Assembly Standing Committee on Utilities and Energy

Good afternoon. Good afternoon and welcome. I'd like to convene today's hearing of the Assembly Committee on utilities and energy. Sergeants, please call the absent Members. Before we move on to our agenda, I have a few housekeeping announcements to make. As is customary, I will maintain decorum throughout today's hearing 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. We have other Committee meetings happening concurrently, and Members may be stepping away to present their bills. We'll work to keep the hearing moving as quickly as possible. Please note that testimony is limited to four minutes on the support side and four minutes on the opposition side. We'll hear from up to two witnesses each. You each get two minutes, up to four minutes in total. Okay.

For any additional witnesses on a measure, only state your name, position and affiliation. If we exceed today's hearing time, please submit your testimony through the email address online on our website. Today we've got 14 measures on the agenda. Three are on our consent calendar. Looks like a quorum is not yet present, so we will go ahead and commence as a Subcommitee. Okay, so with that, we will begin with file item number two, Assembly. zero, no. File item number three. Assembly Member Lowenthal. Hello. Okay, thank you.

Madam Chair and members, I am pleased to present AB 2212 which enacts the offshore wind Workforce Safety Training Facility Development Act. Offshore wind development presents our state with a multi-benefit opportunity to help us meet our climate goals, support and improve our communities, create new jobs, and stimulate economic growth. The workforce needs of the industry are estimated to generate thousands of good-paying, long-term jobs in our state, and we certainly need it in the 69th Assembly District.

However, in order to meet these needs, we must ensure that workers receive the proper safety training and certifications required by the industry to work on offshore wind projects and on the turbines themselves when they are operational. Fortunately, we can draw from the example at the port of New Bedford on the East Coast, home to our country's first offshore wind turbines, as well as the National Offshore Wind Institute.

The Institute provides workforce safety training and certifications for the offshore wind workers so that they can carry out their work in the unique environment and circumstances found on the turbines. The Workforce Safety training facilities established under this act will provide invaluable training to the offshore wind industry's workforce in order to ensure they can perform their jobs safely. I'm pleased to be joined by Dan Jacobson with Environment California, the bill's sponsor, who is here to testify in support of AB 2212.

Thank you very much, Madam Chair and members of the committee. It's a pleasure to see you all. Environment California is a nonprofit, statewide environmental group focused on clean air, clean water and protecting our beautiful places. We know that it's important to accelerate to get to 100% clean energy, and we can't do that without offshore wind. Offshore wind has the advantage of blowing best when we need it the most, which is that afternoon time when the sun goes down.

However, if we're going to create this new industry, we need to make sure that we do it safely. And as the assemblymember has pointed out, we have the advantage of being able to learn from the East Coast where they've set up training centers that make sure, not that we just know how to use the drill or sort of use the particular piece, but there are very specific safety precautions that have to be taken for offshore wind.

For example, the class that I cited the other day is that in case you're in a helicopter flying out to one of these offshore wind facilities and the helicopter goes down in the ocean and flips over, there are classes that teach the workforce how to effectively escape from that kind of a situation. We can't leave this up to a, we hope people are smart enough to figure it out. We need to make sure that they have the training. That's just one example.

But there's plenty of other safety examples that we have. The nacelle for the offshore wind facilities are incredibly small but generate a lot of electricity, and there's bound to be some mishaps that happen in there. People need the safety and health trainings to be able to effectively and safely get their workforce out onto helicopters and back onto shore. Respectfully ask for an aye vote.

Thank you. Is there any, we'll go ahead and open it up for testimony in the room. Is there anyone in the room wishing to provide a testimony in support of AB 2212? All right, seeing none. Moving to opposition. I don't think we've got witness in opposition. Anyone in the hearing room wishing to testify in opposition to AB 20212? Seeing none. Bringing it back to the committee members. Questions? Comments? All right, assemblymember Reyes.

Where are labor groups on this, on the Bill? Because I didn't see them either way.

Yeah, we've been talking with them, with the trades and with the other folks. There's some pieces that they're going to want to look at and say, how are they engaged with the, specifically, with the development of the curriculum? And so we'll continue to work that out with them.

All right. Assemblymember, would you like to close?

Respectfully ask for your aye vote.

All right. We will take up that measure at the appropriate time when we have a quorum. Moving to Assemblymember Berman, file item number two.

Here and ready, racing over. You're the best. Now I lost votes. I just lost votes by returning compliments. Yeah. Yeah. Respectfully asked for your aye vote. No, Madam Chair and distinguished colleagues. I would like to begin by thanking the committee staff for their work on this bill. I will be accepting the committee's amendments described in the analysis. Industrial emissions make up 23% of California's greenhouse gas emissions, which is the second largest source behind transportation.

While the state continues to be a leader in transitioning from combustion to zero emission technologies in the electricity and transportation sectors, industrial emissions have largely remained unaddressed. AB 2083 is a key first step for California to modernize industrial manufacturing and plan for how the industrial sector will reduce its greenhouse gas emissions. This bill would task the California Energy Commission with developing a report on the key strategies the industrial manufacturing sector can undertake to cut its emissions in line with California's existing carbon neutrality requirements.

I recognize that this transition is not as easy as it sounds and that many industries have specific requirements to ensure our goods and food are up to standard. Therefore, California will need to make significant investments to help industries. But first, we must assess and plan in order to ensure that the investments are smart and focused to maximize the health of our earth, our communities, and the industrial manufacturing businesses.

Developing a report that assesses both the opportunities and the challenges in reducing greenhouse gas emissions in the industrial sector will strengthen our industry's sustainability while also helping California achieve its climate goals. Without a strategic approach to decarbonizing the state's industrial sector, we will miss the opportunity to thoughtfully transition to a more efficient and resilient carbon-neutral economy by 2045. With me today are Mark Fenstermaker, on behalf of Earth Justice, and Kayla Robinson, on behalf of Industrious Labs.

Thank you. Good afternoon, Madam Chair, committee members. Mark Fenstermaker, on behalf of Earth Justice, a proud cosponsor of AB 2083, California's industrial sector is a critical component of the state's economy. But many industrial processes rely on the combustion of fossil fuels, emitting criteria, pollutants, reducing air quality, and representing 23% of our greenhouse gas emissions. In 2022, the Legislature passed AB 1279 setting a goal to achieve economy-wide carbon neutrality by 2045, including an 85% emission reduction target.

Reducing emissions from the manufacturing sector will be a key component in achieving these goals, and AB 2083 is going to assess industry's potential to do so. The bill is not setting a new emissions reduction target, it is simply providing an assessment of how industry can help in meeting our AB 1279 goals. CARB's 2022 scoping plan provides a start in thinking of how we're going to decarbonize the industrial sector.

But the relatively few pages dedicated do not assess some of the existing and nascent industrial emission reduction strategies. About seven or eight years ago, Assemblymember Friedman recognized the emissions emanating from our building stock and authored AB 3232, tasking the CEC to analyze how buildings could decarbonize against our 2030 goals. AB 2083 follows the model from AB 3232 and looks at the industrial sector against our new 2045 goals.

We know the industry is going to be a vital part of California's economy, providing many well-paying jobs and also a vital part of meeting these 2045 goals. And we want manufacturing to sustain and thrive in our carbon-neutral future. And that's why we're working with Mr. Berman on this bill. We're grateful for his leadership and we respectfully ask your aye vote.

Good afternoon, chair and members Kayla Robinson on behalf of Industrious Labs, an organization leading efforts to decarbonize the global industrial sector by 2045. Currently, California is a leader in industrial manufacturing. Critically, we have a host of industries like food manufacturing, apparel production, paper, glass, and more. Despite the important role that this sector plays for California's economy, the state does not have a plan on how to strategically deploy zero-emission technologies in line with our current climate goals.

Having a plan developed by the California Energy Commission to supplement some of the early analysis done by the state will be critical to offer an energy and technology forward on how to decarbonize this sector. From industrial heat pumps to electric ovens and thermal storage, this report can help lay out the many zero-emission technologies that exist today to eliminate low-hanging fruit emissions in industrial manufacturing. Furthermore, this report will help identify currently available opportunities and strategies to overcome barriers from this multifaceted sector.

Creating an assessment for how the state can modernize in diverse industrial manufacturing processes will ultimately strengthen California industries globally and better position the state for sustained economic growth in the sector. Without a strategic approach to decarbonizing the state's industrial sector created through AB 2083, we will miss the opportunity to thoughtfully transition to a more efficient and resilient carbon neutral economy by 2045 and for those reasons, respectively, or drive out. Thank you.

Thank you. We'll go ahead and move to testimony in support in the room. If you'd like to speak in support, please approach the microphone.

Sofia Rafikova with the Coalition for Clean Air in support.

Thank you, Madam Chair, Environment California support.

Janet Cox for Climate Action California in strong support. Thank you.

And is there an opposition witness? Yeah, you can go ahead and come to the dais.

Good afternoon, Madam Chair and members. Rob Spiegel, California Manufacturers and Technology Association, in regrettable opposition to AB 2083. I think to just kind of level set this conversation, members, at the very core of AB 2083 continues to be a real disagreement on the fuel source and the transition for industry. We use natural gas.

We acknowledge that our sector is also 23% of California's emissions in the state, and we will continue to reduce our emissions in the state as we have over 20% over the last 20 years. The core strategy, however, of AB 2083 is not a hybrid set of technologies. The pathway forward in 2083 is completely and utterly zero-emission or full electrification of our industry processes.

In fact, if you take a look at the bill, paragraphs 35610 and 11, each one of those elements speak to a zero-emission technological solution for our industry sector. Now, the core elements of what will help industry get to a full electrification, or even an electrification pathway is going to depend on low energy prices and regulation or legislation that helps benefit the sector to accomplish that target. But unfortunately, members, California's industrial electricity rates are the highest in the nation, 148% higher than the US average.

Again, a full electrification pathway for our industry and as described in 2083, is not technologically neutral or cost-effective for the committee. Industry is already looking at examples and opportunities not only to decarbonize but look at greater elements of electrification for our sector. This is because we acknowledge what the scoping plan did. The CMTA, along with our coalition members, were engaged in the process at CARB, were engaged in the Indigo process at CEC.

We've been engaged at the process at the CPUC regarding integration, and we've been engaged at the federal level with the US Department of Energy and establishing the four pillars that are required for industrial decarbonization. But I think it's important for the committee to recognize if we're going to move down a pathway of electrifying our industry. A little bit of information that might be helpful in this discussion is our members are doing assessments. Currently, two-megawatt facilities, three-megawatt facilities under a full electrification pathway.

Of the technologies presented today that may be commercially available and deployable, we're talking 80 energy for these facilities. That's enough power to energize 60,000 homes in California. So this particular bill creates additional challenges for our sector to be able to meet. Now, I know I'm getting close to time, but we focus on four pillars of decarbonization. It was part of the roadmap that was identified in the committee analysis. We're definitely appreciative of that.

The four pillars, energy efficiency for industry, electrification, carbon capture, storage, as well as the proliferation of low-carbon fuels, that is, hydrogen. We don't yet have a pathway in either, really, of the two other sectors to help industry achieve the deep decarbonization that is required under 2083.

It may be an assessment, it may be a roadmap, but ultimately, at the end of the day with that report, there is a new target identified in that bill for our industrial sector of 85% below 1990 levels by the year 2045. For these reasons, members, CMTA is opposed and our coalition is opposed.

Thank you. All right, anyone else in the room wishing to speak in opposition to AB 2083 can approach the microphone at this point.

Madam Chair and members Beth Olhasso, on behalf of the Agricultural Energy Consumers Association and the California Poultry Federation, in opposition. Thank you.

-- on behalf of the California League of Food Producers and respectful opposition.

Audra Hartmann, on behalf of the California Large Energy Consumers, also known as CLECA, in opposition.

Good afternoon. Katie Davey with the Dairy Institute of California in opposition.

All right, open it up for questions and comments from the committee. Assemblymember Bauer-Kahan.

Thank you. So I just want to take us back to the bill of what it actually does because it creates a requirement that we assess the potential for reductions to at least 85% below 1990 levels by 2045. I would also note that it says the assessment shall include considerations of all of the following. But a note by no means restricts the assessment to the listed options.

So if they were to assess and find that these options could not get us to those targets, there is nothing, nothing to stop the entities from looking to other options to get to those goals. 20% reduction in 20 years when my kids are inheriting this planet, frankly, is not enough.

So I guess the fact that we are trying to use the best available data, which is the language in the bill, to determine how best to reduce emissions in a sector that is producing so many, feels like brilliant policy. He's not putting the mandate on you. He's trying to figure out how we can get there using some metrics, some you may not like, but allowing them to include others if those options seem more feasible or better.

So I guess the opposition here is mind boggling to me because I think that all this is doing is asking us to figure out a path forward to a cleaner future for our children. And with that, I'm happy to support it today.

Assemblymember Reyes.

My colleague is correct, this is calling for requires an assessment. But I think the bigger picture is that we know exactly what we're going to, where we have to go. And I think that's the biggest dilemma because we know where we need to go and we've got to make sure that we bring in the manufacturers. In my district, we have so many manufacturers, and we need to find a way to bring them along, to include them in that discussion. And that's why I appreciate that it is an assessment.

It is so important to have the manufacturing, the association involved in this because I think it's clear that we want to move forward for the children and the grandchildren. But we also have to recognize that this isn't going to be an easy task and we may have some great goals that we want to achieve, but you have to be at the table. It's so important.

Your voice has to be heard as we go through this process, not just your voice, some of the others who have voiced their opposition. We're not going to get anywhere if we just keep saying, here's what we have to do, and this is the end of it. We have to bring all of those who are impacted by this, because it isn't just the industry, it is the jobs that are created by the industry, and many of those are in my district.

So finding ways for everyone to be included is extremely important. I know it's an important step forward, but making sure that all parties, all stakeholders are involved in the processes, probably the most important part of this.

All right. And I think I would just to add or to build on what my colleagues have said, I too read this bill as an assessment, and I actually think it's an incredibly important kind of step that has heretofore been missing in a lot of the goal setting exercises that we've done in the state.

I think we do a heck of a job setting incredibly ambitious targets and don't do a very good job of then connecting the dots in terms of how are we going to actually deliver on those? What's it going to take? What are the real barriers to that, what are going to be the enabling technologies, some of which you mentioned in your opposition comments.

And so I actually really support this kind of approach at the same time, as, you know, I certainly approach that support in all of the above approach to deliver on those goals. And so I appreciate you authoring this bill. As Assemblymember Reyes said, we think it's really important for CMTA and others to be at the table because that's the only way that we are actually going to craft real solutions. So with that, would you like to close?

Yeah, I appreciate the comments, appreciate the concerns that have been raised in the conversations that I've had with others who came up in opposition to the bill. We listened. This is a bill we ran last year that was just focused on electrification, and we heard the concerns from opposition, and that's why we broadened it to a broader decarbonization focus and a less technology-specific focus this year.

And I'll be totally honest, I think at the end of this assessment, we're going to have to look in the mirror at things that we're going to have to do if we're going to accomplish these very laudatory goals that we set. That's the whole entire purpose of this exercise.

I get that it creates anxiety, and I definitely want industry to be a part of the effort to make sure that we can do everything we can to be as kind of intellectually honest with ourselves as we need to be if we're going to accomplish these goals that we need to for RBK's kids. So with that, I respectfully ask for an aye vote.

All right. And we'll go ahead and take a moment to establish quorum such that we can vote on your vote. All right, Madam Secretary, please call the roll.

[Roll Call]

Okay, we have a quorum. Do we have a motion on AB 2083? Okay, yes, we do. We've got a motion and a second. Madam Secretary, please call the roll.

Item number two, AB 2083. The motion is do pass as amended to appropriations. [Roll Call]

8-1. So we will keep that open. Thank you.

All right, we've got a motion and a second on the consent calendar. Madam Secretary, please call the roll.

[Roll Call]

Okay, so nine zero on the consent calendar, and we'll leave that open for absent members to add on. All right, we are just moving through it. Motion in a second on AB 20212. Madam Secretary, please call the roll.

[Roll Call]

[Roll Call]

Okay, 81, we'll go ahead and leave that roll open for absent members to add on. Moving on, Assemblymember Addis, file item four, AB 2537.

Well, good afternoon, Chair, staff, and advocates. Today I'm here to present AB 2537. And since there's a motion in a second, we will try to be quick. I'm sure you have a lot to do today, but this is the Community Engagement and Offshore Wind Energy Act. I want to thank the numerous people who have been working on this bill for many months in an effort to get it right. And I do accept the committee amendments.

As you know, California has established critical clean energy goals, and our progress towards these goals benefits not only human communities, but fragile ecosystems and vital biodiversity on land, in the air, and in the ocean. Meeting this goal really, truly does encompass offshore wind energy, with a goal of 25 gigawatts, or enough power for 25 million homes, coming from offshore wind energy by 2045, planning for offshore wind energy is well underway, going back as far as 2016.

In 2022, there were leases provided along the north coast in Assemblymember Wood's district along my coast on the central coast. June 2023, the leases were executed. January 2024, the CEC released California's offshore wind strategic plan. So a lot of movement has been made. But we all recognize that historically, communities that hosted large infrastructure projects have been burdened with harmful impacts. And we are now working together to make sure we do better for the future.

And that's especially important for offshore wind energy that's placed along California's pristine coast. And so during this process, it's important that we uplift tribal and local community voices. And I think we're trying to do that. But I have certainly heard loud and clear from local communities that they have a gap in resources preventing them from adequately participating in offshore wind energy planning as well as community benefits conversations. We know true engagement necessitates having in-depth knowledge, information, and technical expertise.

So AB 2537 is a solution, a stopgap solution, the Community Engagement and Offshore Wind Energy Act that would create a fund for community capacity building so that tribes and communities can engage in these important conversations. So again, I want to thank our sponsors, this committee, and our stakeholder partners for their engagement. I think the amendments make this a better bill. And with that, I'll turn it over to our witnesses, Peter Ton from Brightline Defense, and Andres Ramirez from the City of Morro Bay.

Good afternoon, Madam Chair and Assembly members. My name is Peter Ton. I represent Brightline Defense, environmental justice nonprofit, and the sponsor of this bill. Thank you for that piece of advice there. This bill is very straightforward. Its singular purpose is to create important funding for impacted communities to prepare for offshore wind development through capacity building. And what do we mean by capacity building? In Brightline's work on the ground, it's been abundantly clear that communities are curious, excited, and want to engage in the offshore wind process.

However, what we've also been hearing is that lack of resources is hands down the biggest barrier to engagement right now. This bill would fill that gap by expanding on the existing voluntary offshore wind and coastal resources program established by AB 209 last year by including community capacity building as a fund-eligible activity. The grant program is currently set up to receive federal dollars, money from the state appropriations and private donations.

This bill adds the requirement that offshore wind leaseholders provide financial assistance to set aside specifically for capacity building. Local disadvantaged and rural communities, local tribes, and qualified nonprofits can then apply for grants for technical assistance to enable communities to meaningfully engage in the process. With that overview, I'm happy to answer any questions and respectfully ask for your aye vote.

Good afternoon, Madam Chair, members of the committee, and staff, Andres Ramirez, representing the City of Morro Bay, one of the communities that is going to be on the front lines of dealing with the potential impacts and the benefits of offshore wind development. The member and Brightline have done a wonderful job explaining the bill so I'll just kind of stick to sort of the sentiments from the city and the community. Morro Bay is extremely supportive of achieving the state's climate goals, multifaceted ways of getting their offshore wind development.

Obviously, very exciting. There's a lot of benefits that can come from it. Tax revenues, supply chain, manufacturing activities, job creation, that's all stuff everybody looks forward to. Also some unknowns, right? Environmental impacts, changes in local workforce, wear and tear on harbors, infrastructure, things like that. So as mentioned, the community really does want to be engaged. It's a constituency that cares a lot about their community, but also sees the benefits of what's to come.

Ultimately, what Morro Bay needs is to be able to bring on, whether it's subject matter experts or what have you, that they need technical, they need legal, they need environmental, and communications expertise in order to fully engage their community in that constituency and figure out what are the gaps, what are infrastructure gaps, what are community gaps, environmental gaps. And what this bill does is it provides funding exactly for that. So in supporting this bill, we're supporting our climate goals of California, we're supporting our local communities. And thank you, and we respectfully urge your aye vote.

Thank you. All right, we'll open it up for additional testimony in support. If you'd like to speak in support of AB 2537, please go ahead and come up to the mic.

Thank you. Michele Canales, on behalf of Union of Concerned Scientists, in support.

Steven King, on behalf of Environment California, in support.

Thank you, Madam Chair. Eduardo Martinez with Manatt, Phelps, and Phillips. I was asked to convey the support of 350 Humboldt, SLO Climate Action, Elected Officials to Protect America, Code Blue, and the Monterey Bay Aquarium. Thank you.

Hi, Madam Chair and members. Jordan Curley here on behalf of American Clean Power. We have a little bit of a tweener position, but we're just wanting to express our gratitude to the chair, to the author, to the committee staff for all the great work that we've seen on the language. You know, we're really looking forward to continuing the conversation. So thank you so much.

Hi, Janet Cox for Climate Action California and the Climate Reality Project California Coalition, in support. Thank you.

Moving to opposition. I don't believe we have a primary witness in opposition. All right, seeing none opposition in the room. If you want to speak in opposition to AB 2537 please approach the mic. Seeing none, questions or comments from the committee? Seeing none, I'll just say I want to say thank you for your leadership on this Assemblymember. And I also want to appreciate the engagement of industry folks and the offshore wind leaseholders in this process. As you were talking, it reminds me of there's this African, I think it's an African proverb, that's if you want to go fast, go alone. If you want to go far, go together. And I know that you want to go far, and I know that you're committed to bringing everyone together as part of that. So thank you. Would you like to close?

No. I would say AB 2537 recognizes that California is on our path to meeting important clean energy goals that benefit humans, fragile ecosystems, and vital biodiversity in the ocean, on land, and in the air. And we also recognize that along this path, we have to uplift the voices of local tribal communities and local communities. So with that, I respectfully ask for your aye vote.

Thank you. We had a motion and a second. All right. Madam Secretary, please call the roll.

[Roll Call]

Okay, so nine zero, that fills out, and we'll leave the roll open for absent M\members to add on. Thank you. Moving on to file item five. AB 2666. Assemblymember Boerner, when you're ready.

Let's not invoke the devil. Thank you.

Permission of the Chair for my witness. Let me make sure I have the right bill. I actually wrote good evening because we thought C&C would go really long, and you'd be here at night. So good afternoon, Madam Chair and Members. First, I want to thank the Chair and her amazing committee staff for working with me on this bill. I accept all the committee amendments and look forward to working with opposition should this bill move forward today. Today, I'm presenting AB 2666.

This is my second Tasha B. Special of the Day, which would require the CPUC, following each each general rate case test year to review which costs, if any, each electrical or gas corporation was able to reduce to achieve record profits and to adjust the authorized revenue prospectively based on actual costs. As many of us have discussed before this hearing, the audit requests show that the CPUC is not holding electric and gas corporations accountable.

AB 2666 puts in good governance standards to address issues in the audit and, at the end of the day, protect our ratepayers. The audit shows that specifically SDG&E saw record profits over nine of the last 10 years. I want to give you a picture of what my constituents are dealing with. My electricity bill from February of this year, you'll see $353. I live in 1500 square feet. It's a fourplex away, and we have two outside walls.

There are no more than three people in the house at any one time. We didn't use any heat this year, and we do not have air conditioning. According to the ComparePower calculator, I looked up, my family uses only about 70% of the average family home of this size in San Diego, and statewide we're at the 33 percentile in the entire state.

I guess that's what you get when you have a European ex-husband who's obsessed with energy frugality, and we turn off the lights when we're not in the room. We have basic appliances like most families, a fridge, a stove, a water heater, a washer, a dryer. This cannot be the baseline for San Diego and the baseline for Californians. We know our state is in an affordability crisis, and this is one of the things that happens.

When our gas rates were so high a couple years ago, a lot of Members got calls about the gas rates. I got calls about utility rates, water rates, electricity, gas. My family can afford this. But think about the college student, the young professional, working families, and seniors who cannot go below a baseline like this. And for most of the last few years, SDG&E has had some of the highest rates in the entire country.

Today, more than 25% of SDG&E customers are more than 30 days behind on their utility bills. People just can't pay these rates. When year after year the CPUC approves ever increasing rates while SDG&E shows exceptionally high profits above the guaranteed rates of return, something is wrong. And AB 2666 is about addressing the root causes of this egregious pricing by doing the following four things.

It requires the CPUC, following each general rate case test year, to review which costs, if any, each electrical or gas corporation was able to reduce to achieve profits and to adjust the authorized revenue in subsequent years or in the next general rate case as appropriate based on the actual past costs of the corporation recorded. This is prospective and a power that the CPUC currently has, but hasn't used in decades.

This means that, unlike what you may have heard from the opposition, requires the CPUC to establish guidelines for electrical and gas corporations to calculate and report their actual rates of return to the Commission annually. Requires electric and gas corporations to report their actual... Wait. Requires CPUC to establish guidelines for the electrical and gas corporations to calculate and report their actual rates of returns to the Commission.

Then it requires the electrical and gas corporations to report, based on those guidelines, the actual rates of return, and will requires the CPUC to adopt controls to adequately track those corporations actual rates of return relative to their forecasted costs, and to require that those corporations to identify the cost categories where projected costs exceeded actual costs. We have to get to the bottom of what's increasing our ratepayers' rates.

You'll see this bill is requiring more transparency and accountability of both the electric and gas corporations and the CPUC, so that the egregious price gouging that we're experiencing across San Diego and the state and rate payers across California are protected. If the utilities are not making record profits on the back of working people, this bill won't do anything but bring to light areas in which legitimate savings were made and adjust down true costs of doing business.

As you'll note, I don't have a witness, since this is the Tasha B. Special. I do have, I think, the State Auditor is somewhere. Supposed to be. There he is. So the State Auditor is here to answer any process questions related to the audit on which my bill was based. Before I finish, I do want to address the obviously timing issues because we changed the approach to this bill last week.

These amends were first available, even to me, yesterday evening. For such important accountability, transparency, and good governance measure, I really applaud the Committee on helping, and the Chair, on helping me address the real cost of living issues that we have in San Diego and California. I'll note, despite reaching out several times to opposition, I have received no amendments. They have not met with me on my original version of the bill, nor on this one. As I have I demonstrated for six years, especially on my Tasha B. Specials, I'll continue to work with the opposition and any of my colleagues who are interested in this on any issues should this bill move forward today. With that, I respectfully ask for an aye vote.

All right, we'll open it up for any testimony in support. If you're in support of AB 2666, please approach the microphone.

Thank you. Ignacio Hernandez on behalf of the Utility Reform Network in support of the bill in print. And we're reviewing the amendments, but I imagine we'll likely remain in support.

Thank you.

Hello. Yvette DiCarlo, witness to soaring rates, in support.

Janet Cox for Climate Action California, the Climate Reality Project, California Coalition, Elders Climate Action, the Glendale Environmental Coalition, 350 Sacramento, and 350 Humboldt, all in support. Thank you.

Thank you. Is there a primary witness who will be speaking in opposition? Go ahead, and come on up.

Good afternoon.

Good afternoon, Madam Chair and Members of the Committee. Mitch Mitchell, Chief Legislative Officer for the Sempra Utilities, Southern California Gas Company, and San Diego Gas and Electric. And I sit here before you today and testifying in opposition to this bill. I sit here not only as an employee of the Sempra Utilities, but I also sit here as the former Chair of the San Diego Food Bank and the current Chair of the San Diego Housing Commission.

I hear the stories of people who talk about their electric bill, the impacts on utilities of their own households. I hear the stories every single day. And for that reason, a lot of times we have our conversations up here as a group. We talk about what can we do to truly create solutions that reduce rates and reduce bills and reduce these impacts.

So as we look at this situation, I want to say that we are aligned with you, Madam Chair and Members of the Committee, on the focus on affordability. What can we do to truly bring bills down for all utility customers in the State of California? Now, we've taken a look at the amendments, and we appreciate the nod towards the concerns around retroactive rate making and creating uncertainty, and that is something that is very important to the utilities.

And I would say that, when we look at this, our focus is truly trying to create alignment with the state's policies on the green transition. And we want to do it both effectively, efficiently, and safely. And we remain committed to our customers. We've been having this conversation about rates for 10 years when we were negotiating AB 327 and talking about how rates, how high rates were then.

Now, because of the alignment and all the things that we are doing to try and stay in compliance with the state's mandates, that answer doesn't work for our customers. They don't want to hear about what we're trying to do to on the green transition or wildfire mitigation. They wanna know what we can do to reduce their bills. I have offered, I would say this to the Member. We would love to do an energy audit to help you with your own bill.

80% of our customers use 500 kilowatt hours or less a month. And we believe that that's a part of that is a byproduct of them being concerned about the rise in their cost. And so we look forward to working with the Committee to try and reach some consensus. But we remain firmly in opposition to this bill because nothing in this bill is introduced reduces rates or reduces bills. And that should be the focus. And we are committed to working with you on that.

Thank you.

Madam Chair and Members, Scott Wetch on behalf of the California Coalition of Utility Employees. We're cautiously optimistic about the direction of the amendment. Got them late last night, and we share many of the concerns. I think it's important, though, to speak to the bill in general because there's obviously some very serious concerns about it having the opposite impact that it is intended to have.

You know, the general rate case determines the total amount the IOU can collect from ratepayers to run the utility for a future four year period. That's the revenue requirement. The capital and expenses are based on a forecast. The utility submits the forecast in the application process. But then there's an 18 month process at the PUC with all stakeholder holders weighing in, and that forecast being refined through that 18 month collaborative process.

Once the forecasted budget for the first four years, which is the test year, which then gets adjusted for the next three years, which are the attrition years, for inflation and other factors. The first year budget is based on historical capital expenditures and operations and maintenance expenses, forecasted infrastructure work, and future cost projections. When you have a forecasting process, there is necessarily going to be differences between forecasted and actual capital expenditures and operations and maintenance expenses. But the forecasting process incentivizes the IOUs to find efficiencies.

When actual expenses come in below the forecast, the IOU benefits from a short term increase in their profits. But ratepayers benefit in the longer term because IOUs efficiencies lower the historical spend and lower forecast as inputs in the next GRC. So they find efficiencies, they get a short term increase in their rate of return, but ratepayers benefit because those efficiencies are then baked in to the lower forecasts and inputs in the next GRC.

As a result, a lower revenue requirement and less collected from ratepayers in the next GRC. This bill would require the CPUC to adjust the revenue requirement, as I understand the amendments, for the three attrition years based on spending in the test year. This will not help rates. In fact, it will raise rates. It will take away the incentive for the IOUs to be more efficient, and the IOUs will then be incentivized to spend every penny the CPUC authorizes. It is well intended, but will have the opposite impact for which it is intended. For that reason, we'd urge a no. We would urge... We'll look at the amendments, but in the current version we have to remain opposed.

Thank you. Additional witnesses... You all might want to stay because we probably will have questions. Additional witnesses in opposition to AB 2666, go ahead and approach the microphone.

Thank you, Madam Chair. Hunter Stern on behalf of IBW Local 1245 in opposition pending review of the amendments. And a reminder to the Committee, this is also where our work comes from. Thank you.

Valerie Turella Vlahos, Pacific Gas and Electric Company, in opposition.

Catherine Borg with Southern California Edison, respectful opposition.

All right, bringing it back to the Committee. Questions? Comments? Assembly Member Calderon.

Thank you, Madam Chair. I like your flip chart, or your chart. It's very creative. You always do your homework. Have you spoken to the CPUC to see how this would work with the already staggered GRC cycle that's supposed to ensure timely decision making?

So we got the amendments yesterday evening. As I said, we'll continue to work with the CPUC to make sure the process itself is accurate. These are powers that the CPUC have and they don't exercise. What we're doing is putting in a process that gives a more accurate ability to properly forecast at the lower rates.

If you look at SDG&E's audit, you look at the audit back in the day when we did the audit, you'll see that, because I think there's two ways to look at it. Do you incentivize through savings or do you incentivize the more accurate forecasting that results in lower rates? And so we will continue to work with the CPUC going forward. But we just had these amendments yesterday. But we'll continue to do that, and I'm happy to continue to work with anybody who has concerns on the bill.

Okay, and what does the bill do that the PUC is not currently doing in the public processes in regards to rate of return and the cost of capital?

So what my bill does is says you have these powers, I'm going to tell you exactly how to use them by having them have guidelines for reporting, having the utilities report that test your impact, and then adjust the rates prospectively. Those are things that they have the power to do, but they don't do. And we know that with the CPUC, sometimes we need to encourage them to do the right thing for transparency and accountability for our ratepayers.

Okay. And I have one more question for, I think this might be for the opposition. It's my understanding that SDG&E is in a test year. Can you explain that?

Yeah. So essentially the simplest way to offer the example is that, what the Member is mentioning about, you know, what we're authorized to spend. You know, look at it this way. What we do is we create a plan that aligns with what our objectives are and the mandates that come to us. So if we plan out over four years, $100 in year one, $100 in year two, $100 in year three, and 75 in year four, what we're doing is we're building towards that plan.

As Mr. Wetch mentioned, there are times when we find efficient ways to construct or to do something, and there's a savings. And the incentive to find the more efficient way to operate is something that's good. As Scott mentioned, we can easily say we're going to spend the hundred, the hundred, the hundred, the 75. But if we figure out a way to do it for 300 instead of 375, that is a positive.

And so the concern we have about the amendments is in the test year when GRC's are often late, so they're not on schedule. And we've talked about this building for years. So right now we are delayed and waiting for a GRC decision. So what we've done is we've been ordered to restrict spending because we don't know what the GRDC decision is going to be. So in this, the way the bill's written now, so we think that we're going to spend 100 in the first year, the test. If the GRC comes out and says, well, you know, or this bill went and says, listen, we found that you were over authorized, we're going to take money from you back. We might, they might take it from year three.

And year one is hard because if we hold back on our spending and we, instead of spending 100, we only spend 70 because we were concerned about the GRC decision, it's going to look like we had a big bonus at the end and that wasn't the case. We were just being cautious. So I think you have to, the test year is really important because it sets the tone for the rest of the spend. But that's the year that the PUC bases our request on.

Okay. Thank you.

Yeah. Assembly Member Connolly.

Thank you. I appreciate the author coming forward and the witnesses. Couple questions for the opposition, and perhaps starting with SDG&E. My understanding, at least in nine of the last 10 years, SDG&E's actual rate of return was higher than its authorized rate of return. With such a consistent record of outperforming the projections, how can we be confident that those projections are accurate?

Well, the State Auditor mentioned the forecasting issue and that we need to look at how we're forecasting. Again, I think we take great pride in the fact that we've been at the wildfire mitigation component for 10 years. We learned a lot of things. The difference between 2008 and today, we've learned how to do things more efficient and more effectively.

And forecasting is something you're trying to guess what the costs are going to be, but technology gets involved, and sometimes what you predict, you find some technological way to do it better, more efficiently. With AI coming, that's going to be something that's going to impact forecast. So what I would tell you is that the Commission has the ability right now to look at everything under the phrase of just and reasonable.

If they look at what we've done and what we forecast, and they figure out, they say, well, we don't think you were just and reasonable. They have the ability today to say, we're not going to give you that benefit. This was not just and reasonable. And I think that is the safety net. Right? Is that just and reasonable.

Mr. Wetch. And then I have a follow up maybe you can tackle.

Yes, there's this sort of misconception that the utilities do the forecasting, and the Auditor alluded, made the inference that the utilities set this bar artificially high so that they can come in and undercut it each and every time, which is simply, over time is not the case. What happens is they submit a forecast which they have to submit.

This is a quasi judicial process before administrative law judge where you have to create a record. They have to come in with the data and the evidence to justify their forecast. Then all the stakeholder groups that are accepted as interveners, CUE being one of them, and we never agree on a GRC as a capital plan as proposed by any of the utilities. Neither does TURN, neither does the Office of Ratepayer Advocate, nor do the other dozens of interveners in each of these GRCs.

And it's an 18 month process before this administrative law judge where these issues and data points are hashed out. And at the end of this very lengthy 18 month process, the judge that presides over that then puts forward a decision based on all the data and all the input from all those groups. So this conception that the utilities somehow just dictate their own forecast is illusionary.

Final question. And this relates to PG&E, which is not at the table, so I might just have to follow up. But to the extent, particularly Mr. Wetch, you may be able to comment. So, in contrast, PG&E's record of outperforming its expected rate of return is not as exemplary, shall we say, as SDG&E's. Yet PG&E recently posted record profits. $2.2 billion in 2023, up 25% from 2022. Can anyone explain to me how, even when a utility is consistently making under their authorized rate of return, that company can still break profit records?

Again, Mr., I don't represent PG&E, I represent the workers. But what I will say is IBEW doesn't give a rat's ass. IBEW doesn't give a rat's ass about the profits of any of the utilities. We don't. What we care about is that when thing, decisions in this building affect the market in and destabilize the market. Because that leads to higher borrowing costs of the utilities and it causes predatory investors to jump in.

You fiddle around enough with these things when you don't have the expertise, and what happens is you have hedge funds that come circling around these entities. And we were the chair people, the CUE chaired the creditors Committee in PG&E's bankruptcy, and we barely escaped having hedge funds take over the utility. Hedge funds don't care about climate, they don't care about ratepayers, they don't care about workers. They gut companies, they break unions and they leave town. And that's what will happen if we continue to try to tinker with the process that's been in place in ways for which we're really not qualified to do.

All right, Assembly Member Bauer-Kahan.

I think I just want to start right where Mr. Wetch has stopped. And I don't know if Mr. Stern wants to answer this because actually it was starting with a comment he made. He said, I think, and I don't want to misquote you, Mr. Stern, but you said this is where our work comes from. And I was a little bit confused, but maybe you just clarified that. This focuses on the rate of return, which I think is just profits to the shareholders. So I was a little bit confused by how this relates to your work. And again, either of you, I don't know.

I think, look, all of the... What we're concerned about here is that the current process is that if the utility comes in underneath their rate of return, that in the next GRC, that that will then adjust the numbers down because the base will be, it will be baked into the base.

If, what the bill proposes to do is through the three attrition years to do that where the rate, the funds have already been approved, that that has impacts on the utilities ability to finance what they have to finance and to finance it at an affordable cost. That not only hurts ratepayers, but it leads to a reduction in the infrastructure work that our members are employed to do, and that hurts us.

That's helpful. Thank you. I just wasn't clear on how that all fit into this conversation. So I just, I want to touch briefly on what you were saying about the administrative law judge process. Because I think that what you're hearing, not you, but what the world is hearing again and again from this Committee is that we feel like the PUC is failing ratepayers.

And recently there is a very long administrative law process around the desire for PG&E to underground more than they could ever underground in the years that they intended to do. So the administrative law judge denied them the right and the PUC overruled it. So the administrative law judge, after the lengthy process you described, didn't believe they could actually do that, but that didn't matter in the final determination by the PUC. And now the rate pairs are paying out because of that. So part of what you're hearing from us, I think, is that maybe there are processes at the PUC that should work and they're not working the way payers need them to.

I don't disagree with that. There's issues with the way the GRC works that could be improved. And we have problems with it. We have a lot of problems with it. The fact of the matter, no matter the inconvenient truth in this room is that the majority of the reasons for the rates that we have today come from this building and actions taken by this Legislature, most presumably or most significantly, inverse condemnation and spending ratepayer money like it's monopoly money, on things like net metering. And that is just the fact, if you look at this, where rates have gone over the last six years, those are the things that have driven up rates.

And I think that it's my opinion, and that it is a lot of things. And I'm not saying that some of the programs that are baked into rates are not part of that. I know that that's something that this Committee is focused on and wants to look at moving forward. And I think the Chair has said that in hearings prior to this.

But I do think that it is a very generous depiction of what is happening to say that the reason the rate of return is exceeding what is projected is because they found savings. I think that is one possible interpretation. I think the alternative interpretation that one could hold is that they are going in and forecasting excess to raise the rate of return to give more money to their shareholders.

And so I think that what the author is doing here, which is asking the PUC to look at that, which, to your point, I think is, I think that process... And I do think, again, she's had less than 24 hours with this. I think the process by which that happens will be a work in progress, is what I'm hearing from her, to make sure it matches the PUC. And I appreciate that. I think that's an important work in progress.

But I actually think that the thing in the amendments that I loved the best was directing the Commission to adjust future authorized revenue requirements as appropriate based on the actual past records. I think telling the PUC they have to look at that and they have to do something different so the rate of return is not as excessive as that found in the audit is what needs to happen. Could they do it today? Perhaps. Are they doing it today? I don't believe so.

And so I think us telling them to do it and being more prescriptive is what the PUC needs right now. And so I do want to commend the Committee, and I actually want to take issue with what was said by the opposition about the expertise that goes into these bills because I think this Committee has incredible expertise. And we see bill after bill where they work that expertise into these bills and make them more workable. And I think this is an example of that.

So I don't want anyone in this room to say that expertise is not happening through this legislative process because our staff is incredible, and they are public servants who work very hard to make sure that that is the case. And I think that this bill is an example of that.

And so I am pleased to support this today because I do think that, as a fellow PG&E customer, and representing 500,000 PG&E customers, my constituents are looking at their bills and they are looking at the press about PG&E's profits and bonuses, and they are saying, what is going on here? And I appreciate you offering to do an audit on the Assembly Member's apartment, but if I'm correct, Assembly Member, you're a renter, correct?

Yes.

And so you cannot do many of the things that would be required to do to drive down utility rates, and that is true of the vast majority of low income Californians. And so I'm sorry, I didn't ask a question. And so I just think that what we need to do here is put them first. And I think that's what this bill does. And so I am pleased to support it today.

Assembly Member Patterson.

Great. Thank you. Well, the most important thing I found out is that I definitely need glasses soon. So even with that blown up sign, I can't read it, but... Oh, yeah, well, the arrow. Thank you for blowing up the 353. That's very visible. Could you. Oh, yeah, thanks. Those are too thick for me though. Could you help me understand, do you have all electric in your...

Yeah, in the house we moved into, where we went, we don't have any natural gas, so it's only electric. So gas prices don't affect us in particular.

Yeah, I mean, just as a general thing, sort of my concern moving to all electric in this state is that. Because I would say there are two things people call my office about like 90% of the calls, electricity rates and insurance. I happen to be on both those committees now because of that because they're very concerning to people in my community. The one thing I'm sort of... I do like the direction of the Committee amendments, I think are going the right way.

And I think, you know, I highly doubt this bill stops here today, but I hope you keep working with the opposition. But the one thing we've kind of identified, and my colleague over here to my left had a question about the Tasha B. made a statement about the Tasha B. Special here, as you called it. But how is you, if the PUC, giving them more work. We've already identified these inefficiencies just in the general rate case in general, just how long that takes. And what makes us think that giving them an added layer of review is going to actually result in lower costs?

Well, so it results in lower costs because they're going to use data from the test year of the general rate case to adjust future rates. So that's where that comes from. Second, what I would say is the CPUC needs direction, right? If we don't give them direction, they're not going to do what they should be doing for our ratepayers. So the bill just gives them direction to use more accurate data, which they should be doing already, but they're not.

That's why we're giving them direction to protect our ratepayers. Because I get the calls. This is, you know, $353. And I have to say my, here, 757 kilowatts used in that month. That's no heat, that's no air conditioning, that's a 1500 square foot fourplex. We're not talking I lived in some 3000 square foot beach house. I don't, I'm a renter. This is cost of real Californians. And this would at least give the PUC a process by which we can lower the rates over time and make them more accurate because what the PUC should be looking at is the ratepayers. They should be looking at our Californians and not the profits.

Yeah. So the bill is obscene. I mean, we are all agreeing on that. I guess my thing is not so much how do we make sure it makes it cheaper, can they even do this efficiently, I guess. Does it take away from other things that they should be doing? That's what I'm... Cause that's what I'm concerned about at the end of the day. And what makes you, you know, frankly, what makes you think that they'll actually do a good job?

I do have a bill to move like the broadband piece into the Office of Broadband that would give them more focus on the utility thing. But that was the last committee.

Will you double join them? Double join the bills.

But thank you, I appreciate it. Yeah, I have another one after this too.

Just bring them all together. So, I mean, but that is a legitimate concern that I have is that I don't... I mean, there was another regulatory agency in another Committee the other day that I just think it's gotten so huge. They came in and opposed a bill. Were kind of talking down to the author of that bill. It drove me nuts. You know, this bureaucratic state is getting so huge.

I mean, just philosophically, but also, do they care what we tell them to do or ask them to do? I don't know. And so, I don't know, giving them more work, if they're actually going to even do that in the first place.

We're giving them more a process, which I think the PUC works well with.

Yeah, well, I would just say I'm interested in more of the conversation, what my colleagues have to say. I think, like I said, the amendments are going the right direction. I'm not sure I feel totally comfortable with this today, but, you know, I appreciate you taking the amendments and keeping to work on this and seeing if maybe we can...

And just to be clear, the opposition has never come into my office offered amendments or wanted to have amendments. I have a conversation about this, but I have worked very... He actually lives 10 minutes down the street from me, by the way, so he's my constituent as well.

I just want to see him come do that. Can he come? Can I take pictures of that? Come do that audit at Tasha B's house.

We would love to help with an audit.

I mean, I'm not sure we could live any more electrically frugal with still being clean humans. So I'm not really sure you could do that, but I'll try.

Thank you, Assembly Member.

Thank you. All right, Assembly Member Reyes. And then Assembly Member Ting.

I want to thank you for bringing this forward. Nobody knows what the right answer is going to be. We know that the whole issue is so complicated, and the more we talk about it, the more complicated it sounds. But I appreciate your leadership because you try to take a very complicated issue and say, let's uncomplicate it. Let's figure out the best way. Because just as my colleague, Assembly Member Connolly, talked about all the record profits, none of that is going to the right payers.

So estimates are, the comments were made, you make a plan, you get the okay. You get the okay to charge the ratepayers, you do the job. But then there's a savings, and that savings goes to the shareholders. It doesn't go to the ratepayers. That has always been so frustrating for me.

And just as my colleague talked about these record profits. Yes, you've gone through a whole process, and if you go through the entire process, which is much more complicated than I would ever be able to explain, but you've gone through the whole process. There's nothing illegal about what's been done, but there's something wrong when we get to the bottom line and the ones who are paying the most are the ratepayers. They are the people we represent.

We want PG&E and SDG&E and everybody else to make their profit, but to make so much and to the ratepayers to pay so much, there is something absolutely wrong with the formulas being used. I sincerely appreciate the State Auditor and the fact that the report had been prepared. We know something better can be done. And if we don't do something along these lines, then I don't know what the answer is. But I sincerely appreciate that we're moving, I think, in the right direction.

I do recommend that, as much as possible, that you have the conversations with the author. That's really important. You can tell from the comments that there's great support in doing something. We can't just sit back and say PUC has too much work. We don't know, if we give it to them, if they're going to do it, they have to do it.

And the hearings that the informational hearings that I know we're going to be having soon is going to ask them why they're not doing it, and they're going to have to answer for that. But for us, we represent the ratepayers. We have to be able to answer to the ratepayers and tell them what we have done to reduce what they are paying because this is just one of them. And you may be able to help the author and reduce it a little bit.

She's only one person. We have lots of people we represent, and they are frustrated. If you hear the frustration here, imagine that we're the legislators, and we feel frustrated. We feel powerless. Imagine our ratepayers, and they look to us and they call us and they say, what are you doing?

And when we talk about how complicated this entire system is, we can either say, there's nothing we can do, or we're going to say, I'm not smart enough to explain all of this. But we better talk to the people that are smarter and talk to the people who can take the time to just dig through all of this and figure out what the next step is. But we really need for you all to be involved in it. It cannot be one person doing it. You have to be involved in the solution, because if you're not, then it's going to be a one woman show.

I fully understand, Member Reyes. I would say that I did meet with the author's office and her energy advisor, and I stated that nothing in the bill today, as written as introduced, was going to reduce rates significantly and look forward to working with them. So I have met with them. I think that audits do make a difference.

We do audits for anybody, whether you're a renter or an owner, because we understand sometimes people, if you own an EV, you might be on the wrong rate and you didn't know it. Rate making is complicated. And you mentioned, this is a complex structure. It's complicated. It's not easy for our residents or our customers to understand. It's hard for us to even explain it. You would never want to watch an infomercial about rate making. It would be the worst moment of your life.

But I think that we are committed to doing everything we can with this Committee and Madam Chair to reduce rates. We have been saying this for a decade. And I remember saying to the author's office, we spent a lot of time and money on wildfire mitigation, a lot of time and money on the clean energy transition. And we spent a lot of time and money on our employees, you know, our labor.

Can I say for just one moment. The state has invested a lot of money on wildfire litigation. The state has invested a lot of money on EV infrastructure. We have invested. We, representing the State of California, have invested a lot of money and whatever PG&E or SDG&E does, they always put their estimate, and it's not them who's paying for it. They get the PUC to authorize it, and then it goes to the ratepayers. The ratepayers are paying for this.

And that's the problem is that it keeps going up and there's a request after request after request every single year. It isn't just one request, and the job is done, and then we wait till the next year. We have request after request after request in one year, and the ratepayers are tired of it, and we have to do something. And I want you to be part of the solution because it is so complicated. You will understand it in a way that maybe I'm not going to understand it, but one thing I understand for sure is I've got to do more for my ratepayers.

Thank you. Assembly Member Ting.

Thank you. I guess, going back to Mr. Connolly's example, just to use an example. Could you walk us through how the bill would actually save ratepayers money, given that example, or if you want to choose another example, that's fine.

Yeah, so the idea, so my original version was give me my money back, right? I mean...

Turns out to be illegal, so you couldn't do that.

That's the original version. So you should all really thank the Committee Consultant.

I think I'm looking at the original version.

That's the original version is give me my money back. Because if we saw in 2022 that the authorized rate of return was $415.5 million. SDG&E made a profit of 290 million on top of that. And my rates are going up, everybody's rates are going up. And we have to do something to control the rate making process. So my original version wanted to go back and baseline it and take away all their profits and go back to that side. So you should all be thankful that's not what we're doing. What we're doing. Or not.

Or not. What we're doing... We could find out we couldn't be retroactive because I wanted my money back. But so what we're doing is saying, because you're using the test year, when you see that they're getting savings, then you're gonna... They can re-baseline and out years what that costs are. And that will lower the rates, rather than keeping the rates here, it will go down like this. That's all.

Say it again one more time. Say it again.

So the idea is they look at the actual costs versus projected costs of the test year, and CPUC is then required through the reporting requirements of the guidelines that they give and the reporting requirements of the IOUs to go back and look and say, do we need to readjust it. If the forecast is accurate, there's nothing going to happen. If you look at some of the audit returns, a lot of these companies are fine.

But like you look at SDG&E and that time and time and time and time again was far below, what will happen is you take the actual test year, and then they could reset that for the out years of that. So that will lower the rates.

But I guess the challenge with any forecast, we know a forecast won't... It's very rare to be completely accurate. So in that situation, how do you ensure you're kind of, that there's proper return for the utilities, but they're also, you're figuring out actually what that amount that should be returned to the ratepayers should be I guess.

So it's not returned to the ratepayers. It's lowering of the cost of the out years based on the test here. So that's what it is. There's no claw back, no.

So I was gonna ask the opposition just to see if they agree with that assessment or how that would work.

That's what happens. That's what's missing in this conversation. This is what happens today. They look at the experience over the four year GRC, and the PUC takes the efficiencies or the savings that were derived by the utility, which they enjoyed as above their rate of return, and they lower the baseline, just like the Assemblywoman just described, in the next GRC. This bill basically takes that process and says, no, we're going to do that during the three attrition years, which creates uncertainty.

So the problem is you have to go to market and borrow money to finance all this. You don't finance it as you go. You get your general rate case, you go to the market, you borrow the money so you can do all this work that you've planned. If you have to go back mid stream, year two, year three, and say, oh, we got to give this money back. How many people are going to loan you money? And if they loan you money, you'll probably get the same rate that Donald Trump got on his $175 million bond.

We pride ourselves on being a good investment for loaning money, and it's because of the certainty. It's because of the certainty. I mean, you get certainty with us. And I think that the hard part for listening to this conversation, as the bill was originally introduced, what we're being told is we're better off not being finding efficiencies because if we just end exactly on the forecast and we don't take the opportunity to save the ratepayer money, that's better, then you're not giving anybody anything back. I don't know that that's our philosophy as a company. But if that is something that the Member believes is best, that's her opinion.

I would just clarify one point to that. So what the amendments do is say that you're not giving any money back, nor are you actually going back to the market and saying the rate of return is going to be worse than we told you upfront. It says, so if you go to them and you say, I need to borrow money for the next four years. What's currently happening is all of the savings over those four years compared to forecast are going to the shareholders.

Some of that going to the shareholders makes sense, right? That incentivizes the utilities to actually find some of those savings. So they pass on those as incremental profits to their shareholders. But those are incremental profits. That is not what you went to the market telling them you were going to get. That's incremental. So I think the real question before us is how do we align incentives so that, yes, the utilities are incentivized to find savings, their shareholders are incentivized to invest.

But a piece of that goes back. So it feels to me like, and maybe what I hear you saying is just a one year assessment is unreasonable, unworkable, et cetera. But having four years where all of that incremental profit is going to the shareholders and zero is going to lower the base, that feels like it doesn't make sense, right?

So it's how do we go, how do we identify those opportunities for savings and integrate that into the base rate more quickly, is, I think, the challenge before us. And as you heard the author say, this is certainly a work in progress. But I just want to clarify, you're not going back to the market and telling them that their rate of return just got crappier. That's not true.

But I guess what I'm hearing is that we're all saying we have the same objectives, we're trying to get to the same place. And hopefully, I mean, I'm voting for this bill today. Hopefully we can work together to find a process that works, that gets you your certainty, that really ensures that you can go to the market, raise capital, raise debt, etcetera, but also tries to help us feel like we're helping manage costs.

And I think there is, you know, and, you know, Mr. Wetch said this earlier. I mean, you know, we all agree the process at the CPUC is far from perfect. And I think sometimes we feel, as a Legislature, that we're not being listened to. And when I say we, it's sort of us via our constituents. It's not that, you know, we have our personal opinions about what's going on, but we're channeling what we're hearing in the district.

And I feel oftentimes there's that disconnect between what's happening in the regulatory process and what's happening, you know, out there in the public. And so I think we're, I think the author is really trying to, you know, articulate sort of the Legislature's thought process and channel it into the regulatory process and have that opportunity. Because I feel like oftentimes when we engage the regulators, we just feel ignored or not listened to or really like they don't, they really would rather us not be in that process. And I think for us it's like we're not representing the Legislature, we're representing the state and the people and really trying to articulate that. So I think that's really where this is trying to go.

Mr. Zbur.

So I, I'm just really concerned about the, I understand and support, obviously, the motivation behind the bill. You know, I think we all are concerned about the rates as they're going up and what our, what our constituents are seeing. Also, though, concerned that we are sort of making policy out of that really understandable frustration and concern about the rates going up, but without, I think, looking at sort of processes that are already in place at the PUC.

And so I'm going to vote for this bill today to let it out. But I also just want to say that, you know, I'm just nervous about the fact that, I mean, I don't feel like I could, and I probably, you know, I've had some amount of experience with the PUC, but I don't think that I could, you know, without sort of a lot of technical help coming from experts in the area, put in place reforms that are intending to do what I think you want to do, which I think are valid and good and, you know, and motivated by all the right things that I think a lot of people around the table have talked about.

So, you know, I, you know, the fact that turn is on the bill, I think gives me some amount of, it says to me that there's probably, that we do probably have to look at the regulatory process and what's sort of happening at the PUC. But I'm nervous about whether or not this is the right approach. And when I hear, I also believe the folks from IBW who understand this process well and tell me that a lot of what's happening is duplicative in the bill.

And so I would just sort of ask you as you move forward with this, to really work with both the labor unions and the IOUs. And it asked both the IOUs and the labor unions to work with the author because I think we owe it to the public to get this right, but we also owe it to the public to not do what I would sort of do on my own, which is fairly simplistic. And I'm not saying that yours is simplistic.

Mine would be simplistic if I was doing it. I just want to make sure that we're getting it right and that we're thinking about, we understand exactly what's already happening at the PUC and that we're focused on working within that framework, which has been built up for, for decades. So with that, I just want to thank both the author as well as the folks that are testifying here today, both in support and opposition. And I'm going to support this to give you time to sort of continue working on this bill.

Thank you.

And also I think in recognition of the chairs and the staff's really strong work to try to get this bill to a good place.

Assemblymember Reyes.

I just want to give an opportunity because there was a statement that was made, and I know that's not, that wasn't the intention. There was a comment that was made that if we go through all of this, well then maybe you, all the utilities aren't going to try to find the savings. I know that's not what you mean, because I'm sure you're going to look for those savings, whether that money goes back to the utilities as an incentive or eventually to the ratepayers.

Because I think that is a responsibility. It is a corporate responsibility, utility responsibility. It's an ethical responsibility to review things because the plan was made, the forecast was made. But if there are ways to save money, I think it is an absolute responsibility to find ways to get those savings and as we get the savings and figure out how we take care of the profit for your shareholders, but then how we also take care of the ratepayers.

I appreciate that. What I said was, it's not, the philosophy of my company, of my company is that we don't look for savings, we're always going to look for efficiencies. My point of that was if we didn't find efficiencies and there was nothing and we hit the number, there'd be nothing to give back, which wouldn't, which means there'd be no impact on the customer in terms of rates going down. That was my intent.

All right. I just wanted to make sure that the record would be clear here before we all left.

Mister Holden?

Yeah. Thank you. First of all, I appreciate the author's attempt to really get in there and trying to pull the pieces apart and try to put together something that's efficient and addresses the needs of, and the aspirations of rape heirs to see somehow their rates start to adjust down. Rates have been an issue for a very long time, and trying to find that sweet spot and trying to figure out how to rate restructure or do something that's going to address it.

So there's fair inequity on both sides of the equation. I think that the committee's recommendations are very well placed on your bill, but I got to give you a special nod because this is not an easy subject. And, you know, when you said that you have no sponsors, you have no one that's standing with you. I think you can see that there are a lot of people, including the opponents, who've made representation, that the PUC is kind of a double-edged sword.

You kind of live by it and die by it. You know, sometimes there are bills that come forward and you say that the PUC has already the process in place, it's working, and other times it's not working. And very few, rarely do you have it cut fairly for the ratepayer. There are a variety of interests in this marketplace. It's a really complicated marketplace. It's a complicated subject matter, and it is changing every day.

When I joined the committee, new markets were being formed to try to address climate change, to try to address the changes. And the industries have been part of trying to make the solutions work as well. I come from a community that's a municipal-owned utility. So there's no ratepayer, I'm sorry, there's no shareholder profits to have to dividend. It goes back to the repairs of Pasadena or Glendale or Burbank in the form of services. So there is something that needs to happen.

And I do recognize that in that process, as was pointed out, I think there is a genuine effort to try to make sure that there's a nod, obviously, to shareholders, but at the same time trying to find savings, but at the same time trying to have a regulatory environment that works for the ratepayers. And I think you're trying to cut into that.

And I'm expecting and hoping that those who are seeing the issue a little bit differently do find some commonality in which you said, I've heard that. And so I'm hoping that where maybe you weren't able to get everyone together at some point, I'm hoping that between now and as this process goes to appropriations, that there'll be some commonality that can be developed through that process that can help get all of us to where I think your bill is trying to get us. So thank you for your presenting it and appreciate the comments that have helped create some balance to the conversation.

Thank you. Assembly Member Reyes, did you have a comment? Bauer-Kahan.

I just wanted to, I agree so wholeheartedly with my colleague from LA or no, Pasadena. Everyone down there is from LA, whether they're from LA or not, and that this is a really complicated marketplace. But I wanted to say one thing, because the thing that is not complicated is that these IOUs are monopolies. And so as we talk about a market working, there are a lot of incentives for these companies to find efficiencies.

And at the end of the day, like any other company, they are incentivized to maximize shareholder profit. But in the regular market, where the market works in a healthy way, they're also motivated to win customers. And so they drive down cost for customer and win those customers. But where we have a monopoly, that incentive is not there. And so that is what the PUC is for. And that is why this is a regulated industry.

And so I just think that this is an incredibly frustrating conversation because it is critical to remember what the incentives of the IOU is and what our incentives are, and our incentives should be to maximize ratepayer savings. And that is the goal of this bill. And I think that it has work to do, but I think that is where we need to go and we need to be looking out for them.

And the IOUs will continue to look out for the shareholders and that will hopefully bring us to a balance.

Okay, well, I just want to say thank you to the committee members for the robust discussion. I really feel like tackling the challenge of affordability is the single most important thing that this committee is going to do this year and in the next several years. I also think it's the hardest thing for us to do.

It's not like there's some secret silver bullet and we just haven't figured it out yet. So I know that y'all have heard loud and clear the frustration in this room about skyrocketing rates, the frustration across the state about skyrocketing rates. I do want to also acknowledge that I hear your frustration that a big part of skyrocketing rates are because for the last 20 years, the legislature has come up with mandate after mandate after mandate, and that has been piled on and passed on to ratepayers.

And now we're like mad as hell that rates are so high. So I understand that that's a piece of the puzzle. And while that's not the topic of this bill, I do want to say publicly as part of this hearing, that is a part of the puzzle that I and this committee, we are committed to tackling this year.

And I think we need to be really honest and transparent about what the drivers are of skyrocketing rates and acknowledge the places where they are because of things the legislature is asking you to do. And we need to take a very good look at those mandates and ask ourselves, are those things that we should continue to go to do moving forward? So I will say I hear your concerns. I'm very mindful of unintended consequences.

And I know that the author is committed to continuing to work on this bill. I would ask that you continue to engage with the opposition opposition continue to engage with the author. And please include us in that conversation so that we find a path where, as I said, incentives are aligned, but ratepayers don't feel like they are the ones that are getting left out in the cold. So with that, would you like to close?

Respectfully ask for your aye vote and thank everybody for your comment and your trust, and we'll continue working with the opposition.

Okay. Did we have a motion? Yes. All right. We have a motion and a second. Madam Secretary, please call the roll.

Item number five AB 2666, do pass as amended to appropriations. [Roll Call]

Okay, 10-0. We'll leave that open for absent members to add on. And you've got one more bill.

Yes, and this time I have a witness because I introduced this and realized, zero, yeah, there was this other industry that actually also has this problem. So good afternoon, Madam Chair and members. First, I want to thank the chair and her amazing staff for working with me on this bill. I accept the committee amendments and look forward to working with opposition should this bill move forward today.

Today I'm presenting AB 2683 another Tasha B. Special, the third of the day, and the final one, which will require the Public Advocates Office, known as Cal Advocates, to advocate for lower customer rates during rate proceedings. Cal Advocates is the state entity tasked with representing the interests of the public utility customers and as part of this responsibility, participates in general rate cases. The rates that utility companies charge customers are determined during general rate case proceedings.

In these hearings, Cal Advocates seek to obtain the lowest possible rate while ensuring safe and reliable service. However, utility rates in California have continued to rise, resulting in Californians paying some of the highest rates in the country. In some rate proceedings involving small landline telephone operation operators, Cal Advocates actually advocates to raise customer rates even when the telephone companies are not asking for a rate increase that is inappropriate and dangerous in these rural landline customers who need the service and emergency purposes.

I do want to clarify that it's my intent for Cal Advocates to still advocate for services consistent with reliable and safe service levels. If there are circumstances where the reliability or the safety of a specific service is in jeopardy. I'd be happy to make future changes to this bill to address those issues, but the CPUC makes the final decision during rate proceedings. Advocates should always be advocating for lower customer rates.

And of course, I'll continue to work with any opposition and all of my colleagues to address any issues as they move forward. With that, I respectfully ask for an aye vote. And with me here is Pamela Loomis on behalf of the California Communications Association.

Good afternoon, Madam Chair and members. My name is Pam Loomis and I am here to testify in support of AB 2683 on behalf of the small telephone companies that make up the California Communications Association. These small companies have been serving in some of the most remote and rugged areas of the state for over 100 years. Most of their customers are middle to low-income. Because there's no business case for serving these sparsely populated historic communities.

Both the federal and state government provides subsidies to ensure the availability of reliable networks at affordable rates for citizens living in these hard-to-reach areas. In spite of this, the Public Advocates Office has been arguing for higher rates for our customers. Our standalone residential rates are now in the highest 5% of rates nationwide. The public advocate office points to a phrase in our governing statute that directs the PUC to ensure that rural rates are reasonably comparable to urban rates.

They seem to disregard that in that same statute, the PUC is required to ensure rates are just and reasonable. The small telephone companies appreciate assemblymember Boerners introduction of AB 2683. I can't tell you how often our customers are shocked to learn that the Public Advocates Office is proposing higher rates than we are. And often the Public Advocates Office is simultaneously arguing against network upgrades that support the modern needs of our rural communities, especially our first responders in our wildfire-prone areas. The members of CalCom respectfully request your support of this bill.

Thank you. All right, we'll go ahead and open it up for testimony in the room. Anyone wishing to testify in support of AB 2683 can approach the microphone at this point seeing none, I don't believe we have a primary opposition. Do we have a primary witness in opposition? I don't believe so. All right. Seeing none. Any opposition testimony in the room, seeing none coming back to the committee, Assemblymember Wood.

Thank you for advocating for small rural communities. And I'm going to guess to your witness there, these are often rugged areas, so the cell services is also a problem or there is no cell service. So the idea is that these companies can actually provide service at a low rate that is consistent and reliable for the customers they serve, and then somebody is advocating for higher rates for Lord knows for what, for parity. I just find that inappropriate. So I appreciate you bringing the bill forward.

And it isn't always, it isn't often that rural communities are actually lower cost to live in, but we sure as heck don't need people working hard to make it more expensive for us.

Thank you, Assemblymember Patterson.

Thank you. This bill clearly came from a tweet that I had a few months ago, but. Okay. That, too. I was looking, I was looking at the PUC. You know, all of us are kind of, you know, I mean, we all have to pay utilities and things like that.

And so I was looking at the PUC website, and I was actually kind of shocked how hard it was to find the importance of affordability in decisions. Right. And so we sort of, like, need a reset in a way that that's. That has to be a major component of what they're doing.

And, yes, of course, there are sometimes going to be trade-offs in terms of safety trimming, wildfire mitigation, for example, and things like that, that you're not necessarily very cheap, but it's pretty darn important for districts like mine. I understand that, but I like this bill because it sort of refocuses on, hey, let's focus on affordability. So thank you for doing this.

Yes, I think Cal Advocates, who is paid for by the ratepayers, should be advocating for lower rates for our ratepayers.

Assemblymember Zbur.

Okay, I wasn't gonna make the comment. Cause it's such a nudgy lawyerly comment, but. And I support the bill. I support the intent of the bill. But when I'm reading the language of the bill, when it says that the. I was just talking to my colleague that the public office will, in every general rate case, advocate for lower rates.

I just think it needs to be tweaked some so that it's based on some standard, because otherwise, if they have to advocate for lower rates, even when lower rates, it's sort of the lowest rate that could be consistent with some standard. I think they're just going to lose credibility. So I just would hope that you would sort of tweak that language some so that it's a little more consistent with, I think, the intent.

Consistent with, like, health and safety. And I know it's. I know it sometimes can be hard to keep track. We actually did remind we struck that. Yes. The committee recommends striking the requirement for the PAO to advocate as prescribed in every GRC.

Okay, great. Thank you.

All right. Assemblymember, would you like to close?

Respectfully ask for an aye vote.

Okay. Do we have a motion and second motion by Assemblymember Wood. Second by Assembly Member Zubr. Madam Secretary, please call the roll.

Item number six AB 2683. The motion is do pass as amended to appropriations. [Roll Call]

Okay, 11-0 that bill is out and we'll leave the roll open for absent members to add on. Moving to file item number seven. AB 2697 Assemblymember Irwin.

Well, good evening, everybody. I'm pleased to present AB 2697 a bill related to electric vehicle, the electric vehicle charging experience. A few months ago, we had a joint hearing right in here with Assemblymember Schiavo and Petrie Norris looking at EV reliability and a lot of what was brought up during that meeting is part of this bill. As an EV driver, I'm frustrated with the all too common experience of trying and failing to find a functioning public charger.

As a legislator, I'm frustrated to see our tax dollars being wasted rather than funding working more accessible public chargers. A recent study by JD Power showed that one-fifth of all attempts to use a public charger were unsuccessful. According to the CEC, 41% of our publicly funded EV chargers are installed with estate grants and taxpayer money. That amounts to roughly 40,000 chargers across the state.

This bill requires that state funded chargers that we've installed prior to 2024 be subject to CEC reliability standards that are being finalized this summer and subject to roaming agreements so that different company chargers can talk to one another and drivers can easily access all of them. The requirements in AB 2697 are intended to benefit consumers since taxpayers fund the infrastructure. California has spent nearly $1.7 billion on EV charging infrastructure. Without accountability, these chargers are at risk of being stranded assets without improving the driver experience. We're jeopardizing our clean transportation future. And with me to testify on behalf of plug in America is Alexia Melendez Martineau.

Thank you, assemblymember Irwin, and for the opportunity to speak with you all today. My name is Alexia Melendez Martineau and I'm pleased to be here on behalf of Plug-In America, a national nonprofit founded by EV drivers in California with a mission to accelerate the transition to electric vehicles and charging. We're here today to support AB 2697 which will improve the EV charging experience for drivers.

Plug In American conducts an annual EV driver survey, and based on results from our 2023 survey, public EV charging is currently unreliable and has less consumers wanting more, and early insights from this year's survey show California is no different. Access to charging is one of the biggest considerations for consumers when transitioning to an electric vehicle. Currently, as an EV driver, which I am myself as well, there is a high expectation of your ability and willingness to adapt to the current EV ecosystem.

This can often mean having to spend several minutes each time you charge on a new network, downloading and setting up an account and an app to charge. Especially as California embarks on mass market adoption of EVs, we must make the charging experience more user-friendly to reduce barriers to clean transportation. Roaming agreements help simplify the charging experience for consumers by allowing them to use their favorite app for other charging networks.

This empowers drivers to choose their preferred platform and creates competition amongst companies to provide the best possible user experience. Through pursuing roaming agreements for EV charging, AB 2697 can help make public EV charging experience seamless for EV drivers. Additionally, as California pursues a clean transportation future to meet its ambitious climate goals, we must accurately understand the current and future EV charging landscape.

Setting up time, record keeping, and reporting standards for pre 2024 charging infrastructure will complement the requirements that the CEC is already currently developing for new infrastructure. Thank you again for the opportunity to speak with you today in support of AB 2697.

Thank you. We'll open it up for additional testimony in the room. If anyone wants to testify in support of AB 2697 go ahead and approach the mic.

Good afternoon. Rebecca Marcus on behalf of the Union of Concerned Scientists in support, thank you.

Yvette DiCarlo, EV owner in support thank you.

Moving to opposition.

Excuse me. Good afternoon, chair and members, Reed Addis on behalf of the Electric Vehicle Charging Association. Each and every year our association is striving to develop new technology and deploy better performing and better functioning technology and installing that throughout the State of California. We have really major goals that the legislature has adopted, and our industry is trying to scale up and create that new technology each and every year as best as we can.

We were doing that, though, in a scenario where there was no standards set by the State of California. But luckily, with our support, Assemblymember Ting, Assemblymember Reyes did put forward a law a couple of years ago to establish those standards by which we could, across our entire industry, work. Those regulations are being developed right now. The concern we had with the bill originally that the assemblymember has put forward is that it would have been applying the state of the art regulation.

The regulations are being developed for the State of the art technology today, and those would be applied towards technologies in the past. It would be akin to trying to regulate a flip phone when we're looking at an iPhone 15. So we had a number of concerns. However, the assemblymember and the last committee, they did make some changes to the bill. We actually greatly appreciate the new direction. It allows the CEC to work on how to apply those current regulations against those older technologies.

While we still have a number of concerns, I think we're down to three. We want to continue to work with the assemblymember. Appreciate the approach. Unfortunately, still in opposition today, though. Thank you.

All right, additional witnesses in opposition. You can approach the microphone. Seeing none. I'll bring it back to committee. Questions or comments? Assemblymember Schiavo.

As the chair of the Electric Vehicles Infrastructure Committee, appreciate your continued leadership in this issue. It's really, really important. I run into people all the time who tell me they're not purchasing EV's because they're afraid of what the charging situation is going to be for them. And as an EV owner, I get it. So I know, though, that the industry is also working really hard to improve that because obviously everybody is depending on this to work. Right. And we have to figure it out.

So I know, you know, you're going to continue conversations and find a sweet spot, but to make sure that this really moves forward in a way that makes a difference for people and makes sure that people have reliable chargers when they need them and, you know, don't experience things like all of us have experienced, where you show up and you try five chargers and none of them work, and you go to the next level on the parking structure until you're on the top. That might have happened to me. So, yeah, I greatly appreciate your work and the witnesses perspective on this and, you know, happy to support the bill.

Thank you. And I too, appreciate your focus on accountability and oversight, ensuring that we've got a network of charging stations that actually work. We've got incredibly ambitious zero-emission vehicle goals. There's no way that we are going to achieve them if we do not, alongside that, roll out a network of charging infrastructure that is functional. So thank you for your focus on that. Would you like to close.

Respectfully ask for your aye vote.

All right, we've got a motion and a second, I think. Zero, do we have a motion? All right, we have a motion in a second. Madam Secretary, please call the roll.

Item number seven, AB 2697. The motion is do pass to appropriations. [Roll Call]

10-0. We'll leave the roll open for opposite numbers to add on. Moving on to item eight, AB 3256.

Well, I'm proud to present AB 3256, and as you heard in the previous hearing with Assemblymember Boerner, we are seeing some of the highest electric bills in the nation. And with the help of the committee staff, we have turned this into an audit bill. And as the representative from SDG&E said in the last hearing a few minutes ago, audits do make a difference, and so that's exactly what we're doing.

The Public Advocates Office has identified over 14 billion in wildfire and emergency-related cost recovery requests since 2020. Based on concerns raised by the Public Advocates Office, AB 3256 aims to increase transparency and accountability in balancing and memorandum accounts. Investor-owned utilities are permitted to request cost recovery through regulatory accounts which fall outside of the general rate case. While regulatory accounts are used for state-mandated programs, in some instances they're used to recoup wildfire and emergency-related cost recovery tracking and other instances.

Balancing accounts are used for expected costs that occur regularly, while memorandum accounts are used for volatile year-to-year costs. Costs recorded in memorandum accounts are subject to a reasonable review with potential for inclusion in rates, but recovery is not guaranteed.

Wildfire and catastrophic, catastrophe-related budget requests once emergency exceptions in utility budgets have become the norm and are partially responsible for the exorbitant rates we're seeing. AB 3256 aims to increase transparency, transparency and accountability by requiring the PUC to audit electric corporations balancing and memo accounts to determine if, number one, the costs in these accounts were authorized. Number two, whether the corporation complied with the terms identified by the PUC and three, most importantly, the rate impact to customers.

If the PUC determines that actual costs have already been authorized and collected from customers, it shall deny the corporation a second recovery of the actual costs that have been authorized and collected and close the account. I will be accepting all the committee amendments again, thank the staff for working with us, and I would like to thank the chair also and respectfully ask for your aye vote on this bill.

Thank you. Witnesses in support. Anyone wishing to testify in support of AB 3256, approach the microphone at this time seeing none. Witnesses in opposition.

Valerie Turella Vlahos with Pacific Gas and Electric Company. We do have an opposed position on the bill in print. Appreciate the committee's work to narrow the scope, and, you know, not here to say we are opposed to audits, accountability or transparency, but I guess I did want to ask the committee to think of what is the perceived problem here.

There's nothing nefarious or malicious happening when there are balancing accounts that are outside of the general rate case for mandated work. Just speaking specifically to the analysis and proposed amendments, we would say we want to continue to work there because we would not suggest that account should be closed. Sometimes there's ongoing activity associated with an account, so it should stay open. And then I would just also note that there are heavy penalties in the statute for seeking for double recovery, double cost recovery. Thank you.

Thank you. Did you want to stay up in case folks have questions or. Okay. All right. Any additional witnesses in opposition, please approach the microphone.

Catherine Borg with Southern California Edison. We're continuing to evaluate the amendments and hoping to get into a good place. Thanks.

Hi, Lourdes Ayon with San Diego Gas and Electric. We are opposed to the bill in print, but reviewing the amendments, too.

Thank you. All right, questions? Comments from committee members. Joe Patterson.

Assembly Assemblymember Joe Patterson. Can you give me an idea? I mean, obviously, what does an audit look like for the wildfire balancing account? I mean, I'm just curious, is that how they use the funds, or is it, what kind of level of detail is it getting to? Do you think, in your mind, what that would look like?

Well, so I'll just repeat the three things that it looks at. Whether the costs in the accounts were authorized, whether the corporation complied with the terms identified by the PUC, and what the rate impact is to customers. And the PUC has an auditing division. They are very capable of doing this. As a matter of fact, they do it often. This is requesting a once through audit done by 2025.

And one of the reasons that we thought this was a bill to look at is the public advocate put out a chart that showed, since we started, since these balancing accounts have started, that the rates have increased 120% and 140%. The charts run kind of concurrently with when these balancing accounts started. So we thought they brought up a very good concern. And we think an audit is a way to just make sure that all the rules are being followed.

Thanks. And I don't mean that question in an adversarial way at all. You know, obviously, ratepayers in my district are going to be paying more money maybe if the PUC approves for wildfire mitigation. And, you know, I can't tell if somebody. If five overtime crews were sent out on a Sunday or something like that, versus just, you know, Monday through Friday, general time. Right.

And so, but no matter what, my district constituents are going to pay for that when it comes in for cost recovery or so we just want to.

Make sure also that there's no double billing. That was one of the concerns that the Public Advocates raised.

Okay. Did they identify any double billing or.

This was just from their report.

Okay.

I think it was a concern.

Okay, great. Thank you.

Yes, and thank you. And thank you to the author as well. A question for the opposition. Sorry you don't get off completely on this one. But I'm curious because I remember thinking of bills in the past, like last year, we were working on balancing and memorandum accounts. What is the current process? Because there is some sort of review to see whether or not these expenditures fall into categories, but it's not rising to the level of an audit. It sounds like what happens now.

I think that the analysis did a great job on this part where the PUC is using risk based approaches when for auditing, then there's also different sort of different processes depending on if it's a memorandum account or a balancing account. And we would go to the commission and, you know, show the record. They review. They're also reviewing for adjusting reasonableness and to approve the. To approve cost recovery. Sometimes it's based on a forecast. Sometimes the forecasts are unpredictable.

So the PUC has a process to review it. They can determine, for example, in our, you know, in generation. And a great example that they analysis gave was for generation. So remember, we had the high natural gas prices last year. So there that was where we had to, we did have to collect over the forecast for that particular account. But sometimes, you know, there is refund due to the customers.

Okay. All right. Thank you. I had another question and I kind of lost it as part of the audit. Is the intention of the audit to look at individual accounts, all of the balancing and memorandum accounts? Or, and I guess for me, one of the things that would be nice. Cause you mentioned that we've seen, since a lot of these balancing memorandum counts have appeared, we've seen rates going up.

Will the audit say how much is related to the balancing accounts, which are the memorandum accounts, which are. No balancing accounts, which are related to mandates by the legislature? Correct. Some of them anyway.

And it also coincides with the big fires that we've had. So it certainly could all be justifiable. But I think without the, the information, we don't know it's, the number of accounts that are audited is relatively small. So we're saying by 2025 to audit as many as you can, but do high risk. The committee added high risk first.

Okay. All right. Thank you. Well, I'll be supporting the bill today. I do go back to, we had a bill earlier in the committee, not this, not this, not today, but earlier that looked at what would the potential impacts to rates be with some of the mandates that we might consider going forward. So that might help clarify some things in the future as well. So thank you.

Thank you.

Any additional questions or comments? No. So just very quickly, I think to the question of the perceived problem and that the author shared her perspective when the committee conducted a hearing on affordability. The Public Advocates Office did highlight concerns about the proliferation of balancing accounts. And there was a state audit in 2022 that found that nearly 2.5 billion in wildfire costs could either duplicate already authorized costs or require additional documentation in order to properly evaluate. So I think it is certainly a worthwhile area of inquiry.

There has been a huge proliferation of balancing accounts in the last five years. I think I'm not going to get the numbers precise, but five years ago something like 90% of stuff of dollars were moving through the general rate case. Today it's closer to 60%. So I do think it's a worthwhile topic for us to dig into. And I think a one time audit will not be overly burdensome for the PUC turn up. Whether there's opportunities, it's not so much.

And I think from my perspective, it's not so much trying to even do it as I gotcha, but figuring out what things have been set up as balancing accounts that can now get. That are more appropriately rolled into a DRC because we don't want 40% of stuff that's getting fed into rates to be outside of the General rate case. Moving forward with that, would you like to close?

Respectfully ask for your aye vote.

All right. Motion and a second. Madam Secretary, please call the roll.

Item number eight. AB 3256. The motion is do pass as amended to appropriations. [Roll Call]

120. We'll leave the roll open for absent members to add on. Moving along. Item number 10. AB 3111. Assemblymember Celdero, when you're ready.

You know this is a hot seat, right? Good evening, Madam Chair, and members. I want to start by thanking the committee for working with us on this bill, and I will be accepting all the proposed committee amendments. AB 3111 requires new, large, customer-sided solar and storage projects to notify the California Energy Commission of the installation and scope of these projects.

Currently, the CEC has to rely on information provided to them by Caiso energy providers and other sources to get a sense of what distributed energy resources are on the ground. This bill streamlines CEC's information gathering by having that information directly provided to them. Our office has met with many of the groups in opposition, and I believe the committee's amendments clarify the bill's intent and address the opposition's concerns.

This bill is simply meant to ensure that the CEC and the rest of the state's energy agencies have a complete DER dataset. Here with me to testify and support is Scott Wetch from the California State Association of Electrical Workers.

Madam Chair, members. First, I'd like to thank the committee and staff for all the work on this bill. This bill is pretty simple. The IVW likes and supports microgrids. My members on the construction side are building storage and rooftop solar and microgrids. This bill addresses really a significant problem in that oftentimes the utilities themselves, both municipal utilities and investor owned utilities, are not notified of that.

There is a microgrid storage and DER system being built until the point of interconnection, when they get a call and say, hey, come interconnect us. And oftentimes that's insufficient time to plan for what needs to go into planning for the circuit that may have to be updated or not updated, as well as safety issues so we can begin to prepare and be aware that these systems are going to come online on the customer side of the meter.

It also allows for the public when you're dealing with large systems on commercial and industrial properties. We believe that the public should be aware that those systems are being installed as well. As well as, you know, the unions themselves are interested in knowing where these systems are going. And so we think this is a very modest and reasonable piece of legislation, and we are to urge your aye vote. Thank you.

Thank you. Additional witnesses in support if you'd like to testify in support of AB 3111, approach the mic.

Good evening. Trent Smith, on behalf of the California Municipal Utilities Association support.

Good evening. Joe Zanze with San Diego Gas & Electric in support.

Valerie Turella Vlahos Pacific Gas and Electric Company. Support.

Laura Parra with Southern California Edison in support.

Hunter Stern, Coalition of California Utility Employees in support.

Moving on to opposition.

Good afternoon or good evening.

Do you want to come to the dais?

Good evening, chair and members, Kim Stone, Stone Advocacy, on behalf of the California Solar and Storage Association. Very respectful opposition. We do appreciate the committee amendments and hope to continue to work with the author and the sponsors should the bill continue to move. CalSA tells me that microgrids and virtual power plants are often built at the request of energy planners and regulators.

And in those cases, the CEC can already get the information because they know about the programs, and if not, they can ask the utilities for additional information. And California does already have a really cool data collection website called DG Stats that has information on 2 million smart energy, smart solar and storage systems, size, location, zip code, make, model, manufacturer of battery, a tremendous amount of publicly available data.

CalSA and our 740 member companies want to continue to provide clean energy to the state and think that that's more useful than providing duplicative reporting requirements. So are in a respectful, opposed position. But again, should the bill continue to move, we'll hope to continue to work with the author.

Madam Chair and members Delaney Hunter, on behalf of the Solar Energy Industries Association or the National Trade Group for Solar, we agree with the positions by our sister organization at CalSA. We remain opposed. We do appreciate the efforts of the committee to narrow the bill and most specifically remove the section 218 attestation. However, as Miss Stone referenced, there is already a ton of data remitted to the utility, to the PUC, and to the CEC.

In fact, you could search today that any project over 1 mw provides quarterly information to the CEC today, that's any project over 1 mw quarterly is reporting that information to the CEC today. Also, the PUC has tons of information around these projects because of either incentive programs or through other projects at the utilities. It's not just the time when you flip a switch, especially for large business.

The interconnection process, the determination of whether or not the circuit needs to be upgraded or not, is done well in advance. I can tell you I have customers that need to try to figure that out, and sometimes it's years before we know whether we can even interconnect a project. So I think the lack of information is erroneous and we remain opposed.

Additional witnesses in opposition, please approach the microphone.

Good evening, chair and members. Kendra Harris, the Climate Center. In opposition.

Cynthia Shallot, on behalf of 62 organizations that signed a coalition letter submitted by Indivisible Green Team.

Meg Snyder, Axiom Advisors. On behalf of Pearl X, opposed.

Edson Perez, on behalf of Advanced Energy United opposed.

Good evening. Lizzie Kutzona here on behalf of Tesla. In opposition.

Kim Craig, on behalf of Sonova, in opposition.

Matt Clevencin on behalf of the Center for Sustainable Energy, in opposittion..

Janet Cox for Climate Action California, the Glendale Environmental Coalition and 350 Sacramento in opposition. Thank you.

Good evening. Esperanza Vielma, Coalition for Environmental Equity and Economics 300 plus members in opposition.

Good afternoon. Roger Lin, Center for Biological Diversity. In opposition.

Cecilia Leblanc, resident Assembly Member, Patterson's district five. In opposition.

Tim Ryan, Climate Solution Advocacy Institute, in opposition.

Nate Knott, cafe coup business incubator, Stockton, opposed.

Yvette DiCarlos, citizen, once again, opposed.

Okay, bringing it back to committee. Questions? Comments? Assemblymember Reyes.

It seems like there were lots of amendments to the bill, and a big concern for me was sharing the personal information. It seems like that was something that was removed.

Yes, I'm going to defer to the bill, was with the committee amendments no longer requires microgrids or DERs on residential installations or on smaller-size commercial installations. But the intent of the bill, and it's pretty clear, I think the opposition may have missed it, is to get the notice to the utilities and to the Energy Commission at the earliest possible time, which is when the building permit is issued. Building permits are public information already.

I can go and get every building permit submitted today in Sacramento and get the address and the name of the homeowner and all of that. But we did limit it for the purposes of this bill just to. The only information that will be available to the public through this database is for the larger commercial and industrial installations, not for residential installations. Even though it is public information through the building departments.

It seemed to me also that there was duplication. If the information is available, then we're now requiring a report that will be a duplication of something else.

It's not a report. It requires that they submit this information to the Energy Commission so it can go onto the database that was referenced. The intent of the bill is to ensure that the utilities are noticed at the earliest point that these projects are being planned, which is at the point when they pull their building permit.

Otherwise, the utility will not become aware until the developer, at their own discretion, applies for an interconnection, which in some instances may be very early, but it still won't be as early as when they get their building permit, or in some instances, it could be very late in the process. And there's, you, you know, Assemblymember Wood and others have worked quite a bit on the issue of slow interconnections.

And one of the problems is if the utilities don't know that things are being built, then they can't do the planning that then helps shorten those timeframes. And that's why we want to know as early as possible.

To the opposition. Do the amendments help in any way?

Yes, the amendments are a tremendous improvement, and we appreciate that. And if my client believed that this bill would help with interconnection delays, I wouldn't be sitting here. I would have done a. Me too in support. The interconnection delays are really problematic. And my member association does not believe that providing additional data to the CEC is, is going to do that. If they turn out to be wrong, I think we'll all be thrilled about that, but that's not their opinion at this time.

Thank you, Assemblymember Zbur..

I mean, I think we've heard a lot that there are problems with interconnection delays. And I don't see how a bill that actually requires that a simple notice be provided to the CEC so that the utilities know what's coming is a bad thing. It seems like it's pretty simple. It's something that gives the utilities an ability to plan. Sometimes when you're actually getting the building permit and when the building is done, there can be years in between.

And so these quarterly reports that I think were cited as a good substitute doesn't seem to me like it does provide the kind of notice that would help with these interconnection delays. So I just don't really understand the opposition because it seems like the notices are pretty simple. And it could only having more information can only be better. So I just want to thank the author for bringing the bill.

I'd actually like Miss Stone to have an opportunity to answer my question because I really do not understand the opposition.

I think they feel that it's unnecessarily, unnecessarily burden.

Okay.

I mean, it's, and they already provide a bunch of other information. And again, if we did believe that it was like in service of veteran connection, in veteran connection, they would probably give like, you know, beautifully written essays in poetry.

But you're applying for a building permit. I mean, it's not hard to actually supply that, to supply that to the CEC. I mean, it seems like it's a pretty simple notice. So anyway, thank you for the response. I appreciate I'm going to be supporting the bill today. Mister Wetch, is that okay?

Let me just give an example. So is it a little more where our crews are going out and upgrading like an LADWP going out and we have maintenance and we're updating the grid, the distribution system continually.

It makes no sense for us to go out and perhaps we have crews out in a section of the city upgrading a distribution system, but we don't know that in a year there's going to be a major DER system and microgrid, interconnected and then have to go back out and do any sorts of adjustments to that grid to accommodate that system when we were just out there. That's the purpose of the bill.

Assemblymember Friedman.

When I see a long list of opponents, like in a lot of groups that I work with. But I do have to wonder this time whether these groups just haven't had a chance because of the amendments to really kind of be updated on the changes to the bill.

So I'm going to support it today, but certainly open to hearing more from the opponents as to whether these are legacy, lingering opposition positions based on what the bill was like a couple weeks back or whether there's still the opposition or concerns now. So I'm going to support it today, but certainly open as the bill moves forward to the floor to understanding more about what the problem is at this point. Thank you.

Assemblymember Wood.

Thank you. First of all, thank you for the bill at this point. Honestly, more information sooner is a really good thing, as I understand the bill. It doesn't require, this isn't looking at homes, single homes with rooftops. These are bigger, bigger projects. And so that does require planning, and that is a challenge I don't know. I mean, part of AB 50 we did last year was actually putting a burden on municipalities and counties to actually communicate better with utilities as well.

So they know when some of these bigger projects are coming, and that's an important piece of the puzzle, and they're going to be doing that in the future. But when that building permit is pulled is a really critical moment, and that's when the project's real, really real, and I think it's appropriate, and I'm happy to support your bill today.

Thank you.

Assemblymember Patterson.

Yeah. Is there a question for the opposition? Is there some kind of concern with just, you know, the rooftop solar in terms of this particular bill that I'm not understanding, or are we talking about the major projects?

This is larger projects.

Okay.

It's not residential rooftop.

Okay. All right. Just making sure that was the concern there. And some people know I served on a City Council, and I see some city opposition here as well. We, well, the city, after I left, but when I was on, we approved. I don't know if it meets these thresholds. I'm not smart enough for that. But, you know, major projects in our city of solar and things like that, and I don't know if it would really have impacted us, providing that notice.

So I'm definitely interested in, as this bill moves forward, learning more about that. I mean, I want to incentivize solar and I think we need more of it. But also the grid is, we're talking a lot more about transmission, this committee and things like that. So I don't know if I, too, am confused, I guess, you know, so I'm definitely interested, you know, set up a meeting and talk more about that. So I can better understand with the amendments and sometimes things last week, a hearing, so I totally understand. Things get, you know, move fast.

They know the bill was amended. They read the analysis. We still feel that the reporting requirements are unnecessarily burdensome and would rather build the projects to provide the energy that the state needs.

Okay, thank you.

And I would just say, I don't think there's any other comments or questions. I think many of us are very excited about the potential of distributed energy resources. Microgrids believe it's a critical part of building our clean energy future. I also think it's really important for CEC IOUs to have a holistic, comprehensive view to ensure that we can actually get this stuff online as quickly as possible.

And so I would say if the concern is related to reporting and potential duplication, I certainly trust that the author will engage with you to find ways to streamline the way in which we get the information that's needed to move this forward. With that, would you like to close?

Yes. Thank you. I respectfully ask for an aye vote.

Do we have. Do we have a motion? All right. We've got a motion and a second. Madam Secretary, please call the roll.

Item number 10, AB 3111. The motion is do pass as amended to appropriations. [Roll Call]

12-0. That bill is out. We'll leave the roll open for absent members to add on. Would you like to continue?

Yes. Thank you, Madam Chair. Now I'm going to present Assembly Bill 3263. 3263 would stabilize electricity rate fluctuations by allowing an electric utility to request CPUC authorization to finance wildfire mitigation efforts, including their operational and maintenance costs, through securitization. Existing law allows electric utilities to seek CPUC authorization to take out bonds and tie them to ratepayer bills or securitize the bonds to pay for just and reasonable cost as determined by the CPUC.

With longer and more destructive wildfire seasons, electric utilities have increased their wildfire mitigation efforts, such as their vegetation management. These associated costs are typically required to be recovered by electric utilities within 12 months without the option of stretching out the recovery period. With financing mechanisms like a bond, constant wildfire mitigation has led to significant rate hikes for ratepayers. This Bill is a reintroduction of my Bill last year, AB 1513, which got out of this Committee with bipartisan support and didn't have any no votes.

Rate affordability is a priority of mine, and the primary focus of this Bill, AB 3263, is seeking to ensure the CPUC consider the short term rate stability that securitization provides when evaluating securitization applications. Here with me to testify and support is Adam Smith from Southern California Edison.

Great. Good evening. Chair and members of the Committee, Adam Smith of Southern California Edison, sharing our strong support for AB 3263. SCE applauds the leadership of this Committee on the issue of affordability. We've been here for the Committee hearings. We've heard the important questions and perspectives from the chair and other members here we are all seeing rates rise and we're all looking for ways to smooth the spikes and offer relief to electric customers.

That's why we thank Assemblymember Calderon for bringing this important Bill forward and strongly support it here today. As you've heard from the author, AB 3263 would allow electrical corporations to file an application requesting that the PUC issues a financing order to us to authorize the recovery of wildfire related expenses. Our wildfire and vegetation management work is approved upfront by the Commission and the Office of Energy Infrastructure Safety.

It is necessary to keep our system safe, but we also recognize that this work has costs and will continue to in the future. AB 3263 puts an important tool in the PUC's toolbox to help smooth these necessary costs over time.

The Legislature has previously established securitization as a tool for spreading out the rate impact of other utility wildfire costs, like the 5 billion we were mandated to spend in AB 1054, which is Assemblymember Holden's Bill, and many of you worked on it as well, which incentivized us and sent us off to reduce wildfire risk.

Securitization allows utilities to access funds immediately to start this important work, and through the sale of bonds, we are able to spread out the cost recovery of these projects over the approved securitization period. The Bill maintains the PUC's discretion to determine if securitization makes sense, and it gives the legislation authority to approve an application. If it does, AB 3263 will help manage rate increases caused by the immediate need to harden our electric system against wildfire and deliver on our shared public safety and affordability goals.

For those reasons, we strongly support today and urge your support as well. Thank you.

Thank you. Additional witnesses in support

Madam Chair and members. Scott Witcher, on behalf of the California Coalition of Utility Employees, securitization helps reduce rates for ratepayers in two ways. It spreads the cost of that work over time. But because we're electrifying at such a rapid pace, the rate base is growing exponentially. And so having ratepayers pay it off later actually spreads the cost to a broader base, which reduces what each individual ratepayer pays. And so it's a great idea for ratepayers, and we would urge an aye vote thank you.

Thank you. Witnesses in opposition.

What this Bill intends to do is reverse a CPUC decision that found that this securitization concept was not just and reasonable in rates. And so looking forward, what you're really doing is while you may lower the cost today, you might, you might not. It will definitely be more expensive because of the cost of capital, the time value of money in the future. Your analysis points this out very clearly.

And so I think it's, as we talk about affordability, I think this is a really, really important thing for folks to pay attention to. I really appreciated the Chair's comments earlier in this Committee when she talked about all of the additional programs that go into rates that have nothing to do with delivery of electricity to the customer. So we would hope you would look long and hard at this because this will raise rates in the future and it only might lower rates today so thank you.

Respectful opposition.

Thank you. Additional witnesses in opposition, seeing none. Bringing it back. zero, sorry. Go ahead and approach the microphone if you want to speak in opposition.

Janet Cox for Climate Action California, in respectful opposition to this Bill. Thank you.

All right. Bringing it back to the Committee, Assemblymember Bauer-Kahan.

I want to thank the author for doing this work. I am just grateful on behalf of all my constituents that were all in on trying to find ways to drive rates down, and I know that's your intent of this Bill. I guess I'm a little bit confused, and I know the analysis addresses this a little bit, why the current process is insufficient, right? And I'm specifically focused on this shift to a presumption that there's a short term benefit.

I mean, I think that for once we actually cite an example where it looks like the PUC might have taken the side of ratepayers, which is so exciting and shocking to me by denying one of these, because they said that it didn't make sense in the long term to pay the interest.

And it feels like we're trying to shift that so that there is sort of this presumption that there's a short term benefit and maybe less of a focus on that long term interest that we have to pay, that I know, the opposition is concerned about, and I just want to give you an opportunity to address that because I know your goal. I know we share the same goal here.

I'm gonna defer to Adam.

Sure. I'm happy to start. I think you know when, and this is kind of why we support the Bill. You know, obviously, the Public Utilities Commission regulates everything we do, and they are the ones who issue the financing order. We're not allowed to go out and securitize things over if it's more than a year unless the PUC approves that. I think what the Bill that Assemblymember Calderon has brought forward still leaves that discretion for the Public Utilities to weigh what is in the public interest.

And the question you're touching on is sort of the short term rate smoothing benefits. They also look at, and this is why our, you know, that was actually our request for securitization was denied. They also look at the long term benefits.

I think what the opposition is talking about, the approach that Assemblymember Calderon is bringing forth allows them to look at both of those things when they're determining if this is in the, the public interest and if it doesn't make sense to rate payers today from a net present value perspective, they will deny it. And so I think that that is why we view this as putting a tool in their toolbox but not directly binding their decision one way or the other.

But I guess they already have this tool. So I guess that's what confuses me about this, is they have this tool, they're supposed to weigh those benefits. They seem to be doing it right. The analysis sites, examples where they approve it, an example where they don't approve it. So they seem to be doing that. And so I guess I'm confused why the presumption is necessary. I don't know if that's a better way to phrase the question.

Yeah, I'm happy to kind of work on that version, too. So I think what they have right now is they look at the long term rate implications, the sort of intergenerational question of like, should future generations be paying for these costs? And I think, as you heard, there may be serious benefits to allowing those costs to be smoothed over increased load.

But what they don't have in their pocket right now is kind of a guidance from the Legislature that they should also consider the short term rate smoothing impacts of securitization. And that's sort of like, I think the thrust of what the Bill is trying to change in the PUC's conception of that, you know, when they're balancing out the public interest, try to think not just of the long term implications, but also the short term rate smoothing benefits.

So the analysis specifically says that the CPUC currently weighs for each IOU application whether bond finance go provide short term and long term economic benefit to ratepayers. So it reads as if that is the current. And I'm just relying on our wonderful experts.

Yeah, that's right. That's right, that's right. And it will create a presumption that if there is, you know, if the PUC decides, we would prefer that these expenses be recovered over more than one year, that the PUC has therefore kind of demonstrated that they would prefer these costs spread out over time, because just collecting in one year would create a, let's just use the word rate spike for sure. So they've kind of signaled there's a rate spike here.

And so they would presume that it would satisfy just that one component of the overall public interest. It wouldn't satisfy the

long term.

Long term but it would satisfy that they've made a decision that spreading these costs out over more than one year is in the public interest for ratepayers. So therefore, that should satisfy the kind of short term benefits component of the overall public interest test.

Got it. Do you want to respond? It might be helpful.

I think you've got it right in your question. The PUC already has the tools it needs to judge just and reasonable, and they determined that O and M specifically didn't meet the standard because you're taking operations maintenance and you're going to push those costs out on future ratepayers. Securitization is a great tool. I don't want to sit here and be harsh and say that it's not useful in any situation, but we think the PUC actually got this correct to the benefit of ratepayers.

We're happy to have discussions if they want more limits, if they wanted to talk about shorter timeframes. But the concern over rate affordability isn't just today. And just using your credit card and pushing it out to the future, I think, is not necessarily good fiscal policy. And I think, again, I'm just going to say, I don't say it often, but I think the CPUC actually got this one correct.

And I think changing how the PUC is allowed to make these judgments is one of our concerns in this Bill. It takes away what they do today and it makes it a presumption. It almost ties their hands.

Yeah. So I think, you know, I think I hear what you're saying and I actually agree. And I believe I voted for the prior bill for securitization, if I recall correctly. And so I don't disagree. I think it makes a lot of sense when it comes to rate spikes. But I, like I said, was excited when I read the analysis and saw a moment where the ratepayers actually won a fight with the PUC.

And I think that to take away the tools they have to look at those long term benefits because I get the rate spike issue, but then in five years, are we paying the price and having regretting the securitization. And again, it's an option. It's something I think that it makes sense for the PUC to look at. But I do think they should be balancing those things.

So I'm having a hard time with the presumption, but perhaps there's a way to massage this so that they do appropriately look at those short term benefits but weigh them against the long term benefits. Thank you.

Seeing no additional questions, I guess I'll just sort of respond a little bit to some of your concerns and sort of share my perspective on this because I'm certainly mindful to the intergenerational issues that you raised and that have really kind of been the frame through which these have historically been made. I'm also very mindful that we are not, I think you said, just using our credit card and pushing today's burdens onto our kids and our grandkids.

But I really do feel like we are at a truly extraordinary and transformational moment for the State of California. And we've got, in so many ways we've got, and I've used this analogy before where it's like, you know, we've got a giant egg. The snake is swallowing this giant egg right now, which I believe we are actually making generational investments in many cases. And the notion that then we're going to just pay for them in one year I don't actually think reflects the benefit.

So that's why I think we need to consider many alternative approaches to financing. But that's why I am supportive of this Bill because I think it's a very different moment than we have been in. And I think, like I said, we're making some generational investments today that I think warrant cost spreading over a period of time. All right. See no additional questions or comments. Assemblymember, would you like to close?

Well, I'd just like to thank my colleague, from Orinda for your comments, I appreciate them and I appreciate your comments, too, Madam Chair. And also, again, the Committee's work with my staff. I respectfully ask for an aye vote.

Do we have a question? We need a motion. Do we have a motion and a second? I know where you're from. All right. Motion and a second. Madam Secretary, please call the roll.

[Roll Call]

[Roll Call]

Okay, 11-0. That Bill is out, and we'll leave the roll open for absent members to add on file item 12. Assemblymember Connolly.

No controversy on Boeing. I know I should probably mention that up front.

With that Assemblymember Connolly. Support, support. Would you like to proceed?

Yes. Thank you, Madam Chair Members. To clear the air, I pulled the Bill just to have a brief conversation on this important topic, and you're gonna love my witnesses, so thank you for bearing with us. This Bill has been amended from its original form, which aimed to resolve a key regulatory constraint on microgrids. AB 3107 would now require the CEC to study the potential benefits that microgrids could provide for communities and local governments.

A microgrid is a system of energy resources and loads that can connect to the rest of the electrical grid. As a single entity, microgrids can be isolated from the wider grid or islanded to maintain electrical supply, even if the surrounding grid goes down. As was stated in the thorough Committee analysis, microgrids have been most often developed to support things like hospitals and other critical infrastructure, military bases, and rural communities that frequently experience grid reliability issues.

Community microgrids can spur the deployment of clean energy generation, which we need to accelerate as we know, to reach our climate goals and increase efficiency. By empowering localities to design energy systems that best fit their needs, this more tailored approach can provide affordable, locally sourced energy to communities and drive local job creation. Despite the potential for these benefits, there are few microgrids currently operating in California.

Largely because of regulatory constraints. Recent efforts to develop microgrids in Oakland, Lancaster, Berkeley, and elsewhere have been obstructed and curtailed in their scope, leaving us with few examples of fully implemented community microgrids to even evaluate as case studies. There's an ongoing CPUC proceeding on microgrids, but in more than a half decade of discussion, there's been little tangible movement to facilitate Microgrid Development. For that reason, a CEC study is warranted and could help paint a clearer picture of the role of microgrids in California's energy future.

I would now like to introduce my two witnesses for the Bill, Allie Detrio with Reimagine Power, and Esperanza Vielma with the Coalition for Environmental Equity and Economics.

Thank you, Assemblymember. Good evening, committee and Chairwoman thank you so much for your time today. My name is Allie Detrio, and I'm the Chief Strategist for Reimagine Power. I'm also the senior advisor for the Microgrid Resources Coalition. I'm one of the foremost experts on microgrids, and I've worked on microgrid policy issues in many states.

I had the privilege of working with Senator Stern back in 2018 to patent my previous role to pass SB 1339, the Microgrid Commercialization Bill, and I spent the last five years on its implementation at the CPUC. I've written dozens of comments and testimony for the record, led or attended countless meetings with staff. I've given multiple presentations and participated in every single public workshop and working group meeting in that rulemaking, and many of my coalition partners have as well.

There are well known policy and regulatory barriers restricting the development of community owned microgrids, notably section 218, the Over The Fence rule of the Public Utilities Code, and other antiquated regulations that are many decades outdated and need modernizing for the 21st century.

For example, many California Energy Commission approved taxpayer funded grant projects such as the Oakland Ecoblock, Lancaster Advanced Energy Community, Bassett Avocado Heights in LA County, Beaton Berkeley, and many others have been facing needless obstruction, expensive litigation, years of costly delays, or were forced to completely redesign their projects due to these barriers. Oakland Ecoblock was originally approved by the CEC in 2015, and it still hasn't been built.

I personally know of dozens of other customer communities who have attempted to develop microgrids and were stopped, and it's likely that hundreds or even thousands more never got off the ground for these same reasons. The original version of this Bill attempted to address the over the fence barrier head on and had a really wide and diverse coalition of nearly 300 supporters, public entities, and elected officials all registered in support of the Bill.

All of those organizations still support the current version of this Bill, even though they aren't listed in the Bill analysis, and all of those stakeholders are demanding change from the status quo. We want the Energy Commission to take a much closer look at the barriers to community owned microgrid development in California. AB 3107 is going to direct the CEC to study this further. We respectfully ask for your aye vote and I'm here to answer technical questions and elaborate on policy details. Thank you. .

Okay. Well, good evening, Madam Chair and Committee Members. My name is Esperanza Vielma and I am the Co-founder of the Coalition for Environmental Equity and Economics. And I'm here to testify in support of AB 3107. The Coalition for Environmental Equity and Economics was formed with our partner, Green, the church, Pastor Carol due to the need for our grassroots coalition members to be informed and engaged with their right to clean, sustainable and affordable energy.

While we, of course, support the Bill as amended, we're also in strong support of the original language and are joined with over 300 climate and environmental justice organizations, renters rights, affordable housing, nonprofit consumer rights advocacy organizations, and local elected officials from every part of the state, representing thousands of constituents. Year after year, efforts by our frontline communities like ours have moved to divest from fossil fuels and equitably transition and invest in affordable, renewable, reliable and local energy.

But that's been stifled by PG&E and other investor owned utilities. It's not lost on any of the organizations and community leaders who supported the original Bill. That the original language, despite broad support for it, was also struck as a direct result of the lobbying by the IOUs. The IOUs will have you believe that the only kind of renewable energy is that that is worth supporting is that of utility scale.

Despite the CPUC's recently approving a 20% rate increase and further considering a provision to charge every single mother who rents or owns a small home in my community earning as little as $39,700, a $24 monthly fixed charge in her rate, even if power is not available, which has happened often during public safety power shut off events. So let me make something clear. The question of the ability for our workforce to work on microgrids.

Thank you. You can go ahead and wrap it up. Thank you. Okay, great.

Let's move to additional testimony and support if you want to testify in support of AB 3107.

Kim Stone. Stone advocacy on behalf of California Solar and Storage Association in support.

Allison Hilliard with Reimagine Power and Civic Well, and the 300 other supporters in support of 3107. Thank you.

Edson Perez with Advanced Energy United in support.

Cynthia Shallot on behalf of California Indivisible State Strong and it's 40 chapters across the state, and it's California's Climate justice workgroup, Green Team and it's 60 other organizations that signed on to the collaboration letter and also 300 organizations that signed on to the Climate Justice Letter, in support.

Cecilia Leblanc, member or resident of Assembly District Five and strong support. Thank you.

Kim Craig, on behalf of Sonova in support.

Eloy Garcia for Schneider Electric in support.

Kendra Harris, The Climate Center in support.

Yeah. Tim Ryan, speaking on behalf of myself as well as Professor Anthony Wexler, renowned climate scientist, and Jonathan Greenberg, his co founder at the Climate Solutions Advocacy Institute. I'm here to speak in support of AB 3107. It started out as a very urgently needed Bill, but despite support for the original wording, the Bill voted on today is only a study Bill, as we've heard. So why isn't the original Bill being heard?

It's because members of this Committee or the chair perhaps did not want to anger the IBW, whose lobbyists have consistently worked to protect the monopoly interests of PG&E utilities.

I'm sorry. I'm just so flabbergasted that I forgot we were, like, doing. I thought. I'm literally so flabbergasted that I, like, forgot we were. This is name, affiliation and position only.

Oh, well, you know, maybe I'll just finish what I started.

No, you will not. You are out of order. Please sit down. Well, okay. Next.

Not democracy here.

Roger Lynn, echo those comments, Center for Biological Diversity in Support.

Thank you.

Nate Knott, Cafe Coup, small business incubator, Stockton, in favor of AB 3107. Thank you.

Janet Cox, for Climate Action California and 350 Sacramento in support. Thank you.

All right. Questions or comments from Committee Members? Oh, sorry. Opposition?

Madam Chairman and Member Scott Wetch, on behalf of the California Coalition of Utility Employees and the aforementioned State Association of Electrical Workers, IBW, I did not intend to continue to oppose this Bill, today in this Committee, waiting to see what the amendments and exactly what the parameters of the study would look like, until I heard the presentation from the author and the sponsors. The assault on Section 218 has me very, quite concerned with exactly what the purpose of this study is to identify barriers.

We will have to continue to oppose this Bill throughout the process unless there's some balance brought to what this study would look like. Section 218 is a very simple section. It basically states that if you're going to become a retailer to retail seller of energy in California, that you need to be regulated. Now, we had an experiment with deregulation. I lived through it here and it would end it in disaster.

It's important for the purposes of protecting ratepayers, workers, the integrity of the system, resource adequacy and reliability that if you're going to sell as a retail seller, you have to be regulated just like a utility, just like an energy service provider that provides direct access. We have no problems with microgrids.

If a landlord, a property owner, if a group of community property owners want to join together and build and own a microgrid, if landlords want to build a micro grid with solar installers and provide it to their tenants, no problem. But the moment that somebody builds a micro grid and builds storage and solar and then wants to become a virtual utility with no regulation, just selling willy nilly to people, that is where we have a huge concern, and the Legislature should too.

So we're going to oppose this Bill through the entire process unless there's language put in to provide some balance.

Thank you.

Good evening, Members of the Committee. Valerie Turella of Lajos Pacific Gas and Electric Company and came up here today just to comment that, like the opportunity to speak to the author about creating a balanced study of benefits in the current language, costs, identifying cost shifts, maybe even identifying having the CEC identify funding sources that are off the Utility Bill and also doing that in coordination with the CPUC, as in the current law, in the Stern Bill, CPUC has open proceedings. Thank you.

Thank you. Other witnesses in opposition. If you'd like to testify in opposition to AB 3107, please approach the mic.

Yes, Chair and members, Lourdes Ayon with San Diego Gas and Electric, we align our comments with PG and E. Thank you.

Laura Parr with Southern California Edison in opposition.

All right, I'll go ahead and open it up for questions and comments from Committee Members.

And I'd be happy to set the stage a little bit more and respond as well.

Questions or comments from Committee Members?

I'll make a comment. So I read the analysis as I want to do and got super confused by this presentation because these are author amendments. They are not in the analysis because they were author amendments. So I don't know what just happened, but I am flabbergasted by what just went down on a consent item and feel like it was a complete disrespect to the process and

Additional questions or comments from Committee Members. Assembly Member Calderon?

Yes, I, too, want to kind of piggyback on my colleagues what she just said. I don't know, just what just happened, because this was a consent item and you said that you pulled it. So I'm going to support the Bill today and then I'm going to try and figure out what just happened.

Okay. So I guess my comments. Oh, Assemblymember Zbur.

You know, I sort of the same thing. I guess I was actually glad that this was made into a study Bill because actually I had concerns about the original Bill, not because I oppose microgrids. I actually think microgrids are a very, very good thing. But I had significant concerns about microgrids being completely exempted from the regulatory agency which is there to protect consumers. To protect. I mean, it's the whole regulatory process. So I'm going to support the Bill today. But it's.

Yeah, it's a, because it's a steady Bill. But I do want to say that I sort of agree with the concern about just exempting. I mean, you could have anyone who basically put solar panels and battery storage. These could be huge things that are just outside the entire regulatory process that we actually have to protect to protect consumers and protect everyone.

So I'm going to support the Bill today, but I want to say I'm glad that it's a steady Bill because I think that the original Bill had some problems.

Yeah. So let me just clarify. I supported the change in direction. So I agreed with the Committee's direction to make this a Study Bill. The issue on 218. I have been in discussions with opponents of the original Bill as well. The goal is to essentially not do what they're saying could happen. So I think this will be a balanced study. My goal today was just to kind of daylight the issue a little bit more. Apologies if it did go in different directions.

That having been said, my intent would be to have a balanced study. I think the CEC is the place to have it, obviously seeking input from all stakeholders on that. The goal here is not to deregulate the electric industry. We're looking at smaller projects kind of as outlined in my original statement, and so look forward to the continued discussion. But, yeah, it's not anything more than it appears. So just wanted to get that on the record.

And I guess I would, I would just say that these were authors amendments. If you didn't want to take, if you didn't want to change your Bill, then you shouldn't have changed your Bills author's amendments. I think that was just a masterclass in how not to handle a consent item. I think you have disrespected me. I think you've disrespected the time of our colleagues, and I, unfortunately, will not be able to support this Bill today. Any additional questions or comments?

Okay with that, Assembly Member, would you like to close?

My apologies. That was not the intention. As I said, I support the direction this is going. In with that, I would respectfully ask for an aye vote to continue the process.

Is there a motion and a second n a second? Madam Secretary. please call the roll.

[Roll Call]

[Roll Call]

All right, 9-0, your bill is out. Okay, moving on to our last item. Assemblymember Friedman, AB 2256.

Let's end with a whimper and not a bang. I will be accepting the Committee amendment described on page five, comment four as proposed to be amended AB 2256.

I'm just gonna say would require the California PUC to conduct an independent cost of service analysis evaluating the recent NEM 3.0 tariff. I do have talking points, but I will hold them. If there's no opposition, I won't read them. If the opposition comes up, I will continue. So with that, I'm going to go to my witnesses. Testifying today are Roger Lin with the Center for Biological Diversity and Steve King with Environment California.

I can go first. Good evening, Ms. Chair and Members. My name is Stephen King, and I'm the Clean Energy Advocate with Environment California. We thank you, AssemblyMember Friedman, for helping to keep rooftop solar on the rise in California. So today during Earth Week is just a great time to reflect on the steps we're taking to protect our planet. We know that the more we continue burning fossil fuels rather than generating our power from clean energy, the more we just exacerbate the impacts of climate change.

And if we want to meet our state's critical climate and clean energy goals, both in the near term and the longer term, we need to double down on proven clean energy solutions like rooftop solar. And there's a reason why rooftop solar has played such a pivotal role in driving California's clean energy success. First of all, it can be deployed quickly in just a matter of months, rather than waiting years or decades.

Rooftop solar panels also generate energy directly where it's needed, decreasing the need for expansive transmission build-out that damages the environment, sparks wildfires, and racks up costs for ratepayers. It also improves local air quality, water quality, and public health by displacing the need for dirty fossil fuel power plants in California's communities. Yet, as of 2022, we've actually only taken advantage of just 10% of our rooftop solar potential. But unfortunately, we're going in the wrong direction now.

Rooftop solar installations plummeted by 80% year over year a year ago when cuts to incentives were put into place. And that's why we need to properly value rooftop solar's costs and benefits to ensure that we can get solar back on track and meet our climate goals.

While we're disappointed that the Committee's amendments weaken the bill and remove the study of non energy benefits, we look forward to working with the Committee and Assemblymember Friedman to make sure that rooftop solar and clean energy can keep growing in California.

Chair and Members of the Committee, Roger Lin with Center for Biological Diversity. I apologize to the folks behind me. And I'm also a member of the Disadvantaged Communities Advisory group that advises the state on eliminating the barriers to clean energy resources in environmental justice in low-income communities. There are two significant barriers. First, the lack of a consideration of nonenergy benefits, public health, and the environment. Second, the perceived cost shift fabricated by the utilities to maximize utility profits and minimize local clean energy resources.

The Energy Commission developed a barrier study that included a principal recommendation to consider non energy benefits. That was in 2016. The PUC's failure to consider these critical benefits is one reason we are in litigation with over the CPUC's gutting of rooftop solar, currently before the state Supreme Court. The PUC is headed in the wrong direction for renewables. We need more rooftop solar, not less.

The Air Resources Board has said that we need to double in their scoping plan, we need to at least double the amount of rooftop solar to even have a shot and meeting our climate targets. It's unfortunate that we've taken NEBs off the table, the Non-Energy Benefits, but we want to work with the author and the Committee, so we're here in support to move the conversation forward.

As we move forward, though, we have to challenge unchecked assumptions fed to us by the utilities regarding the perceived cost shift. Just one example, the PUC has even determined two years ago that the amount of transmission spending, the main cause of rate increases avoided by rooftop solar, is significantly underestimated. The Center thanks Assemblymember Friedman for taking on these tough questions, getting us closer to our climate targets, and not leaving behind disadvantaged communities in the clean energy transition.

All right, additional witnesses in support. If you would like to testify in support of AB 2256, please approach the microphone.

Madam Chair and Members, Kendra Harris, the Climate Center, also representing Climate Action California, 350 Humboldt, Glendale Environmental Coalition, all in support. Thank you. Thank you.

Edson Perez with Advanced Energy United in support.

Witnesses in opposition. Do we have a primary witness? Okay, come on up.

Thank you, Madam Chair, Israel Salas with San Diego Gas and Electric. I know it's late, so I'll keep my comments short. The CPUC recently authorized an assessment of NEM 3.0. It's going to be a ratepayer funded study collected in public purpose program charges. We don't think the gill is necessary. It's going to look at just one metric. Having said that, we do appreciate the Committee's consideration of the bigger picture with net metering going forward and the broader state climate goals that we all have to achieve.

Thank you.

Thank you. Additional witnesses in opposition.

Good evening. Brandon Ebeck, Pacific Gas Electric. Align our comments with SDG and E.

Laura Parra on behalf of Southern California Edison in opposition. Thank you.

Okay. Questions or comments from Committee Members? Assemblymember Bauer-Kahan.

I want to thank the author for her efforts on clean energy. I think it's critically important, and I think we've seen over the years that it has to be an all of the above approach to our clean energy future. And I think distributed energy is a part of that.

And I know that there's not as much rate of return for the IOUS in distributed energy, which has been a real barrier to some of the policies that we've moved forward. But I think that communities have benefited from it, and we know that. And so your effort to continue to move forward and understanding how to continue to support distributed clean energy I think is really important.

And I think I'm happy to support the bill today to continue that conversation, because I know it's something my constituents really want. They want more clean energy in their communities. So I appreciate your efforts here.

Thank you. Assemblymember Reyes.

I do wish that our disadvantaged communities, I wish there had been more specifically on the nonenergy benefits and maybe not in this bill, but sometime in the future. I think that is something that is important that we do look at.

There have been other attempts, and I think that at some point we need to consider that when we're looking at the entire picture, it's an important part of what we need to look at when we're trying to make these decisions. But I do appreciate that we're moving forward with it to do the study at least, and I think that it'll help to, to inform us as we move forward. Thank you.

And I would just add, I really appreciate your data-driven approach to driving these decisions as we're looking to tackle our climate goals. We've got to make sure that we are doing the things that are going to deliver the biggest bang for our buck, and understanding the full picture is super important, so. Thank you. All right. Would you like to close?

It's late. Let's go home.

All right. All right. With that, we've got a motion and a second, I believe. Yes. All right. Madam Secretary, please call the roll.

Ayetem number 13 AB 2256. The motion is due pass as amended to Appropriations. [Roll Call]