can't really ignore given the potential impacts on the economy, especially of the real estate market. Also, given the fact that we need to do those things if we want to build the housing that we need desperately in this state.

I've been on a variety of panels with the individual who leads CBIA, and one thing that he says that really stops me in my tracks is that multi unit housing and not necessarily in high fire threat areas, is struggling to get coverage at this point because of the dysfunction in the insurance market. This is all connected, right?

Half the structures that we've lost over the last decade, or half the structures, sorry, let me correct that. Half the structures from the 20 largest, most destructive fires in California history were lost due to utility cost ignition. So obviously utilities are a big part of the problem and a big part of the solution. But there are other solutions that are more cost effective, particularly given that the utilities have done a lot of work over the last five years.

San Diego in particular has been a leader and helped to show the way. The other IOUs have followed and the smaller IOUs and the MOUs. We are in a much better place with respect to utility ignition prevention. So then we need to do the other things. Right.

And there are a number of them that we are struggling to do as a state, but are much, I would argue, more cost effective than asking ratepayers to invest the next ratepayer dollar in, say, more underground and covered conductor, more hardware in the utility system. So that's just my perspective. I think the state needs to develop its own perspective about this broader question of cost effectiveness across different silos of investment.

And that's why I think these kind of strategic planning initiatives at the state level, not the utilities, not oeis, CAL FIRE, the other potential actors. Forest Service should be involved too, because they own a lot of the trees. But we need to figure out ways to keep communities safe. That's what we need, community safety. We need to create a situation where it's not a bet the company risk that there would be a single ignition.

Because if it is, the utilities are going to spend whatever they need to spend to try to prevent that. Think that's my perspective. Having that body of experience at this point. Thank you.

It's really valuable.

Thank you. All right, one more question from Selman Member Schiavo and then Assembly Member Connolly.

Just on the wildfire. You know, Mr. Pierce was talking about SDG and E and the success that they've had. And I don't know, Professor Wara, if you've looked at kind of comparisons of what's been invested by each different utility and what's been the result, know, I don't know, maybe not result, but the different levels of investment and like, you know, SDG e, how do they rate in terms of how much that costs? They're having a good success.

And then we hear about PG&E wants to put a lot of investment in undergrounding, which we know is incredibly expensive. And there's a lot of new technologies out there. I heard about kind of early tracking cameras and other technologies covering transmission lines. There's different kinds of options that are out there as technology progresses that theoretically would be a lot cheaper than undergrounding.

So do you have a sense of where is that sweet spot or that happy place of this is how you want to balance that investment as a utility around wildfire mitigation.

So this is a question that utilities across the west are thinking about. Right know, we don't know anything yet about. There's no finality, but we're hearing disturbing things about what happened in Texas this week with respect to utilities. Obviously in Lahaina, there was a terrible outcome that is really reminiscent of the campfire for all of us. I think there are a clear set of investments that. And they really begin with operations more than capital investment. Right.

The most effective things that our utilities have developed, and San Diego is really a leader on this. I want to give them a ton of credit for this is you need to know when it is safe to operate your system. And when it is not safe. And that means pretty simple stuff, putting weather stations on poles.

And then you need to develop a process to turn the power off when it's not safe or do other things like fast trip or fast curve or epss, depending on what place you're at that limit, the risk those compromise reliability. Let's be straight about it. Right. It is a less reliable service, but it is a safe service.

And then the question I think should be to what degree are we willing to spend everybody's money to improve the, to get the reliability in these high fire threat districts back to where the low threat districts are in terms of reliability? And that's a values question. I think that there is a very expensive path to very high reliability in the high fire threat districts.

It's not clear to me that we can afford that as a state or that the ratepayers that are going to be punished the most, the folks that Matt so eloquently show in that graph are facing those skyrocketing bills in the summer, that we should ask those people to pay the cost to make sure that someone in a very high fire threat district has very high reliability during fire season at a minimum. And we've done work on this.

I think it's reasonable to think about asking the high income areas that are high fire threat to pay some of the cost of their undergrounding more like how we have treated undergrounding in the past when it was kind of to improve your view in, I don't know, an affluent place. But for the low income places, then the question I think should be, are there other kinds of reliability resources, distributed energy resources, right.

Battery storage, even just generators that we can think about providing as an alternative to a very expensive capital investment. How do we feel about having less reliable power in those places? That's not a question we've really been willing to confront as a state. But I think that the situation in rates requires it. It is a hard choice. It's a values driven choice. Different parts of California are going to feel differently about it, but that's where we are. I mean, that's what the chart be.

And different parts of America all across the west, this is a problem. Oregon, Washington, Texas, Colorado, and different places are going to come up with different answers, too. And it's okay. But we need to ask that question.

Thank you. And I appreciate, I just wanted to comment that I really appreciate, Mr. Friedman, your urgency about the situation, because I think that really reflects what people in our communities are experiencing and the urgency with which we need to really address this issue and so appreciate all of your ideas that you brought to the table today. Thank you.

Assembly Member Connolly, thanks.

Wanted to bring up dynamic rate pricing.

Which was mentioned in the testimony.

We know there's some pilot work going on in the agricultural water pumping space, basically to nudge users towards shifting their.

Electricity use to non peak hours. So the question is, is there any.

Statewide kind of effort toward moving toward dynamic pricing?

Yes, Assembly Member, I could take that. Currently, right now, as part of the ongoing proceeding that's looking at the fixed charge, there's actually a second track of that, that's actually looking at dynamic pricing as well. And I think really looking at how we should potentially, at least from SDG E's perspective, potentially pilot some of these ideas.

And really I'd say, Carl, before we can walk on this, I think we're just coming off mass enrollments of time of use rates, and I think we are finally seeing a lot of buy in and a lot of understanding around that.

And so shifting to broad dynamic pricing that potentially changes every hour or every 15 minutes could potentially create some confusion among customers and really could potentially have an issue where we're seeing on the technology side, those that can invest in technologies that could handle that type of dynamic pricing would, and those that couldn't, wouldn't, and they would potentially lose out. So again, I think we're taking the right approach of studying it and looking at how it could be implemented in the future.

Great. Thank you. And just I've got one more question before we open it up for public comment. I wanted to come back to a point that several panelists made related to public purpose programs and the need to evaluate the cost effectiveness of those programs and then remove the programs that are not cost effective. So this is a question for our public advocate. How many programs are managed currently of these programs are currently being managed in the PUC?

I have to say, I don't know off the top of my head, I would say it's over. It's in the hundreds. It's a lot. And I can get you the specific number. I'm sorry, I just don't recall the top of my head. Yeah, we'll get you that number. We have it.

And how many of those programs do you think are cost effective based on your analysis?

Zero, I would say hundreds are not cost effective. Let me just put it that way. Yeah.

Okay. And sort of spoiler alert, your predecessor shared with many of us that he thinks it's one program that is actually cost effective. Okay. All right, which I share that and sort of say that publicly in this hearing because I think it just highlights what an urgent need it is for us to, and we've got the partial list of non effective programs here.

So we really want to follow up on that, get that analysis from you and your team, and then understand what we need to do as the Legislature to ensure that we are evaluating and eliminating programs that are not cost effective.

There's a number of other points, so just want to say thank you to everyone who offered up your menu of options for opportunities for us to start to bend this cost curve in addition to the public purpose programs, number of ideas that we discussed here that we really look forward to following up with you on. So thank you in advance for working with us on that as we work to turn, I think, some of these nuggets into real proposals and real cost savings for Californians.

So with that, we'll go ahead and say thank you to all of our panelists for being here, and we will open it up for public comment. Thank you, everyone, for your patience and sticking around. We're going to limit public comment to two minutes person, so we have time to hear from everyone.

Madam Chair Member Scott Wetch, on behalf of the California Coalition of Utility Employees, really well done hearing. Thank you for conducting this very timely. Rate relief is an extremely important issue to my Members. It feeds their livelihood. I'd just like to say we embrace many of the ideas that were put forward, especially by Professor Wara. There's many, many different programs that need to be eliminated. There's no free lunches here. We support the alternative financing, looking at GGRF, securitization.

But the two most salient points made here today is one. The NIM subsidy of $6.5 billion is not congruent with rate relief. You can't have both. You can't have 80% of your customers paying 400 and $5500 a year to subsidize 20%. This Legislature only subsidizes the UC system by $5 billion a year. And to pay three times the subsidy to solar customers than you do to care customers is unconscionable.

And then lastly, the point that the graph that was pointed out by some Member Ting to reiterate the reason why revenues have stayed flat while rates have increased, are very simple. You add more solar customers, they come off the system, they stop paying into the revenue pot. And the smaller pot pool of ratepayers have to pay higher rates to make up the difference for all the fixed cost. Hence, the need for a fixed charge. Thank you very much.

Good afternoon. My name is Dr. Jean Nelson with Californians for Green Nuclear Power. Chair Cottie Petrie Norris was quoted in a January 262024 Politico article. I thought it was kind of shocking that a couple of weeks before the budget deadline, our state agencies realized, zero, beep. If we take Diablo offline, we're not going to have enough energy to keep the lights on. Then we go to a May 242011 CCST report.

That's the California Council on Science and Technology, and I know you have a fellow as part of your staff right now. Commissioned by the CEC, nuclear power can provide constant, reliable, emission free energy with a much lower and more easily met requirement for load balancing. Roughly 30 new nuclear power plants could provide two thirds of California's electric power in 2050. France's example shows the benefit of following the science instead of following the lavishly funded Pacific Corp lobbies.

Mind you, last year, Pacific Corp. Was number five in lobbying in California, which leads California away from Diablo Canyon to expensive and polluting Wyoming coal fired generation. Per CGNP's emails to the Committee and staff, the recent shameful denial of CGNP's CPUC intervener compensation was also a likely consequence of that lobbying, which we look for redress. Thank you for your time.

Good afternoon chair and Members, Elise Von Rick from Trenton Price Consulting. We represent the climate center, appreciated Assembly Member Connolly's comments about how behind the meter resources can address some affordability and wanted to just like the company, to consider the untapped potential of lower rates using bi directional electric vehicles. And there is a Bill in this body, SB 233, by Senator Skinner, which calls for light duty passenger vehicles and school buses to be bi directional by 2035.

There's an electric power research Institute has estimated that vehicle to grid technology could result in over 1 billion in annual savings for ratepayers. And the Public Advocates office has done similar studies that show some of these savings can be passed on. So just want to kind of add that to the toolbox of solutions that this Committee considers. Thank you.

Thank you. Pat Barrett, South Stockton resident, seven years old, advocate for the systemically oppressed people in that area. I am on a fixed income.

In front of God and you people, I will humbly say my income is less than one $200 a month. Having that extra additive will not work for a lot of us. I was fortunate. I am low income. I was able to get solar put on my roof thanks to grid alternatives. It has brought my utilities down as my electricity went down to month, my gas went up. But we're working with it. It is still under $30 every month.

And because it is only me and I still use the hangers outside to dry my clothes, I don't do the true ups, but I don't get incentives because I was given a program part. I just want you to know that I cannot and a lot of other people cannot afford. Either I'm going to give up food or I'm going to Rob Peter to pay Paul. Or at 70 years old, I have to go find me a hustle.

70 years old, great great grandmother, why are we putting into ourselves, into this position? There's other people that have it worse than me, homeless. Why would they move into a house when they got to deal with electricity and other utilities? You know what I mean? We have to find a solution where other people are all taken care of. I want you to look at goal number one, STG's goals 13 and 7, because that is what this would cause a domino effect to.

It will add to poverty, it will add to homelessness, and we're just going to be chasing our tails. Thank you.

Hi, Rob Holly from San Jose. The Flagstaff study shows the damage a huge utility tax would do. The working poor will be end up subsidizing the wealthy who can afford higher electric use. That's why over 200 organizations oppose the unbounded utility tax. AB 1999 restores the balance and ensures a fair payment for electricity. And yet it preserves the incentive to conserve. Conservation is still important since it limits the size of the electric system and hence how much it costs.

And as you've heard today, the utilities otherwise are under no incentive to limit the size of the electrical system. Zero, by the way, solar users already pay a minimum fee. And when our NEM reimbursements already have public purpose program deductions from it. So our NEM people are already still paying into the public program. 1999 removes the issue from the utility bias CPUC and restores control to you, our elected representatives. When groups such as diverse as Howard Jarvis and Greenpeace agree on something, you should listen.

Thank you.

Good afternoon Chair and committee members. Thank you for the opportunity to speak today. Sorry, I'm a little tall. Is it possible to... Thank you so much. I appreciate the help. I am Reimagined Power's Senior Policy Analyst my name is Allison Hilliard. The CPUC's own report on affordability of the grid of the future from 2021 found three main reasons for rates rising and the main reason is transmission spending.

The second is California IOUs investor-owned utility return on equity for infrastructure, which was discussed today, is the highest in the nation, and also wildfire mitigation, the transmission spending. The report showed that there are many self approved projects with massive cost overruns that repairs are on the hook for for IOUs return on equity. The IOUs just reported record profits and the public people are rightfully outraged that stakeholders are profiting while they are getting while the ratepayers are getting gouged with rate increases.

For wildfire mitigation, many of those costs are now starting to hit rate bases as well as we go into 2024. The solution is distributed energy resources like energy efficiency and onsite solar. The legislature needs to focus on deploying more DERs and spending less on transmission infrastructures, which will help bring rates down for everyone while allowing the state to adopt to a changing climate and meet our decarbonization, reliability, and electrification goals. Also, localization of energy infrastructure is another solution that should be considered.

We urge the legislature to adopt policies that help advance local and community energy solutions. Thank you for your time today.

Thank you.

Hello. Good afternoon to all the committee members. Assembly members - Okay, thanks. I'm not as tall. My name is Esperanza Vielma. I am the co-founder of the Coalition for Environmental Equity and Economics, and so I represent over 300 environmental justice groups statewide, including Green the Church. And so affordability is a great concern of ours with our members, and so we adamantly oppose any additional proposed fixed charges for our residents, particularly when there is no cap.

So, the additional $30 a month for our low-middle income residents will be an extreme burden. We instead advocate for a cost effective fixed charge of $10 for everyone, $5 allocated for care and fair customers. And this is through the Assembly Bill 1999. And then the question was asked, what's the national average? The national average is $11. Moreover, the true challenge lies in the proliferation of long distance transmission lines, which was discussed, which exasperates the lack of rooftop solar.

Investing in rooftop solar not only mitigates transmission line costs but also benefits all ratepayers, regardless of solar adoption. While empowering individuals such as Pat from Southside Stockton, that just spoke. In conclusion, we urge our committee to prioritize equitable solutions, such as expanding solar access to residents, apartments, schools, and churches across the state. By doing so, we can tackle affordability concerns while advancing environmental justice, sustainable and equitable solutions. And to the flagstaff research component, the 1250 square foot home, we have information.

So, if you want to follow up with us, that kind of gives you a Cliffnote version of the 200-plus pages of that report. Again, thank you for attention in this matter.

Thank you.

Good afternoon. Laura Parra with Southern California Edison. Edison is committed to delivering safe, reliable, and affordable electricity to help the state achieve its goals of carbon neutrality. And we agree with many of the speakers here today discussing the energy transition and how we can make that happen for all households and make sure we have an actual savings. So, especially as we move forward here. So we want to continue to have these discussions with a broad view of gasoline, natural gas and electricity.

So, as you continue to have these hearings, we hope that we can keep that in mind for our customers. Thank you.

Thank you.

Good afternoon, Madam Chair. My name is Dan Jacobson with Environment California. I think three quick points on programs that we can implement quickly that might not be the silver bullet, but might be part of a silver buckshot that we can do for rates. The first would be grid enhancing technologies. A couple of people have talked about that. I can't emphasize enough that this is a smart way, and we need to look into that to make sure that we're taking advantage of it.

Second, similar to grid enhancing technologies, but is advanced conductors. How can we use this new technology to ensure that we're bringing on clean, renewable energy, save us all money, help protect us from wildfires? Third is looking at some other planning processes that the Public Utilities Commission has. Resource adequacy is a smart one to look at and to see what kind of changes we can make there to ensure that we're doing the smartest planning. Thank you for your leadership.

Hi. My name is Susanna Porte. I'm a music teacher from Berkeley. I'd like to say that the single greatest driver of high costs is the long-distance power lines, transmission and distribution, a big utility tax, because, let's be clear, that's what the income graduated fixed charge is. It is a utility tax. It makes the matter worse. It punishes people who conserve energy and who live in apartments and small homes, and it does absolutely nothing to stop big utilities' out-of-control costs.

For example, a single mom making $40,000 a year falls outside of the carefree range, and her bill would be doubled with the fixed income graduated fixed charge. So please don't take your cues from the same people who got us into this mess over the last 20 years. Big utilities. If the legislature is serious about solving this problem, they need to take control and pass strong policies that reduce spending on long-distance power lines.

You need to make sure we build fewer grid infrastructure projects and use lower-cost methods. And guess what? More rooftop solar and batteries can help you do that. Rather than vilifying rooftop solar as so many have here, you should see it as a solution to your problem. By the way, it's only 2 million solar rooftops out of 22 million ratepayers, so that's only 10% of Californians.

And if you think that they're taking money away from other people, show a new chart for what's happened since rooftop solar installation plummeted last year after NEM three was installed. Our rates keep going up, and yet solar installation is going down. So that puts a bullet through that argument. In any case, please, no income, graduated fixed charge, and let's keep rooftop solar growing. Thank you so much.

Good afternoon, Madam Chair. Molly Croll with American Clean Power Association. Thanks for the excellent discussion today. Electric affordability is obviously a huge issue. We heard some good ideas about ways to address that, such as shifting costs from ratepayers using GGRF funds or other methods. But we can't let this issue be a reason to slow down our clean energy transition. And especially necessary upgrades in the distribution system and transmission infrastructure are essential to enabling load growth, which, as President Reynolds pointed out, will ultimately reduce rates.

And for protecting reliability, we also need to be aware of the cost of inaction and the risk of future reliability and climate emergencies, which, if we deal with those with last-minute solutions, whether that's expensive, peak imported power, or extending old power plants that are costly, will undoubtedly be more expensive than doing the long-term planning today in a cost-effective manner. Thank you.

Good afternoon, Madam Chair and the committee. Thank you so much for this robust discussion today. PG&E is very committed to a safe and reliable service that we offer our customers at the lowest cost possible. And I just want to point out today, as President Reynolds said, our general rate case was recently approved, and so were several cost recovery memo accounts hitting bills all at once. And we know many of our customers, they are experiencing a real burden and hardship.

We're looking for cost-effective solutions. We hope that over the next four years of insurance solution that we've worked on with ratepayer advocates will save our customers $1.8 billion. We are looking for federal and outside funding, and we're glad to hear that there's still a call for removing costs from bills. We do support the fixed charge to reduce rates for our low-income customers and bringing equity to the bill, and to ensure electrification remains competitive.

But I would be remiss if I didn't try if I didn't say to correct the record. Currently, our customers' cost on their bill for undergrounding is very minimal. It's less than a penny on the bill currently, and we need to be thoughtful that one size does not fit all. As we look at utilities across the state, undergrounding costs have decreased over time due to innovations in our process.

We just have a lot of trees in PG&E's area, and continued vegetation management does come at a cost. The legislature passed SB 884, recognizing that undergrounding is long-term and permanent. Customers pay those costs over time, like a mortgage. We can continue paying $1.3 billion on vegetation management annually, along with shut-off options like PSPs or what's called what everyone's calling fast trip today. So, as Professor Wara said, there's a lot of difficult choices.

And I would just point out that PG&E's shareholders look like all of us. Most of our shareholders are large mutual funds, pension funds. They look like all of us, and they're putting their money upfront to invest in a very capital-intense system. And our credit rating is still suffering. And so we are climbing back to a higher credit rating to bring affordable financing that can be passed on to all of our customers.

So I thank you for the discussion today and look forward to talking about many of the proposals that were discussed today. Thank you.

Madam Chair: John White with the Center for Energy Efficiency and Renewable Technologies. Again, thank you for an excellent hearing. Covered a lot of ground. A couple of points I'd like to make. Transmission investments are essential for the build-out of the clean energy grid that we all want. And load growth is important, and load growth is catching up with us. We have increased artificial intelligence demands, data centers, bitcoin, so forth, and people like Santa Clara, Silicon Valley are growing leaps and bounds.

So we have to keep up with that growth. We also need to find ways to approve transmission more quickly. It takes too long, costs too much. We've got a proposal before the PUC for a joint proposal, which we think is important. And lastly, I agree with my friend Dan Jacobson about grid enhancing technologies and reconductoring are sort of like energy efficiency for the grid.

You can get more out of the same right away and the same power lines if you add some of these things, and they're relatively cost effective. So thank you.

Good afternoon, Madam Chair, and thank you so much for sticking around. I wish more of you. Anyway, my name is Yvette DiCarlo. I live here in Land Park, and I've had solar roof on, solar panels on my roof in the Bay Area, so I do have that experience, as well as being in the smud district. I wasn't planning on talking today, so I'm going to be following up with everyone more articulately.

But I'm here to defend rooftop solar, and obviously agree with some of the people who were from the public, actual public advocates that are talking about in regards to the benefits that it has. We already pay a fee. We do pay an infrastructure fee for it. The only subsidy that we get, or had got, was for a federal subsidy. So there were no California subsidies that I am aware of that have gone into anyone who's gotten solar in the last 10-15 years.

So SDG and a made a comment about they pay a dollar for a resource, and then they sell it for a dollar. I can assure you that's not true. It took me a long time to find out from PG&E when we had our panels in San Francisco that they paid us, turned around, and sold it for. That's not a subsidy to us. We don't get money from it. It's a net metering. That's what net metering was all about.

We don't get money for excess electrons that are put onto the grid. Those electrons are something that those utilities do not have to pay for, and they turn around and sell them. The capital costs are borne by the people who put the panels on their roof. They don't have to go through EIR queues and delays. It's extremely beneficial to have solar panels put on by private residents on their own private land without having to enter into expensive contracts or have these delays.

So I do feel that some of the panels were talking a little bit on both sides of their mouth, saying, in summer, there's going to be high electricity rates for these people in the Central Valley. And I absolutely have big concerns for that. Solar is when the best time that's generated is in the summertime, and so you would be able to offset those needs by having more solar up and fast. The gentleman from TURN was saying how quickly applications had come online.

There were 23% in their jurisdiction. That's phenomenal. We should keep accelerating that. We need to keep encouraging that as the fastest, cheapest way to get the electricity that California is gearing up for. So I feel like the utilities say they want competition, but they're afraid of competition that they don't have direct control over without PUC or legislative interference. So, thank you for this conversation. I look forward to articulating this more in a follow-up.

Thank you.

Robert Stockstead, I live in Berkeley. I was concerned about AB 205 and the provisions in it, including the effort to switch to an income graduated fixed charge or just a fixed charge. And I contacted representative and was told, "Well, you should really talk to the CPUC. It's up to them now." Well, I'm glad to see that the legislature doesn't agree with that. They're taking charge. They're going to fix that problem.

They introduced AB 199, and I as a few other speakers, strongly support that and hope that the legislature continues to take charge of the situation and not leave it up to the CPUC. Thank you.

Thank you. And as we wrap up the business of today's hearing, just thank you again to all of our panelists for your time and for your insight. Look forward to certainly continuing this conversation. My team and I and other committee members will be following up on many of the ideas that were surfaced here today with that after our marathon hearing. We are adjourned. Thank you.