Assembly Standing Committee on Utilities and Energy

Good afternoon, Professor Wara. This is Kevin with the legislative data center in the hearing room. Just want to let you know that we can see you, but if you want to test your audio, just go ahead and say hello, just so I know we can hear you loud and clear.

Kevin, how does this sound?

Do you hear me okay?

Yes, I can hear you loud and clear. Thank you.

Great.

Great to see you.

Good afternoon, everyone, and welcome to the Utilities and Energy Committee hearing for Wednesday, February 22. We would like to call this meeting to order this hearing of the Assembly. Committee, utilities on energy. We're here for an informational hearing to discuss energy affordability, specifically to explore solutions to alleviate these short term spikes in energy costs, as many of us have felt with recent natural gas bills, and to better manage longer term energy Bill impacts. Before we begin, we have some housekeeping to go over. Some of our panelists will be participating remotely. There will no longer be phone testimony, so public comment will be either in person or submitted via email on our Committee's website.

Additionally, I will maintain the quorum during. The hearing, as is customary, in order to hear as much from the public within the limits of our time. We will not permit conduct that disrupts or otherwise impedes the orderly conduct of legislative proceedings. Any individual who is disruptive may be removed from the room. Also, I'd like to take this moment.

To welcome back returning Members to the Committee and extend an even bigger welcome. To our newest Members who are here. Some Members, Calderon, Connolly, Mathis, Schiavo, and Wallis, who will be with us soon. Welcome all. Over the last few months, many Californians have experienced record high electric and gas bills. Some customers have reported a doubling or tripling of their Bill, even when their usage did not change. Most of these Bill increases came unexpectedly shocking, many Californians already struggling with inflation and economic uncertainty from extended global pandemic.

More troubling to all of us, just last year, this Committee held a hearing after spikes in natural gas prices last winter drove electric bills to an unmanageable level. For Californians at this time, a price spike of the magnitude appeared to be an exceptional situation. But given the events of the past few months, we must ask the question, is this the new normal, and how will this be addressed?

What we have learned in the past year about the drivers of these price spikes are many questions that we will be raising as well, and the methods we have or could develop to keep energy bills affordable for Californians. So we're holding this hearing after enormous constituent outreach of the impact of these high bills have had on real families and businesses.

This hearing scope will be broad, including perspectives from the large investor owned utilities, the public owned utilities and community choice aggregator, along with the CPUC, ratepayer advocates, labor and environmental organizations, and academics. While a comprehensive evaluation of total energy costs should include other fuels, for ease of today's discussion, gasoline costs will be a topic in a future hearing. With that, I'll turn to any of my colleagues for any opening remarks, and I'll start with the Vice Chair and work our way to the left.

Thank you, Mr. Chair. Align my comments with yours that you just laid out. This is probably the most significant constituent service issue that I have faced in a long, long time. So this is serious. We want answers, not excuses. All right. Thank you.

Colleagues.

Thank you, Mr. Chair. I want to thank you for convening this informational hearing. It really is timely. As my colleague Mr. Patterson has indicated, the calls that we're receiving from constituents remind us how difficult this issue is and how they are suffering because of the increase price in natural gas, also in electricity. And although we're seeing a little downward turn, there's no guarantee that it's going to continue to go down.

I think that in the background paper, your analysts did it the best, said it the best. If natural gas markets sneeze, the California electricity market can get a cold. And everything is so interconnected. But we're here today to talk about very specifically natural gas. And I look forward to the proposals to energy affordability today. And as we continue with this legislative session. Thank you.

Any other colleagues would like to say anything? Okay.

Again, welcome to our new colleagues.

We have invited our first panel to discuss actionable solutions to manage natural gas. We will start with our first person testifying, Leuwam Tesfai, Deputy Director of energy and climate policy at the California Utilities Commission. Please welcome. I will ask that the panelists provide.

Their opening statements, and we can turn.

To the Committee for questions after that. Yeah, why don't we ask all the panelists to come up for this first a section as well, for purposes of time, efficiency here.

Thank you, Anna.

Thank you. Good afternoon, chair Garcia and distinguished Members of this Committee. My name is Leuwam Tesfai and I serve as the deputy Executive Director for energy and climate policy at the California Public Utilities Commission. So in this role, I have the honor of leading our energy division staff. The approach we take to this work is with a North Star of affordability, reliability, safety, and reducing greenhouse gas emissions. We're doing this work with equity as our focal point to enhance the lives of all Californians.

Thank you for the opportunity to present today on the work that the CPUC has been doing to support affordability as we continue to enhance reliability, greenhouse gas emissions and safety. Next slide, please. So, when addressing affordability, we leverage strategies both to reduce costs and to change how we allocate costs. So on this slide, in yellow we have cost reduction, and on the right we have cost allocation.

So, for example, when looking at opportunities to reduce costs, we heavily scrutinize the new budget of revenue requirements put forth by the utilities in their rate cases. We also can alter how we allocate these costs. This can include allocating a larger share of the overall costs for the revenue requirements to different classes of customers, like commercial customers or residential customers, or collecting certain costs from certain customers, like an income graduated fixed charge. Next slide, please.

Next, I want to hone in on gas affordability, both looking at trends and highlighting some recent strategies to address gas affordability. Next slide, please. So this slide highlights the primary components of gas rates, procurement, transportation, and our public purpose programs. And the charts show one, the revenue requirement per year of each rate component, but then also the share revenue requirement for each of those rate components. A key highlight of these charts is really the increase in core procurement costs in recent years.

And I really heard that echoed in many of the remarks as we started today. So, most notably, historically, the share of core procurement rate component for SoCal gas and SDG and e averaged 23% from 2016 to 2020, and since 2020, that share has increased to over 30%. Core procurement has also increased for PG&E in recent years, though by a smaller amount. These higher commodity prices are due to core procurement, which includes the commodity costs passed on to core customers.

That's residential and small business without a markup. So this is the cost of market driven gas costs, which is not regulated by the CPUC, that is overseen by some market surveillance by FERC, and we've called for them to look at some of those issues.

Transportation, so that's the utility's cost of operating the natural gas transportation system, which really includes distribution transmission and really looking at costs to making sure that aging infrastructure remains safe and in accordance with federal rules like from FIMSA, as well as CalGEM, our state entity on gas storage, and then our public purpose programs, which also cover costs for mandated public purpose programs like energy efficiency and Low income energy efficiency programs.

Next slide so this slide is really focused on what you all were talking about in your opening remarks and some of the near term cost drivers for fossil natural gas. And so this slide highlights some of the near term cost drivers.

Looking at these cost drivers for high natural gas commodity prices, it's just important to remember that these high gas prices were across the west, not just in California, and several factors contributed to them, including persistently colder weather that started earlier in the season across the west. Other factors also include an increase that we saw in liquefied natural gas exports. This is really driven by the war that we see going on in Europe and Ukraine and the market impacts that that is having.

I mentioned the colder winter weather that started about two weeks earlier than we usually see, as well as pipeline infrastructure issues, more specifically, a significant outage on the El Paso natural gas pipeline that serves Arizona, New Mexico and California that started in 2021. That line did return to service on February 16. Next slide, please. Now I wanted to turn to some recent policy actions and proposed mitigation measures.

The CPUC recognizes that even as it works to transition away from fossil gas, it has a responsibility to keep the existing system safe, reliable, and affordable. Recent gas transition efforts will save ratepayers money. So, for example, in September of 2022, the Commission adopted a decision to end gas distribution line extension subsidies, which will go into effect this July. It's expected to save investor owned utility customers an approximately $164,000,000 per year to avoid stranded asset costs.

When we saw the concerning high gas prices in the West, I also just want to identify that we took prompt action to mitigate those impacts by moving, for example, the California climate credit, which is typically distributed to customers in April to as early as possible. And that was adopted by the Commission in an expedited decision adopted in February.

In addition to that, given FERC's role in market monitoring, the CPUC worked with the governor's office to request that FERC launch an investigation and potentially enforcement actions regarding the high winter gas prices in the west. A letter went to FERC on that issue in February. In addition to that, on February 7, the CPUC did hold an onbound curing.

It was focused not only on the natural gas market, but then also as mentioned by Member Reyes, the impacts that we might be seeing on the electricity market coming in the next few months. And so we're very attuned to that and looking at what solutions we can put together there. Next slide, please. I also wanted to comment on electric affordability as well. Looking at the slide. Next slide, please.

So looking at the slide, we really acknowledge that residential bundled rates have been gradually rising over the last decade or so, and there are a number of factors behind this trend. Forecasted changes in electricity rates over the next few years are expected to lead to less affordable bills for Low income customers, particularly in hotter climate zones. Many customers in these climate zones require more electricity for essential needs due to high air conditioning and loads, and tend to earn less income than customers in coastal areas.

And we are very attuned to that. Next slide, please. So on this slide, what you're seeing here is that for PG&E and Edison, revenue requirements for distribution and transmission operating expenses have been increasing at an annual average rate greater than inflation. The primary drivers of these ONM costs are wildfire mitigation work, including enhanced inspections, vegetation management efforts, and wildfire liability insurance costs. PG&E, Edison and SDG&E distribution and transmission rate base has also risen sharply.

So my understanding is that that part of the presentation is on the second panel.

Okay, I can hold my remarks.

Wondering if we'll hold off those remarks so that we can.

I'll use the same slide deck as well. Okay, Kevin?

Okay. Thank you.

Thank you.

We'll ask the next panelists if you're done with the remarks on the first part. All right?

Okay. Thank you.

Yes, sir.

Please. Thank you and good afternoon. I'm Roger Schwecke, Senior Vice President, chief infrastructure officer for Southern California Gas Company. I hold the same responsibility on the gas side for San Diego Gas and electric. First, I want to express our concern and understanding for the impact that natural gas prices have been having on consumers and look for ways on how we could potentially mitigate it reoccurrence in the future. What happened this last winter is something that we do not want to have happen again.

As we look at our infrastructure investment, operations and maintenance, we hold several main key principles, safety, reliability, affordability and efficiency for our customers. And as a prudent operator, you must prepare for every reasonable eventuality against this. We came into this winter confident that our pipeline infrastructure and storage system were prepared to perform for the winter. In fact, we looked at our storage inventory levels and I'll talk more about what happened across western United States.

But our storage inventory levels in our storage fields were at a six year high on November 1. And our pipeline capacity to take gas coming in from the state, we know that about 90% or more of the gas consumed in California comes from out of state. So our ability to bring gas in, we were at our five year high that we had been. It was driven before the reduction by maintenance that we had corrected.

So with that, we were looking, coming into the year, the winter, in very good shape. I think everyone thought the winter was going to be fairly mild. Well, as it turned out, it wasn't. Commodity prices are set regionally, nationally. And I was mentioned, we don't mark up SoCal gas in San Diego, do not mark up the price of gas. It's a commodity pass through that is set by the market. We're a market taker, we're not a market maker.

So as EAIA laid out and was laid out before, the key drivers of the prices across the western region, and when you look at a map, the prices in Sumas and Washington down to Kingsgate, Northern California to the south, they were all higher than we had seen before. And it's because of below normal temperatures, higher natural gas demand, which is result of the temperatures, and reduced interstate pipeline capacity, which was mentioned about the El Paso pipeline system.

But there was also issues coming in from Canada as well, and then Low storage levels across the western United States. Infrastructure and the importance of infrastructure cannot be understated. It's needed for maintaining reliability and affordability. Compressor stations, pipelines, storage fields, they are all needed to maintain not only gas reliability and affordability, but electric, because as was mentioned, gas generation makes up a good portion of electric generation during those periods of time when it's needed.

So from that standpoint, we came in, and then you take a look at what other sources of gas, and that's like storage fields like our Eliso Canyon and our other three storage fields that provides in state gas that can supplement gas coming in from the state to meet those higher demands that we had in November, December and January.

Our demands were probably, I don't know what units want me to use, but 200 million cubic feet a day, it's probably a little less than 10% of our average demand across those three months on a five year average. That was something that was completely unexpected. We were looking in all the forecasts. We're looking for a mild winter time frame, but having that gas in the storage fields and be able to pull in a gas helped mitigate the prices.

How much is tough to say, but without them, prices could have been higher. It's hard to imagine that prices were higher than what they were, but they could be because if you look at back some of the daily spot prices, they were higher than those monthly prices. So as we look forward was mentioned, a lot of things have been done in our working in concert with the PUC to do things to support customers, to help them navigate these unusual periods.

From our early communications and frequent communications are still going on today. Use of energy efficiency measures, Bill assistance programs, our gas assistance Fund and as we mentioned, early climate credit on customer bills, which helped. Now you look at February versus let's say December, when the prices, the pricing has probably dropped almost 70% for February versus what it was in January. Significant drop.

And when we look at our futures market going out, we're seeing that March is going to be even a further drop, much more in line to what it historically has been showing how January was a very unusual month and again, it was across the western United States. So the other thing is this winter is not done. I think we're all seeing the cold weather that we got coming in now.

I'm born and raised in Southern California and when they say there's going to be snow level at 1000 foot, I'm going thousand foot, that's the top of some buildings in downtown LA. And it's probably something I've never seen in my lifetime in California, snow levels those Low. So that's something we have to look at.

How we go on a going forward basis now, the El Paso line coming back is going to be a great assistance that will allow more gas to come into the gas, especially on our southern part of our system, which is critical, which serves customers down in those areas. And San Diego gas and Electric, other things that we can look for that may help us, maybe not now is, let's say this summer or this winter, the next winter we have our Elisa Canyon storage field.

The capacity in that field is limited. The CPUC set a limit of 41 bcf. Calgems regulated has set a maximum safe level at 68 bcf. That's something that could be looked at as a possible way to add more in state storage. Gas within the limits, set safe limits by Calgem. That's something that probably can help and it's at no cost to consumers. Putting more gas in the ground at that storage field is not going to drive the price of operating that storage field.

It will drive up when you actually use it. But there's no physical investments that have to be made or safety enhancements that have to be made to get to those levels. So with that, the other thing is, when you look at price drivers, it's what the market perceives. And if the market perceives that, there's a constraint somewhere in the system just perceives that could potentially drive up prices.

The one constraint that we have at Aliso Canyon is the Aliso Canyon withdrawal protocol, which only allows us to use Aliso Canyon when we're in a strained condition. If you can alleviate that constraint and allow more for price suppression than just reliability, that could help. If you think of that, our demand was 200 million cubic feet a day for three months, more than historically 20 bcf. At Aliso Canyon, that's the same amount. So it possibly could be looked at to help in that.

So with that, I look forward to answering your questions and exploring opportunities on how we can look to maintain reliability, safety, and affordability moving forward. Thank you.

Good afternoon. I'm Carla Peterman, Executive Vice President of corporate affairs and chief sustainability officer for PG&E. Thank you. Chair Garcia. Thank you. Vice Chair Patterson, thank you for the Committee for holding this hearing and for inviting us to participate. As my colleague said, we know that natural gas prices have been unusually high this winter. Prices are coming down for March for PG and e customers. On average, we expect the March Bill to be 25% of the February Bill.

So we are seeing that same decline in forward pricing that SoCal gas and SDG&E are seeing as well. But we share your concern about natural gas prices and the experience that our customers are having. And we are here to help our customers manage their energy use as well as offer assistance programs for income eligible customers. We also appreciate the state's attention to this issue and support for an investigation looking into factors that may have contributed to high prices this year.

Similar to SDG, e and SoCal gas, we do not mark up the cost of natural gas. We pass it on to customers at the same cost that we buy it. And every year we take aggressive actions to keep costs as Low as possible, and we plan ahead. So we use three key strategies to help limit the impact of natural gas prices on customers. Number one, access to three, gas production basins to access lowest price gas.

Two, using gas storage to procure gas during times of lower prices for use later. And number three, financial hedging to lock in lower prices. So collectively, during the gas price runups in the winter, our procurement team was able to save customers well over 1 billion through these measures. So that included procuring interstate pipeline capacity so we could access diverse Low cost basins.

Two, natural gas storage, which was full at the beginning of winter for PG&E, and then third, financial hedging to protect against winter rising prices. So, like SDG&E and SoCal gas, there are some immediate steps we supported to ease the shock. We implemented the climate credit that was advanced by the PUC, and we very much appreciate that action on behalf of our customers, and that will allow PG&E customers to receive gas and electricity from us to receive a Bill credit of about $91.

Customers are also receiving credits through the cap funding, with more than 300,000 PG&E customers receiving a Bill credit. We also funded the Reach program. This is an income qualified assistance program through the PG&E Foundation. We've also encouraged customers to use programs like Liheap, the federal program. In January alone, our customers received a total of 8.6 million in emergency energy Bill assistance, with the average Bill credit totaling around $1,000.

We also took steps to smooth some of these costs for our customers, including spreading cost over several months to reduce the sticker shock for customers over the last few months. And we will continue to pursue all available measures to manage gas costs for customers. And we look forward to hearing your ideas today. Thank you for the time.

Thank you Vice Chair Patterson and the rest of the Members of the Committee for inviting me to speak today. My name is Michael Colvin, and I am the Director of the California Energy Program at Environmental Defense Fund. EDF has over 500,000 activists and Members here in the state, and each of them are impacted by these affordability issues.

As you may be aware, a typical gas customers utility Bill includes both the gas commodity and the fixed infrastructure, including the pipeline transmission, the distribution, the storage, some of the other tools that have been talked about. And so while the rest of the panel has focused on the gas price commodity spike that we've seen in the short term, I would like to focus on how we ensure gas affordability in the long run. And that means how do we focus on the infrastructure itself?

On a molecule basis, most of the gas the state uses is for nonresidential use. Yet on a revenue requirement basis, most of the money is allocated to the residential customers. It's really expensive to get all that pipe into our homes, and so we're planning on preparing to decarbonize the entire system, and that means change. And whenever we're talking about a change to the investment strategy that the utility has to make, we have to ensure that we have the proper guardrails put into place.

We're going to have to consider both the affordability and the equity of those changes. And so ensuring affordability is going to be really paramount for us. And so that leads me to a couple of key principles that the Legislature should enshrine to ensure gas affordability in our infrastructure in the long run. Principle number one, gas service itself should be decarbonized by 2045. The gas utilities on this panel have already made that commitment publicly, and we should enshrine it now.

The time is ripe, and having that level of certainty is going to be a critical component to the long term affordability, since knowing where we are headed will allow these gas utilities to propose and for the PUC to authorize the most cost effective long term infrastructure costs. Principle number two, we need to update the utility's obligation to serve, and it needs to no longer be focused on the gas commodity itself, but on the end products and services that the customer needs.

Simply put, if there's a more affordable option to serve a customer, they should do that, and the utility should be allowed to make that investment choice and propose what the best strategy is. And it should not be tied to any one particular commodity. And I'll note on this is that there's probably going to be a different investment strategy for residential customers than there will be for the electric generators than there will be for the large industrial customers.

And so allowing to have some of that flexibility baked into the system is going to be really important. In principle number three, we should recognize that business as usual itself is no longer an option. The gas utilities must be required to demonstrate that new gas pipe infrastructure is the most cost effective choice for their customers. The PUC recently adopted a new General order for major gas pipeline infrastructure, which requires that all non pipeline alternatives must be evaluated.

The PUC is probably going to need some additional legislative authority and guidance on this matter to make certain that they're implementing this in the best way that they can. And so with those three principles in mind, I have a couple of key strategies that I just wanted to briefly mention. One, the decarbonization transition itself could lead the utility with some pipes that are not fully depreciated.

As part of the climate bond that you all are considering, we should include alternative ways to keep those pipes affordable and ensuring that they are fully depreciated. Securitizing them with a bond will keep shareholders whole and will avoid a stranded asset issue. And by not relying on repair funds, we can avoid a major new line item on the Bill as we are navigating this transition. Strategy number two, eliminate any subsidies from gas residential customers.

There is an ongoing fight and it happens time and time again, between the different customer classes about who pays for what portion of the gas system. As the end uses of the gas system is going to change, we're going to need to update those cost allocation rules. And there are several inherent subsidies from residential customers that are baked into the system right now. And we should take a really long look at do those make sense? Are they still in the public interest?

Cost causation should be a key strategy to keep in mind. Number three, targeting the deployment of decarbonization programs with an equity and affordability lens to ensure that we do not have the same amount of fixed infrastructure. With a declining customer base, frankly, wealthier and whiter customers are going to probably want to try and decarbonize and electrify their homes first, and that's going to leave our more vulnerable customers left holding the bag. That's the exact wrong outcome. And so there are ways to safeguard against that.

We should take that to heart. Number four, we should leverage the investment, excuse me, the Ira and other federal monies, to help buy down ratepayer costs of major new investments such as hydrogen hubs. We need appropriate safeguards in place to ensure the environmental and ratepayer protection of these federal funds. And we stand ready to advise on those new business investments.

And last but not least, after the California energy crisis of 2000 to 2001, we raised the Low income discount or the care program from 20 to 30% to 35%. But we never did that for the gas system. Changing care now is going to require legislative approval, and it might be an appropriate tool in our toolkit that we should think about. With that, I thank you so much for your time and attention, and I look forward to any questions you may have.

Thank you. We'll turn to Members if you have comments or questions to the panel. I'd like to start with a question about Aliso Canyon. Did I understand correctly that you are limited to the amount that you can put in storage?

That is correct. Let me explain. There's two limits. One is the technical limit that is set by CalGEM, which equates to the pressure in the reservoir, which equates to about a 68 Bcf working inventory level. We have a limitation set by the CPUC of 41 Bcf as the appropriate level at this time. The decision that said that said it was an interim level and could be looked at going forward. So now might be the time to look at it.

What I'm trying to determine here is part of, I think what PG&E was mentioning was that you want to try to buy gas on that spot market when it's cheap or cheaper and then put it into storage for use. I find it very difficult to justify at the PUC level to put this cap at the 41.

Because. What you're doing is you're artificially putting a cap on affordable gas that those folks can buy at the time that it's affordable so that they can use it at a time when they need it. Storage is meaningless if you cannot have the capacity to store and choose when to store by virtue of the marketplace.

If we are subject to the marketplace, it makes absolute sense that you have to have a kind of discretion with respect to the levels of the storage, because if you artificially say we're not going to store anything above the 41, you just tied their hands on finding on the spot market at times when these rates are coming down. So I want to concur with what has been said here and also encourage PG&E and others.

We have the marketplace that we have to deal with, but we can't put artificial barriers to cost containment and cost control to find these sources when they are coming down, to put them in a place we can store for a period of time and then use them when we need. We're really, with all due respect to the PUC, you are part of the problem here, and I think you need to fix that problem.

Yes. Next. Yes, sorry.

Thank you.

Hi, Pilar Schiavo. I actually represent the district that includes Aliso Canyon. I'm going to take a little bit of an issue with the comments just made, because I would say that there was a lot, and to say that there's no payment to customers. There was a lot paid by my community in the Aliso Canyon blowout. And people were evacuated. They were evacuated from their schools. They were evacuated from their homes. They've had lasting health impacts.

And so there's a reason that there are restrictions on Aliso Canyon, and they're serious and they're real. So I would like to talk a little bit about storage, though, because I hear what you're saying, that your storage, it sounds like aside from Aliso, was at maximum capacity. But then in the presentation, there was also discussion of storage in the west being lower than normal.

So where is the disconnect here if you all had all the storage filled up that you were able to fill up, and then where's the storage that is not filled up, aside from Aliso? Because I know we're clear on why that is not full. Were there places that had capacity that chose not to buy and fill up at those times, or was there something else going on?

I'll just say I can only speak to the sources which PG&E procures from. And so in terms of our own storage and the third party storage where we procure from, those were all full. I don't have as much personal insight into other parts of the market, Roger.

Yeah, same thing. I know kind of what's going on in California. But there's storage fields that are located up in the Rocky Mountains, elsewhere on the West Coast, up in Washington. Where they were, I do not know. For EI to make.

The statement that they were low, I'd look at ours and PG&E and the independents that are located in PG&E service territory were at full levels.

Okay, thank you. And so, I think one of the questions I also have is around when the gas prices were, when the gas was purchased and at the rates at which they were purchased. I'm curious if the CPUC, do you have that information? Is that publicly available? Who bought from who and for how much? And is that something that the public has access to and we can look at?

Thank you for that question. I think this actually goes to some of the comments I made about the Federal Energy Regulatory Commission. So they are the federal agency that has oversight over the full national markets. And so there are tools and access to data that we do not have access to as the State of California individually, that FERC does have access to.

And so part of the call that the Governor made to FERC to take a look at. Have there been any market manipulation indicators, any anomalous activities going on? Both to look, do the market surveillance and potential enforcement actions, were included in that request to FERC, because FERC is the one that has access to these tools as their role of a national oversight over the gas markets.

Okay. And anecdotally, I agree with my colleagues here that this has been absolutely a huge issue in the district. We have heard from so many constituents, constituents who, I have seniors with fixed incomes who their bills went from $90 in November to $444 in January.

When you're a senior on a fixed income, even a $99 credit or $91 credit is not going to be enough for you, and spreading it out over a month is not going to be enough for you to really make up if there are months of these higher bills. When you're saying, I'm also hearing a difference because you're talking about the prices dropped 70% since January, which is great. You're talking about 25%. Why is there such a big difference between the two of you?

So our numbers are very similar. I was saying that bills are going to be 25% of what they were. That's about a 75% drop. So we are seeing similar to higher reductions.

Okay. I guess the other question I would have is, is there some other solution that we need to. I understand that gas prices are passed through. I also understand that gas companies, last year, for example, made record profits over what they made the year before at that same time. And so I guess my frustration is that our constituents are suffering and struggling and deciding whether or not they can turn the heat on.

And I think everybody needs to feel that a little bit and it can't just be 100% passed through by gas companies that, "well, we just bought at the highest rate on this certain day, and now you're going to have to pay for it." I feel like the gas companies are going to have to feel it a little bit, too. My gut feels like that is not fair that the consumer and our constituents have to pay 100% of that high rate.

And the gas companies just pass that on completely. And I think that's something that we should look at. Thank you.

Thank you, Mr. Chair, and thank you for putting this together. I think it's a really important conversation that we're continuing to have as a Committee. I actually want to piggyback on what Assemblymember Schiavo just closed on, which is this pass through question, which is, so what was touted today is that gas companies aren't profiting off of natural gas. Right. They're not selling it at a profit, however, they're passing it 100% on to the consumer.

And as senior Schiavo pointed out, I can speak just to my gas and electric company. PG&E's profits last year were up 7%. The year before, were up 11%. So I guess I'm a little bit perplexed, because when the cost of the good one is selling goes up, often the person or company that is selling it, their margin goes down. They have to absorb some of the costs that are increased. That is not the case here.

They just pass it on to the consumer, which, as Assemblymember Schaivo pointed out, could lead to less motivation to drive those costs down, but also just seems antithetical to what should be the case. Right. I mean, it should be shared between the utility and the consumer and not completely on the back of Californians. And I guess, obviously what we're talking about is rate reform.

But I think that that's a conversation that we really do need to have because we continue to just see these IOUs profiting off the backs of Californians. I have a question, and I know that, and maybe this is for the two of you. I know you try to send notices to customers that things may be higher, right? As you're seeing those prices go up.

But as was mentioned, people who are living on a limited income, who are budgeting, who are trying to make ends meet, when they get a surprise bill of $100, that can be the difference between being housed or unhoused. Right? And we have a homelessness crisis in this state. And so I understand that in electric rates, you sort of smooth those out, and in gas rates, we do not. Right?

And so I guess I want to understand a little bit better how we can meet the needs of customers who are trying to do it all, who are trying to budget, who are trying to make the decisions they need to make and can't because they don't know what to expect in their monthly bill. So how do we do better for them?

Well, I can start off by saying we have various payment plans that customers can be on that can help spread out the cost of those bills, and we're able and willing to work with any customer in that situation. And as you noted, we did reach out to customers as soon as we saw where gas prices were going. Understandably, though, you hear communication from us. It doesn't really resonate sometimes for customers until they see it. And so we are working with those customers now.

And I just want to make sure you do understand we are doing everything we can to control cost. The cost would be higher if not for the hedging activities we've done, for the storage that we've undertaken. And this state has decoupling. Right? The intention to separate. We don't earn a profit on gas and electricity because we want to encourage utilities to invest in energy efficiency, to invest in gas efficiency. So we also have customer programs that are focused on that as well.

Yeah, my statement is basically the same. As we look at things on a going forward basis. It's just, customers, we got 20 million consumers in Southern California. To get their attention in the October and November time frame when their gas bill is $25, $30, they don't have that awareness. Also, I think we were all caught off guard just how high they were going to go, because when it went to December, it was fairly high, but it was kind of comparable to the year before in 2021.

But when January hit, that's where everyone was surprised. But we were continuing those communications, offering up those assistance programs, including our level pay plan where customers can smooth out their payments throughout the year. So that's what we're always looking to do in our activities, the same as PG&E's, to try to mitigate the prices. We continue to do that every day. And that decoupling that was mentioned, we also don't make any more if they use more gas, or use less gas.

Unlike others in the United States, their profit is based on if it's cold weather, they're going to make more money. In California. If the weather's colder, we don't make any more money, just like we don't make any more money when the gas prices are higher. So it's a situation in California that is, in some respects, unique to the United States.

I think just one thing you're hearing from us is we want answers, too. That's why we're very supportive of a FERC investigation, because we can see what's happening with our systems, but we don't understand all the root causes, which is why it's so important to continue to have the federal focus on this issue.

Thanks. I'm going to kind of reemphasize a couple of points hopefully you're hearing loud and clear, and that starts with, really, our constituents, your customers, really felt blindsided by these rate increases when bills went up two or three fold, frankly, with little explanation. It's great that we're trying to understand it now. I absolutely think that there has to be a better job on providing information, and hopefully forecasting now, understanding our gas system as part of the market.

But that having been said, can the CPUC and IOUs better predict future market volatility? We talked about hedging. That's one strategy. We know that FERC is in the mix as well. But what are some strategies that can be used to avoid this surprise?

Yeah, it's interesting, because when you look back in the September-October time frame, all the weather forecasts were showing a mild wintertime. And we all know one thing we know about a weather forecast, it's going to be wrong. Well, in this case, it was so wrong that everyone was cut off guard, the entire marketplace.

So it's very difficult to forecast where commodity prices are going to go, when it's so driven by demand, which is driven by weather, and how we can get better at that, I don't know. It's a challenge. But the tools that Carla mentioned as far as physical hedges, which is storage, buying gas when it's lower prices during the summertime, using it during the winter.

It's been a strategy that's been in place since gas companies were around, since we started developing stories at SoCal's area, we developed stories back in the '50s. It's been that strategy, that physical hedge that we're able to do along with now, the financial instruments that have come along, that allow you to plan for that. The thing about trying to forecast where the market is going to go, half the time you could be right, and half the time you could be wrong. So it's a real juggling act.

It's a challenge.

Yeah, we know that weather is one factor, but not the only one. So, for example, we've talked about either planned or unplanned maintenance on lines that could very well be from out of state. I was struck by the fact that 90% of our natural gas is imported. I'll maybe come back to that real quick in a minute. But is there a system by which CPUC and/or the IOUs are informed of pipeline maintenance in other states, like Texas or Oklahoma?

Yeah, all the interstate pipelines and the California utilities have what are called electronic bulletin boards where we actually post and we'll post our planned outages and our planned schedule, along with the capacity reductions that result from that scheduled maintenance. The situation that happened in El Paso pipeline was unscheduled. It was an unfortunate rupture of the pipeline where several people got killed, which then required the work of the FEMs that have come in and investigate. That was obviously an unplanned event.

But we post all our events, and most of the planned events have to do with pipeline regulations and safety regulations that we're complying with for inspecting our pipelines to make sure they're safe.

Yeah, and again, I would join my colleagues in strongly asking that you develop a system to better inform customers. As you can see, these price volatility situations happening. So, final point, on the 90% import, and that is, as we know, we also are trying to greatly increase our use of renewable energy in the state and ramping that up through policy goals that we've implemented. Can we become less reliant on natural gas imports with an increase in renewable energy sources?

Kind of a rhetorical question, but how is that playing out? I think, Mr. Colvin, you spoke to that a little bit, but that's really the overarching goal. And then how do we map that out going forward?

So I have two really brief responses. The first one is: we're going to need a strategy for what do we do to figure out what we're doing for the gas system for each major customer segment that's out there, and the strategy is not going to be the same. And that needs to be okay. Right now, we sort of have one large strategy for the entire gas system, and we're going to do something that's a little bit different.

That's going to require some pretty strong signals to these guys. To underline another point that you made about how we notify customers, there are studies that are out there that show that the average customer spends less than five minutes a year looking at their utility bill. Most of it's automated. And so I have a lot of sympathy for my colleagues here that they're sometimes trying to communicate to customers and shouting into the wind.

And so if there are things that we can do to authorize more automated programs, that would be really helpful. There's been some hesitancy in that in the past. I think the other thing that I want to give SoCal Gas a little bit of credit, they are trying a pretty revolutionary gas demand response program right now. That's just before the PUC. And that could be a way of doing some shaving on the larger industrial customer side. And that could be a place to get some savings.

I think the last part of this is the communication strategy for each type of gas customer is going to be different. But thinking about where the money is and where the rate stability that you're looking for, it's not going to be on the commodity, it's going to be on the fixed pipe.

And so if there are ways that, as we're trying to meet this moment, we're not doubling down on the existing strategy of an expansion of existing infrastructure, but we're making new infrastructure choices that are going to meet where we're wanting to go, I think that's going to be the better thing to do.

And if I can just add to that and say PG&E is investing in all the areas that Mr. Colvin identified. So we are focused on introducing more biomethane into our pipeline to diversify the fuel source. We're also looking at hydrogen in our power plants. And then we have several pilots we've proposed to electrify entire communities. So to the point, if you can electrify an entire community, then you can strategically decommission the pipeline and save on some of those investment costs.

Those are all areas that we are investing in, but they do take time and they do require coordination with policymakers.

If I may respond as well, I did want to touch on kind of communication strategy. In December, as we saw the gas prices starting to rise, they weren't at where they were in January, but we saw that trajectory and we did communicate with the utilities and told them to, or directed them to enhance their customer communications. So this included emails. It also included social media, community-based organizations, faith-based organizations, to tell customers about signing up for CARE Program for low-income customers, sign up for seasonal levelized billing that helps you pay a little bit more in the spring and the fall when your bills are typically low, to levelize your bill in the summer and the winter.

In addition to that, for customers to sign up for bill forecasting tools that can text you when it looks like your bill is getting to a certain point, there are limitations on the utilities being able to text customers who have not opted into these programs.

And so I think as we go through an experience like this, really using this as an opportunity to encourage customers to sign up for those text messages, which can be used in an instance like this when bills are trajectory going upwards, but could also be used in other instances when it's important for the utilities to communicate with customers immediately, because there were emails, there was social media, but there were gaps. And we've heard that from customers and we know that's to be true.

And so if there are ways that we can optimize text messaging, get more customers to opt into text messaging, I think that could be a real asset in a time like this.

Thank you, Mr. Chair. these microphones got shorter. So thank you for sharing the information related to the text message. So I feel like perhaps my experience as a Southern California gas customer is probably very similar to a lot of folks. I opted out or opted in to paperless. So I don't get the bills delivered at home. I got emails that I don't read, but I did opt in into the text messaging program, which I just got 12 days ago that my bill is due.

So don't want to open that text message just yet. But I do believe that that's a really great way of communicating with customers if customers knew about the opportunities. Curious also about the language axis, language issues related to more than just English or Spanish specifically, or other languages across the state. That's something that we have tried to manage in other scenarios like EDD, DMV and other just daily, everyday uses for folks across California. I'm curious.

I know that our second panel is related to the electric affordability. I would love to know some of the investments that both SoCal gas and PG&E are making with regards to some of the more natural resource, renewable energy, I'm sorry, renewable energy opportunities and the investments that you're making. Because I do believe that as large utilities you are creating, you know where society is headed and the legislature and what we've been trying to accomplish and the goals that we have set forward.

I don't think that you get an opportunity enough to talk about the work that you've done in that space. And I think it's just important for us to also hear what that could potentially look like. And some of those investments that you're making, I know some of those investments are actually taking place in LA County specifically, and if we can replicate what that looks like across the state and specifically, what are we doing related to storage? And maybe some of the challenges that you faced I think would be helpful in informing us and making some decisions as we move forward. Thank you.

Thank you for the question. As chief sustainability officer, I love to talk about this topic. And last year, PG&E released climate goals, and they're some of the most aggressive in the country for a utility. So, for example, we committed that by 2040 to be carbon neutral on our electric and gas system as a dual fuel overlapping utility, we think we're really uniquely placed to have a diversity of options to serve our customers.

So specifically, in terms of some of the investments that we're making and really how do we get on the path for our 2030 targets? We're investing in a lot of clean energy, 93% of the electricity we provide is carbon free. And we're investing regarding storage, we're referring to energy storage or gas storage, both. So we're doing significant investment in energy storage, large scale, as well as investing in supporting our customers to have residential and customer level storage.

So, for example, we have a virtual power plant programs where if a customer has rooftop solar and storage, that can be aggregated and that's actually serving as a power plant for the grid. So we're doing work on the electricity side. As I mentioned earlier, we're also investing in electrification of communities, understanding what does it take to electrify a community. And our commitment is to do this with at least three disadvantaged communities in our service area to help lower the cost of the energy transition.

We're also doing significant investment in electric vehicles. One out of every six EVs is in our service area. And we have programs around vehicle grid integration. Basically, use your car as a power plant. So we're pretty much everything that can be a power plant that's already out there, we are focused on how do we aggregate that and actually use that for the grid. And then just to conclude, as I mentioned, on the gas side, we know that natural gas plays an important role for our customers.

And we have to make sure they still have the heat, they still have the comfort. So we're looking at diversity of strategies, biomethane, hydrogen, reducing use, gas efficiency. So we have a suite of actionable measures that we've taken and we've integrated into our opperations.

I'll pick up where Carla ended. And that's with regard to what we call our clean fuels initiatives. And we'll start with biogas, biomethane renewable natural gas. And looking at connecting a lot of those sources to our system. We made a commitment by last year, by the end of last year to be at 5% renewable natural gas in our system. When we were. We got a 20% goal by 2030.

So we're striving to get those sources of that supply into the system because that gas can be used without any modification to the gas system. Then you start moving into other areas, like hydrogen blending, the possibility of blending hydrogen, renewable green hydrogen into the system to reduce the carbon intensity of the gases consumed by customers. We're doing a lot of research on that. We're proposed pilot programs with the PUC to look at that in a real world experience.

And then lastly, I'll talk about our project that we currently have just undertook. And it's called Angeles link. Angeles link is 100% hydrogen pipeline looking to run from out in the desert area where you can have produced green hydrogen moving all the way into the LA Basin, down to the LA and Long Beach ports and create that hydrogen hub that was mentioned. And looking at federal funding sources, we're in the initial stages of that.

The Commission approved our ability to track cost, to do the initial pre feed study of that. But that's a way to move large volumes of those hard to electrify customers, power plants, industrial customers, others that can't basically electrify. So those are some of the things we're doing. And then I'll add to that, looking at fuel cells and whether fuel cells can use straight hydrogen or natural gas, their emissions are less. And then a big target market for the hydrogen pipeline is the heavy duty truck market. To get that, the amount of trucks that are just in Southern California with the harbors there.

Sure, people usually don't say, I have a hard time hearing me, but anyways, so from that standpoint, looking at those 250,000 trucks that traverse Southern California on a daily basis, and how can you basically use hydrogen to clean up those and a lot of those down the freeway quarters in Southern California, the 710 freeway, the 110, all those freeway quarters, the five run through disadvantaged communities, and if we can clean up the air in those, there's a lot of benefit all around for that, and at the ports.

And I would be remiss. We've supported almost all these efforts that the utilities have mentioned, but we've also really tried to put in the appropriate both rate pair and environmental safeguards that there's a way to do this right and there's a way to do it wrong. And we need to be really careful because we don't want to make the investment twice.

I appreciate the challenge and opportunity that we are presented with. My district is surrounded by the two, the five, the 10, the 60, the 101, the 110, the 710, and the 134 freeways. Literally everything that comes from the port of Los Angeles and the port of Long Beach goes through my community. We have the highest rates of asthma in children in LA County, and then they travel back to our majority leader, who left recently to San Bernardino and into warehouses in the Inland Empire. So finding those solutions, especially for the 250 heavy duty trucks that traverse the area, I think is highly important and really appreciate the work being done and the collaboration. Thank you.

Right. I know we have two follow up questions, but Vice Chair and I call it to my right.

All of the renewable gases you just talked about are, in fact gases and will need to be stored, will need to be put through pipelines and all of that. So the fact of the matter is that the infrastructure, if you're going to do the things that you're talking about, has to be there.

My question is about you go and fill up your storage facilities with a variety of priced gas. In other words, you got a batch of gas in storage. Some of it came in expensive, some of it came in less expensive, some of it came in more expensive. How do you figure out what that aggregate, that bulk cost, if you've got a whole bunch of different volumes at certain prices?

I'm a Reits person. You go ahead, Roger.

I'm an operator. So it's an accounting function, right? It's the whole last in, first out, first in, last out, or a blended. When you look at the gas that comes in, do you basically say, the last gas I put in is the first one out, or did I just blend it based on the weighted average of the volume of gas I bought that I injected into storage at that period of time?

What I'm hearing is that it's an estimate of the cost to you, not a precise cost to you.

No, it's a precise cost. It's tracked specifically of what we paid for that gas.

I mean, what you pass through to ratepayers.

I'm trying to understand the question.

You've got a storage facility. The storage facility has certain amount of gas that was cost at x, a certain amount of gas that cost at y, certain amount of gas. And when you require ratepayers to pay for that, how do you price it if it's not an estimate?

Well, it's actually the accounting of the gas, the amount of gas we put in, the volume at the price across the different periods. And then when you pull it out, it's that gas volume times the prices that then are basically added to the portfolio of gas that's bought. Because you got to remember, not all the gas comes out of storage is served on a given day. We're still buying a lot from the interstates. That averages the price, what customers pay.

The other different gases that were talked about here. You're proud of all of those. Can you give me an idea of all of that different gas than natural gas? Will it cost as much, less than or more than the natural gas that you are replacing it with?

More.

It will cost you more?

Those gas are in early stages of commercialization. So biomethane, for example.

Will that not affect the ratepayer?

It's such a small portion right now that that's not driving what we're seeing in the gas markets today. However, it's something that we're all thinking about is how do you actually lower the cost of those gas? And so that's why we're all doing pilots, all doing research to figure out how to bring that gas lower so it can be at scale, because we use a lot of natural gas. And that is one of the challenges, that there's not a readily available substitute.

I think I heard you say that this is going to be more costly than natural gas.

I will observe this. Natural gas prices have fluctuated wildly over the years. So there's been a lot of volatility with gas prices, and I would expect there would continue to be as we start to pursue decarbonization goals across the world. And so I think it's the right question to be asking, how do we make sure that whether it's natural gas or the substitutes, that they're lowest cost possible and that there's not the volatility for customers?

It's still a marketplace. And I think you're going to have the same kind of challenges with one kind of a gas as you have with another kind of a gas. And it's going to require the storage. It's going to require the conveyance. It's going to require finding it and buying it. And I've been here 10 years in this committee, and we've always heard about the reliability. We've always heard about the fact that we want to have it affordable. Reliability is down, affordability, it's unaffordable.

So the challenge that you are attempting to meet doesn't give me a whole lot of hope that reliability is going to get better and costs are going to come down. With all due respect, and that's why I've asked these questions about how you price, how you pass them through. If you don't have storage because somebody's telling you you can't store and you can buy much cheaper natural gas, then you should be able to fill it all up.

If you're really looking for reliability and you're really looking for affordability, you got to use the systems the way that they were produced, developed. I'm hoping that all of the aspirations here can be met without a real reliability and a real cost burden. And I don't yet have confidence that the aspirations will meet the expectations of ratepayers. I think it's going to be an expensive transition.

We're going to take one last question for this panel.

Just back to the storage question. Can you talk a little bit about what was done in terms of when the prices spiked and you had been in a good position in terms of storage? My understanding, and correct me if I'm wrong, is that you can draw down to about 30% is what the allowable percentage is, or is there a rate that you can draw down to, or you can draw down to zero? And what did you draw down to with those lower, cheaper prices that you had in storage versus the most expensive that you had just bought, and why? What was the thinking there?

Let me see if I can explain storage operations, because there's not really a limit and you can draw it down. The challenge is that it takes you four or five times as long to fill it back up. And when you go into the winter, you have to manage how much you draw down in November, in December, in January and February, because you got to have enough gas and storage to meet your peak demands during those other months of the winter.

It's like we're going to experience peak demand this week. The coldest and highest gas demand we'll probably see all winter will be this week. So while you can pull it down, you have to manage not only what you pull down that particular month for prices, but you then have to manage how much do I have to keep in storage? Because the level of storage inventory will drive the amount you can pull out at any given time.

And when you look at hourly demands, daily demands, that's where you have to make sure you still have enough gas in storage to be able to meet those demand profiles that may happen in February.

In this instance, when we had such high prices that you had to buy gas at. It seems like it would have been a lot easier on our constituents if you took more from storage and less of this high cost gas, high price gas, and then spread that over more time, I guess. But is that you couldn't do that?

When you look at it on a hindsight basis, you could probably say, we should have. Could have. Should have.

Yeah.

But you go into January and you say, well, I have high prices. How much can I pull out and still protect and not have to actually curtail customers like electric generation customers in February. That's the tricky part, because you have to plan for the worst case scenario. And that worst case scenario could be you could have another pipeline outage or something, and demand could be a lot more than you anticipate. So it's a delicate balance. That's why the more storage assets you have, the more you have the balance.

And did we see, and this is my last question. Sorry. Did we see the same kinds of spikes in, like, Oregon, Washington and other neighbors in the west, or were there things that they did that we didn't do that we could have done? Any lessons learned there?

So when you look at the price scenarios in January, December and January, the prices in those areas were the same as they were in California. That's, to me, what makes it. This is very unusual because it wasn't just a Southern California issue. It just wasn't a California or a southwest issue. This was a western United States issue where prices in Washington were the same, $45, as they were in California.

I'll just add, I appreciate your question, and I'll talk to our operators. I think we all are looking at, how could we, in hindsight, knowing what we know now, would we have managed our storage differently? I mean, looking at all of those, because, again, we don't want to be in this situation. We're hearing from the customers probably more than even you are. And so we are very motivated to avoid this situation. And so I'll commit to going back and talking with our team about this.

And if I may, I just wanted to share know we were in communication with the regulators in Washington, Oregon, Nevada, New Mexico, Arizona, Colorado on the same issue. They're seeing it just like we are. We've been trading information as much as we can, but just making sure that this was not only happening in California, this was certainly happening across the west. So I just wanted to share that we have been very closely connected with the other western states and understanding what their concerns were.

Some of these states have, for example, coal reserves that they were able to rely on, but at the same time, they were very concerned about having those reserves for the summer. Same thing with that was more Arizona, New Mexico, talking to Washington. And know they did have hydro resources, but those were running low and they were concerned about having those hydro resources for the summer. So I'll just end it there.

Hard to limit the conversation, particularly with this topic. And so two colleagues have asked to ask an additional question. Colleagues to my left. So the gentleman who just arrived, and then my colleague, Bauer Khan.

Thank you, Mr. Chair. And I think we all understand the volatility going on right now. So currently, it's my understanding that under existing law and regulation, all natural gas in use customers can choose an alternative competitive provider for gas known as a core transport agent. Correct.

So what can we do as a state to help allow customers better hedges against the vitality that we're seeing. Knowing that, can you expand into that a little bit? Because I don't think a lot of us fully understand what that means and how we can use that to address vitality and what's going on.

If I can begin. We have been in close communication with the core transport agents. They are also very exposed to the high gas prices right now, to a very concerning level as well. So I'm not sure that they would necessarily be a viable alternative for customers right now looking to reduce their exposure to the high natural gas prices. But we have kept up the communication with them in order to help monitor the situation for them along with the customers of the investor owned utilities.

Yeah, and I'll just note that as I shared in the beginning of my presentation, through physical and financial hedging. We saved customers about $1.0 billion in the run.

I know you're all doing the best that you can, but Michael, you were. I just think there's not really enough general knowledge on the fact that these even exist.

So just from a general knowledge perspective, the utilities buy gas on behalf of their residential customers or at the core. And so they do both the transport and the commodity purchasing for all the rest of the gas, which is about two thirds of the gas in California. They just are the common carrier, they're the highway. But everybody else goes out and buys the gas on their own.

And so where the CTAs or core transport agents come into play is I as a residential customer or I wouldn't do it, but a residential customer or another could say, hey, don't buy on my behalf. I want to become unbundled. I'll go and figure out and I'll play the market on my own. I will note two things. One, there is a history of some really concerning consumer protection issues with some of the CPAs.

And so we just have to be very mindful for that as an option. The second is we are trying to peanut butter more of our decarbonization programs onto the core customer base. And we don't want the core transport agents to be a way to escape an environmental obligation. And so allocating the cost, making certain we have an even market field, excuse me, even playing field or accurate market rules are going to be really important. So it's an interesting option. I think it's more for customers who have a little bit more sophistication and are trying to do things in that way. Let's go for it, but let's get the market rules right.

I just wanted to make a comment as it related to what our Vice Chair was saying earlier about rates and our transition to clean energy because it was concerning to me. And I just wanted to point out that the briefing materials mentioned as the summer Connolly said, 90% of our natural gas is coming from out of state and 45% of that is being used to create energy. And so as I have been studying this issue, Uruguay went a clean energy revolution because of cost.

They were importing too much energy. It was costing them too much money. The only way for them to go energy independent was clean energy and their cost took a huge dive down. They got more affordable because the energy was local, controlled and affordable. And so I think we need to be realistic about what our clean energy future looks like and that becoming energy independent with a clean energy grid in California could actually be a huge benefit to Californians and their costs.

Thank you. Let me thank all of you for your presentations and for sitting there for almost an hour. And this is just the beginning of the panel. There aren't any other questions. We certainly will do some follow up as it pertains to some of the questions that may have not been fully answered. But thank you again. We have the second panel that will be starting and we'll ask the other members of the panel to please come up and if our first presenter is ready to go, we'll say, let's get going. Here you go. Thank you.

Is it okay if I start over for the electric side? Okay. Sorry about that earlier. All right, so shifting to affordability on the electric side. Next slide, please. All right, so again, looking at this slide, we acknowledge that residential bundled rates have been gradually rising over the past decade, and there are a number of factors behind this trend. Forecasted changes in electricity rates over the next few years are expected to lead to less affordable bills for low income customers, particularly in hotter climate zones.

Many customers in these climate zones require more electricity for their essential needs due to high air conditioning loads and tend to earn less income than customers in coastal areas. Next slide, please. So what we're looking at on this slide is that for PG&E in Southern California Edison revenue requirements for distribution and transmission operating expenses have been increasing at an annual average rate greater than inflation.

The primary driver of these operational and maintenance costs, or O&M costs, is wildfire mitigation work, including enhanced inspections, vegetation management efforts, and wildfire liability insurance costs. Next slide, please. PG&E Edison and San Diego Gas and electric distribution and transmission rate base has also risen sharply, particularly with respect to PG&E's transmission and Southern California Edison's distribution rate base.

All indicators point to continued significant rate growth in the near term from wildfire mitigation efforts and so on this slide, I wanted to highlight some of the recent policy actions that the CPUC has taken trying to plant some of these seeds to improve affordability.

So some of these solutions include that the CPUC has enacted and is working on things like net energy metering reform from last year, the income based fixed charge that we were able to get through the legislature applying cap funds for arrearage management, adjusting the cost of capital for the IOUs late last year as well. And I'll highlight a few of those in the next few slides.

So the CPUC recently lowered the return on equity for the four large IOUs to align with national utility trends that happened at the end of last year through our cost of capital proceeding, and we're expecting to see the results of that in the next coming months and years. In January, the CPUC also approved a settlement for wildfire liability self insurance for third party claims for PG&E rather than purchasing commercial insurance. We're expecting this to lower the overall cost to PG&E customers.

In addition to that, the CPUC last year adopted metrics and forecasting tools in the affordability rulemaking for assessing the affordability of combined essential utility services. This includes electricity, gas. We also included water and telecommunications there by location in California, and this is really the first of its kind in the nation. And so by having this increased transparency as we get additional proposals from the utilities, we're able to better track that both for the CPUC as well as stakeholders that are very essential to CPUC proceedings.

I also wanted to highlight that recently the CPUC adopted a decision that reforms net energy metering, as all of you know. And that policy that we're implementing is called the net billing tariff that will gradually alleviate the cost shift from participating solar customers to nonparticipants. This marks a major step forward in establishing fairness and equity in rates and bills. And so that was a seed that was planted in Q four of last year that we're expecting to see customer benefit in the next coming months.

I also wanted to turn to our demand flexibility rulemaking, and this is where we are exploring the design and implementation of the income graduated fixed charge that we were able to pursue pursuant to AB 205 last year. And we anticipate that this will promote greater equality and equity in our residential rate structure by mitigating cost shift concerns and supporting affordability of essential electric service for lower income households. Also ongoing in the demand flexibility rulemaking, the CPUC is examining an optional real time pricing tariff program statewide that would help facilitate electrification for customers and other flexible end uses while incrementally reducing certain grid costs. So with that, those are the end of my remarks and happy to turn to other panelists.

Thank you. Good to still be here with you. And I am still Carla Peterman, Executive Vice President of corporate affairs and chief sustainability officer with PG&E. And so, as it relates to the electric system, just like the gas, we do recognize responsibility that we have to serve our customers safely and reliably while keeping bills as low as possible. And we really are working to stabilize bills in the long term. And I can give you some examples of what we're doing.

So, as was already mentioned by Director Tesafi, all utilities have similar bill drivers. And key drivers recently have been the cost of energy and grid investments, particularly for wildfire resilience. These drivers are once in a generation cost. They are, which is why we all need to work together to address them. But we need them to make the system safe and reliable as we prepare the grid for this new normal. And we do continue to make the system safer every day.

In PG and E service area, we now have a 90% reduction in wildfire risk overall, and we are continuing to invest in technologies to drive that wildfire risk reduction even higher. On a cost front, we are working to keep overall customer bill growth at or below inflation for the long term, and we have measures that are focused on that goal. Here are just some of the examples of things we've done in the last year, particularly around wildfire costs, because that's such a driver.

So we've committed to undergrounding power lines to reduce recurring maintenance costs, including vegetation management. We spend up to 1.8 billion a year on vegetation management, and there is a way to lower those costs. And we met our mild target in last year, and we're on track for this year as well. But in the near term, we were able to see significant savings for customers in our veg management program by finding different operating efficiencies.

By reducing unit cost, we reduced the cost of our vegetation management program last year by $200 million. And we're seeking similar and further cost improvements this year. As was noted last month, the CPUC approved a self insurance settlement that PG and E achieved with consumer advocates. So thank you for their support. This can result in over $1.0 billion in savings during the rate case period that we're talking about from now through 2026.

And then we're also seeking nontraditional funding sources, including the Department of Energy grants. So PG and E recently received encouragement from DoE on our first four concept papers we submitted for just under 400 million in grid resilience funding, and we're working on developing the full applications with our community partners. The efforts that the legislature and the CPUC took this past year have helped us make the system safer and have reduced cost.

So, for example, the support for customer arrears relief was incredibly important, and we maximized the opportunity for our customers in our service area. The passing of constructive legislation that supports our long term undergrounding plan that will allow us to do the program more cheaply, also very critical. And then the CPUC's meaningful action on NEM, the net billing tariff, which we estimate removes a billion in cost from our customers through 2030 compared to NEM 20.

But I will tell you, there's still more that this body and regulators can do to support affordability. First, please ensure that the fixed charge legislation that you passed last year is implemented in the timeline set. We must see this through. This is a key opportunity to drive affordability, particularly in the Central Valley, and it will also give clearer signals for electrification. Second, please support rate reduction bonds, which allow for lower customer bills near term as we're going through the transition.

Third, consider more areas of relief, just like with COVID This is a very unique time. We've been talking about that, and it is an opportunity to help our customers manage through it. And then finally, please look at mandates or programs that have seen their useful life in order to find opportunities to reduce cost and bills as we invest in what the system needs now going forward. All of these actions can improve affordability without compromising safety and reliability. Thanks, and I look forward to your discussion.

Good afternoon. I'm Barry Moline, the Executive Director of the California Municipal Utilities Association, and we represent the state's publicly owned electric utilities that provide power to 25% of the state. And I want to thank you, chair Garcia, for the opportunity to participate in today's hearing. POUs are not for profit utilities, and our rates reflect our cost of service. Our rates are on average about 15% to 30% lower than the investor utilities.

Our rates are set by locally elected governing boards, and most POU governing bodies hold public meetings every two weeks. These are their governing board meetings, and like you, they consistently hear from their customers about the importance of affordability, that has risen significantly, as it has also for you all. So we have some pretty big challenges. The first one, obviously, is achieving the 100% clean energy goals while supporting the state's climate goals through electrification.

We can only do this by keeping costs under control, because if we don't, then people will revolt. We have three concerns. One is the cost of the transition itself. And experts say that the new resources that will be needing in generation and transmission will be at a cost of at least $100 billion. That's over 23 years, but nevertheless, it's a significant cost. We already pay the highest transmission rates in the country, and spending on transmission in California has tripled since 2008.

And our research shows that just in Northern California, our transmission costs will likely double by 2040. So it's worse in the Central Valley because it's hotter there, so bills will rise even faster. At the same time, Californians are driving more electric vehicles and installing more electric stoves, and that's going to increase our utility's peak demands pretty significantly, and that'll require more investments in clean power, which raises costs further.

The second issue is supply chain, and our members are experiencing significant delays and cost increases in materials, and we're seeing wires and cable costs increase by 60%, and solar projects themselves are increasing by 50%. So all that puts upward pressure on customer bills. Third, obviously, as noted in the last panel, there's been increases in natural gas prices, which impacts electric customers as well, because we use natural gas for part of our generation. Our electricity prices for generation were three times higher than anywhere else in the US. So that was covered. Obviously, we're still assessing the impacts, but the Governor has asked the Federal Energy Regulatory Commission for an investigation, so we'll see what that uncovers. And finally, customer rearranges continue to be a challenge for some publicly owned utilities. And I would agree with Carla that expanding that program would help significantly.

We greatly appreciate your leadership, chair Garcia, in funding the California Rearrange payment program. It's helped hundreds of thousands of residents with COVID utility debt, and we're still seeing rearranges of two to three times their pre 2020 baseline. So it's not just COVID related, it's just general economy related. So some solutions.

First, we would like to make sure that for publicly owned utilities that we maintain our local governance control over rates and programs because we think that eroding control over rate making will add new financial burdens to growing affordability. The second is that we would like to continue to see flexibility in choosing resources that work for various communities all throughout the state. There are resources that are available locally, and that's a benefit to our state.

So policies that prescribe a particular solution across the board will actually lead to higher prices. Third, we implored your investments with the legislature and the Governor last year in reliability and clean energy. We need more of that investment to take pressure off of ratepayers, and it was touched on a bit in the last panel. But budget billing is something that, as a practical matter, can be explored much further.

I think on the customer side, when customers don't, customers don't pay as much attention to their gas bills in the summer because they're so low, but obviously they do in the winter. And if we can balance those out over time, then there won't be as big of a hit at any one time. It is a challenge because this is the customer's choice to enter into budget billing. And as we heard earlier, customers don't pay a lot of attention to their bills five minutes a year.

So nevertheless, that is a reasonable solution to help smooth the price for the costs over the full year. And finally, I think as a state, we want to access as much funding from the Inflation Reduction Act to help us decarbonize and control costs for consumers, because the more money that we receive from elsewhere, and we're doing that aggressively, I mean, trying to decarbonize aggressively, the less impact we'll have on prices. Thank you.

Good afternoon, Chair Garcia. My name is Mitch Sears. I'm the Executive Officer for Valley Clean Energy, which is the Community Choice Aggregation Program serving Yolo County. We thank you for conducting this hearing. We appreciate the opportunity to unpack a program that we're working on right now that's really kind of solutions based and is several layers lower than what's been described so far.

It's really focused on the agricultural sector and the dynamic pricing pilot that we're setting up to be able to work with those farmers to shift load, which can have some resulting cost impacts. Before I get into those comments, just a little about VCE, we were formed back in 2018. We serve about 61,000 customer accounts, so we're on the small side, but we do have a 225 megawatt peak load.

We're the only CCA that's based in the Central Valley, and so we face many of the climate issues that you've been describing here already. We also are on target to be able to create a renewable portfolio of 85% plus by the end of next year. So we're making a lot of progress there. That's new build that is also backed up by battery storage primarily.

So we're doing a lot of work here at the local level at a relatively small scale and showing that it can be done. We're based in Yolo County, and so agriculture is about 15% of our overall load, and that's what I'm going to focus my comments on today. So a little bit about how we got here with this particular program. In response to the 2020 heat dome, the CPUC asked for proposals to help reduce load and to improve reliability.

We became aware, and in our thinking about this, we became aware of two studies that really kind of shaped our thinking. One was a CEC funded epic project that was applying dynamic pricing to agricultural users here in the Central Valley. The second, if we go to the next slide. The second was a CPUC study that showed and identified that agricultural pumping load was one of the most significant and cost effective ways for the State of California to shift load.

So both of those things combined, we developed and submitted a dynamic pricing pilot to the CPUC that was approved by the CPUC. It's a three year pilot program, capped at 5 megawatts. Again, quite small in the grand scheme of things, but really allows us to start thinking about what solutions are and sort of customer centered solutions. So the next slide shows what I mean by dynamic pricing. This is exactly what the farmer sees when they go and set their weekly irrigation schedules.

So what we're doing is we are giving hourly prices a week ahead. And what the farmer is able to do is look at that week and see where the prices are most affordable, in essence, where the grid is least stressed. So this is the meaning of dynamic pricing. So we're putting the power into the customer's hands to be able to make these choices. So up here, green is cheap, red is expensive, and that's how the farmer sees it and plans out their irrigation week.

The farmer then utilizes the software to set the irrigation schedule and the automation equipment that's funded by our pilot program. Turns the pumps on and off based on the farmer's input. Simple, actionable, market based price signals is what makes this really appealing to the farmers who are participating in this program. In the past year, we partnered with PG&E, thank you very much, to implement the first year of the pilot, known as the Agricultural Flexible Irrigation Technology pilot or AGFIT.

Our results so far look quite promising. So if we go to the next slide. So in year one, we worked with several farmers representing about 2 megawatts of our total five megawatt cap and the results that you can see on the screen. So what we did is we took their usage in 2021 before the pilot was established. These are August numbers. And then we compared that to after sending price signals in 2022. So again, August, same customers.

What you can see is an inversion of the duck curve, where we're actually taking power or taking use out of sort of the most critical parts of the day and shifting it into area times when it's more available, essentially the renewables that are more available. So if we go to the next slide, you can see the same usage pattern on this slide. The graphic represents both August and September.

So the reason why we show this slide is because it demonstrates that the price signals are effective even when we experienced a historic heat event in early September. So the farmers are seeing those price signals and they're still shifting in those cases. So this is helping farmers save money. It's helping us bring resilience to the grid, which in turn can save all of our customers money. We have a target of about five to 10% cost savings for these farmers who are participating in the program.

The LBNL study I mentioned or referenced before identifies that there's about 1000 megawatts of agricultural load that's shiftable in California. So again, we're doing five of those thousand. We'll be expanding our pilot program to fill out that entire 5 megawatts in our service territory in year two of the pilot. And we believe that there is significant opportunity for CCAs, including investor owned utilities, to scale up AGFIT, bring near term reliability while helping ratepayers save money by reducing load at the peak.

I want to emphasize just a couple of quick points here at the end. One, we're a Community Choice Aggregation Program. Basically, our customers can leave. So we are very focused on affordability. We want to make sure that we're providing value both to the customer and the communities that formed us at the beginning. So we're really sort of plugged into that side of the equation. So we're meeting customers where they're at. We listen to farmers. We are working with them on how they actually schedule their irrigation.

I want to emphasize also lastly, that this is not a one size fits all approach for all agricultural operations, but it is an important opportunity for cost effective load shift with multiple co benefits. Those include grid reliability, cost and water savings, and drought hardening of a $50 billion a year industry. So thank you very much. Happy to take any questions.

Thank you Members. Michael Boccadoro, on behalf of the Ag Energy Consumers Association, appreciate the opportunity. Let me just be clear. Rates are high in California. They're two to three times the national average today, not just agricultural rates, all rates. And they're going to go far higher. They're easily going to be at four times the national average in the not too distant future, probably by 2030, based on many of the estimates. They're rising faster than the national average and the rising far faster inflation.

In fact, we can make the case that they're driving inflation here in California significantly. The earlier panel focused on gas rates. I'm going to try to limit to electricity here. It's interesting to hear PG&E talk so much about reducing costs. If they're doing all these efforts to reduce costs, why are they proposing to increase rates in 2023 alone by 36%. 9.1 cents a kilowatt hour. That's from their own presentation that they gave to some agricultural and business customers in the San Joaquin Valley very recently.

It's a massive rate increase and it's just the beginning. And it's not one time. That'll go into rate base and it'll be there every year. And every year after that they will build on that rate increase. Next year they're proposing another rate increase. And in 2025, another rate increase. And in 2026, the fourth year of the general rate case, yet another rate increase. This is a huge problem for ratepayers.

And so what you're hearing from your natural gas customers because of a price spike is being built in, baked into the electricity prices in the state. It's a problem for low income ratepayers. It's a problem for businesses, problem for agriculture. We often hear that we don't care about rates, we only care about bills.

Well, I can assure you that our bills in California and the farm community are far higher because we use more electricity than other areas, because we move water here in California, we're not reliant on rainfall to grow crops. We move water around, we pump water, and that is what drives our energy costs. And so they're far higher here. So on top of the high rates, we use more energy. And so we're at a huge competitive disadvantage to farming operations in other parts of the country.

And that's true for all businesses. Businesses, unlike customers, are not affected by climate. When you're producing a widget or a commodity, takes the same amount of energy here in California as it does just about anywhere else. And so we are very much impacted by rates and overall costs, and it's a huge problem. And even residential ratepayers, we often hear that our bills are below average, even though our rates are far above average. Reality of that is, averages are inherently inaccurate.

If you're on the coast, you probably pay a little less than average. If you're in Mr. Mathis' district or Mr. Garcia's district or other areas where it's hot, you're paying far higher than average. And so it's really disconcerting to hear folks talk about our bills are low, so we shouldn't worry about high rates. High rates affect a lot of folks, and ultimately they're going to affect the state's climate policies. We're already seeing it.

Even though PG&E's rates are high and going higher, they are failing miserably to be able to deliver electricity to the San Joaquin Valley, where we need it to electrify our forklifts, our tractors, our equipment. A typical heavy duty truck requires between 1 and 1 and a half megawatts, according to PG&E's own folks that participated in a recent meeting down in Mr. Mathis's district. Per truck for a rapid charger.

So if we're going to replace a 200 truck fleet at an agricultural operation, going to need 200 megawatts delivered. PG&E is not in a position to deliver that today. It's taking three to four years or more for them to be able to deliver that electricity. And a lot of that is the fact that they are focused on reducing their own liability with wildfire mitigation. Not arguing that it isn't important, but it's coming at a cost to electrification of other areas of the state.

It's simply not happening in rural areas, because PG&E cannot deliver on that. So I can go on for hours about the concerns with PG&E. But they're rapidly becoming one of the biggest barriers we have to the state's climate policies. Literally, you know, all the efforts that we do in the dairy industry, and the other industries to reduce emissions, are going up in smoke every time PG&E causes a wildfire. The Legislative Analyst did a wonderful report on that recently.

About the impacts of black carbon from wildfire. And how they're dramatically offsetting all the reductions other parts of the industry are doing. So what are the solutions? We've got to start looking for ways to take some of the costs out of rate base. Whether that's for electric vehicle charging or others. I'm not suggesting it doesn't need to be done. Just can't go into rate base. It can go into an infrastructure bond. It can go into other ways to get that infrastructure that we need done.

Without putting it into rate base. The utilities love investing money. They're not investing their own money. They're investing ratepayer money. They love to invest it because they make money every time they invest capital. The more they invest, the more return they get. And so we just really need to take a hard look at that. We do. And I appreciate the comments earlier. We need to take a look at having companies pick up part of these costs. When we see price spikes.

They have to have a little skin in the game, we like to call it in the Ag community. If you don't have skin in the game, you're not really truly concerned. And I've been a ratepayer advocate now for 30 years. And I can tell you, at the end of the day, shareholder interests always take precedence over ratepayer interests with the investor owned utilities. And then finally, we have to watch natural gas rates. They're still a very significant component.

The panel didn't get a clear answer about the cost of biomethane. And I am one of the biggest supporters of biomethane in the state. My dairies are creating more biomethane than any other source here in California. And the reality is biomethane is really expensive. The price spikes that we're talking about were $50 gas that came into the system. PG&E, and the gas company, particularly the gas company are trying to bake that into natural gas costs by loading up the system with biomethane.

And I'm a big supporter of putting biomethane to productive use. We need to capture it from our facilities here in California, put it to beneficial use. But we need to be very careful because it is very expensive. And contrary to popular myth, it is not going to come down in cost over time. It's getting more expensive because we're moving to smaller and smaller dairies, smaller and smaller wastewater agencies, and smaller and smaller landfills where the economies, the scales are lost, not gained.

Hydrogen can also dramatically increase costs. We're looking between biomethane and hydrogen. $35 a MMBtu, up to 60 $70 a MMBtu for hydrogen today - green hydrogen. So be very wary when you hear the utilities talking about putting large amounts of renewable natural gases into their pipelines. Not going to do much from an environmental standpoint. Hydrogen can have an impact. Biomethane burns the same. So we need to be very careful about gas rates going forward. I'll conclude my comments there and look forward to answering questions.

Good afternoon, Chair and Members of the Committee. I'm Katie Sloan, Edison's Vice President of Customer Programs & Services. Affordability has been on everyone's mind, as we've been hearing today. So I'll share first what Southern California Edison and the other IOUs have been doing to keep electricity affordable for our customers. Since January of 2020, SCE has enrolled more than 600,000 residential customers in programs that provide monthly bill discounts of up to 30%.

These bill discounts, which we've heard about today called CARE and FERA, offer monthly relief to our low income customers. We hear from these customers every day that these programs have a positive impact on their lives. SCE is also providing bill extensions and payment plans for more than 480,000 residential and small business customers, deferring hundreds of millions of dollars in charges. Other IOUs are doing the same.

Business customers of all of the state's IOUs have taken advantage of incentives on energy efficient products, including lighting upgrades and food service and HVAC equipment. Commercial, industrial and agricultural customers can also earn energy and build credits by reducing energy use when it is helpful for the reliability of the system. There are really a lot of ways that our customers and our business customers can save money. That is what the IOUs have been doing.

But we also know that there are important challenges ahead, and we need to make sure all of our communities can participate in the clean energy transition. This transition to a decarbonized and electrified world produces energy cost savings for an average household over time. According to our analysis, total energy cost for an average household decreases by about one third by 2045 across all energy sources, gasoline for transportation, heating for homes, and electricity.

But we also know that in the here and now we need to make the grid ready to support carbon neutrality and that will have costs. That is why SCE and the IOUs are glad to see such a strong legislative focus on affordability. It's coming through in this hearing and in bills like AB 982 from Assemblymember Villapudua. SCE and the other IOUs support utilizing state and federal funding for public purpose programs and other activities that are not directly related to the utility's cost of service.

Just as proposed in AB 982. For example, costs associated with SCE's income qualified CARE and FERA programs would be appropriate to fund with state funds since they provide valuable assistance for income constrained customers and are a beneficial public good beyond the utility's core operations. Other examples can include energy efficiency programs and the net energy metering subsidy. Supporting these public benefit programs with state funds would also result in meaningful rate reduction for all customers. For SCE customers, this could represent a monthly bill reduction of 7%.

In closing, I'd like to echo the recommendations of my colleague at PG&E and urge the Legislature to maintain its commitment to carbon neutrality and affordability of electricity for all. Thank you.

Thank you very much. I'm going to open it up. Questions? Colleagues? Please.

So thank you all so much. And I just wanted to check and see amongst the different agencies, are there programs that can spread the bills out over time instead of having these peaks in Winter and also in our area in the Summer. So you have more of an even bill throughout the year. Does every utility have that kind of program? Does it vary? How does that work? And it seems like that would be a huge ease on consumers.

I can start for Southern California Edison. We do have a levelized payment program, and that's one of the things that we've been reaching out to our customers about, especially since the beginning of the year, because we know bills and affordability are going up. So that's one of the tools that we have that we've been promoting. I think most of the other IOUs have the same.

Anyone else want to?

It's just a matter of getting customers attention to do it. And we do talk about it a lot because it avoids having a $500 Bill in January and trading that for a $20 Bill in the middle of the summer.

I'll add, in addition to those programs, just in terms of how our business model works. When we're directed to build a plant, we have to go get energy, we go pay for that, and then we collect those costs from customers over several decades. So investor owned utilities are a cash negative business because we go out and borrow, and that's what we're compensating investors for, for that money. And then we collect it from customers over a longer period of time.

And so that was what has made the model work. We are in unprecedented time, where there's a lot of investment that needs to happen in a very short period of time. And so I do want to call out that that is unique. I also wanted to follow up on Mr. Boccadero's comments that I know the presentation he's talking about because my team made it, because one of our commitments is be very transparent about where we see rates going so we can have a conversation with our customers. Those numbers he cited, though, are very high end. That would be if the PUC approved everything that we asked for, which, contrary to popular belief, does not happen.

But we want to be really transparent about what we're filing, what we're asking for, so we can invite the conversation about where are we making our investments, what are the value for our customers.

Thank you, Mr. Chair. And I want to just stay on that point about rate increases. And I guess I'll this to you as well, if that's okay. But it perplexes me. Right? I mean, in your presentation, you said that wildfire management costs went down this year, right? I think that's what you said. I can't remember the exact number, but.

Yeah, we were able to reduce the cost, but the costs are growing. Because just for perspective, our service area, over 50% high fire threat. 10 years ago it was 15%.

Right. No, I know I represent the high fire zone, but I think his point is well taken that these are the rates you're asking for. I'm hopeful the POC won't give them to you because profits keep going up. So I'm a little bit confused by why rates keep going up unless we want to be giving the investors more money, which appears to be what we're doing. But I just want to understand this.

What is the dynamic that allows for these rates to continue to increase when we're seeing profits increase? I feel like that needs to be a piece of this conversation that isn't happening as dynamically as I would like as a Legislator.

I can start something I wanted to this theme of seeds that we've planted and kind of seeing the improvements that they're going to make for affordability. So at the end of last year, we concluded multiple applications from the investor owned utilities for their cost of capital. A key component of this is the return on equity. So the return that they make on the investments in capital.

And so due to what we're seeing in market conditions, we were able to reduce the return on equity, which hasn't occurred in over a decade at the Public Utilities Commission in the entire time that I've been there. And so I do think that it was an important update that we were able to do through the development of a very robust record and looking at market conditions. And I think that there's going to be a payoff on that for customers moving forward. So that's where I would like to start.

And maybe since I made the point. Let me just make two comments here. We're at this unique point in time when PG&E is investing significantly in wildfire mitigation because they neglected, and this was long before Carla's time. It's not on Carla I have the utmost respect for. Former Commissioner Peterman worked very closely with her at the Energy Commission PUC. This was long before her time.

But PG&E did not do the necessary maintenance to their system over time, which has led to the problem that we have today. And the problem is they're expecting ratepayers to build them out rather than shareholders. Any other business, shareholders would be on the hook if they wanted to stay in business to do that. We've let them off the hook. And shareholders clearly have value from reduced liability, huge value, and they're not paying a dime towards that reducing liability. It's all falling on us.

Or the majority. Overwhelming majority is falling on us. And they do need to have some skin in the game going forward. We made these same points during legislative hearings on wildfire mitigation. They fell a little bit on deaf ears. I'm glad they're starting to pick up some steam. So that's a really critical point that we need to focus on going forward. We're here on wildfire mitigation because the utilities did not invest. They put it into dividends to their shareholders. And now they're back all over again looking for us to pay for it a second time.

May I just have a brief response? Yeah. So it would take longer than this hearing to get into it, but PG&E shareholders have definitely had skin in the game. You remember, we went through a bankruptcy. There's a lot of skin in the game there. Major contributors to the wildfire fund. For many of the costs that we're talking about, shareholders have paid a share of those costs through disallowances. So I understand the perspective and it's important to look at who's bearing what cost.

But we can follow up with you and provide more information about that. But I wanted to get to your question about it is perplexing, right? That rates are going up, and yet I'm talking about cost savings. And so I just wanted to offer a couple of pieces of commentary to help with that. First of all, coming out of the wildfires that we saw in 2017 and 2018, investor owned utilities were directed to go make the system as safe and fast as possible.

Many of those investments did not go into rates right away. We put them in accounts, and those accounts are being reviewed by the PUC. And that review has been happening over the last year and this year and next year. So investments that we made several years ago are just starting to go into rates now. The other thing that you're seeing is the fact that we are making safety investments to go forward and the way our rate case is structured.

There's this whole process before the rate case where we share all of our risk and those risks are evaluated in a public process, and then we submit our rate request based on a risk prioritization, targeting the highest risk first. So there's a very public process that many people participate in to evaluate what we are asking for. This is our rate case year at PG&E. So the rate increases that we've talked about really reflect a major investment moment for us. This is a milestone year. These are the investments that we think are needed to make the system safe. And there is a very public process for others to evaluate whether they agree with those proposals.

I understand that, and that's why I said, I hope the POC looks long and hard at the rate increases, because you're right, it's not entirely up to you or any of the IOUs. My last question is looking at the forecasted rate trends. There's a significant difference between Edison and SDG&E, and PG&E. Half your rate are expected to go up 6% annually, as opposed to 10 and 11%, I guess. Help me. What are you doing right or better?

Yeah. All I can speak about is what we've been doing at Southern California Edison, and we've had a real focus on operational excellence and reducing costs for nearly a decade now. And so we're seeing that that continues and builds on each other. So I can't speak to what PG&E is doing, but that's the commitment that we've had to continue to look at the costs that we have and bring them down and increase efficiency in all of our operations. So that continued effort is helping us with keeping our rates low.

And I think it's not just Southern California Edison. They are the low price leader in California. We appreciate that. The municipal utilities and the community choice aggregation because they are much closer to their communities. They're much more willing to design programs, to work with their farmers and their other customers and their constituencies, and take the time to sit down with them and make sure they work. And the municipal utilities are publicly elected bodies.

And because of that, they're much more sensitive to rate increases and investment decisions than an investor owned utility. And so 30 years ago, when I got started, I wasn't a huge fan of municipal utilities, and now I am. And it's because they are close to their communities and they're responsive to their communities. And we do much better in CCAs and in municipal utilities than we do with the investor owns.

I can give you endless stories of proposals we've taken to PG&E and their rate team to design rates that would be better for agriculture in the San Joaquin Valley and the rest of the state, and most of it falls by the wayside. They're trying to take away our ability to aggregate loads under the Net Energy Metering program right now, something the Legislature put in place, recognizing that AG is different. And PG&E is leading the charge at the Commission to take away our ability to put solar installations on our farms. And it's absolutely counterintuitive. It's not how you treat customers in any other model.

Yeah, thank you.

If I may. I mean, it's really our bread and butter. As I said before, and as has been mentioned, we're really close to the communities that we're serving. Right. And our customers can leave. And so we're very sensitive to the idea that rates matter and that costs matter to our customers. Not to say that the investor owned utilities don't. It's just a different model of how you get to these sort of outcomes. But we are more nimble.

I would say that we have the ability to set rates as long as we're able to retain that ability through the CPUC and through the Legislature. There are times when that's brought into question as to whether a CCA can continue to maintain its ability to be nimble, to be innovative, to be able to explore the types of things that I was describing here today. And that's just one of the programs that we have.

I mean, we're really working on reliability through microgrids and developing local resources so that we can tie those microgrids into those local generation to be able to serve some of the critical needs that happen within our communities. Where we're close enough to know and to care about what actually happens to those customers. So, for example, there is a portion of our service territory that's essentially an electricity dead end.

We're looking at the idea of taking a locally developed solar plus storage project, tying it into a microgrid, working with PG&E to use their system to increase the reliability and keep those critical facilities open when they're fire hazard or when there's a PSPS event or something else that's happening. I have a board meeting once a month. It's a public meeting. The public can come and talk to us about how we set our rates.

That's just a different model than what's been set up and what historically has taken place here in California. But that's part of the value of CCAs and municipal utilities going forward is that responsiveness. It goes everything from rates to sort of what's happening in terms of equity. There's a full range of things that we're really sort of closely tied to because we're close to the communities or closer to the communities than the IOUs have been able to get.

Thank you. And I just hope we would use the know if Edison is doing something to drive costs down and PG&E is coming and asking for higher rates, the PUC is asking the questions as to why they aren't implementing things and learning best practices from other IOUs to drive costs down. I mean, we shouldn't have this kind of differential across the state. It doesn't make much sense. You know.

I want to really give you an incredible shout out for your demand management project, because those of us that have seen how much it costs to buy energy when there's so much demand in the west, know that if we can drive demand down in those moments, it will make rates go down across the state. And so these are the kind of projects we need to be investing in because it saves ratepayers money. So. Thank you.

Yeah, really just wanted to quickly focus back on the issue of ability to pay. And just as customers are facing these bills, taking into account working with so. And this is to the CPUC. Percentage of Income Payment Plan, or PIPP, which allows a participant to pay a predetermined, affordable percentage of their monthly income toward their utility, electricity or natural gas bill. What are the results of that pilot program so far?

So that program was recently adopted, and so it's still in progress, but we are working very closely with the utilities in order to monitor the program, and we'll be getting some results soon. I'll be happy to get that to your office.

Very interested in seeing that. And then I think as was referenced, the income graduated fixed charge for IOU residential electric rates AB 205, which was passed last year. The CPUC has until 2024 to implement. Is it possible to implement this sooner to provide relief to ratepayers?

So in the publicly released scoping memo for the proceeding, we did schedule getting a decision out on this around Q2 of 2024. So we do have that set up. This is a first of its kind program. We're looking into really important strategies on determining income and being able to get accurate information there. So that is the schedule that we have set up. And so right now I can't commit to a sooner timeline, but it is because this is a first of its kind.

And we really appreciate that the Legislature has given us the space to explore this opportunity. We think it's very important and it's included in a rulemaking related to demand flexibility, which is a program that was discussed earlier. But we have made sure to front load the income graduated fixed charge at the top of the track for that proceeding in order to take care of that first.

Great. And then going to come at you with one more thing Leuwam, and that is Net Energy Metering. You referenced the CPUC changes to that program. There are concerns, to put it mildly, that this will disincentivize home solar installations at a time when we need to be increasing production of renewable energy. Can you address these concerns?

So right now we have. Thank you for that question.

And others can chime in as well if you'd like.

So we have started the implementation process there. As you know, there was a glide path time period in order to start the shift over to the net billing tariff. And so we are working on moving into that time period. It hasn't started just yet. In addition to that, we were able to get some funds through the last budget related to storage and particularly for low income customers.

And so in tandem to the implementation of the net billing tariff, we have an open proceeding in our self generation incentive program, looking at how do we push out those funds as soon as possible to those low income customers so that they can not only invest in solar, but also invest in that critical component of storage that we need to have connected with solar. So we're doing both of those in tandem right now in order to get them done as soon as possible.

So what about the overall disincentivization, though? In the market.

Well, I think a really important component of the program, as I said, is getting the storage component out there so that customers are able to continue to invest in solar as well as apply storage to that investment as well in order to better enhance the reliability of the grid and the contributions that those customers are able to continue to make to the grid.

And then finally - much more discussion on that I'm sure - wanted to also join my colleague in giving a shout out to Valley Clean on your program around load shifting shaping the demand curve. I know that other CCAs are looking at similar innovations, so keep up the good work in that regard. Thanks.

Thank you. Just to piggyback on that, I guess I'm wondering, this seems like it could be a game changer in a lot of ways in a lot of areas. And so I wonder if that's something that I think all of us would like to be able to choose when the lower rates are going to be. And I know there's some of that that happens, right, nighttime and charge your car overnight and all of those things.

But is this a technology or that you think is going to be expanded? It sounds like some other CCAs are looking at this. Is this something that other utilities are looking at adopting in some ways as well?

I can start. So the CPUC has adopted or authorized real time pricing programs across all of the investor owned utilities. So this is a great example of how we were able to focus on agricultural customers. But we do have real time pricing pilots out there across the state for many different types of customers. In addition to that, in the demand flexibility rulemaking that's focused on income, graduated fixed charge first.

But that proceeding is going to be a venue to talk about dynamic rates and being able to take real time pricing to the next level. Also, looking at opportunities for automation in order to reduce the amount of time that customers have to think about how they change their electricity use and being able to automate that as much as possible. I'm happy to turn it over to others on the panel to share more.

Yeah, hi. Katie Sloan with Edison. I just want to also point out that we've transitioned most all residential customers in California, at least with the IOUs, to time of use rates. So it's not the real time pricing, but they're already getting quite a bit of time of use signals. And that was just completed, at least for us, last year.

The one thing I'd like to put a caution on is I think real time pricing is great for customers that have that visibility, that want to spend more than five minutes a year thinking about their energy bill or they have the automation. But I don't think we should jump quickly into real time pricing for all customers because that will be a significant cost. Even just the education, marketing, and outreach that we did for time of use, which is less complicated, had a significant cost.

And if we're already doing time of use, the additional benefits you're going to be getting from real time pricing for the mass of customers probably won't be as much as what we're seeing in the more sophisticated sectors. So I would just say to focus real time pricing where it's more sophisticated customers. Thanks.

And I would just add that it's really important to recognize, to accomplish some of these demand management programs, we have to make investments, either capital investments in hard equipment, so that we can reduce our irrigation schedules. So it's really important that we're working with community choice aggregation or municipal utility that's going to keep the signals consistent.

Because unfortunately, in the investor owned utilities, a lot of the signals that we got 15-20 years ago, the rug has been pulled out from under us now today. And we've seen changing time of use rates. We've gone from one period of time during the day that was previously peak, and now it's more in the evenings.

And it's really hard for agricultural customers to come back out at 9:00 at night when it's dark and restart our irrigation systems, which is the new peak period. It used to end at 6:00, which we could handle, but in the summer, 9:00 it's dark. And having workers in the fields restarting irrigation and driving the fields in the dark is not safe for our employees. So these are some of the real world implications that we also need to better understand and manage as we go forward. We can take price signals, but it comes with costs sometimes, and we have to take that into consideration as well.

Yeah, I would emphasize that. And answer to your question, your basic question, is yes, it's a game changer from our perspective. And it has to be designed carefully to be able to put in the automation, to be able to make sure it happens. But we're focused on the agricultural sector right now because that's where the opportunity exists.

But this really goes far beyond, and SCE has got a pilot that's going on right now with dynamic pricing, where we're looking at things like electric vehicle charging and how you actually integrate those types of facilities onto the grid using dynamic pricing to get the most out of it. That's really where sort of the, I like to say, cooking with electricity now happens. And so where we have the opportunity to do this, there's many sectors and many applications to it.

We're just choosing the agricultural sector first because there is a level of sophistication, there's a relatively few number of customers within that sort of bundle. And we know how to go and talk to them. We know what, it's a small margin business to begin with. Right. And so any savings matters to them a lot. And so this is an area where we think that we can make some good progress with the type of investment that's been spoken about.

And this is a hot topic. So I'll add in on it and just say, may surprise you that we have over 1000 different rate permutations, 1000 different rate options. Because different customers have solar or they have different time of use needs. And so one of the things, just first off, is making sure that customers are on the best rate for them. And we've been working with our industrial and commercial customers, one on one contact. What is happening with your load?

What is the right rate? We're looking at how do we take the lessons learned from that and expand that more effectively to our residential customers. Because although there are rate tools for them, sometimes people don't always know even how to best utilize them. So that is an area of focus for us. But I think what you're hearing from all of us is the value of moving load. It is increasingly going to be less costly and easier to move load than it is to change supply, given all the things that we've talked about today. And so there is a lot of work on that and we're collectively working on those issues.

Thank you, Mr. Chairman. So I do appreciate the emphasis on agriculture, being that I've been the Vice Chair for quite some time and sit on a few international ag policy groups as well, and that my district is the largest ag producing area on the entire planet. With that said, one in four jobs in the South San Joaquin Valley is related to agriculture. One in four. My area is roughly about 60,000 jobs are directly affected, directly tied.

And when you look at this, we talk about, and I'm not even going to get into the drought and the water situation and I'll save the lecture of the natural gas issues. But when you multiply that out and you really think about what does that mean within the agricultural communities, that's 60,000 jobs. Well, most of those folks are married and their spouses work in education and public safety, at the pharmacy, they're the doctors, they work all the other jobs in the area.

And then you take the typical 2.5, right, the two kids and a dog. And most ag families are more than that. So now you have a multiplier of 4.5. Well, 60,000 times 4.5 is 270,000 people. Where do 270,000 people go when the lights go out and they can't get power to fuel the farm and the jobs go away, when the water is gone, when the natural gas is gone, when ag dries up? You mentioned margins.

And this is something that I've got my team actually working on to really lay this out. What I see is that we've had a minimum wage increase, which then stacks on top of the energy rates going up, which then causes the cost of water production to go up. Now, little known fact, but roughly 10% of the energy use in California goes to conveying water.

So now you got minimum wage, energy, water, fuel cost that gets in there, and then you have your raw materials stacked on that, and then you got to get to your product. So now we're at, what is that, five steps? And then you stack in retail cost before it gets to your homes.

So I understand that people are showing record high profits, but I think it's extremely important to show the public the different levels of the margins and how the inflation is affecting everybody at every step of the way. Because it's the energy cost that's going up, it's the food cost that's going up.

Don't get me started on eggs and the phone calls I've gotten there. But we have to look at these things, and we have to look at the fact that, I forget which newspaper, LA Times or whatever it was that reported something. About 60-70,000 people have left California. We lost a congressional seat. But I've got to look at the fact that I have 270,000 people, that's half the population of an Assembly District, that if we don't get this figured out, they're gone.

I don't know where they're going to go. I don't know how California is going to survive. But this is just the agriculture community. I've heard here we have multiple different rate plans, we have different things that we can do. Well, let's stop talking about it. Let's sit down and figure out how to get it done. Let's also, as a state, look at how we can do things that will help prevent cost being pushed down to the consumers, both in their homes and at their jobs.

Because this has to be figured out. I agree with my colleagues. It is extremely perplexing when we hear from the businesses, we're doing things to reduce. To the public it sounds like a crock because all they're seeing is every single thing they're paying going up. Kitchen table economics. If your energy is going up and your water is going up and your gas is going up and your food cost is going up, something's messed up.

So as we move forward with energy this year, we need to look at what are we doing to reduce those cost at all cost. And that's what I'm interested in hearing and I look forward to ongoing conversations with that. Thank you.

Thank you, sir. Good breakdown of the realities that sit in front of us. And be remiss to say, if the guy saying it with a pinky ring like his wasn't saying it, I don't know we'd come across as serious as it did. Nice little pinky rings being serious about that.

George Washington. Thank you.

We'll move on to the next panel. And I know that we've put in a good 2 hours already, and I appreciate the Members who have stuck around, those who have come in and out, and we've had some really good conversations thus far. So looking forward to finishing off this last panel.

I will remind folks we will be doing public comments after these panelists, and so we'll be doing those here in those people that are present. All right. Our first panelist, I'm told, is remote, so we'll get them queued in and ready to go. And again, thank you all for being here.

Can you hear me? There we go. Good afternoon, and thank you very much for inviting me to testify on what I think is a critical issue for California, affordability of our energy services. My name is Michael Wara, and I am the Director of the Climate Energy Policy Program at the Woods Institute for the Environment, as well as the Policy Director at Stanford's Sustainability Accelerator. We work closely on energy affordability issues, particularly as pertains to the energy transition.

And today I'm going to share a perspective on blue sky solutions. I think at the start we need to emphasize that energy services, both electricity and gas, are an essential service for all Californians. We have an obligation to make sure that all Californians can afford to heat and light their homes and fully participate in California's economy. And energy services are a central piece of that social safety net.

I think it's important to distinguish between volatility, short run volatility, like we've experienced this season, and long term rising costs, which are a significant issue for California. And I'm going to address them in sequence. Short term volatility, as has been discussed by a number of the panelists already today, can be handled or managed by both economic and physical hedging. Utilities currently have the ability to pass through costs and rates with little obligation to hedge.

Of course, they have an important reliability concern and attempt to manage to ensure that their services are not interrupted, but there's less focus than there needs to be, I would argue, on economic hedging to help to stabilize prices. That may raise prices a little bit when natural gas and electricity commodity prices are extremely low, but it will help to avoid what we've just experienced in California in the form of extraordinarily high natural gas prices.

And it will create important incentives for other economic actors in the gas market to provide gas at reasonable cost to Californians when supplies are tight. Unregulated private firms, that is not regulated by public utility commissions, routinely hedge in order to manage the kind of volatility that we've just experienced in California. The CPUC should work to develop better approaches to requiring hedging on the part of its investor owned utilities, both gas and electric, in order to stabilize prices during periods of shortage.

This type of approach is not one that PUCs generally engage in. It's hard to regulate and monitor hedging practices, and it requires different kinds of expertise than PUCs typically have. But I think it's clear that it's likely to become more important as we make progress in the energy transition, as we move from different energy sources. Right. Heavy dependence on natural gas in California to less dependence on natural gas.

We're likely to see these kinds of price spikes that we've just experienced, and we need to be better prepared economically to protect Californians when they do occur. Moving to long term rising costs in California of our energy commodities, I think it's fair to say that long term rising costs are mostly due to safety investments, as has been discussed already today. Both on the gas side in response to San Bruno and the Aliso Canyon well blowout and on the electricity side in response to wildfire.

There are multiple options to improve affordability for low and moderate income Californians, but there is no silver bullet. We need to really have an all of the above strategy to protect Californians from rising gas and electricity prices, especially on the electricity side, I would argue. I'm going to go through a few options, and I would just emphasize, though, that all of them can contribute to creating better affordability for Californians, but none of them will do the entire job.

One, I think it's important to look at, are new, innovative rates focused on affordability, not just discounts. The care and fear of programs are important, and they create greater access to energy for Californians. But we're also seeing a massive and growing problem with bill arrears, and I think that reflects the inadequacy of those programs, given the rising costs in rates. The PUC is taking important steps in this direction.

In particular, I would commend the PIPP program, which is, as was just mentioned, it's a trial, and we need to think about how to move faster and go bigger with these new affordability approaches. We also need to encourage price responsive demand. As has already been discussed, the exposure of ag pumping to real time prices is an important experiment in this area.

I'll just say as an academic that I've spent the better part of my career hearing about really innovative and interesting pilots and seen very few real time pricing approaches actually go to scale. And we need to think in California about how to move beyond the pilot. The five megawatt pilot is impressive. What's going on is really exciting, but how do we make that mainstream? That is the key move that has to happen in California. We've seen it.

We're beginning to see it with the approach to residential retail pricing, where we have two rates, one for the middle of the day when solar is abundant, and the other during the evening hours when energy supplies can be tight. But we need to go further with that and encourage much more price responsive demand across all different user classes with a focus on what is appropriate for different customer classes.

Also, I think it's important to look at how we can cooperate with our neighbors to reduce the overall costs of the system. There is a recent proposal within the Assembly to change the governance of the ISO to allow for a regionalization of the ISO footprint. This is a solution that will create some affordability benefits.

It'll reduce the overall cost of the system because it will allow us to rely on resources from other balancing authorities that currently have to be contracted into California and where we have significant constraints at the intertize the connections between different balancing authorities. It'll allow us to plan and operate the system more efficiently, and that will produce some savings for Californians in the long run.

Another approach that I think is important, incredibly important, and has been mentioned at times today, is a real focus on shifting nonessential, noncore parts of the bill, both the gas and the electric bill, out of rates and into taxes, And also, more broadly, thinking about the cost of the energy transition as a one time, policy driven investment, where it may be appropriate to recover some of it in rates, but it also may be appropriate to consider recovering some of it via bonds issued by the state and paid back in taxes.

Finally, and this is something that has not been mentioned today, but I think is important to consider. Currently, all ratepayers in California receive rebates from the sale of greenhouse gas allowances that are issued to utilities and sold for the benefit of ratepayers. I think it's worth considering, given the affordability crisis that we have, reallocating those revenues to focus on low and moderate income ratepayers. There's no reason that all ratepayers necessarily need to get greenhouse gas allowance revenues as a bill credit once a quarter.

We could easily move to a system where low and moderate income rates were bought down using these allowance revenues and bills for people that struggle to afford the rising gas and electricity prices in California could be lowered as a result. In closing, I'll just say there's no single solution on affordability, especially in the long run, for California. But we need to be focusing on a variety of options and moving from pilot to scale in how we implement them.

All of the above is essential given where we are and where we are likely to be headed in the next 5 to 10 years. As has been mentioned, the wildfire problem is getting worse, not better, unfortunately, because of climate change, and so we cannot expect that we're going to get to the end of 10 years and have our wildfire investments be done.

We also need to be thinking about how to create a reliable system, and that can significantly come from cooperation with others and from developing better price responsive demand options for consumers in California that help them save money and provide benefits to the system. Thank you very much, and I'm happy to take questions.

Thank you. We're going to hold off questions until after all the presenters put their information forward, so we'll continue with the next person.

Thank you, Chair Garcia. I actually have a slide. It's a part of the deck that Deputy Executive Director Tesfai used. Thank you. If you could go to the next slide, please. All right. Good afternoon, Chair Garcia, Honorable Members of the Committee. My name is Rachel Peterson. I'm the Executive Director of the California Public Utilities Commission.

I'm very glad to be here this afternoon with my esteemed colleagues on the panel and to follow the remarks of our Deputy Executive Director, Leuwam Tesfai, who was with you for the first two panels. My role this afternoon is to speak about big sky ideas that the CPUC has been working to bring to the table and, in some cases, already enacted. The first is the Strategic Reliability Reserve.

And here, first and foremost, I want to thank the Legislature for joining with the Administration, the CPUC, and numerous state agencies to establish the Strategic Reliability Reserve by legislation and by budget in 2022. It's designed to perform several functions for California, acting as an insurance policy that helps us keep the lights on in the event of extreme weather, that it stretches our electricity supply.

It is a pragmatic and essential step as California makes our overall clean energy transition. But importantly, and relevant to today's hearing, it is that the Reserve is funded from the General Fund and not from ratepayers. You have already heard this theme echoed throughout today's speakers, and that's a very important step that the Legislature took last year. Our second is the Integrated Resource Plan.

We have been leading the Integrated Resource Plan process and using it to set energy procurement targets by utilities and community choice aggregators for seven years. With each cycle of the IRP, we are setting an energy portfolio that achieves greenhouse gas emissions reductions, achieves reliability, and accomplishes this at least cost. In a similar vein, the Administration has proposed this year that the state establish a central procurement mechanism to similarly cost effectively acquire the long lead time, large and diverse clean energy resources that California needs.

And then third and last, in the vein of big sky proposals, we are constantly seeking sustained sources for clean funding for clean energy infrastructure that are not from ratepayers. This is a theme that has been echoed quite a bit today, and ever since the federal government passed its series of legislation and budget bills in 2021 and 2022, we at the CPUC have been pressing the investor owned utilities to seek that federal funding, also to relieve ratepayers from financial pressure.

Particularly the Infrastructure, Investment, and Jobs Act offers numerous opportunities for utilities to seek funding for deployment, demonstration, and research in areas like grid resilience, grid innovation, and other areas. Our President, Alice Reynolds, has sent two public letters, and we have been working with the utilities at a staff level to seriously press them to pursue every possible federal dollar for the energy infrastructure that California needs.

This is a concrete example of how we are continuing to explore these non-ratepayer sources of funding for the generational wildfire and decarbonization investments that California is making. These demonstrably increase health and safety benefits for all Californians, and it's very appropriate that the broader California pay for these, not just ratepayers. I'll conclude my remarks there, and thank you very much, Chair, for the opportunity.

Thank you, Mr. Chair and Members. Good afternoon. Good late afternoon. My name is Marc Joseph. I'm testifying on behalf of the Coalition of California Utility Employees. I want to thank you for the invitation to testify. I'm going to talk about three items that are identified in the Committee background report, two of which have the potential for a big reduction in future electric rates because it's where the big money is. One of which, unfortunately, is as likely to raise rates as lower them. So first, wildfire.

We've heard a lot about wildfire. This is a California problem that's getting worse. To reduce the risk of igniting wildfires, the utilities are going to be spending a lot more In the past, all the utilities. According to a CPUC estimate, the three IOUs will increase their revenue requirement by $40 billion during this decade for wildfire risk mitigation. Because utilities, utility ratepayers will pay to address a collective statewide problem.

If instead, and you've heard this theme before, if instead we use General Fund money to reduce wildfire risk, we could have an immediate electric rate reduction and a continuing electric rate reduction. We could do it either directly or with bonds, as Michael Wara has suggested. I understand how difficult this would be given the current budget constraints, but funding statewide priorities from the state budget is an equitable and effective solution.

Second, net energy metering. Rooftop solar customers do not pay their fair share of the cost of the grid. In 2022, $4.6 billion of those costs were shifted to other customers, other customers who tend to be whiter and richer. And it's raising the rates for non-solar customers, raising rates by 10 to 20%. That's a big chunk of rates. Now the good news is that the Commission's decision in December will eliminate about half of that cost shift from new NEM customers.

And I stress, from new NEM customers. It doesn't do anything for the existing $4.6 billion per year. But thanks to the legislative action last year in AB 205, rather than use purely volumetric rates, the Commission is now authorized to adopt income based fixed charges for all customers, solar and non-solar. Assembly Member Connolly asked, can we do this faster? I wish we could. I think the Commission schedule is about as aggressive as we can get because it's a difficult thing to do.

We have to find out what the income is of every household, and we have to do in a way which respects people's privacy and gets it right. It's a worthy goal. It's a worthy task. It will be difficult, but if the Commission does it right, most customers will see a rate reduction. And finally, regionalization of the California ISO. That's a different story.

The biggest potential cost savings from an ISO with a broader footprint across the west is coordinated scheduling of all the generation and loads in the day ahead market. The good news here is that without any legislation, the CAISO has adopted its plan for a regional day ahead market in December. PacifiCorp has already said it's going to join. And that is most of the cost savings one can get from regionalization without legislation.

The other areas of potential cost savings are in coordinated transmission and resource adequacy. But whether there are potential cost savings to California is entirely unknown because we don't know what the cost allocation rules will be. But if we give up control of the CAISO, if we change the governing structure before negotiating the rules, other states may just see California as the deep pocket and our costs will go up, not down. Finally, there's one thing that is certain.

If the CAISO becomes a regional transmission organization, tens of thousands of good union construction jobs building solar in California will go elsewhere. Over the next two decades, more than 200,000 jobs building solar in California would be lost. So regionalization may not save any costs beyond what is already in the pipeline. And any cost savings that could occur would come at the direct expense of California construction workers. Thank you, and I look forward to discussion about these and other ideas.

Sorry about that, Mr. Chair. Thank you, Mr. Chair and Members of the Committee. My name is Matt Baker. I am the Director of the Public Advocates Office within the PUC. We are an independent office that advocates on behalf of residential ratepayers and small commercial users. Our goals are clean, affordable, and reliable energy services. A lot has been said about the challenges that we're facing right now.

So I'm going to kind of just go into what we see as the solutions, or what we see as potential solutions. And I want to emphasize that the title of this workshop is blue sky solutions. So many of these ones are ones that we think warrant further study or ones that we should talk about. But we do believe that given how bad the rate crisis has become and will become, that we need to reexamine our priors every chance that we get.

So I want to lay out just kind of buckets of what could be solutions. And most of these ones are ones that have either been done in the past here in California or are being done in other states and I think could have a big, potentially have a large impact. First is I believe we need to move much more quickly to affordably decarbonize electricity through increased electrification.

If we can increase the amount of electrons, then we can spread more of these fixed costs across a larger base and help drive put downward pressure on rates. One, we have to do that right. I think a couple of things that were brought up today that we should really be focusing on. Why is electrification hookups taking so long? That is a core function of a utility, and I think we really need to look into why that's happening and try to solve that problem.

Two is we have just received a large slug of resources from the state government. Thank you very much. That was really helpful. And from the federal government. Thank you, federal government. But let's make sure that we are coordinating all of these resources across all of the agencies that are responsible for giving them out. And let's try to do that before we use additional ratepayer dollars in this area. Let's spend it wisely. Let's find out what the gaps are, and let's move aggressively forward in that area.

And then finally, I think electrification, particularly of transportation, is something that we should be thinking beyond programs. We should be thinking systematically for it. I think that it is time for us to reexamine some of the ways that utilities are incented to engage in electrification. In particular, let's look at trying to find ways to encourage the shareholder funding of increasing beneficial electrification. In many ways that may mean revisiting decoupling or other policies like that and seeing if they're still valuable in this time frame.

So that's number one. Number two is let's look at alternative sources for financing utility programs and services. Some of this has been brought up before, but I just want to give two examples. In the State of New Mexico there's a renewable energy transmission authority. Renewable or infrastructure authorities are common in many states, but basically it's a much lower cost of capital that can reduce the cost, the final cost of a project by anywhere from 25-30%, depending on how it's done.

So let's look at some of those mechanisms, particularly for things like wildfire hardening, which are going to be very expensive and are going to be ongoing for a long period of time. Second, to emphasize what a number of people have been saying, let's look at ways where the state and ratepayers and utility systems can partner to drive costs down. And I want to give an example that I think is kind of a win win example.

We heard about how the NEM decision, while it was great going forward, you still have a lot of ratepayer expenditures that are going to legacy NEM programs. My office has done some calculations that if the state were to offer a rebate like the State of Hawaii does, let's just say it's a 30% rebate, for a battery purchase for anybody who already has an existing solar system but doesn't have a battery.

If we were able to do that for the 12 or so gigawatts of rooftop solar that does not have battery, and, as part of that deal, we were to put them on the new successor tariff, that would be 12 and a half gigawatts of evening power that we could be using like that, that would really help with our reliability issues.

More importantly, even though it would cost the state about $3 billion to do that, between now and 2030, it would provide about $15 billion in ratepayer savings, and it would help end, it would dramatically reduce the cost shifts that we've been hearing about that exist in this area. My office thinks that it's really important to kind of address that. So those are two areas where I think that are kind of blue sky that I think we can do something about.

Finally, I also think we need to really have really clear metrics about what ratepayers should pay for and what they shouldn't pay for. I think we should be focusing on identifying whether it's a public purpose program. I wouldn't put the equity programs in this bucket, by the way. But the public purpose programs and other programs that we're doing, we want to make sure that those are cost effective for the ratepayers, that at the very least, they're not putting upward pressure on rates.

And finally, a number of people have mentioned income fixed rates. My office worked with TURN and a number of other people in really kind of pioneering that office, that idea, I should say. And I think there's a lot to it. We want to make sure that this works, that the concept moves expeditiously. I think Michael Wara mentioned that we could be using some of the climate credit for this.

My office will be coming forward with a proposal that would do that for the lower tiers of the income based fixed rates, hopefully in conjunction with the number of people who are sitting at this. So with that, I'll end my time.

Hello. My name is Mark Toney. I serve as Executive Director of TURN, The Utility Reform Network. I really want to thank Chair Garcia for your leadership in addressing the bill affordability crisis. I also want to recognize Assembly Member Schiavo for staying for the entire hearing.

That's tremendous. Should not go without recognition. TURN believes that we can and should live in a society where power, broadband, and phone service are treated as basic human rights for all families. I'm going to talk about what the Legislature can do, what actions you can take, to increase affordability, lower rates. One, use the funds already allocated to help ratepayers hit by recent rate spikes.

TURN led the campaign that resulted in the Legislature approving $1.2 billion in 2022 to help ratepayers. But only 600 million of that 1.2 billion was actually spent. So you have the ability to designate that the remaining 600 million help ratepayers recently hit by recent rate spikes by simply extending the dates covered to March 2023 and by targeting the funds for CARE, FERA, Medical Baseline, and other vulnerable customers.

Whatever you do, please don't let the Governor's Budget proposal pull back the unspent funds as proposed that have already been allocated for rate payer relief. The second thing I want to talk about is we're in a paradigm right now where the sky is the limit when it comes to how much utilities can request for rate increases, and the sky is the limit to how much the CPUC can grant in rate increases.

What you could do, as a Legislature, is you could limit each utility to say bundle your rate increase request to more than no more than three a year. In 2022, major utilities submitted at least 44 applications to increase rates. 44. It makes it almost impossible to keep track of the impact of death by 1000 cuts. You could also require that the CPUC limit rate increases to the Social Security Cost of Living Adjustment. Okay. Make the utilities live within a budget. Okay.

At the very least, require utilities to justify every dollar requested over the rate of inflation. You want to hold utility shareholders accountable for increasing wildfire safety at lower costs? Then authorize TURN and other groups to fully participate in the Office of Energy Safety Proceedings. You want to limit how much profits shareholders make over capital investments? Then create a public transmission authority to use public bonds, which are far cheaper than the utility capital structure. They have done this in New Mexico.

They have done this in Colorado, okay? So there is a model for doing this. We need more transmission for offshore Humboldt wind farms we keep talking about. We need more transmission. We need to do it in the cheapest way possible. Now, the third category is, and this is really important. Legislators, you are responsible for some of the affordability crisis, okay? And I need you to take that responsibility because so many times you will pass bills, adopt bills, that force ratepayers to pay billions of dollars.

For instance, ratepayers have already invested $2 billion in electric vehicle charging and support because the Legislators demanded that the utilities pay for it. Utilities don't pay for anything. Ratepayers pay for everything. That's how it works. So please just say no to any new energy mandates that increase ratepayer monthly bills. And please promote race and economic equity.

Shift the following expenses from utility bills to General Fund. We've already talked about, some people have talked about wildfire mitigation spending. That should be shifted. Energy efficiency programs should be shifted to the General Fund. All this wonderful clean hydrogen infrastructure people want to build doesn't belong on utility bills. Net energy metering incentives, that $4.56 billion is still on, that should be put into the General Fund. Transportation electrification, building electrification. We need to do something to increase affordability, reduce the rates. Not just limit the increases.

We actually need to bring the rates down. You can count on TURN to partner with you to develop concrete solutions to the affordability crisis. Please contact me with details, for details, on anything I talked about today, and we're happy to work with your office.

Thank you. And thank all of you who have presented. Been asked, my colleagues, if you've got some questions on any of the subjects that were touched on. No question. Mr. Mathis, any questions?

You done earned it.

So thank you, everyone. Talking about the big ideas is the funnest part maybe, of today and some of the most challenging, I think. And Mr. Tony, I appreciate the energy you're bringing at the end of the hearing. So I have a couple of questions, and one of them is I hear what you're saying about shifting some of these costs, many, lots of big costs to the General Fund.

And I get what you are saying, and I understand your point about the utilities are not going to pay for this stuff. They're going to pass on costs. But it also doesn't seem right at a certain level. I mean, at a certain level it seems like, and this gets back to, I think, the conversation we were having earlier around skin in the game. Certainly the municipal utilities seem to be in a very different situation in terms of addressing affordability.

I'm really concerned about the investor owned utilities, though, and I would disagree that going through bankruptcy shows a lot of skin in the game because I think that that's a way to avoid skin in the game as well. I guess all of this is raising a lot of concerns about how we're going to pay for this, who's going to pay for this, and then the ongoing challenges that we have around electrification.

When we're hearing about challenges when it comes to needing to be able to hook up to the grid, we're hearing that around all kinds of green energy opportunities and needs and demands in the Central Valley around electrification. We heard about today. We're hearing about it when it comes to new kinds of sources of energy that are coming online, wind and all of those kinds of things.

You know, we have utility workers here today, and I wonder if you can talk a little bit to what that is about because it seems like - is it just a workforce issue? Is it just choosing where you're investing your resources and workforce, and can they just hire more people and get more work done faster and help us meet our deadlines? Or is there something else going on I'm not understanding?

Thank you very much for the question. So first let me say the ability to hook up to the distribution system is a big concern for us. We've heard it from lots of different places where you got housing tracks that can't get energized, you've got electric vehicle charging stations that are built waiting to be energized, and all of the electrification that we have in the future.

I'll put a plug in for a Bill that we are sponsoring to address exactly that question, which will start in the Senate. It will be in this Committee, and we would hope for support, because this is a problem we want to solve. And we've taken a crack at laying out a process to hold the utilities accountable for doing this in a timely manner. And to the extent that they can't have a plan to figure out. Okay, what is the constraint?

It's not entirely clear what the constraint is. One thing we know is it's not the people we represent. It's not the blue collar workforce that are the problem. There are enough of them. They're asking for more work. It won't surprise you that someone who represents union will say, it's a management problem. It is a management problem, because if the shortage is of electrical engineers, then it's on management to use their time wisely and to hire enough people to do the work. This is basically - basic utility 101. You hook up people when they want to be hooked up. So there's no question there's a problem to be solved. We hope to make progress on it.

And what is that? The Bill you're.

SB 410. Thank you, Senator Becker.

Okay, thank you.

If I could please respond. I think there are two things that the Assemblymember brings up that are worth discussing. One is whether we pay for things like welfare mitigation, climate change initiatives. Whether we pay through the tax bucket or through the utility bill bucket. It's the same families that are paying, right? They're not different. It's the same California residents. So I think the question is that, as policymakers, you have to ask yourselves is, what's the more fair way to distribute how people pay?

So with a utility bill, it's very regressive, because no matter your income, there's a little bit of differentiation, but it's very small. When we look at the income tax system that California has, it's a very progressive system where the more money you make, the more you pay, percentage wise. And, in fact, if you are a low income family, you may be paying negative income tax, you may be getting a child tax credit and not be paying income tax at all. So I think that.

I just wanted to address what you're saying. Where's the money going to come from? It's coming from the same people. The question is how. Who pays and how much? We would like to suggest that there's an argument to be made, just like with the income tax system, that people who earn more, that it is equitable. For those of us, like me, who earn more than the average should pay more.

Okay, so that goes for me. On the - is it realistic to expect utilities to live within an inflation cap? It's going to be hard unless some of these things get changed. But I want to read you the 2030 Zero Carbon plan Technical Report published by SMUD, page 20 Financial Impacts and Options. SMUD rates are significantly lower than those of neighboring utilities and are among the lowest in California.

We believe eliminating carbon emissions from our power supply by 2030 is achievable with rate increases that don't exceed the rate of inflation. So I only read that to give you an idea of - there are at least some utility companies who aspire to achieve the zero carbon targets, but also with a commitment to do it in an affordable manner. And I think there is not enough pressure on the investor owned utilities to do the same. Thank you.

Can I just address the municipal and IOU thing? Because I think some of the comments that some of us have made kind of get to that. If you're a municipal utility, you're funding everything through a revenue bond. That revenue bond is at whatever the municipal bond rate is, which is probably close to the state borrowing rate.

Whereas if you're in, so let's say it's 2, 3, 4% at least a year ago, and the utilities borrowing at a bond rate plus a return on equity rate, which blends out to be 6, 7, 8%. If you're a water utility, maybe it's 9%. And if you had a mortgage at 3% or 2.5% versus one at 6%, it's huge.

So since we're building so much, like whether it's wildfire hardening or all of the transmission that we're building, maybe let's look at seeing if there are ways to lower the cost of that financing. And that's what other states have done. And that would be the final piece on that reference.

Thank you. Yeah, no, I appreciate that. And I appreciate the equity lens on it, too, in thinking about it, and this is incredibly helpful information definitely raises some red flags around these 44 applications a year for rate increases. That's a lot. I appreciate the Executive Director, Peterson, being here today, and I know you were here for the whole hearing.

So you've heard a lot of concern around so much cost being passed on to ratepayers versus everyone keeps saying skin in the game, which I kind of hate that term, but everybody knows what we're talking about and just hope that in kind of bringing back some top level points from today is that that's a huge concern and taking that consideration into what you're looking at for the rates going forward, what can be passed through and how utilities can have to make that investment too, and have to feel the pinch as well, that it's not just on our neighbors, our friends, our communities who are really struggling and suffering right now.

I very much take the point, Assemblymember, I appreciate that you raised that at the end there. I will say that we are under some specific paradigms and statutory structures under which we are permitted to, in certain cases, such as penalties or disallowances going forward to take funds from shareholders.

There's a very specific structure around that, and we have exercised that authority to the tune of billions of dollars, honestly, against both the very large utilities that were here today, as well as several smaller ones too, that haven't done right honestly by the ratepayers. And so we do exercise that authority when it's appropriate. We can't take a rate case and order shareholders to pay part of what's being requested.

But we are definitely, as Mr. Tony knows, Mr. Joseph, Director Baker, they are all active participants in every general rate case that comes before the Commission, and they bring their pleadings and their best arguments and briefs and we listen. Every single general rate case is heavily contested before the Commission. Every single final decision is a series of compromises among all the stakeholders. These participants often agree to settlements with the utilities as well during those rate cases that sort out who is to pay what.

And so I definitely appreciate all the commentary and ideas today. I wrote down several of your ideas today, but everyone, I think knows that we are actively looking in multiple ways to reduce costs for ratepayers going forward. But I appreciate your point. Thank you.

Questions? Would you like to make some closing remarks?

So I'm going to make one more pitch for something that I didn't pitch initially. I mean, I talked about the two big things where the big money is, which is in wildfire mitigation and net energy metering. Those are the two big things. Together, it's 10 to 30% of rates. You've heard a lot of talk about, well, let's get wildfire out of the rates, because this is a collective investment. Maybe you can do it, maybe you can't.

But what Matt Baker brought up, spend 3 billion to save 15 in rates. It's right in the Legislature's wheelhouse. You could establish a credit recognizing this will be paid over time. It's not an immediate, immediate budget hit because it takes time to do this, but to the extent that we can get $4.6 billion out of rates every year, year after year after year. And these systems, they all have a 20 year grandfathering. So take 4.6, multiply it by 20.

It did decline some over time as people fall off, but most of the systems were installed in the last five years, so maybe it's 15 on average. If you can spend 3 billion, get 15 out of rates, that's a worthy endeavor. That would make a real difference in numbers that people would see.

Just briefly. The affordability crisis is more than just people losing homes. It's more than people losing utility service. It's also when the price of electricity gets too high, it undermines California's climate goals, because people are not going to want to switch to heating by gas, to cooking by gas, to hot water by gas. If they're afraid it's going to cost them more in the future for their monthly bills, then at least most months natural gas. And so this is why we need to take action very urgently.

I'll only close by saying that I think you heard across a number of stakeholders, a diverse range of stakeholders today, quite a bit of agreement on the need for action. So I do think there's commitment will interest ideas from many of us on working with you to find new indifference, financing and other solutions to this crisis. Thank you very much.

Just a couple of little things in the scheme of things. One is try to find more ways to make more decisions within a rate case versus kind of in one off applications. And you don't have like the 44 things stacked on top of each other. Look at how you use things like balancing accounts or mandate those things. Sometimes it's important to use them. I'm not going to say that, but don't use them. But try not to get very specific in the rate making and kind of dictating how rate making should be done.

And then I just think encourage all of us to really reexamine our priors. We are in an unprecedented situation. Climate change has hit us. We've got fires, we've got droughts, we've got all of that. We have to electrify, we have to rebuild our grid. And I think the last thing is try to think of it in terms of what the outcomes are.

So I think everybody would agree that if you think of regionalization as how do we get resources from where the sun is shining at different places and be able to share facilities and use them efficiently, what's the best way to do that? That may not mean doing anything with the governance of Cal ISO it might mean doing something with the governance of Cal ISO, but let's try to think about the outcomes that we agree upon and then figure out the best ways to get to those outcomes.

Thank you all very much. Thank you. Thank you.

A lot of work to be done.

I don't know if Michael had last.

Michael, yes, closing comments.

I think what I'd jus say is what's really struck me today is the enormous consensus about a broad range of approaches to trying to rein in affordability. And I think it gives some direction to the work of the Committee and the Assembly. And I also think that there are a lot of efforts underway that are going to make a difference over time. But we are in a difficult situation.

We need to be really focused on this question in order to ensure energy access and the clean energy transition, as was pointed out. So I don't have any big additional points, but I would just note how much agreement there is across the three panels about what needs to be done.

Thank you, Doctor. We're going to move on to the public comment period where we'll ask folks to step up, state their name, affiliation, and if you could keep it to under a minute, that would be greatly appreciated.

Thank you, Chair Garcia and Members of Committee. Rebecca Lee, on behalf of NRG Energy, our subsidiaries Zoom Energy and Direct Energy, are core transport agents in California able to provide competitive natural gas service to end use residential and commercial customers. Like the incumbent utilities, we are faced with same market volatility. Unlike the utilities, we do not have cost recovery at the Public Utilities Commission.

So through hedging and risk management, we are able to offer customers roughly 20% less this month for their projected 2023 natural gas through a 12 month fixed pricing rate. Therefore, we urge this body and the agencies examine the role of competitive retail providers in helping customers better manage their energy needs. Thank you.

Good afternoon. Alex Jackson with the American Clean Power Association. We represent utility scale developers across a range of technologies and solar, onshore wind and now offshore wind. Thanks for being here. Staying with us through the public comment. Very much agree with the theme of the hearing today that we face a critical and urgent challenge with affordability and there is no one solution for it.

However, I want to elevate two of the proposals that you heard today, which we think merit your consideration and which will be before you likely this session. First is regionalization. We agree with the comments of Michael Wara that that provides an important cost savings opportunity for California ratepayers by allowing us to operate and plan the grid more efficiently. And I must disagree with my friend Mr. Joseph, that we could just rely on the extended day ahead market.

We think that's an important proposal, but we're concerned we won't see robust participation in that market unless we have a governance change that provides more comfort. Second, we want to elevate the central procurement mechanism in the administration's Trailer Bill.

We think that's an important tool to our toolbox that we'll add to help increase resource diversity, reduce our dependence and exposure to volatile natural gas prices for projects like offshore wind, which are big and capital intensive, the more we can derisk that project development by providing a line of sight to procurement, the more cost savings we'll realize for ratepayers. Thank you.

Thank you. Kevin Johnston, California Farm Bureau Federation. Thank you for staying with us. Try and be brief. I'll echo many of the comments that Mr. Boccadero made. I think it's very important to recognize the difference that agricultural customers face and having non residential customers be part of these panels. I know you saw the CPUC rate trends. Those don't tend to include non residential customers. It's very residential focused, but we face the same issues.

And so I think it's very important to have that voice in the room and that we're facing some of those same problems. Another thing I heard throughout was time of use rates and ratepayers need to mitigate and ratepayers need to do this. And as the unfortunate phrase of having skin in the game, I think the utilities need to do their fair share as well to feel the brunt of some of those impacts. And I will just make a comment about, Director Peterson said about the penalties.

I'm not sure if everyone's aware, so when they do like the penalties for PSPS issues, those actually go to the General Fund. Those don't go to ratepayers. So that's something that could also be a fix, is that when a utility is penalized for issues, that those funds actually go back to the ratepayers that are suffering the harms. Thank you.

Good afternoon, Mr. Chair and Members. Mike West with the State Building and Construction Trades Council. The State Building Trades is the largest statewide coalition of construction workers in the United States, with nearly half a million members, 70,000 of which are registered apprentices. I rise in opposition to the concept of regionalization for several reasons. First and foremost, we believe that efforts to regionalize the power system will result in a loss of hundreds of thousands of construction jobs in California.

By lost, I mean jobs that will be outsourced to other states where labor protections and strong places - where labor protections aren't strong and places where diversity in the construction trades is lacking. Places where environmental laws are lax. In addition to the construction losses in California, ratepayers will lose significant control over the decision making process, ceding some of that control to other states. This is a dangerous precedent to set.

Instead of focusing on regionalization efforts, we should encourage the Legislature to help us get more renewable energy projects permitted in our own borders where labor and environmental standards are strong. Embracing regionalization is akin to California saying we can't build these renewable projects on our own. That's not true today, it wasn't true a decade ago, and it's not going to be true in the future. We can build these projects in California. We will build these projects in California. Thank you.

Thank you so much for those public comments. Again, thank you to all the panelists and recognize the work of our team here at the Utilities & Energy Committee for putting all the information together. So thank you and to the Members who attended. This meeting is adjourned.