Senate Standing Committee on Energy, Utilities and Communications

And I would like to welcome everyone to today's hearing. We have one bill. One bill on today's agenda, AB 3121, by Assembly Member Petrie-Norris public utilities incentives programs has been pulled by the author from today's agenda. So I'm going to ask that our author come forward and present her one item. AB 3264, the floor is yours.

Good afternoon, Mister Chair. Good afternoon, Senators. Before I begin, just for the avoidance of doubt, this item is not the bill with the 10:06 p.m. timestamp. So let me just start with the good news up front. I'm here today to present Assembly Bill 3264, a bill to address energy affordability.

As we all know, California's electricity bills are skyrocketing. Most California customers have seen a 50% increase in their bills in the last three years alone. As we all know, too many California families are struggling to make ends meet. AB 3264 will start to bend the cost curve and bring down bills for hardworking Californians.

This proposal acts on the recommendation that have emerged from hearings on affordability that have been held this year by both your Committee as well as by the Assembly's utilities and energy Committee. The bill does three critical things. It starts by making affordability a priority. AB 3264 establishes an affordability target that will shape decision making moving forward.

The bill directs the CPUC to evaluate households overall energy burden, develop strategies, and a framework to reduce total energy costs by 2035. Looking at a 5%, 10%, and 15% scenario, this framework will then be used to evaluate IOU revenue requests.

Number two, the bill initiates a value for money review of the hundreds of public purpose programs that are currently funded by ratepayers. And number three, the bill commissions a study on public financing for transmission infrastructure. I know, we all know, in order to deliver on our clean energy goals, we need to increase transmission capacity by 350%.

We need to ensure that we do so most cost effectively and so that provision will address that really urgent need. Lastly, I also want to note that this bill, it's not the intent of our bill to add burdensome requirements on demand side reporting.

I aim to work with the energy entities and the CPUC on ensuring that we implement that section most effectively should this bill move forward today. Taken together, this suite of solutions will set the stage for us to lower bills for everyone and to put more money back into the pockets of California families.

With that, thank you Mister Chair and look forward to Committee questions. Respectfully ask for your aye vote at the appropriate time.

Thank you. Before we get into questions or comments for support and our opposition let's establish a quorum secretary. Will you please call the roll?

[Roll Call]

Members of quorum is present now. Assembly Member, do you have any principal witnesses in support? If you have two, we'll court them. Two minutes.

Witnesses. Thank you.

Good morning. My name is Katie Morsoni.

I'm an attorney with The Utility Reform Network. A long term advocate for residential ratepayers at the CPUC. Turn is here in support of AB 3264. AB 3264 will provide the Commission and the Legislature important tools for implementing long term ratepayer savings to address the current affordability crisis. We need more information to better understand and address the problems.

Drivers. AB 3264 directs the CPUC to develop a tool to track the overall energy costs that each household faces. These tools will provide important information on the depth of the affordability crisis by including all energy costs from utility bills to transportation fuel costs. These metrics can be used to better understand new utility spending requests and evaluate them.

The bill will also require the utilities to visualize where they are spending their money and the costs that are in residential rate payers rates. And addressing the crisis will also mean that we need to consider some creative solutions. Our electrical grid will need significant investment in the future, specifically transmission upgrades.

These upgrade costs will have to compete with other spending priorities and without another solution to Fund these upgrades it will exacerbate our high rates. AB 3264 prepares us to face this problem and directs a study of alternative financing.

This study will provide an opportunity to compare and contrast different methods of paying for these investments and will allow allow the state to plan ahead to manage the rate increases. Addressing affordability means acting now and looking ahead into the future so these problems do not worsen.

These and other provisions of AB 3264 provide key data points to inform future policy. Turn respectfully request your aye vote.

Thank you. Thank you. Any other witnesses in support?

Good afternoon, Chairman and Members, Tara Dias Andress. I'm representing the Public Advocates office. I'm here to testify today in support of AB 3264. The pace and scale of electricity rates increases will not stop without intervention. We estimate that electricity rate crisis faced by customers will continue unless swift action is taken.

AB 3264 promotes critical activities that provide a solid path forward for putting downward pressure on rising electricity rates and bills. Specifically, the bill requires the PUC to establish an energy cost framework to identify and track major cost drivers and access the impact of the energy costs on households.

This framework will be an important tool to prioritize how repair funding should be used. In addition, this bill increases the visibility on demand side programs so that decision makers can determine the benefits of these programs and ensure that rate payers are contributing to the state's energy policy goals.

Lastly, the bill takes the important step of initiating a study to identify options for reducing the cost of transmission expansion. This is critical because while upgrading and expanding California's transmission system is necessary to achieve the state's energy policy goals, it is also one of the primary cost drivers for repairs.

In summary, our office supports AB 3264 because it provides an essential foundation to reduce and control costs and which will provide long term relief to electric customers who are currently being really burdened by high utility rate bills. So respectfully request your aye vote. Thank you.

Thank you. Now our additional witnesses in support state your name and your organization, please.

Mister Chair and Members. Victoria Rome, with NRDC in support.

Mister Chair, Members, Hudson Perez, on behalf of Advanced Energy United, Earth Justice, the Building Decarbonization Coalition, and the Silicon Valley Leadership Group, in support.

Mister Chair and Members. Erin Niemela, representing the Energy Efficiency and Demand Management Council. We're supportive of the concept and we'll continue to work on some specifics going forward. Thank you.

Daniel Broad, on behalf of Union of Concerned Scientists and Support.

Caitlin Rodner Sutter, on behalf of Environmental Defense Fund, in support.

Thank you.

Rebecca Marcus, representing CALPIRG in support.

Alex Jackson with the American Clean Power Association, in support.

Thank you.

Thank you.

Chris Rosa, Silicon Valley Leadership Group support.

Thank you.

Now let's move to witnesses in opposition. Are there any primary witnesses in opposition to this measure? Seen none. Are there any tweeners on this, on this issue? Seeing none. Great job, Assembly Member. I'll bring it back to the Committee. We have a question by Senator Becker. Go right ahead.

Thank you. First of all, I want to thank you for bringing this forward.

I know this year we've all been concerned about rates and the cost of rates across the state and what I really appreciate here is you're looking big picture at what are the really significant things that we can do over time to really take a cut into rates in a meaningful way.

And I think what you're proposing here will set us up to do that. You know, a couple things just want to highlight specifically adjusting the, well, first of the framework for understanding rate pair total energy cost I think is fantastic and really important. Seems like a great idea, adjusting the PUC report on energy efficiency programs.

Look at which energy efficiency programs are working again. That's the kind of stuff we should be doing here, studying ways to save money on transmission build out. Absolutely something you and I have talked about. Just, just make sure we can, sometimes we have to wait for reports so we can do legislation.

So we just got to figure that out next year because I think we probably want to take some action, but excited to work with you on that. And then I think the transparency on costs are positive.

Just to flag a couple things to work on over time, when we talk about costs related to NEM and NBT, for example, just how cost is defined in this, as we've sort of seen that thrown around a little bit, I think is just important.

And then I noted that a cost calls out costs related to energization as a separate category and feels like that really shouldn't be separate from regular distribution grid costs because we certainly expect utilities to provide timely service, which was the whole goal of that effort.

So I just kind of flag those two things, maybe to discuss the future, but just really happy. I think this is going to go a long way to letting us take that big picture and really make a dent that we all want, a meaningful dent that we all want to do. Thank you.

Thank you. I appreciate those comments, Senator. And I think to the point you made about the report on alternative financing for transmission, certainly for me, for you, I think for everybody here. We don't just want to have a report that then goes and sits on a shelf.

So the turnaround date for that is July of next year with the anticipation then that it's going to give us some really important insights so we can take that next step to dig in, make that policy and start saving substantial money on transmission build out great. Thank you.

And thank you for withdrawing the other bill.

Thank you, Senator Durazzo,

You're welcome.

It was important, and it goes to show that you were listening and others here in the Capitol are listening. But I'm glad to see that you outlined us one of the principles of this report or study affordability.

I introduced legislation this year on the affordability of water because we have millions of families that are in debt because they cannot finish paying their, their water bills. So if you're gonna, I don't mean you personally, but if we're gonna make affordability a priority, what has been the priority? I mean, has it not been.

I'm trying to understand what will change. If we've talked, we talk a lot about affordability, but what have we done and what's going to change now? What's going to bring the kind of relief that you're talking about and that people are demanding because they just cannot make it. What's going to change?

And hasn't affordability been a priority up until now? So what's going to, how is this going to change things?

So I think that we all know that we are in the middle of a really profound transition. So this is a pivotal moment for California as we work to build our clean energy future and achieve our clean energy objectives.

I'm a big believer that those are of the utmost importance for our state, and that as we build that future, we've got to ensure that our energy policy balances what I kind of call the three legs, you know, legs of a stool. So we need a policy that's sustainable.

We've also got to focus on reliability, and we've got to focus on affordability. And right now we don't have any, we don't have specific goals around affordability that we then utilize to balance decisions and weight tradeoffs. And I think that's something that's really importantly missing.

And I think particularly as we enter into this period of huge transformation and huge build out and huge investment, we need to have that front and center to help inform our policymaking and to help shape agencies actions as we move forward. And I do think that there are so many areas of opportunity.

Just, you know, one nugget that came out, I think, in the hearing that you had on affordability, as well as the hearing that the Assembly had on affordability when we were talking about the cost of transmission infrastructure. So right now, that is being financed in perhaps the most expensive possible way.

So it's financed off of IOUS, balance sheets and credit ratings. They have very, very high rates of borrowing. All of those costs are then passed on to ratepayers with an additional rate of return. The kind of stat one of the economist shared with us.

If we just substituted the borrowing costs of the State of California, if we did nothing else but substitute the borrowing costs of the State of California for the borrowing cost of one of our IOUS, we would be saving 33% of project costs.

So that's why that's such an important priority and I think such a clear opportunity for savings. And I'm excited for us to really understand what it would take for us to truly implement a public financing option in a way that saves taxpayers and ratepayers money.

If I could just follow up. Question is, I care about all Californians. However, there are Californians, a significant number, who are unable to pay even the most minimal bills for electricity and other utilities.

So I would really like to see a very specific analysis of the impact that it's having on the various levels of income that people receive through the state. We can't afford to let people, the working poor, I'm not talking about the people who work. What is the impact on them?

It could be 50% higher of their income than somebody else. So I would really like to see that, because that kind of information, without it, we're going to be making policy that will hurt them even more. Thank you. Thank you, Senator.

Thank you. Senator Stern.

Thank you, Mister Chair. I want to commend the author for taking a big picture look here and for being magnanimous in how you've approached not just this bill, but the other legislation that was going to be before this Committee and the General spirit that you bring to this, which is just try to keep things moving forward here.

I honestly think this comprehensive look at things which doesn't obviate the ability to look at what's in 3121, I'm sure those conversations will continue about all those programs.

But to do something holistic here to me, feels like the right approach and holistic, not just in the sense of the electric sector or the gas sector, but all energy sectors.

I am concerned that whereas we have the Public Utilities Commission and all these ratepayer advocates on the electric and gas side, that when it comes to oil, diesel, propane, those sort of unregulated markets that people are dependent on for their energy, that we still don't have enough tools, enough data, I'm really hoping that that sort of full Bill analysis, I think it's due by the end of 26.

I'm a little concerned about that timeline because I feel like if we don't have that information in our hands, coming in sooner than that, say, even next year, as we get into bigger conversations about, say, cap and trade, where both oil and gas are in the same program as electric sector, that we're going to miss those sort of comprehensive opportunities to cut people's bills, trying to think of what those interim opportunities are to get that data and sort of feed that into our process.

So I'm hoping that we sort of don't hang all our hopes just on this one report in how many years is that? Whatever after next session, because we're going to be doing some big things next session. I don't know if you have a comment on that, but I am.

You know, for example, if the Department of Petroleum market oversight is not given adequate authority to keep looking at both refining as well as the wholesale market and how it relates to the retail market this session, we're going to be hamstrung going into next year.

So do you have anything to alleviate some of that concern that, that we'll be waiting two years, basically, for that kind of data to come back? And what are we going to get in the meantime to help give us tools? Well, thanks for that question.

As I said earlier, none of us want to create some report that we forget we even asked for and then nobody reads. That's certainly not what we want to do. So with this proposal, as I said, the analysis on alternative financing for transmission infrastructure will be done in July of 2025.

The additional data collection so that we can initiate a legislative review and a data driven assessment of the 300 energy efficiency programs that are ratepayer funded. That, too, will be done by July of 2025.

In addition to all of the, I think, foundational information that we'll get from the energy Burden report and the kind of scenario, planning and goal setting piece that comes in 2026, there's a ton of work that we can all do together in the meantime.

And I know this is a shared priority for everyone on this dais, and I think that there are a ton of things that we can tackle. As we saw through the legislative process, there were quite a few proposals around affordability that came both from your side of the house as well as for ours.

Many of those didn't make it all the way through the process.

And so I would love to figure out how do we come together and pull together, sort of a bicameral group of folks who really want to dig in and work on this and come up with what I think is going to be a multi year plan to actually tackle this issue.

There's not a secret magic wand that any of us are going to be able to waive, but I really, really do believe that there are opportunities. I want us to work together to tackle those. And I'll also note, and I think we all know this, the status quo is working great for some stakeholders. Right.

Which can make it really hard for us to push policies that change that. So look forward to digging in. But certainly my expectation isn't, oh, we're going to pass this and then regroup in two years.

That means a lot. That's reassuring. I think the idea of a bicameral process and doing some of that work through the off season is actually a wise idea. So I'd sign up for that effort. I'll just flag the, the two biggies for me that I hope they're contained in the bill.

But there's PUC work underway that I hope also culminates in time. On the gas side of things, the bill calls out costs due to commodity prices as well as costs associated with separating transmission costs in the jurisdiction of the Commission versus the jurisdiction of FERC. I think those are important elements.

And PUC currently has an investigation alongside FERC per direction to look at those gas spikes of a couple years back that cost people thousands and thousands of dollars through a very cold winter and people still haven't been made whole from that.

I think that we've got to get to the bottom of that investigation and I hope that data will yield some longer term look so we don't go through those spikes again.

And then the other piece, which is not in this Bill but it's in another bill pending from Senator Skinner is the refining cost impacts and making sure we have oversight over the petroleum side of the market because those are just the wholesale market for gas trading and the petroleum side are a Wilder west than in this electric side.

But I'm ready to have those tough conversations too from 3121. I think we should put it all on the table. So I'd move the bill at the appropriate time and appreciate your leadership. Have a motion.

Senator Rubio.

Thank you. I won't belabor the point here, everyone. Thank you for this. And I know one of my biggest, I would say sadness, is that I know we're talking about something that's not going to bring relief, immediate relief, to rate payers.

And I know that when we pass policies like these, you know, our consumers hear about it and they expect to see it this year and it's going to take several years. But I want to piggyback on my colleague from Los Angeles.

This is the reason we were being a little resistant with other ideas that we share very similar demographics and communities, that we definitely want to explore the difference in incomes in terms of how do we bring relief to those that are really in the brink of not being able to sustain it.

And as data comes forward, we need to really see what we can help in that regard. And that's all I would ask. But thank you for bringing us forward to our constituents. I know that we want relief, immediate relief, and we're hoping that we get there faster, but this is a step in the right direction.

So thank you.

Thank you, Senator.

Thank you, Senator Skinner.

Thank you. I know it's not necessarily anticipated in this study. The study regarding the transmission is about alternative financing.

I just raised that given that all of us are very concerned about affordability, and that is one of the key motivations of this study, that we might also encourage that there be a clear look at the necessity for the level of transmission that's being projected.

And I raise that and people might be looking at me like, you know, woo Hoo, we're electrifying. Of course, we need all that. I will bring us back to the seventies when the projection for California, because of our electricity use, was that we were going to need major new power plants up and down the coast of California.

Sighted about every 100 to 200 miles. So in other words, another, at least 20 were projected at that point. That is also the time when the State of California started the Energy Commission. And the Energy Commission first did refrigerator appliance standards for efficiency and then subsequently additional.

But the action just of reducing the electricity draw of refrigerators in the State of California cut California's per capita electricity use by at least 20%. Just refrigerators. And with the additional reductions in demand that came about because of some changes, those power plants were not needed. And I raise it because, yes, we absolutely are committed to electrifying.

Yes, we want electrify our transportation. That logically means we will need more generation and potentially more transmission. But there's still a very strong role for Nega Watts. What that breakthrough is to achieve those, we may not know yet. I doubt that people in, say, the sixties thought that refrigerators could be made greatly more efficient. Right.

Just as, anyway, we won't give more analogies. But the point being is that I think we would be, it would be silly to miss the opportunity to have our best minds also look at what else we could do as we electrify to bring down that demand, because that's really what's going to save our ratepayers costs. Appreciate it.

Yes, and I think, yeah, I think there's a ton of opportunity with emerging technologies both on that side and as you know, as you know, with grid enhancing technologies some of which exist today, some of which are in development. There's a huge opportunity for us to continue to get even more out of current infrastructure.

So we certainly want to do everything we can in California to incentivize that.

Thank you, Vice Chair Dahle.

Thank you, Mister Chairman. So real quick, I'm going to support your bill, but I want to say we have a report, SB 695 report came out last month. And what did it tell us? It told us that wildfire and nims are one of the big factors of cost.

Obviously, this bill is going to address financing, which I think is a huge opportunity for, you know, if we can get our money cheaper, obviously that's going to drive down the rates.

But I just want to say for the record, what really needs to be in this study is the policies that come out of this Committee and this house and the other house about how we're going to be 100% renewable in this time. That cost is driving that.

Those policies are driving the cost, but nobody ever takes into consideration, and we can't really do good planning until we know what the policies that we're driving is driving the cost of. And you said there were some people happy about this legislation.

I haven't found anybody, the utilities or customers that are happy with California's energy policies and the cost. So I'll support your bill. But at the end of the day, we have to look at the policies that are passed because they're driving up the cost of electricity in California.

And trying to meet these targets in a timeframe is very difficult to do.

Thank you, Senator. Thank you. Any more questions, comments, or concerns by Committee Members? I, too want to thank the Assembly Member for this measure and coming forth as stated by all my colleagues. Cost is a major concern regardless of what sector we're looking at when it comes to energy.

And I do want to kind of echo what my Vice Chair stated. I mean, we have to kind of look at ourselves, too, and take a closer look at what we're doing to drive those costs. It's good to be aspirational. It's good to have goals.

But we have to understand those aspirational goals have real cost impacts and restraints on the, what we do as a state as it relates to delivering this power.

So I hope the study will look at that as well, because again, we hear from our constituents, we hear from businesses, and the major reason why businesses are leaving California is not because of all those other factors, but they say uncertainty on their energy costs. We've heard it from many businesses, the uncertainty and businesses need certainty.

And when their rates are constantly changing, it makes it far too hard to do business here in California. So I appreciate this, and I hope it provides the information that we need in order to work in a collaborative manner to go forward. So at that point, I mean, at this point, I'm going to let you close.

All right, well, thank you. Thank you, Mister Chair. And I'm just picking up your, on your comments. We all recognize that this is having a terrible impact on hardworking California families.

As you said, it's also a tremendous risk to our economic growth and development and our ability to continue to create great new jobs and be the world's fifth largest economy. So I think for all of those reasons, this is an incredibly, incredibly urgent issue.

It's one that I know is friend of mine for you, for the Committee, and certainly for me and my colleagues in the Assembly.

So look forward to continuing to work with all of you as we move this measure forward and implement it, should it become reality, and to do work on all fronts so that we can, as we said, lower bills and put more money into the pockets of hardworking California families. So with that, respectfully ask for your aye vote.

Thank you. We have a motion from Senator Min, and we have a do pass to the Senate Floor, so please call the roll.

[Roll Call]

All right, that measure out, 16 votes, more than enough to get out of this Committee. We want to thank you, and we look forward to our continued work. And I just want to take this opportunity to thank Committee staff for a very, very productive year. Hopefully, this is our last hearing. We might have another one, so.

But, Mister Chair, you may not be done, but I think since you are retiring, I want to thank you for the great job, the great work you've done all year long. Thank you.

Appreciate it. All of us who make it work. So I appreciate amazing colleagues as well as the Committee staff that allows us to do the jeer and the Vice Chair.

I said all of my colleagues, the Vice Chair.

Why don't you go up and say that to them? But okay, we're going to open up the roll one more time. So for APPCN Members to add on, please call the roll.

[Roll Call]

All right, we now stand at think our work is done here.

All right, Members, the Senate Committee on energy, utilities and communications, we stand adjourned.