Senate Budget and Fiscal Review Subcommittee No. 2 on Resources, Environmental Protection and Energy

You Senate budget Subcommitee number two on resources, environmental protection, energy will come to order. We are holding our hearings here in the O Street building, and all the Members are present, but we will do the quorum in a second. We have 13 issues on today's agenda. We'll be discussing the issues listed in the discussion section of the agenda. After discussion, we will have public comment on all of the items. We will not hold a vote on the vote only calendar today. These items will be voted on at a future hearing. Before we begin our discussion, let's establish a quorum consultant. Please call the roll.

[Roll Call]

A quorum has been established. Now let's start with issue number 10, the energy resources program account, or IRPA. Structural deficit Relief Trailer Bill language first we'll hear from the CEC, who will present the governor's proposal.

Thank you. Good morning. Can you hear me. Good morning. My name is Damien Mimnaugh, chief financial officer at the Energy Commission, and I'm here to present our energy resources programs account. Structural Deficit Relief Trailer Bill language the energy resources Programs account, which we call IRPA, is the main Fund supporting the Commission. IRPA supports the bulk of our activities in leading the state to a 100% clean energy future.

The revenues in the account are linked to the sale of metered electricity, that is, retail electricity sales surcharge generated about $71.6 million in 22-23 and currently costs the average household about $2 annually, so that's about month. Revenue growth in the account has been stagnating in the last several years, and this is a result of two main factors. The first factor is building and appliance energy efficiency measures that have reduced the growth of electricity consumption.

This is a direct result of the success of CEC's efficiency measures on items such as computers, clothes dryers, dishwashers, and the list goes on and on. These policies reduce electricity consumption and have saved California consumers well over $100 billion over the last 40 years. However, the reduction in electricity consumption has also impacted IRPA revenues. The second factor is the increase in behind the meter electricity from sources such as rooftop solar, wind, and non utility generation. We refer to this as BTM electricity for behind the meter.

Under current statute, BTM electricity is exempt from the IRPA surcharge. As BTM electricity capacity grows and reduces retail electricity consumption, IRPA revenues decline correspondingly. The Center Office of Research looked into this issue in 2021 and published a report forecasting that PTM electricity will grow from about 7% in 2015% to 17% of total electricity consumed by 2030 compared that to retail electricity sales, which are only anticipated to increase by about 1.6% between now and 2035.

The Senate report concluded that the growth in BTM electricity results in an inequitable cost shift from higher income customers to lower to middle income utility customers. So while the revenue in the amount. Excuse me, while the revenue in the account has stagnated, the amount appropriated each year has increased. The Governor's Budget proposes expenditures of about $95 million out of IRPA in 202425 and compare that to revenues of about $72 million. So this creates a structural deficit.

Now, the Administration, the CEC, and Department of Finance have reduced URPA expenditures by about $37 million in the years prior to the pandemic. But we have exhausted the available options to reduce IRPA expenditures. So therefore, our language proposes to do three things. First, raise the statutory cap on the IRPA surcharge to what it would have been if the cap had been tied to inflation. Second, tie the statutory cap to the consumer price index moving forward. And third, extend the surcharge to behind the meter electricity consumption.

So extending the surcharge to behind the meter electricity consumption would more equitably distribute the IRPA surcharge among consumers. And this proposal would allow the CEC to incrementally adjust the surcharge as needed to keep the Fund solvent, which would balance revenues with appropriations and expenditures. Approved by the Me. Thank you for your consideration.

Thank you. Finance, would you like to add anything?

David Evans with the Department of Finance. I would just like to add that should the Legislature approve this proposal, the Administration would not be seeking to increase the surcharge in the Budget act.

How about LAO?

Thank you. Sarah Cornette with the Legislative Analyst Office. We generally believe the proposal is reasonable as IRPA is in a structural deficit and this account funds CEC's operations, extending the surcharge to behind the meter generation would help ensure that those customers pay their fair share as they are served by CEC programs and initiatives.

And while any proposal that could increase rates should be considered very carefully, as California's rates are so high and rising faster than inflation, this proposal is modest and is expected to increase rates only by a few additional cents a month at, at a graduated pace.

So we recommend the Legislature approve the proposal but continue to closely monitor both future requests for IRPA spending as well as the need and cost effectiveness of existing expenditures to try to constrain that expenditure growth and keep the rates charged to customers from increasing too quickly. Thank you.

Great. Thank you. I'm going to start out, I have a number of questions and concerns about. And so I'll start out with questions for the CEC. Won't growing electricity demand from transportation and building electrification outpace any reductions in demand from behind the meter generation?

So Damien Mimnaugh, Financial Officer at the Energy Commission, the growth in electricity is anticipated to only be about 1.6% per year between 2022 and 2035. That's based on the most recent hyper that CEC produced. And so that is not expected to keep pace with the appropriations that will be made out of the Fund. The increase in the appropriations made out of the Fund over time.

Yeah, I'm just not sure. I mean, the table provided shows IRPA funding assumes flat revenues in spite of the CEC projections for significant demand growth. Right. I've heard the chair say we're going to double or triple electricity demand, so that just doesn't quite compute.

David Evans with the Department of Finance. The Fund condition statement that was provided, it provides a snapshot, a point in time estimate based on the revenue that the Commission is bringing in and then the authorized expenditures that the CEC can spend towards, such as like legislative proposals, BCPs and things like that. And so we flatlined it to just show the current revenue projections and then also what the current expenditures.

And that shows that there's a structural imbalance and that the expenditures are outpacing the revenues that's collected in the Fund. It doesn't include prior year expenditure savings or employee compensation information, which can have an effect on the amount of savings that's applied, and that would adjust the revenues, like in the out years. But it's very difficult to project that information multiple years out. So we just try to keep it as simple and as constant with the available information that we have.

Yeah, I understand that, but just with respect, I mean, if we're talking about doubling or tripling electricity use, then those revenues will go up substantially more than what is represented here as really flat.

Possibly, but it's just very difficult to extrapolate and to presuppose that information with the information that we have available. We are constantly updating this information multiple times within the year, especially during the May revision process. And so updates to this Fund condition statement will be available at that time.

Yeah. Good. Again, just with respect to me, that doesn't compute. Additionally, the CEC, I just want to be very clear. CEC is doing a lot of critical work to support our energy needs and help the state transition to clean energy. So I'm very supportive of making sure, the Department is adequately funded. I just want to be absolutely clear about that. And I think that adjusting the IRPA cap to reflect inflation and these responsibilities seems justified for certain, in my opinion.

But I have a lot of concern about trying to extend a surcharge on electricity sales to include behind the meter generation that is self consumed and unmeasured. So what is the rationale for extending to behind the meter? If I grow my oranges in my backyard, I don't pay sales tax on those oranges. So what's the rationale for extending to behind the meter consumption?

Yeah, I'd say two things. One is the work that the Energy Commission does benefits all Californians who consume electricity. So the efficiency work that we have done has saved Californians about $100 billion more than that over the last 40 years or so. Like I mentioned, we produce efficiency regulations on many appliances. And so a consumer would be benefiting from the Energy Commission's work even if they were consuming their electricity behind the meter. The second is more of an issue of equity.

So the consumer who's consuming behind the meter electricity is not consumed or not paying the IRPA surcharge that forces the surcharge to be collected, or requires the surcharge to be collected by other consumers. And so it is more equitable for the surcharge to be spread out among as many consumers who are consuming electricity.

Got it. Well, again, not to mean at all the important work the CEC does, which again, I stand behind 100%, but again, I just think if you send that analogy doesn't make sense to tax people on their own self generation. Another question is, how can you accurately measure the amount of behind the meter electricity that is generated and self consumed in order to determine the right amount of surcharge to collect from each consumer?

Yeah, the trailer Bill Language includes a formula to calculate that. And that's based on a combination of multiplying the solar energy system size, which we have, based on our data, by 8760 hours per year. So it's the number of hours in a non leap year. Multiply that product by 17.68%, and that's a capacity factor based on the annual percentage of the solar photovoltaic system operates at its maximum rated capacity, and then subtracting the net electricity exports to the grid in kilowatt hours from the product. So that calculates the amount to which the IRPA surcharge would be applied.

As we talked about, you're talking about cents per Bill, right? So I guess question is, would the administrative burden of doing that calculation for every solar customer be worth the revenue?

In short, yes.

You believe it would be?

Yes, that is correct.

Okay.

David Evans with Department of Finance. I would just like to add that every incremental adjustment that happens, currently the surcharge rate is 0.3. And every incremental adjustment that happens, it raises the revenue by $2 million.

Yes, 2 million. What do you mean?

For everyone that is using the metered energy right now? So every time the surcharge is increased by one increment, it increases the revenue for the Fund by $2 million.

Right. You're saying that's the entire population today.

Yes. And that is without applying it to behind the meter?

Right.

As of yet.

Right. So adding behind the meter would be a fraction, obviously, of that 2 million.

Extending the surcharge behind the meter generation in 24-25 we anticipate would produce about $4.5 million in revenue. And then in 25-26 when you have a full year of revenue collection, about $9.8 million.

Great. And I don't know if you've estimated the administrative effort, but I won't ask you that. But I think that's the question here. And if it is based on unmetered estimates, then is there a possibility of legal challenges as well to that?

The Administration has put forward this language in previous years, and we're not aware of any potential legal challenges at this time. I would anticipate that it would have been raised as part of previous legislative discussions, so I wouldn't anticipate it. But I also don't want to pretend to know what sort of legal challenges could be coming.

Last question is about how you're proposing the charge itself. The LAO analysis says the current IRPA charge is about month for an average customer. But the proposed change will increase costs for solar customers by about month. So how is it the increase for solar customers is larger than the total cost for an average customer?

Yes. This reflects the economics that larger homes with larger energy consumption have more of an incentive, have historically had more of an incentive to put solar on their homes. So the electricity produced by those solar systems would therefore be larger and would be resulting in the discrepancy that you're seeing or the difference in the numbers that you're seeing.

Yeah, could be. But again, that's a significant increase. Last question to consider. If the request is approved, what's a timeline for the CDC to consider a surcharge increase?

So, under current statute, we evaluate the revenue to be generated by IRPA in the coming fiscal year, and we can look to increase the surcharge at business meeting in November of the calendar year. At this point, because the surcharge has been set at its cap, we are not doing that. But we would look forward to beginning that, restarting that process every November moving forward.

And right now we're anticipating that we wouldn't need to, if the proposal is adopted, would not need to increase the surcharge until 2027-28. But as my colleague from the Department of Finance noted, we'll be revising those updates multiple times per year.

Well, let me open up to my colleagues, see if my colleagues have any questions on this. Senator Dahle.

Thank you, Mr. Chair. It's good to be back at the Committee. Sorry I missed the last one. So I just want to, first, I have just a comment. I'm assuming my colleagues have been bombarded in their offices with people from solar who are not happy about some of the changes in our solar policies in California. But with that being said, the Chairman brought up a good point about behind the meter, and those people are using our infrastructure behind the meter even though they're generating their own.

And it's the wealthy that can afford to put on solar and the non wealthy are paying the Bill. I think we need to be transparent about that. That's a fact. To the tune of about $6 billion a year non solar customers are paying for solar customers. There was an article out just the other day that I read. It was about $6.8 billion. So I actually commend working behind the meter option because they're not paying their fair share for the infrastructure.

But what I don't like about this proposal is that we don't need to do anything until 27-28. In your budget says it's good and what do we do now? We're going to give the authority, if we pass this to the CEC to be able to up their rate at that point. We should come back in later years. And if we need to up that rate, we'll up that rate.

But at the end of the day, again, everybody's going to be charged for the work that you're going to do behind the meter. Again, your comments of everybody's going to get charged that everybody, and then you're going to go out and try to figure out the people that have solar, what they're needing to be paying. So again, the poor people are paying for the people's your work for the behind the meter stuff. So for me, I think we should wait. We have time.

There's no reason to. And we should maybe look at ways to be more efficient. Government doesn't ever. They're getting their cost of inflation. You're asking for the cost of inflation. But what about the person who's on a fixed income, who's. These little incremental bills are piling up and they have no ability to pass it on because they have no inflation factor. They're on a fixed income. And I'm hearing from them in my office. I'm assuming my colleagues are as well.

If you're a single mom or you're a retired person who owns their home and is on a Social Security or a retirement, they don't get an inflation factor in that. But everything is going up and it's the policies here that are making those things go up. So for me, I think we should wait. I think that there is maybe an opportunity to do some work behind the meter and get the people that are benefiting from the transmission lines and the infrastructure that aren't paying for it.

I think there's some room there that we should focus on more so than passing a tax across the board for everybody and then going using that to Fund figuring out what the people that are wealthy, people that have had the ability to take advantage of our solar policies in California. So those are my comments, and I don't know if you have anything to add with it, but you just stated that we have till 27 or 28 before we actually have to do anything. Why would we do it now?

Just two things to add. One is if the proposal is adopted, we would not need to update, increase the surcharge under current projections until 2027-28. So that assumes that the proposal is adopted and that the behind the meter revenue is collected starting in 2024-25. The other thing I would add is we take your concerns about equity very seriously. And this proposal incorporates those concerns by extending the surcharge to behind the meter generation. That would help spread the cost of IRPA among more consumers and lower the cost for everyone.

I appreciate that. What about the growth? The Chairman brought it up. You know, you're going to have. What's the estimates for growth, though, for your revenues?

The growth would be based to the sales of electricity, which would go up by about 1.6% per year. That's based on the most recent CEC calculation done as part of the 2022 IPER.

Which 1.6 equates to how much for your budget.

1.6 would be upon a base of about $72 million per year. So call it about $1 million. I don't have a calculator with me but that seems about right.

This proposal that you're proposing would possibly generate 10 million, correct.

Extending the surcharge behind the meter. Electricity generation would generate about $10 million a year moving forward, $4.5 million in the first year because we were only able to collect for half the fiscal year. It's collected on a calendar year basis.

Thank you.

I am still stuck on what the chair said and also what was just echoed about if our electricity use is supposed to double and triple as we electrify whole transit systems and all new buildings which aren't plumbed for gas at all, it doesn't add up to me that we are going to have a 1.6 or this exceedingly low percentage of increase.

And I don't know if part of what's happening in the complexity of the analysis here is that there's the question of demand, which we expect to double and triple, but then there's the question of supply, and we're not sure if we can rely on the supply increasing at those kinds of rates. But I was listening to the Department of Finance to your answer, and I understand there's some complexity in there, but there's just something that doesn't quite pass the smell test about that part. So I'll just associate my comments with concern about that not being properly addressed in a way that makes sense. Thank you.

I agree with my colleague.

I thank my colleagues for their comments and we will move on. Just again, summarize the concerns about the Low estimates in terms of the electricity growth. And I'll just say for one, I'm grateful to our Californians who have moved to solar and have reduced stress on the grid. And we've obviously already made significant changes in the net billing tariff going forward and the kind of principle of taxing people in their own self generation I have a real issue with. So we're not going to vote at this time.

Yeah, I do want to say, given our just with a little bit of respectful pushback to my friend from Bieber, in the end of the day, we've got a climate crisis on our hands and we really are trying to do what we need to do to ensure that folks are helping out. And that's what the folks who are doing rooftop solar are doing. They're providing an additional source of energy that is going to help us reach the massive electrification goals that we have as a state.

And I just want to keep that in mind. I know there's a lot of debates about equity in this conversation, but we really do need to ensure that we not take actions that harm our ability to continue to generate a lot of good, clean electricity.

Good. Well, thank you for that. I appreciate you responding to all of our questions. And we will hold this open and move to the next item. Thank you. We're now going to move on to the CPUC budget proposals. Before we begin, I just want to make a comment on a very concerning proposed decision from the PUC this week on community solar. Maybe we'll bring up the folks from the CPUC.

You. We'll do broadband first. Which of the controversial decisions are you want to. Yeah, focus on? Yeah, we'll. Broadband comment? Yeah, we'll do broadband first. In terms of the questions, my comment is energy related, but it's for a future item.

I just want to put it on the record because a decision this week on community solar, and in 2022, the legislature passed AB 23116 from assemblymember Chris Ward requiring the PUC to create a new community solar program that would actually incentivize the development of community solar, where California has lagged, as you know, particularly for people who do not have the ability to install their own rooftop solar.

Earlier this week, the PUC released a proposed decision in response to that bill, which rejects the exact kind of community solar program that's available now in 22 other states. Almost all the stakeholders seem to believe that the proposed approach from the PUC will not result in a viable community solar option in California, and have raised concerns that this will undermine the state's ability to compete for federal solar for all funding.

And the proposed decision also suggests the pc could use money that we've budgeted under the Clean Energy Reliability investment plan to make up for not offering an economically attractive structure for community solar. So I just want to put on the record, I'm personally very troubled by this development, and I want to be very clear that this hearing is just the beginning of our oversight over CPUC budget items. So our subcommitee will have a chance to discuss this at a later date.

Discuss community solar at a later date. But I just wanted to register, since that decision just happened this week, I just wanted to register my strong concern about it. With that, we'll move on to issue number 11. This is the broadband package, budget solutions, and ongoing implementation of broadband for all. First, I would appreciate hearing from the CPUC, who will present the commission proposal.

Good morning. Chair Becker with Red. It's on counterintuitive. Okay, thank you. Good morning. My name is Rachel Peterson. I'm the executive director of the California Public Utilities Commission. Very good to be here to have the opportunity to present to you this morning on a range of proposals that the CPUC has in our budget change proposals. I have with me Director Robert Osborn from our communications division, who has been working on the broadband for all program since the legislature passed SB 156.

You had proposed a few questions up front. I prepared remarks related to your questions. If you like, I can go through those. Also, I can just touch briefly on the budget change proposal we have before.

You just get the budget change proposal first, and then we'll get to some of the discussions.

Sure. So really, there are two core elements that we're proposing to the legislature that are part of the administration's budget. One is that we have 46 positions that we proposed in fiscal year. I'll get 2021. Thank you, David. That we proposed first as limited term positions, and we're coming to you now to propose that we make them permanent. And we often do this at the CPUC.

We do a walk then run approach because we need, especially with a startup program like this, we need to see whether or not the work is going to be permanent. And we've been working at speed on implementing SB 156 since 2021 and have realized with all of the components of the program that are going to stretch not just in 2024 but well beyond into the future that this is actually permanent workload. And so we've proposed converting those positions from limited term to permanent.

We also have a separate proposal about expanding our authority to distribute grants in the California Advanced Services Fund. This is a fund that is part of the overall broadband for all initiative. We have authority to collect and issue grants up to 72 million now. And we're proposing to expand that grant making authority up to 150,000,000 that allows us to make infrastructure and adoption grants in order to an expanded set of technologies.

And so it complements both the Federal Funding Account program and the Bead Broadband Equity Access and Deployment program. Those are the two core proposals in front of you in this proposed budget.

Thank you. So this is a very important issue. It was a huge priority of the legislature, a lot of money at stake here. And obviously we saw during the pandemic how the digital divide had not been closed previously and the real repercussions on students particularly. But it also broadly affects our economic development across the state. This issue in my own district on the coast, for sure, on the cemetery coast, has been a big issue for many, many years. So I'll just start out.

So the broadband for all initiative promised to close the digital divide. So how has initial three years of funding progressed the state to meet that goal?

Yes, thank you for the question, chair. And my response is going to touch on three kind of overall aspects of how the funding is working. So first, I'll touch on the startup of new public oriented Internet service providers. Second, our grant making across all of our programs, all of our accounts for the unserved. And third, there's a significant tribal effort going on in which our technical assistance is helping tribes leverage millions in additional federal dollars. So back to the startup of new public oriented isps.

So SB 156 set a goal of introducing and assisting the startup of new entrants to the broadband market in a recognition, just as you said, Chair, that the incumbent providers were not serving the unserved and had no plans or business plans to do so. And so the law specifically told us to make sure that new local governments, special districts, joint powers agencies, and tribes could enter this market area and become ISPs. We started that effort with the local agency technical assistance grant program.

In the last three years, we issued 106 grants to those types of entities to do the planning and pre engineering work that they needed to do in order to identify where they could locate a network, how they would design it, and what unserved households they would serve. Three quarters of those grantees have now applied to the main federal funding account program. In September of last year, we received the first tranche of applications. This is the second prong of our strategy.

We received 484 applications totaling 4.6 billion in requests. Three quarters of those of those original public grantees have applied for these funds, and together they would serve about 500,000 households if they are to receive awards. So we're well oversubscribed. But the good news there, that's a good news story in itself, but it also demonstrates that that technical assistance grant making had the intended effect.

On March 12th, next Tuesday, we're opening the Loan Loss Reserve program for its first round of applications, and we expect to make grants in that program by May or June. And that's the third prong of this strategy. Loan Loss Reserve is a credit enhancement tool that allows all of these new entrants a greater security in entering this area because they're first time ISPs, many of them, that credit enhancement will help them secure the financing they need to build and operate these networks.

So that's the three pronged strategy under the federal funding account, the broad SB 156 design.

Great. I had one follow up question, but I realized I neglected to get comments from Finance and LAO first. So, Mr. Evans, any comments?

David Evans, Department of Finance. I would just like to clarify that 46 of the positions for the broadband, for all BCP proposal, these were positions that were already made permanent positions, and this was through a Control Section 11 Point 96. A JLBC notification was provided to the Legislature in 2022, and so these positions are already permanent positions. The request is to make 46 out of the 50 positions that are being requested here to have permanent funding for these positions. And so they're already permanent positions.

There are already people in this role and already doing this work, and that the legislature believed that it was and the administration believed that was also ongoing and permanent. And so the request is to just have funds to permanently fund these positions.

Got it. Thank you. I'm from the LAO.

Good morning. Brian Metzker with the Legislative Analyst Office on the proposal to make the 50 positions permanent. We find that several of the broadband programs and projects require permanent staff and have long and ongoing implementation periods, and therefore we recommend approval of this proposal as budgeted. I believe the issue also includes the governor's proposed delays and reductions that are a part of the general fund solutions that are a part of the budget.

So there's $100 million in last mile project funding that's proposed for delay from 24-25 to 26-27 as well as a $250,000,000 reduction in the Loan Loss Reserve Fund, 150,000,000 of which is in 24-25 and 100 million of which is in 25-26. On those budget solutions, we find the proposed delay of the 100 million to be unsustainable in 2026-27 under both the administration and our office's revenue and expenditure projections, and therefore this delay could be viewed reasonably as a reduction.

Also, we find the proposed reduction of 250,000,000 in General Fund from the Loan Loss Reserve Fund is a reasonable start. However, given the serious budget problem facing the state, we recommend the legislature consider other general fund budget solutions using the remaining broadband infrastructure funding that's available. This is particularly notable given that there is 1.86 billion in additional federal funds that are anticipated from the broadband equity access and deployment, or bead program. And so we recommend that based on that, there be some considerations of additional reductions.

Just to clarify, you're saying because of the 1.8 billion federal, you think there could be additional reductions? In which part?

We're recommending that the 100 $1.0 million delay that's in the Governor's budget be viewed as a reduction, given the unsustainability of that in 2026-27 and that the legislature consider additional general fund reductions to last mile project funding, given that we're anticipated to receive a significant influx of additional federal funds from the Bead program.

And does the Bead program particularly complement last mile and how does.

Yes, it does, Senator. So our administration of first, last mile, and then Bead is that the last mile program that this Legislature designed is really intended to distribute equitably to every county across the state a certain allocation, and those are the allocations that we're assessing now. We're preparing to disperse the first tranche of that in June of this year. It is a fiber focused program, and it also is intended to accomplish those other goals that I was speaking about.

Bring new entrants in that are publicly minded, publicly oriented towards serving disadvantaged communities, connect to the statewide middle mile network, and with a special focus on equity and making sure that disadvantaged communities are served. So that's SB 156. Bead is complementary in the sense that it also seeks to achieve universal service per what the Federal Government has set out as a goal of the program.

But universal service has a different definition for the Federal Government, and it also is available to a wider array of technologies, which is also a good thing. It's not fiber focused in the same way. So complementary in the sense that as SB 156 accomplishes service to the unserved, those will be moved off the table for Bead. Bead, then we want to direct to remaining communities that still require universal service, and where a different suite of technologies can address their needs better than perhaps SB 156 could.

So we're administering the two programs in a complementary way.

Okay, well, I'm sure I know Senator Dahle is going to have lots of questions and my other colleagues, so I'll just do one more for just when I was going to try to get a status update in the Last Mile grant program. So you did mention that. And I think you said June is the first tranche. Now, obviously, the planning implementation process has been quite lengthy. So what are the main drivers of that lengthy process?

Sure, I can give you some context there. I just want to note that at the outset, we are not delayed. You're correct that it's been lengthy. But what happened was we actually fielded requests from some of those new ISPs in late 2021 and 2022 as they began to understand our planned timeline for issuing those technical assistance grants and then moving to the distribution of the FFA money. They actually asked us, and there are public letters about this.

They actually asked us to slow down because they needed more time in order to get all of their planning and prep work done so that they could be ready to submit a strong last mile network application. And so based on that feedback, we slowed the process down. We also received another public letter in late last year as we were setting up the timelines for the due process objection and rebuttal. That's permitted. That's required in our FFA program.

We actually got letters from providers asking us to slow that process down because they wanted the opportunity to review all 484 applications, submit objections, and we ended up receiving about 1000 objections. And then on the next phase, where you offer everyone a chance to submit rebuttals. We had to slow that down as well on their request so that everyone would have a chance to respond to those thousand objections. So you can see we've been pressing the timeline forward.

But everybody, all the providers and potential providers who are involved in this program themselves have wanted us to take a measured approach so that they are as prepared as possible. And I do think in the end, it's going to be a good thing because we will be delivering networks that are truly to unserved locations, and we will have gone through all the objections and rebuttals that all of these entities are submitting to us.

Okay, well, thank you. I will have some follow ups, probably, but we'll start. Senator Dahle.

Thank you. I just have a couple of questions. I am waiting patiently, and I know this is a huge task, so I don't want to belabor that. But I just yesterday signed on to a letter that we use all technology. I know the federal side has a little bit different. On the state side, we went to fiber, and that last mile for fiber is very expensive and hard to do, especially districts like my own.

And I don't want the perfect to get in the way of the good because there are opportunities, and we've seen it in other states with different technologies, to actually get the same amount of service without having to go fiber all the way to the last mile. So I'm sure that's on your radar. I'm hoping it is that we are technology neutral, that we want to get the service out there the most efficient way and timely that we can.

And if it's not fiber all the way to the last mile, then so be it. If it still works, because I know some of the folks that were in my office over the last week are showing me technologies that work where we get to the backbone, the middle mile, and we have the ability to use wireless to those last miles, and that would drive the cost down and also speed up the process.

And in places where we have a lot of miles, let's just put it that way, districts like mine, I mean, I represent 15 counties of this state, and a lot of them are very spread out, little communities out there who really desperately will change our economies if we can get this infrastructure put in. So I just wanted to make that note. And is that something you're looking at? Is those other technologies, and do we need to do some cleanup?

Legislation that would allow you to use, would allow you to be able to use those technologies, because the legislation we have says fiber in it on the state side. That's the question I have.

Yeah, so, Senator, I appreciate the point and the question. And California actually on the energy side as well, has always benefited from being technology neutral. And so we very much are in the same mindset. I'll note, just to start, that the two complementary programs, Bead and CASF, are both technology neutral and include technologies like fixed wireless, which I believe you've said serves part of your district. And we just made a few grants in the last few months under CASF for projects.

They're further south than your district, but they are for fixed wireless, both last mile and the providers providing their own middle mile using fixed wireless technology. So CASF is actively making grants to a wider array of technologies. And then, as we've all noted, bead is available as well. I'll just comment that under SB 156, given that we are not even midstream, we're actually slightly past midstream in terms of our grant making, it would be a little disruptive right now to move away from the fiber focus.

So I just would submit it's because we're so far along in bringing those last mile networks to fruition that fiber remains kind of the prioritized technology there.

Because of the legislation. Have we seen any of the big players in this area, the horizons and the other infrastructure, people that have infrastructure come to the table and actually start? Because originally they were like, no, we're not going to let you get on our. For example, there's a main line that goes all the way from California to Washington, up the I5 and my communities.

It goes right through the communities buried fiber, and we can't get on it because they just don't want to serve us. And that's one of the reasons we did the legislation and said we're going to put the fiber in so we can actually get it done. Are they coming to the table at all through this process? Because we forced their hand basically by passing the legislation and getting the reinvestment. Money's coming.

Yes. So I'll give a little bit, and then Rob will be able to add some detail because he's closer to the objection and rebuttal process. One provider AT&T did submit a large number of applications, and then we do know that some of the other incumbent providers have submitted applications as well. Now, to your question about whether or not separately they're enabling improved access to their own fiber. I'm going to actually ask rob to speak to that.

Yeah, I think right now our main focus is getting last mile providers onto the middle mile. But that doesn't preclude a last mile applicant from going to a Verizon or another company to get middle mile access.

Doesn't preclude, but whether but they're doing it or not.

Okay.

The goal was to try to. If you own all the infrastructure, from my getting educated more on the subject, they want to put everybody on sell there because then they're out of your realm and they're on their own and they can go do what they want. That's my opinion. They don't say that, but I've been witnessing. So it's been difficult to force them to be able to access their network when it's right in your backyard sometimes.

And then we're going in and putting another line right next to it so we can get access. That just doesn't make sense. And it's hard to get my mind around for those people who are suffering out there that it would change communities if you have the infrastructure in place. So thank you.

Any other questions or comments? All right, well, thank you. I just have a couple of other last ones. I do think that some of the points raised were important. And I just sort of clarify. When you say it is technology neutral but fibers prioritized, what does that mean exactly? It means you are still considering other technologies for certain areas, certain legs of this.

Yeah. Thank you, Chair. So, under that program, SB 156, I believe that nearly all of the applications have proposed fiber. Am I right on that? Yes. So, because of the way the program was designed, the applicants have prioritized fiber. I mean, fiber is the gold standard and the most future proofed. And so if they're successful, they will want to bring fiber to their last mile networks.

Now, in California Advanced Services Fund and Bead, those are the ones where an array of technologies can be proposed and deployed. And we've been doing active grant making under CASF already to deploy other technologies like fixed wireless.

So that for that 1.8 billion from Bead, that is technology neutral.

Yes.

In terms of the approach. Okay, I think I've got it. Let's see. I had a question here about how the Commission intends to engage with legislature in administering the bead program. Is that something we can get some comment on?

Yes. So, to start off, I want to say that we're happy to take feedback from this committee from the legislature on administering Bead. It is actually already a public process, a public proceeding. I'm glad you asked. I always actually have struggle with the acronym Broadband Equity Access and Deployment.

Got it.

Okay. BEAD is so much easier. That's why I go there. But you can hear embedded in the name equity, access, deployment. Those are the three kind of core things that the Federal Government and we are trying to achieve.

So for the commission like commissions around the country, because we're a public utility commission, when we are administering a program like this, we need to have an open proceeding so that any decisions that require commission approval can be fed up to the commissioners and proposed on an agenda and approved. Dozens, possibly up to 100 stakeholders are participating in that process. And as you know, Senator, we actually have, legislators often do participate in our proceedings, and so we welcome that engagement there.

I will note that the Federal Government has a lot of goals and criteria for bid as well. And so we're navigating the fact that the Federal Government is very involved in reviewing our initial proposal. We actually haven't heard formally from them yet about our proposals. That's why the allocation is as yet to be delivered as well. And just so noting that we have a lot of criteria to meet that are set out in the notice of funding opportunity from the Federal Government.

Okay, well, that makes sense in the role, as you say, as a public commission. But appreciate your willingness to engage going forward because it is a tremendous amount of money, and we'll be very interested in how that is spent, I guess, maybe. Lastly, for LAO, what does LAO recommend as an alternative to the budget control section process for bid? And what types of information do you think we should request from the CPUC for legislative oversight?

Sure. Thank you for the question. And just to clarify, our understanding is that CPUC will use a budget control section to receive the bead program funding. There is a notification requirement that's a part of that process, but we recommend that the legislature consider an alternative, like provisional budget bill language or trailer bill language, that actually dictates what information the Legislature would like to receive about the funding.

That could include things such as what conditions are placed on the funding by the National Telecommunications and Information Administration, as well as any changes that would be required for state administered processes. And that could be done again through budget bill language that says any amount additional to what is appropriated here would be subject to a certain set of requirements.

Okay, great. Good. I think that's something we will follow up on. Excellent. Well, thank you. Critically important program, and exciting that it sounds like we will expect to see a lot of progress this year. Good. Well, there's two other issues we want to dive deep into. The next one is going to be the intervener compensation program claims support. And on that one, we'll get the appropriate folks up here. We'd love to hear from you, Director Peterson, or whoever's appropriate on that.

Yeah, I fly solo on this one, Chair.

Okay.

Right. Happy to take your questions.

Great.

Or I can go through the proposal if you'd like.

Yeah. Is there the proposal first?

Yeah, happy to. Sorry. So, the Intervener Compensation program, we were awarded six positions in fiscal year 22-23.

Yes.

Thank you, David. And of those six positions, four were permanent at the outset and two were limited term. The proposal we're coming to you now with is to make those last two positions their associate program, government analyst positions, convert them from limited term to permanent. I think given all the dialogue around intervener compensation, it is pretty clear that that workload is permanent and ongoing. And that is what brings us to that proposal to you today. So it's a very small, but we hope, very effective request.

Great. Any comments from Mr. Evans from Department of Finance?

David Evans, Department of Finance. No additional comments.

Okay, great. And LAO?

Yeah. Sarah Cornett with the Legislative Analyst Office. So just for some context, you all are probably familiar, but the intervener compensation program provides compensation for parties that intervene in CPUC proceedings, and we recommend the Legislature approve this proposal, which should help the CPUC address a backlog of unresolved claims and lengthy processing delays. So, as Director Peterson noted, the CPUC has struggled to fill these two positions that were granted as temporary because of their temporary nature.

And the addition of several permanent staff a couple of years ago has helped the CPUC reduce that backlog of unprocessed claims. But there are still some substantial delays, and the CPUC is still not close to meeting that 75 day statutory required timeline for resolving claims. So we recommend the legislature approve this position authority, but require that the CPUC report back during the budget hearings next year regarding its progress on resolving the backlog and its timelines with its claims processing.

And if the CPUC is still struggling to resolve claims in a timely manner consistent with statutory requirements, the legislature might want to consider providing additional staffing resources at that time.

Okay, good. Well, it does sound like those additional resources are needed. I did want to take this opportunity to ask a few questions about this, because, number one, it's our understanding that a coalition of CPUC interveners have requested that a workshop be held to discuss current practices when compiling and processing claims. Can you comment what steps have been taken to schedule and plan for that kind of workshop?

Thank you, chair. Thanks for the opportunity to talk about this very important program. And I really appreciate LAO's comments on it as well. So just to start, President Alice Reynolds has made this an organization priority for us to reduce the queue of intervener compensation claims. And so that acceleration that Sarah pointed out is because our administrative law judge division has been able to place more resources on working on the queue.

And in addition, we have been able to hire into the permanent positions, and those folks are trained and up and running and are processing claims. I also want to point out that it is a complex process. The word process, I think, doesn't do it justice. The commission, as you well know, Chair, the commission, reaches complex decisions on five different regulated industries. Right now, the commission is about to start a voting meeting easily. We have 50 to 60 items on every business meeting agenda.

Within the complex decisions, I would say often we have eight to 15 parties participating. When an analyst receives a request for compensation after a decision is complete, they are essentially saying to us, please recognize that our party made a substantial contribution to this decision. So an analyst takes a 100 page, 150 page complex policy financial regulatory decision, takes what that intervener has said they contributed, goes through that decision.

In order to find out and determine whether that substantial contribution has been made, we need to be rigorous. That is, ratepayer funds that are supporting the program. I very much value the intervener compensation program because it brings such a diversity and a sophistication of parties to us to contribute to our decisions. But they are being paid ratepayer dollars. And so it is our job to make sure that what they claim is actually being represented and was, in fact, a substantial contribution to the decision.

All of that work is being performed by judges and analysts. And so you want it to be rigorous. You want us to take the appropriate amount of care in looking at these decisions. All of that is to say, now to your question, Senator, because the President has made this an organizational priority to work on the queue. That is where our resources are focused. If we decide to hold a workshop, we appreciate the fact that stakeholders have suggested this.

Holding a workshop means holding a workshop, taking comment, taking reply comments, and then going through a public process in order to determine whether or not to make any changes to process or procedure. Those would be the same people who are right now working on processing those claims. And so, for the moment, as President Reynolds has directed us, we are prioritizing, working on that queue and bringing all the people we can devote to that queue, and we will absolutely consider holding a workshop.

But we're prioritizing at the moment. Thank.

Great. We understand. Obviously we need to get you, and I'm certainly supportive of getting support for the folks you say to focus on the claims and reduce the backlog. But yeah, from my understanding, my discussion, it does seem like that workshop would be helpful, and hopefully we can figure out a way over time to do both, to have that without slowing down the process. You did mention, I think, that the process has accelerated in recent months.

And when you mentioned a couple of changes, what were the changes? You think that attribute to moving faster?

It's all about staffing, Senator. It is about having been able to hire into those permanent positions. We find that it takes three or four months for someone to get trained. As you know, we deal in complicated matters and so no one can just drop in and assess an intervener's claim against a proposed decision. So we note it takes three or four months for them to get trained. We were able to hire last year. Those folks are trained and are working away.

Okay, great. You can tell us about the supervision and controls to make sure there's consistency.

Sure. Yeah, so there's a unit, as we proposed in our 22-23 there's a manager and there are analysts who are the unit working on these claims. The manager is responsible, like all managers are, for making sure that folks are making progress on their deliverables, comparing notes, keeping kind of a standard decision bank so that we make sure that results are consistent and just responsible for making sure the unit is delivering.

And are there plans to revisit the handbook? My understanding was the handbook hasn't been updated in a while, the intervener compensation handbook.

So at the moment, that would actually go in the same category as a workshop. To my mind, again, anytime we do something, we try to do it in a transparent and public way. And so it would require developing a potential proposed changes, probably holding a workshop, taking comment, taking reply comment, and coming out with a revised version. At the moment, we're focused on the queue. We'll definitely take that into consideration, though.

Okay. Lastly, the extent that policies regarding award compensation have been either changed internally or newly applied, can you comment if you provided interveners with an opportunity to update claims filed before the change?

So there have not been any statutory changes to the ICOMP statute, nor have we introduced any policy changes. So I saw that question and I'm not certain what it's in reference to, but again, same process. If we were to try to update procedures, we'd issue a proposal, take comment, et cetera.

As far as folks being able to take a, what happens is when we are proposing, it's, in effect, a proposed decision on a claim that is issued 30 days ahead of the voting meeting where the commissioners vote on it. They vote on 20-25 claims. Every meeting. Once it's issued publicly, the intervener or anyone else has a chance to comment on the proposed decision on that claim. So there is that moment of transparency when they get to, say, present their comments.

Okay, good. Yeah. It's more just to make sure that if you make any changes, that there is that opportunity to update claims.

I appreciate that. Thank you.

Yeah. Good. My colleagues have any questions, Senator Allen.

Yeah, thank you. I'm getting interested in this issue. I've spent a little time looking into it, and I was listening carefully to your answers. I'd love just a better, I don't know the extent to which you can provide more detail as to how the claims are assessed. You talked about there's a nuanced and deliberate process which makes totally sense, total sense, I guess. Do we have some concrete criteria that are used to determine if contributions are substantial? I'm sure it's a fact based, somewhat adjudicatory process. But what does the assessment process look like exactly? Practice.

Thank you, Senator. After, thank you, Senator Dahle.

Sure. So first off, the statute itself is actually pretty instructive because it's a detailed statute and identifies the categories of who is permitted to be an intervener on what basis, and then it identifies substantial contribution for us if you've our decisions.

The commission decisions after the body of the decision that discusses sort of what's the policy, what is the regulatory determination here, it's followed by within that discussion, what you'll notice is that our method of bringing in that intervener participation is to say this intervener proposed that we treat this issue in the following way. And then at the end of that discussion, it'll say we agree, we disagree when we're analyzing a claim.

And part of what we're looking for in that decision is to see those moments where we agree, and then that flows into the findings and the conclusions and finally the orders in the decision. That's the core element of where you can locate a substantial contribution. So to answer your question, those are some of the criteria our team are using. It's not always that simple. The discussion often will incorporate elements of what an intervener discussed in their briefs or their testimony.

But it won't necessarily say the office of Rachel Peterson said this, and therefore. But that's where our analysts have to be trained to look for those nuances within the body and the findings and conclusions to note. Okay. The office of Rachel Peterson has said they made this contribution. Can we find it in this decision? If we can, great. If we can't, then we're in that gray area.

Okay. Just for my edification, do you have a general sense of what percentage of the claims are paid out or approved?

I'm sure we have that data. I don't have it with me. We'll absolutely get back to you on that.

Okay.

I also imagine, if I may, it changes over time depending on.

Do they tend to be approved or they tend not to be approved? Or is it.

Oh, yeah. If you were to look on the agenda, out of 20 claims, the majority are being approved.

Okay. All right. Now, how does this system differ for utilities? Are they reimbursed similarly? Are they seeing a similar delay in their ability to recoup costs?

They're not reimbursed in the same way. In fact, what happens is they are the entities that have to post, effectively, a bond into an intervener compensation fund. That is rate payer dollars that's in that fund. And then when our Commission orders a payment to an intervener, it comes from that fund and is paid to the intervener without taking us into an entirely other area of energy policy or utility regulation. The utilities have general rate cases. I'm speaking mostly about electricity and gas utilities.

That's where they propose a budget to the Commission. The Commission reviews, also with intervener participation, reviews that budget. And that budget, which is a four year forecast, would include posting to the intervener compensation bond fund.

Gotcha. But in terms of. The process by. Which they're, I mean, do they, do they have, I mean, is there, do you think that there's a level playing field when it comes to the way that their claims are analyzed? They're being asked, they're kind of given this special place in the energy provision world, and then, you know, they're, they're basically then asking for ratepayers to pay for them to do some of their business work before the Commission.

Are they, you know, is, is there, is there inner, you know, and maybe we could talk about this later. But are the public serving interveners like turn or NRDC, those types given the same kind of, or anyone who wants to get in given the same kind of compensation? I guess I understand the reimbursement process is different because of the bond. I get that. Thank you for that answer. But is it an apples to apples analysis,

I suppose when it comes to assessing the validity of a claim and the phalanx of people they bring in to advocate on their behalf and all the costs associated with that.

Between the utilities and the sort of ratepayer advocate.

Apples to apples. Between

Interveners.

Interveners.

Yeah, I see. It's a great question. I think that I don't know which Legislature set up the intervener compensation program. I think it's a brilliant program because without it, you're exactly right, there would be no level playing field. The utilities are a monopoly. They have a natural interest in bringing as much to as much

Guranteed rate of return of profit.

They have an interest in bringing as many resources as possible to propound whatever it is they're propounding. Intervener compensation. Like the private Attorney General Doctrine. It is a way of bringing alternative perspectives into the process. We benefit from it. Rate payers benefit from it. The public in California benefits from this program. I think it's quite brilliant. I wouldn't be honest if I said that utilities and NRDC are on the same playing.

Just utilities are very well resourced and they have a natural incentive to advocate for themselves as strongly as possible. Nonprofit organizations simply don't have the same resources. I do take pride in this program because I believe that it does offer a way for the nonprofits and the small organizations, community based organizations, to participate on getting closer to a level playing field and bringing that really important perspective. Right. I think we have a proliferation of groups that are participating with us.

And so I think they're seeing the benefit and seeing the impact that they can have and receiving compensation is just really terrific.

Just one thing, if I may, Sarah Cornette with the LAO. I think something that Director Peterson mentioned that I think, I want to maybe just note that with intervener compensation program, I think we did have some limited conversations with some interveners to try to understand the issue and due to the processing delays and the backlog, that is having an impact on some intervener participation.

So while this program is a very important part of CPUC's work, has been a long standing program, the existing delays and the backlog are, from the limited conversations we've had hindering participation from some interveners who just can't wait for their work to be reimbursed, are paying their staff on lines of credit, waiting for these reimbursements to come.

Yeah. No, actually, in some respects it underscores this kind of different role. I appreciate your comments. They do bring something important to the table, and there is something that I understand, but I can't help feel a little bit strange about that. We've got ratepayers paying effectively for big companies that are guaranteed a rate of return to advocate for themselves. Anyway, I'm just getting my head around it.

I understand there's an appropriate degree to which they're helping the decision making process of the PUC, and that makes sense. But they've got a very different profit motive here than the others.

You're going to the regulatory compact, what we call the regulatory compact, which is that the utilities are a monopoly, but the purpose of a utility commission like ours and in every state around the country is that that monopoly, because it's providing an essential service, also submits to heavy public regulation, and their appearance before us in proceedings is part of that heavy public regulation.

Right, but they're being compensated to weigh in to impact the heavy public regulation by rate payers. But anyway, this is not the topic we're talking about today,

Happy to continue the conversation with you. You're asking excellent questions. It is the structure in which we're working. To Sarah's point, again, the fact of the impact on some of the interveners is the reason that we have prioritized working on the queue. It's why we're throwing all available resources towards that.

And just one, maybe quick other thing to note. As Director Peterson mentioned, utilities are compensated for their engagement in a very different manner as the interveners through their general rate cases. So the intervening parties, these nonprofit organizations, ratepayer advocates, they are not on the same playing field in terms of the utilities, both in terms of the resources they're receiving, but also in terms of the timeliness in which they're reimbursed for their work.

So the Legislature in its statute with ICOMP has included a 75 day required deadline that the CPUC has not been meeting for interveners. So just to kind of tease that out, there's not really an equal playing field to your question, under the current system in terms of utilities versus intervening parties.

Yeah. Well, thank you. I think this may require some work. So I really do appreciate it, and I look forward to future dialogue on this. And I certainly support this item for all the reasons stated.

Great. Thank you. I appreciate all the comments. And we're going to move on to issue 13. This is the ongoing support for clean energy resiliency.

Thank you, Senator. Yeah, I get to stay.

Okay.

I get to bring our subject matter expert, Luam, testify, who I know you know.

Yes.

So we're just rearranging the chairs.

Absolutely. Thank you. And this is the last one, thing. We'll dive in deep before public comment.

When you're ready, I'll begin.

Okay.

Thank you very much. And so, issue 10, the primary budget change proposal we have before you is similar to what we've been speaking about, is a proposal to make SB 100 positions, convert them from limited term to permanent mint.

We. Again took a walk, then run approach with these, and when originally proposed after SB 100 was passed, we proposed limited term positions in order to discover along the way whether the workload was permanent. As I think we'll discuss today, the program is extensive. California has very ambitious goals for its clean energy transition and the work that our integrated resource plan program staff, our resource adequacy program staff, and a number of clean energy program distinctive program staff are doing is absolutely permanent.

We know that and are actually very happy with the progress that we've been making so far, which I believe we're going to be speaking about a little bit today. So that's the core budget proposal in front of you. If I can just speak a little bit about SB 100 to start off, and then I'll probably turn to deputy Executive Director Tess VI, who's our deputy Executive Director for energy and climate policy, for more detail. So, in 2018, SB 100 set out ambitious goals.

We have been regularly issuing both procurement orders and tracking reliability issues, and we've been preparing and issuing quarterly progress reports in which we've been discussing challenges and learnings along the way. As we're moving forward, it is a very large and intensive staff undertaking. We are going to have to sustain our expansion of clean electricity generation capacity at a record breaking rate for the next several years.

Just in February, the Commission approved an order that will result in procuring 58,000 clean energy in order to help us achieve our 2045 goals. We have both generation buildout rates and transmission development rates that are practically unprecedented that we need to do. And the staff who are working on this at the Commission are living and breathing this work day in and day out. Let me pause there and see if you have questions that either myself or Luam can address.

Thanks. And first, before we do that, let's see if we have additional comments. Mr. Evans.

David Evans, with the Department of Finance. I would just like to add that the positions, they were funded for three years, and the impetus necessity for this BCP is that the encumbrance period associated with these positions, they're going to expire June 30, 2024. And these positions are currently filled and they're actively doing the work. And so I just want to add that also to the comments that were made.

Okay, excellent.

We don't have concerns or comments for you about this proposal. Okay, great.

It gives us a chance to just discuss just a little bit some of the lessons learned and reflect, I guess, for about three years of implementation so far feels like more, but so can you comment? What are some of the key lessons learned from the CPUC's implementation during those three years, and what are some key challenges that will be the focus of the requested ongoing funding?

Well, good.

Sure. Yes. And actually, let me go straight to Deputy Executive Director testify for that.

Thank you. Great. Testify. Thank you.

Thank you, Chair Becker, and good to see you again. And thank you to the other members as well. So a couple of the challenges that we've seen are really in determining the correct timing and the type of resource procurement to meet the SB 100 goals as our system continues to grow and is very dynamic. And so this is going to really require a continuous process of stakeholder engagement, analysis and deliberation and will continue through 2045.

A few of the other tasks that we've determined are needed and have been challenging, but we're working through our development, implementation, and refinement of what we call our resource procurement programs, such as integrated resources planning, as Director Peterson mentioned, as well as resource adequacy, which is a very complex exercise that's really taking a lot of staff time and coordination across staffs and across agencies, which I'll get into. So in addition to that work, it's the tracking and compliance work.

So we know that there are hundreds of projects across the state and outside of the state that are working to come online. And through the requirements of SB 100, we are needing to be able to track those projects, understand where their progress is, as well as anticipating the transmission that's going to be needed to be able to serve these projects that are coming online in this 2045 resource horizon. And not only that, we're doing it across over 40 load serving entities.

So those are the investor owned utilities, but also many community choice aggregators as well as electric service providers, which creates an additional challenge that we have been working through and then through that process. Another challenge we've seen is being able to understand new types of resources. So, yes, we have a lot of solar on the system, wind on the system, but we're also trying to understand new technologies that we're going to need.

So newer technologies like long duration energy storage, offshore wind, more advanced geothermal as well, and being able to also look at emerging technologies that I'm not listing that we haven't even thought of that we might need as we try and get to our 2045 goals. And building out that institutional knowledge has really been a key undertaking at the PUC.

And then I just wanted to end really, on that collaboration process I mentioned earlier across the CEC, the Energy Commission, the Air Resources Board, the California independent system operator, as we work together on transmission planning, demand forecasts, and really other key planning activities, and all of that is really tantamount to reaching the SB 100 goals.

Yeah. Well, thank you. I'm grateful. This opportunity, just because this is such a key part of what we're all trying to do here, right, is get to 100% clean energy. So it's great to be able to discuss this. A few things. Want to just sort of just dive specifics, just to kind of dive into. Does the CPUC expect to consider the central procurement function that we passed last year in the upcoming RP process?

Yes, Senator, we do. We actually have a statutory deadline of September 1, and so we are studying that and are going to be issuing an order related to that before that statutory deadline.

Can you comment on any factors the Commission will be considered in deploying that option?

Well, as deputy Executive Director Tesfai pointed out, and also kind of associated with the State of the Market in California, we have a fragmented energy procurement market. That was one of the core elements that I think we discussed with you at this time last year in this venue. And with a fragmented market, it's hard to, if not impossible, for all of those different actors to somehow coalesce around procuring the large, long lead time resource that the state needs.

And so that is a major consideration that we're thinking about and our modeling in integrated resource planning is examining. And so when we issue this order, it will take that analysis and say, here's why in this marketplace at this time, California should consider an investment in a long lead time resource.

Good. Well, that's good to hear and hopefully be very helpful then, in that, as you mentioned, for those large lead time resources. And speaking of one. So in AB 525, the CC established a target of five gigawatts of offshore wind by 2030 and 25 gigawatts by 2045. But I believe the PUC's new preferred system plan forecasts only four and a half gigawatts by 2035 and no increase after that. So can you tell us why are the PUC's plans and the CEC's targets so far apart?

Yeah, I'll start, and then Luan will definitely have more technical detail. So the CEC's responsibility was to set a planning range, and so that's the range that they established. When we look at resources, when we are examining, conducting the modeling, as far as what does the system need going out into the future, we're looking at cost, reliability and availability of a resource. And that once the model performs its work, that translates into a need.

And that's what kind of undergirds the procurement portfolios that the CPUC is issuing every once in a while, actually on a pretty steady pace, given the amount of procurement we need to do. And so our model right now, to understand what we've said is needed from offshore wind, that's currently what the model is projecting that the state needs. Let me see if there's any technical detail to add.

Yeah, I can have a little bit more detail before you do that.

Just clear what you said. The model is not what the resource is capable of. You're saying that's what you believe will be needed.

Yes.

So to get into a little bit more detail, the modeling process looks at a lot of different issues, and cost is a big one. A big change that we've seen over the last few years is really the cost related to offshore wind going up very high, even higher than when we were having the conversations about central procurement. We do think that the central procurement entity is a key tool for managing those costs.

But as we compare different resource costs, it was determined that this is the level of offshore wind that we're able to look at right now. Again, this process is iterative. We do it every year, and so there will likely be additional megawatts looked at. We look at those costs by leveraging the NREL National Renewable Energy Lab resource cost numbers that they do across all different types of resource types. So it's agnostic to a type of resource.

It's not specific to any specific type, but it does specifically mention very high costs coming in for offshore wind. So we're looking at ways that we can mitigate those costs by leveraging things like central procurement. But something I want to go back to is we have determined that we do need these resources, so we're creating an affordable path to be able to get there.

But we have determined that we do need a resource like offshore wind to help balance other resources we have on the system, like solar, and we are very committed to creating a pathway to get there.

Okay. Yeah, it's interesting. I just try to understand what you're saying about the group projecting some of those costs, because obviously we don't have a lot of, in fact, this will be the first floating offshore wind that we have here in the United States. And just sort of to really further note that this was the legislation, right? I don't think the register, you referred to it sort of as a range, but the legislation really sets very specific targets.

I just want to make sure that, and maybe we can do this in sort of follow up, make sure I understand how the preferred system plan then kind of how that plays out in terms of our urgency in pursuing it and sort of our expectations from it. I know we're going to have a chance to dive in offshore and probably at some other hearings.

Just wanted to note that I think from everything I've heard, some of the higher ranges are possible and want to make sure we kind of don't lose our focus on that. Any comments?

I appreciate the points, chair. And I will note that Members of the Administration are on regular study tours of the offshore wind that is installed in different parts of the world. And we are also tracking very closely on the cost issue. As Ms. Tessfai pointed out, it is a new technology. It's being deployed for the first time in places around the globe, and costs are high at the moment. But that's actually a benefit of our annual modeling.

We always incorporate the most recent commercial information that we have from other similar projects. So with thanks to the governments of Scotland and Denmark for going in on this technology, if that manages to bring some of the costs down, we'll incorporate that into future modeling runs.

Ok. I think it's probably enough on that for right now. I've got a few other questions before you turn over to my colleagues. Do you have anything else on this? Okay, just two other areas wanted to just dive into for now, and then we can flag.

One is you mentioned resource adequacy, and there are a number of entities that express concern to me and others in meeting the RA requirements due to the tightness of the market and the difficulty of procuring resource adequately, even at prices that are multiple times higher than in past years, I think five to 10 times higher probably is what you've seen, and those are well above the penalties for non compliance, but they still want to do it because they don't want to be in non compliance.

So how has the CPC addressed these concerns, and has the CPC incorporated concerns about affordability and managing these issues?

Sure.

Yes. So the resource adequacy proceeding has been open for probably at least 10 years, and is our constant venue for stakeholders to bring concerns and for us to develop solutions there for these market issues.

Yes.

We're experiencing a tightness in the market right now. The factors of that are, as you spoke about with your first issue today, there is an increase in the CEC's load forecast. We rely on that to project out what California is going to need. There is a decrease in how resources that are variable are getting counted because we need to make sure that we're relying on the amount of energy that they actually produce for the periods of scarcity.

There is an increase in what we call the planning reserve margin, which is the cushion that the California ISO also helps establish. That gives us all greater certainty that we have enough resources. And then there has been a decrease in the availability of imports in the west. And that's partly because our neighbors in the west are also dealing with these grid conditions and the heat conditions that we are over the summer.

And then, like I said, that market fragmentation has meant that all sorts of different entities are seeking to procure. So all of that is leading to tightness in the market. We use our resource adequacy proceeding to float and vet proposals to address the market rather constantly. And many stakeholders, including the community choice aggregators, are very active participants in that proceeding. I'd like to ask Leuwam to address some of the solutions, some of the ideas that we've been floating there to address the tightness right now.

Great.

So as Executive Director Peterson mentioned, we really have seen the RA market tightening. Some load serving entities that were not sufficiently forward hedged, what I mean by that is procured, have experienced resource bill delays, for example. And so some load serving entities have different levels of sophistication. Some of them are properly hedged where they have a backup plan if one resource doesn't come through.

And we've been really working closely with all of those load serving entities to help advise them on that kind of thing and encourage them to make sure that they are properly hedged, that they don't have all of their eggs in one basket when it comes to resources coming online because there might be delays for supply chain or construction issues or weather, that kind of thing. And so it's really important for all of our load serving entities to be properly hedged.

And I think that's a way for us to help make sure that the load serving entities are able to meet their requirements. In addition to that, Executive Director Peterson mentioned that there had been in the last few years an increase in the CEC's load forecast. Actually, the most recent CEC load forecast did show a slight decrease. And I do expect that to be able to show some softening in the re market in the near term as we work through additional mechanisms to improve resource adequacy.

Great. I get the second point for sure. The first point, you mentioned them being properly hedged. Did you say that you were going to help them sort of do that, or what was the first point?

Well, with resource adequacy, they're supposed to do procurement for all of the months of the year, but especially in the summer. And there have been some load serving entities who have been struggling to get some of those last megawatts. So we do have a lot of communication with them to make sure that they understand what opportunities there are out there for them to get those last few megawatts.

Okay. Yeah, that's good. There's stuff that they didn't know. You would hope that they would probably know about some of those, but if.

It's helpful, so they do know about them. But sometimes the prices are still high, and so there can be a challenge there if there is a resource available, but a load serving entity does not want to pay a high price for it. And that goes to the market fragmentation issue that was mentioned earlier. We used to have three IOUS. It was a buyer's market, three IOUS many generators.

Now we have over 40 load serving entities out there in the market competing with each other to do procurement. And that creates an additional challenge. It's just the economics of the market, and that has been a big development that we've seen over the last 10 years, and this is the impact that that has. But again, as I said earlier, we are working on tracking many projects and working through our TED task force to help get those projects online.

If developers have issues with permitting issues, we try and come in and help them through those issues to make sure that we just get more resources in the market. It's a separate additional duty that the CPUC, along with Gobiz and CEC, have taken on to try and help get resources online. But there is an issue right now of market power, where there are many, many buyers and a certain number of sellers out there, which creates this competition and high prices.

Okay, good. Well, something certainly keep track of. My last question is just around how's CPUC assessing the various demand response programs? And what do we know about which programs are more effective? And how can the state fine tune this strategy?

Thank you. Thanks, chair, for the question. So demand response does play a critical role in ensuring that the grid stays reliable and that also we're pursuing all possible cost effective technologies that customers can use. We do need to assess demand response resources in the same way we assess all of them, every type of resource. What does the grid need? How can the resource deliver it? How can we be sure that it's delivered? And what is the cost effectiveness of it overall in our portfolio?

And so we've been piloting and looking at program designs and procurement mechanisms for demand response over about two decades now. And we do have assessment reports that show a range of outcomes and just, I believe, show the ongoing need for us to make sure that demand response can deliver what ratepayers are and the grid are relying on it to deliver, especially during those moments of grid stress. And so, like I said, when it's correctly designed, when it's correctly deployed, it really does play a crucial role.

Okay, that's probably good for now, but what is the CPUC doing to create a more level playing field between IOUS and third party providers for signing up demand response customers?

That's a technical question. Let me go to Leuwam.

Thank you.

So the CPUC recently adopted the demand response programs in December of last year, and the new budgets for the 2024 and 2027 cycle. And so this is both Iou and third party. In addition to that, as part of the adoption, these budgets across the state are at 1.55 billion between 2024 and 2027 ratepayer dollars of authorized funding for these demand response programs. You had also asked which of some of these programs that are doing the best.

And so an example of that is the base interruptible program. And so this is a program that was funded at $473,000,000 as part of that $1.55 billion budget. Just a program that has continually had a very high level of performance can really be counted on for reliability needs. The commission is also currently exploring a novel framework for the future of demand response, which includes the widespread adoption of dynamic rates on a real time market price condition. And so this initiative is called CalFuse.

We've issued a staff white paper, now we're going through the stakeholder process. But that's really something that's going to unlock the demand response market to a wide variety of participants through software as a service, as well as other customer related integrations with appliances, for example, to be able to really unlock the next level of demand response for the state.

Yeah, and those integrations, I think they're starting to happen. And that's really, we have some pilots.

You're right.

The next wave where we can really count on this and have it be a substantial part, even, I think, more so of our portfolio. So CalFuse is the name of that.

That's the white paper that we've issued on that. And then that was the start of our stakeholder process.

And what about data sharing with third parties?

That's a huge part of. So because, for example, we'll want to be able to leverage the appliances to be able to leverage the rates that are going to be cloud based rates that we're working on with the CEC. And so that's how we're able to leverage all of these additional technologies and have data access so that appliances can connect with the grid and know what the current grid conditions are.

And, for example, a refrigerator defrosts at a time when there's Low stress on the grid, lowest prices. And so not only is there a grid reliability element, which is classic for demand response, but there's a real enhancement of affordability for customers as well.

Great. I think we're just clarifying. So again, Calfuse was named the white paper.

Yes. So CalFuse stands for, like, California, but it's the unified demand signal that is going to customers appliances, electric vehicles, for example, as well, from these cloud based rates.

Okay. And that just came out, that white paper.

Just the white paper came out actually in 2022, and it's being done actually in a demand flexibility proceeding. So the first part of the proceeding is focused on the income graduated fixed charge. It's also approved certain pilots, like you had mentioned. And then right now, we're going through the stakeholder process and vetting of the white paper.

Okay. But again, when you say data, you talk about the data connection, connectivity with devices, but also about customer data, the third party sharing with IOUS to make sure that it's not only IOUS who can sign up.

Exactly. Customers and things, because we're really going to need not just the IOUS, we're going to need a whole host of innovators to be able to leverage these rates and the customer data to be able to bring that affordability to customers as well as the grid needs as well.

Yeah, good. With integrated thermostats and all that as well. Been important part. Okay, great. That's all I really had. Anything else? Okay, well, thank you for sticking with me in those questions and discussion topics and some good stuff for future. Thank you Teleo and Torrent as well. And to you, Director Peterson and deputy.

Exec Director, thank you for the opportunity to have been here.

Yeah, great. Appreciate the discussion. Yeah, very much so. So we'll move now to a public comment. And we're taking public comment for those here in the room, and you can start when ready. Yeah.

Thank you, Mr. Chair. Are we on or am I just too short? All right, Mr. Chair. Senator Allen, thank you very much for the opportunity. Beth Olasso, on behalf of, I'm sorry, Senator Blakespear, on behalf of the Agricultural Energy Consumers Association, we're here on the intervener compensation item. We are the only AG intervener to get icomp, so it's a really important program for us. Some of our small farmer Members pay us $25 a year.

So obviously a very big bang for the buck in what they get. In representation at the PUC, we have seen a remarkable difference in getting our IComp requests back. The turnaround with the new staff, the temporary staff, it's working. We had several $100,000 in outstanding. We just got three back within a matter of a couple weeks. So we urge the permanent staff and thank you for really taking a deep dive and look at this program.

To your question, Senator Allen, does our intervention really make up for the might of the utilities? No, but it makes a difference. We do see incremental change, especially on the AG side. We're able to do what we can. So we really appreciate your support of this program and urge adoption. Thank you.

Thank you.

Good morning, Mr. Chair. Senators, Amanda Gualdrama with Cal Broadband. With respect to issue 11, we'd like to note our agreement with the LAO's recommendations. The CPUC should provide the Legislature with detailed information regarding the billions of dollars in investment toward broadband, including the estimates of the number of unserved households that will be connected when those resources are exhausted. The Legislature's oversight of the implementation of the broadband programs and projects will be critical to their success.

And just a note on the discussion today with regards to the delayed implementation of the FFA. The request to slow down the process so that potential submitters can get ready is substantially different than providers seeking to exercise their due process right. Slowing down the process for potential submitters was a policy decision to wait for potential new municipal broadband networks to submit applications rather than moving forward. The challenge process is a due process. Right, included in the CPUC to ensure dollars are spent on connecting unserved locations.

We just thought that clarification was important. Thank you.

Thank you.

Good afternoon, chair and Members Mara Agar. On behalf of the building decarbonization coalition, we request the state maintain funding for the CEC's equitable building decarbonization program. As you know, this program is first of its kind and helps Low income individuals receive home retrofits that improve indoor air quality, health, comfort, and energy affordability. We also support any final climate bond package that includes at least $400 million in funding for this important program that will help California meet its climate goals. Thank you very much.

Thank you.

Good morning, chair and Committee Members. Thank you so much for the opportunity to speak today. My name is Allison Hilliard, and I am reimagined Power's senior policy analyst. In regard to rate increases, I'd like to flag the CPUC's own report from 2021 on affordability of the grid of the future. It found that transmission spending, sorry I'm so tall, I got to fix the mic.

It found that transmission spending is the main cause of rate increases, along with the California IOUS, return of equity, which is the highest in the nation, and wildfire mitigation. The big of those three that I'm going to flag today is big transmission. The solution to that is distributed energy resources like energy efficiency and onsite solar. The Legislature needs to focus on deploying more DERS distributed energy resources and less spending on transmission infrastructure.

This shift will bring rates down for everyone and make energy more affordable while allowing the state to adapt to changing the changing climate and also meet decarbonization, electrification, and reliability goals. We also urge the Legislature to focus on the localization of energy infrastructure and to adopt policies that help advance local and community energy solutions. We're excited about the DEBA program and look forward to seeing how that evolves. Thank you so much.

Thank you.

Senators. My name is Bill Julian. I'm a retired legislative staff. I'm here as a Member of the public. I was happy to hear Executive directors comments about the Intervener compensation program. I staffed the Utilities and Commerce Committee when that program was created in 1984. I staffed Ms. Moore, who chaired it when she carried the legislation that put it in its present form. I have been a legal advisor and Legislative Director for the Public Utilities Commission and participated in the decisions in decisions on intervener compensation.

And I've litigated cases, including general rate cases, in front of the Commission and received intervener compensation awards. So I've watched this program evolve over 40 years, and I guess I would say I'm part of the institutional memory on this program. This program is intended to institutionalize all the different and very diverse perspectives on the public interest in utility regulation. And if you read the purpose section of the existing statute, it says it's to support participation as well as intervention.

And the Commission's practice, unfortunately, over a number of years, has been to unnecessarily constrain and restrict those opportunities for participation for the underrepresented Members of the public. In the utility field, as Senator Allen has observed, the basic institution is the utility, and the utility's participation in the regulatory process, both informally and formally, is the basis for hundreds of millions of dollars in ratepayer or public provided funds, as it should be. Utilities are required, are regulated, they're required to participate.

But the public also needs to have its voice institutionalized, and that was the purpose of the intervener compensation program when it was first created in 1984. And as it has been revised, the Commission needs to revisit how it administers that program. And the Legislature, I'm very happy to say, is now also observing how the Commission manages those institutional programs. The revisions include this overly legalistic and constrained approach to substantial contribution.

A substantial contribution can be made by a public interest organization or by public representatives who participate in ways that don't necessarily impact formal proceedings. You're seeing this in the broadband field. And remember, the Commission's approach or the Commission's obligations extend both to energy and to telecommunications. And the telecommunications field is one place where the public really needs to have their voice institutionalized, not be episodic, not be constrained, but needs to be heard.

We're all benefit, all ratepayers, the public are all benefited by this kind of robust participation. And the fact that you're focusing on it, the fact that the Commission is beginning to deal with an overly legalistic and frankly politicized process that that's come to your attention and you're standing up for that, I think is very, very important. As I say, I'm sort of institutional memory on this program, and I'm retired. I'm not a lobbyist, but I'm a Member of the public.

I'm offering my experience and legal expertise on this. So thank you very much for taking it up. And I hope to see the kinds of statutory revisions as well as your budget support for this very important effort to institutionalize public voices, those voices that are not heard as effectively as they need to be in the regulatory process. Thank you.

Thank you very much. Well, with that, I want to thank all individuals who participated in public testimony, want to thank all the Administration and Department, finance and LAO, if you're not able to testify today, we can have comments submitted in writing to the budget and fiscal review Committee or visit our website. Your comments are important to us, and we want to include your testimony in the official hearing record. Thank you again.

We appreciate your participation, and thank you for all the panelists and for everyone's patience and cooperations. Senate Budget Subcommitee number two is adjourned.