Assembly Standing Committee on Utilities and Energy

Good afternoon and welcome. I would like to convene today's hearing of the Assembly Committee on Utilities and Energy. Before we move to the agenda, I have a few housekeeping announcements to make. Today we will first adopt our Committee rules. We have five measures on today's agenda. Three are on consent.

Following the Bill hearing, we will adjourn and then move into the second act of today's double header, which is an oversight hearing focused on strategies to reduce California transmission costs. I will maintain decorum during the hearing, as is customary in order to hear as much from the public.

Within the limits of our time, we will not permit conduct that disrupts or otherwise impedes the orderly conduct of legislative proceedings. Any individual who is disruptive may be removed from the room. Thank you in advance for your understanding.

For today, testimony will be limited to 4 minutes total, which is 2 minutes for the support position and 2 minutes for the opposition position. Each measure. For additional witnesses on a measure, reminder to please only state your name, position and affiliation, if any. Let's see. All right.

We don't have a quorum, so we will go ahead and begin today's hearing as a Subcommitee. Oh, no. We got to do the rules first. Sorry. Okay. And we need to warm. Sorry. Thanks. Okay, so we are ready to move to the first measure on today's agenda. AB13 by Assemblymember Ransom. Assemblymember, whenever you are ready.

Thank you. All right. You ready? Awesome. Good afternoon, Madam Chair and Members. Thank you for the opportunity to be here today to speak about—yes—thank you for the opportunity to be here today to speak about Assembly Bill 13. It's no secret that here in California, we pay some of the highest utility costs in the nation.

Yet year after year, we are hit with rate increases, and our constituents are frustrated, and they are struggling. The hikes that we are seeing outpace inflation often, while the explanations or justifications are just not clear to us. Both residential and commercial rates are impacted, and these cost increases affect our families.

They affect our businesses in every sector, public and private. Schools, manufacturers, healthcare facilities, and everyone is feeling the strain, and no one is exempt. Ultimately, this means that we are paying more for goods and services, and families and businesses are being forced to make difficult choices.

At the same time, the California Public Utilities Commission has been asked to approve rate hikes to adequately pay investors, recently. In what world does that make sense? Are we able to go to our 401ks, CalPERS, are we able to go to Fidelity and say, I don't think I made enough money on my investment. Can you give me more?

We don't have the ability to do that, and it just does not make sense that that should be an option for our residents in our community.

So, I think it's really important that we are clear that the California Public Utilities Commission, although the word is "Public," that they regulate private industry, and as legislators, you and I are actually less powerful than the Public Utilities Commission, when it comes to regulating the rates. But unfortunately, we have more accountability. Can you not hear me?

I'm sorry. Yeah. Maybe just bring that mic a little closer so that individuals watching at home can hear you. Thank you.

So, as legislators—can you hear me now? Okay. As legislators, you and I don't have the same authority as it's in regards to our rates and our utilities, as the Public Utilities Commissioners do. We have more accountability. We have to respond to constituents, and our utilities commissioners do not. So, we are introducing Assembly Bill 13.

It's a Bill to reform the Public Utilities Commission by increasing legislative oversight and ensuring that it's more responsive to the needs of the citizens. And I'll go a little bit into that as well.

AB 13 aims to enhance the CPUC's oversight capabilities, by promoting a more diverse and accountable board, increasing transparency on rate hikes, and thereby, improving the public trust, giving consumers access to the information that they very well deserve. Diversity is crucial in addressing the complex challenges arising from utility rate increases.

And when I speak of diversity, I'm talking about diversity—geographic diversity—where our commissioners are located. In the proposal for Assembly Bill 13, you will see that there is a proposal that we align the commissioners very similar to what we as legislators do. We don't all have the ability to live in District 13.

We are geographically dispersed throughout the State of California so that people have the representation, so that we can be accountable to people. The Board of Equalization is split into four boards, and then there is the Chair.

By aligning the CPUC with the Board of Equalization, you would have folks, as example, PG&E, I believe, is in District 2, SoCal Edison is in District 3, and SDGE is in District 4. And with redistricting, Board of Equalization is shuffled around. You don't have to constantly figure out how you're going to change the Commission makeup. That's just one point that we'd like to make.

A divorce board also would have to be accountable to the information of what's happening in those very unique communities. We also have offices for the CPUC in San Francisco, Los Angeles, and Sacramento.

So, this is something that we can do to serve our constituents, so that people are represented by people who have lived experience. Just— AB 13's diversity ensures that these decisions are scrutinized from various viewpoints and aiming to make sure that people who are impacted can actually have those, those dialogues, and have access to the folks who represent them, and also ensuring that people who represent them can feel the pain, quite honestly.

Let's also be clear that when you have diverse representation, in regards to geographics, then you have more accountability amongst your colleagues. So, if one colleague, say, is compromised because maybe they live in a district where they have that relationship, it's uncomfortable sometimes.

You have other colleagues who can say, look, you know what, we have to do what's best for the State of California. So, that's very important. We also have implemented—if you all—first of all, I also want to say thank you to your Committee for a very thoughtful analysis.

The analysis was very spot on, and I want to make sure that I also address—I'm going to pull up my notes—also address some of the concerns that were in there, one being the reporting. So, so we are requesting that....

Sorry, we are requesting that we add a Legislator from the Assembly and a Legislator from the Senate, so that we can serve as a liaison. We know that we do get reports from the Committee, they come—CPUC's President comes—to give us information.

But we would like to be able to have more real time understanding of what's happening. That is not different from what we see on different boards throughout the State of California, where, in some cases, we have ex-officio Members.

So, we want to be able to have our legislators because ultimately, we are the ones who are being questioned by constituents about what are we going to do, what's happening, and why we are not stepping up for our residents.

So, we want to make sure that we have Members from the State Legislature that are involved, as these things are happening. We also would like to mandate that the CPUC report annually, and we know that that sounds redundant. I did see that in your, in your analysis.

But the difference is, is that we want them to be very specific about reporting out on rate affordability and pending rate decisions. One of the things that we've heard from the IOUs is that it often takes sometimes months, and up to a year, after they've requested for a rate to be heard.

And that is, that is also valid. And so, we want to know not only what have you done, but what's pending, what has not been done. And then we want to know if there are rate hikes. Can you please tell us, tell us why, tell us a little bit more.

We also would like to allow that one non-governmental public advocate, with a background in public interest law, advocating for the public be appointed to the PUC. And lastly, we want to request that the CPU submit a report to the Legislature within 15 days after finalizing a rate-setting decision.

And so, those are the key elements of the Bill. And so, with that, I would like to introduce—I have with me today two, in my opinion, these are experts, who will be able to speak to some of the merits of the Bill.

I have Mr. Jeff Shields, who most recently served as the General Manager for South San Joaquin Irrigation District. He also served on the board for TURN and has a lot of experience working with CPUC, including serving as an Expert Witness. And I have a former CPUC Commissioner, Ms. Loretta Lynch, here with us today.

And so, with that, I'm going to introduce—well, first I'm going to—Chair, is it okay if I introduce my witnesses?

Thank you, Assemblymember. We're going to pause for just a moment so that we can establish quorum quickly. Madam Secretary, please call the roll.

[Roll Call]

All right, thank you. You are welcome to begin. Welcome.

Thank you.

Mr. Shields, go ahead.

Thank you. Yes, my name is Jeff Shields. I live in Ripon, California. I'm here today to speak in support of AB 13. My 38 years—after 38 years—I retired, having served as CEO and General Manager of four different electric utilities. Three in California, one in Oregon.

I also recently resigned from the Board of TURN, after serving 12 years as their Treasurer. Today I'd like to talk to you about why I resigned from the TURN board, and the disparate treatment consumer advocates experience in front of the CPUC. And we can discuss the Commission's blatant violation of Public Utilities Code 1804-e, which addresses intervener compensation.

I'd also like to talk to you about the monopoly privilege enjoyed by investor-owned utilities and the so-called regulatory compact that is supposed to protect consumers but doesn't.

I had hoped to talk to you today a little bit about the concept of Regulatory Capture and the flagrant abuses at the CPUC, not just by the utilities, but also by the investment bankers that finance these utilities.

I'd like to discuss the economic turmoil across the state, which you've already heard a little bit about, as a result of the extraordinary bad service, coupled with the highest electricity rates in the state, in the nation.

I want to share a story about my good friend that is, right now, building a new factory in the Midwest and moving out of Ripon—his operation completely out of California—because of his high electricity costs.

I also want to tell you about another friend in Ripon that got so tired of waiting 19 months for PG&E to come in and agree to extend power. 880 feet into his ranching operation, he opted instead to take his whole 90-acre homestead and almond orchard and take it completely off grid.

Unfortunately, my time and yours is very limited today. So, I'm only going to tell you that the regulatory function in California has failed our citizens, and something must be done to change it. Your support for AB 13 is important and it's an important first step. So, thank you.

Thank you. Hello Ms. Lynch.

Hello, my name is Loretta Lynch, and I want to thank the Chair, Ms. Petrie-Norris, and the Members of this Committee for allowing me to testify in support of AB 13 this afternoon.

AB 13 is an important first step to make the PUC more responsive and accountable, both to the customers that they are supposed to serve, but also accountable to you, the Legislature. The Legislature has plenary control over the Public Utilities Commission, through Article 12, Section 3, of the California Constitution.

And appointing legislative liaisons to interact with the Commission, on a weekly or daily basis, will provide a really important additional layer of oversight and involvement. To know what the PUC is doing in depth and to know what processes it's following in the myriad, and I have to say, somewhat mind-numbing proceedings that they conduct.

Knowledge is power here and knowing day by day what the PUC is doing, or as Mr. Shields indicated, is failing to do, is just as important. I would like to address the one point on the reporting—the 15 days after issuing a general rate case—I personally think that's really key and critical.

And the reason is, parties at the PUC only have 30 days to request a rehearing if there's been a problem in the decision, either legally or factually.

And so, having the Legislature know, in advance of that 30 day absolute deadline, that a case has been decided, and how it's been decided and why, really creates a whole new level of accountability, but also transparency, both for you, but if you know, then the public will know as well, and that could prove the difference in parties choosing to file for rehearing, and get some of the bad decisions looked at again.

Thank you.

Thank you. Is there anyone in the room wishing to testify in support of this measure? You may approach the microphone at this time.

Thank you.

Good afternoon. My name is Will Abrams. I am a wildfire survivor and party to various proceedings before the California Public Utility Utilities Commission, in very strong support.

Oh, and I'm sorry, sir. We're just going to do name, position, and affiliation, if any, at this time.

In strong support. Will Abrams.

Thank you.

Thank you.

Clifton Wilson, on behalf of the San Joaquin County Board of Supervisors, in support. Thank you.

Hi. Adria Tinnan, on behalf of TURN, the Utility Reform Network. We're currently neutral, working with the author toward support, and appreciate the Bill.

Thank you.

Chair and Members...with San Diego Gas and Electric. We have a support, if amended, position and are working with the Member to see if we can come to an agreement.

Thank you. All right. Seeing and hearing no one else. We'll go ahead and hear from—do we have a witness here in opposition? If we do, you can approach the podium at this time. All right. Seeing none, we'll open it up for any additional witnesses in opposition.

If you are opposed to AB 13, you can approach the microphone at this time. All right. Seeing and hearing none. We'll open it up to Members for comments or questions.

Question?

Yes.

Assemblymember Davies.

Just a comment. I want to thank you for bringing this forward. Definitely transparency is important and accountability, and I think that the whole way you have it set up is perfect. I can tell you that, having dealt with the PUC at times, not everybody comes out to the area where the issue is.

And so, they're basically hearing a lot of people coming in and giving them the information, or how they see it. And so, I think that having districts like that, or areas, that allow them, obviously, to get out to the areas and really have an opportunity to even go to City Council meetings and hear more on that.

But you definitely have my support on this. I think transparency, and I like having someone from the Legislature and the outside being on there, so that we have different inputs in there. So, I definitely will be supporting this. Thank you.

Thank you. Assemblymember Zbur.

Hi. Thank you, Assemblymember Ransom. Really great to see you and see everyone who's here today. This is a big bill.

I mean, it's big and it's significant, and frankly, I'm going to support it today, because I want to give—because I have respect for the author—and because I think there are some things that need to be reformed at the PUC.

I'm not quite sure if this is exactly the right set of approaches, because it's so big, but I haven't had the opportunity to have an in-depth discussion with the author and I think it deserves that. And because of that, I'm going to go ahead and support the Bill today.

But you know, we obviously, we know that there needs to be some reform at the PUC. But there's a whole bunch of questions about whether or not the, you know, moving to this sort of district BOE method is sort of the best thing.

I just think there's a lot of discussion that should take place, and I want to give you the opportunity to have those discussions with those of us in the Legislature.

Thank you. All right. Seeing no other Members wishing to speak. Assemblymember, would you like to close?

Yes, I would. So again, Chair, thank you so much for this opportunity. As legislators, we have an opportunity, and we have a responsibility. We don't have the authority to make rates ourselves. We can only control what we can control.

And right now, our constituents are looking to us for leadership, and folks are asking, what are we going to do? Because the pathway that we are on right now is not sustainable.

The purpose, again, of this Bill is to respond to the public's concern, concerns that the CPUC is not adequately controlling the things that they are in charge of. We have a huge issue with trust in our community, and quite honestly, people are looking at us and wondering if we're in folks' pockets.

And I know from working with—in—this Legislature for the last, what, 70 plus days, that our legislators care about the State, we care about this community, and we care about this issue. We also are facing these bills as well. And so, restructuring the PUC to better serve Californians is important for the sustainability of our State.

And requiring reporting and justification for decisions made on rate cases is an example of how we can put people first. Prioritizing transparency and affordability to address the rising cost is what Californians deserve.

And the regional diversity, just like we have to be in districts, just like we look at the Voting Rights Act to tell our communities that it's not okay to have everyone living in one district, because it's not okay for representation. The same should apply for the PUC. They effectively are acting as legislators without the accountability and responsibility.

And that's why this Bill is really important for us to control what we can control. So again, I really do appreciate everyone for, you know, giving us this opportunity and I respectfully ask for an "Aye" vote. Thank you.

Thank you, Assemblymember. All right, we have a motion from Assemblymember Kalra. A second from Assemblymember Schultz. Madam Secretary, please call the roll.

[Roll Call]

Thank you.

All right, 10 - 0. That Bill is out. We'll leave the roll open for absent Members to add on.

Thank you very much.

All right, we're going to move to adopt the Committee rules. Do I have a motion and a second. All right. Motion from Assemblymember Harbedian. Second from Assemblymember Schultz. Madam Secretary, please call the roll.

[Roll Call]

10-0. We'll leave that open for absent Members to add on. Moving to the consent calendar, we've got three items today on consent. Can I get a motion and. All right, we've got motion from Assemblymember Schultz. Second from Assemblymember Davies. Madam Secretary, please call the roll.

[Roll Call]

11-0. And we'll leave the roll open for absent Members to add on. Okay, moving to our next and final item file. Item number three. AB 99. Assemblymember Ta, whenever you are ready.

Yes. Good afternoon, Chair Member of the Committee. I'm here today to present AB99 important Bill that would restrict investor owed utility ability to increase rate above the rate of inflation while allowing part for necessary increases. I want to begin by thanking Committee staff for working with my office on this Bill.

And I will be accepting the Committee proposed amendment to AB 99, Section 747 of the Public Utility Code declared that the Legislature intend for the California Public Utility Commission to lower electricity rate to the lowest amount possible.

Despite this, investor owned utilities have consistently increased prices above the rate of inflation since 2013, focusing California residents to make really difficult choice about energy uses. UC Berkeley and environmental nonprofit Next 10 found that low income customers are bearing the brunt of this high energy price. Ongoing energy rate increases have a serious impact on consumer view.

The PUC forecast that in 2030 when the residential rate will be higher than the rate of inflation, the PUC authorized return on investment or profit than IOU can earn in a given year.

According to the State Auditor, from 2013 to 20231 of the IOU actual rates of return was higher than other rise up for nine out of 10 years and the rates in rates keep coming. In 2024 alone, the big three IOU or raised rate multiple times California need relief from this exceptionally high energy price.

My office and I are constantly told that the race making process is too complicated to understand. There is issue with this process. Not one person is able to understand or even know when the IOU are looking to justified yet another massive rate in REIT. One recent request was over 900 page long.

These reports are nearly impossible for everyday Californians to read and currently address. The ultimate goal of AB99 is to protect consumers from excessive energy cost. Additionally, this Bill will aid transparency and reduce waste. This legislation provide reasonable exception for costs directly related to safety, enhancement, monolithication and higher commodity or fuel cost.

This means energy corporations can still meet legal obligations regarding combating wildfire, any issue with climate and more. Our office is committed to strengthen and ratifying these exceptions to ensure the effectiveness of the final legislation.

Outside of these reasonable exceptions, California Public Utility Commission would need a justification to approve any rate increase above the inflation rate which would provide rate payer with essential protection against runaway costs. Finally, the opposition mentioned that it is something that IOU are already required to do. If that is the case, why are they so strongly opposed?

AB99 provides much needed protection for our most vulnerable Californians facing high energy costs. My office remains committed to working with all stakeholders to draft an effective piece of legislation that offers rates payers the relief they need. I'd like to introduce Mr.

Bohun with California Senior Legislature to speak in support of my AB99 and I really appreciate your support and ask for your ate vote.

Thank you, thank you, thank you Madam Chair and Members of the Committee for the Opportunity to come before you and testify in support of this Bill. My name is Jim Bohan and I live in Woodland in Yolo County. I am in my mid-70s and I've been retired for about eight years now.

And I'm actively involved in issues related to older adults. And this certainly is related to us. I'm a Senior Assembly Member person with the California Senior Legislature and Advisory Council Member with the Agency on Aging Area 4, representing seven counties. And I'm a Commissioner with the Yolo County Commission on Aging and Adult Services.

And I sit on the legislative committees for Yellow Healthy Aging alliance and the Agency on Aging, Area 4. Today I'm here as a Member of the California Senior Legislature. Over 4 and 3 quarter million seniors in California today are in Social Security. And more than two thirds of those are absolutely dependent upon that.

I bring this up because the average Social Security income is only $1800 a month in California. Over the past two years, PGE has requested and received six rate hikes. And they have recently applied for a seventh rate hike specifically to compensate IOUS themselves, even after reporting a $2.5 billion profit for this last year.

In my area where I live, our utility rates have gone up over 50% in just the last four years. My wife and I retired and lived in the same house we've had for 25 years. Fortunately, we made some really good decisions about our retirement. And so we live fairly comfortably.

We recently, four years ago, actually decided to put a solar power system on our house. And the system now produces almost all of the power we actually consume. The system we installed was actually the largest system we were allowed to install under the NIEM agreements.

Thank you. If you can go ahead and wrap it up, sir. Thank you.

Thanks. So our rates have increased. My costs have increased from $8 a month to $75 a month, even with the solar system. So Social Security. Millions of seniors in California rely on Social Security. And with the existing utilities rate reaching $300 a month for those seniors now, it's really important that you actually support this Bill. Thank you. I appreciate it. And thank you.

Thank you. Thank you for being here. All right, we're going to open it up for testimony from other individuals in the room. If you'd like to testify in support of this measure, please approach the microphone.

Hello, Adria Tinnan with TURN the Utility Reform Network. We're currently neutral on this Bill, but working closely with the author to get to support. Thank you.

Thank you. Okay. Seeing and hearing no one else, we will welcome our witnesses here to testify in opposition.

Madam Chair and members, Scott Wetch, on behalf of the California Coalition of Utility Employees. Been doing this for 37 years and who knew this was such a simple answer. We should have done this a long time ago. I'm being facetious, of course. You know, oftentimes simple bumper sticker solutions seldomly solve problems.

This bill, while it, from the original concept, has been improved because it does take into consideration fluctuations in commodity prices and whatnot, it doesn't take into consideration a couple other factors. One is labor costs. So if we have CPIC at 2%, the companies are all going to look at my members and say, 'okay, we can't afford to do anything on the collective bargaining side more than whatever CPIC is.'

So a vote for this bill in its current form is a vote to restrict the bargaining of power and the compensation of all the men and women who risk their lives every day to go out and keep the grid going and the power on. The second thing is, changes in mandates that come from this body.

A couple weeks ago, the NRDC issued a study of rate increases, and let me just read you this one; puts it in pretty good perspective. Since 19--excuse me--since 2018, PG&E's residential rates have increased by 40% above inflation. Forty percent above inflation. About half of that was due directly to the cost of wildfire mitigation. Okay?

Half of it was due to the net metering cost shift that this Legislature and PUC have imposed, which is $8.5 billion a year and increasing by a billion dollars a year. So according to this very unhappy--I'll distribute it to everybody here if you have not seen it.

So 40% increase above inflation for residential rates at PG&E and approximately half of that is due to the NIM cost shift which this bill would not allow them to take into consideration and add a billion dollars of growth per year. You would have basically utility stopping to do a lot of the work that they do. So it's an ill-conceived idea and we would urge a no vote. Thank you.

Thank you. Mr. Wetch, do you want to stay to answer member questions? Thank you.

Thank you, Chair. Thank you, committee members. My name is Will Abrams. I am a wildfire survivor and one of many victims of utility-caused fires that relies on the commitments of the California Legislature, the governor, utility executives to ensure that all victims are paid in full.

I'm here to oppose this because, quite frankly, it is well-intentioned and--but directionally--but focusing on inflation is not necessarily the right metric. I would look to CPI and other indexes and tying that to the return on equity of the utilities moving forward.

Secondly, and most importantly, we cannot allow utilities to increase their rates unless they have fully and fairly compensated all their victims. This needs to be a threshold for increasing rates. Many of you live in wildfire affected districts, and I know that you are hoping that when fires occur in your neighborhoods and in your communities that the utilities will not be able to raise rates without making sure that they compensate victims.

If my neighbor burned down my home and was a contractor and came to me and said, 'hey, Will, sorry I burned down your home. I can't pay for it, but I'd like to give you a higher rates for rebuilding your home for you.' Right? That's essentially what this is. They burned down our home, they haven't compensated us, we were supposed to be fully and fairly compensated as of AB 1054, yet we are not. We are relying on the Legislator to hold them to account and make sure all victims are paid in full.

Hold them to account for with their statements that were made by their executives to ensure that all victims will be paid in full. I know that the Legislature had strong positive intents--I'm sorry. Sorry, am I taking too much of your time? I'm sorry if-- okay.

And sir, if you can wrap up your testimony? Thank you.

Look, I'm really appreciative of the support among committee members, and we just really need to make sure that victims are paid in full as a precondition for utilities getting rate increases. Thank you very much.

Thank you.

Chair Petrie-Norris, I don't know if that was really in opposition to this specific bill.

Yeah, sorry, I--are you supposed to be the second? Thank you. You're supposed to be the second witness in opposition. Thank you for that.

My name is Jon Kendrick. I'm here today on behalf of the California Chamber of Commerce. I think in the interest of time, I'll kind of move away from what I've got.

That's all right, sir. We'll give you your two minutes because that was very confusing. Thank you.

You know, I'd like to start by acknowledging that there's a shared priority here: energy affordability. California has among the highest electric rates in the country. Businesses, families, entire communities are struggling under the weight of rising bills, and while the author's intent is laudable, I think AB 99 is the wrong tool.

And before I tell you why it's the wrong tool, I want to maybe suggest an alternative, right? Last October, the governor directed the PUC and the CEC to evaluate rate drivers and identify cost-saving reforms to preserve reliability while addressing affordability.

The regulators have delivered these initial assessments. Rather than a blunt force restriction in the form of an artificial cap, we should be examining the layering of costs for multiple mandates, overlapping programs, and infrastructure requirements revealed in these assessments and identifying thoughtful cost-control measures.

When I look at what's wrong specifically, why this is the wrong tool, I appreciate that the author has taken the committee recommendation to eliminate the election for rate-making mechanism, but also at its core, rates today are not simply climbing because of inflation.

They're rising due to decades of legislative mandates, wildfire hardening requirements, insurance costs, grid modernization, climate policy implementation. The bill doesn't appropriately account for these real cost drivers and it doesn't really provide a predictable or timely path for any sort of carved-out exceptions.

Requiring a PUC determination on a directly related cost adds uncertainty on whether a particular cost fits into the exception, which will delay critical projects and disincentivize proactive investments in safety and reliability. If we underfund our IOUs, we will see--we will threaten the stability, safety of our modern power service. Thank you.

Thank you. All right, we'll go ahead and open it up for opposition testimony in the room. Please approach the microphone if you are opposed to AB 99.

Thank you, and good afternoon, Madam Chair. Israel Salas with SDG&E, and Southern California Gas Company in opposition, even with the amendments. Thank you.

Thank you.

Hunter Stern, IBEW 1245, in opposition.

Rod Brewer with Southern California Edison, also in opposition.

Delaney Hunter, on behalf of PacifiCorp, in opposition.

Good afternoon. Jacob Evans with Sierra Club California, in opposition. Thank you.

Good afternoon. Valerie Turella-Lajos, Pacific Gas and Electric Company, opposed. Thank you.

Thank you. Okay, we're going to open it up for comments or questions from committee members. Assembly Member Calderon.

Thank you, Madam Chair. Question. Given the bill's exemptions, what IOU costs or expenditures do you believe would be subject to this bill?

I think that my bill is really, really, is a really common sense approach because I understand the bill going to be amended. The process and the bill would really help the consumer. So it might be you have many exceptions like safety enhancement, commodity cost, and monetization.

I mean, like I never seen any IOU bill that have a lot of exemption like my bill, so I think that we, I've been working with the opposition and I really welcome their, you know, opposition. However, I think that my bill is really, really fair. It really give an approach in order to provide affordability to everyone who live in California.

Assembly Member Hart.

Yeah, I think this issue is extremely complex and this solution tries to make it simple and it just doesn't work. I appreciate the work that the committee staff did to kind of make this more manageable and more, less destructive, but I just don't see how imposing a cap that has no relationship to the costs and the burdens and the, and the requirements of what we need to do to make this really work is going to be a solution.

And I'm afraid what it does is it gives the wrong impression that, you know, we can skip all the hard steps and avoid making the difficult choices that we need to actually reform the system rather than just doing something simplistic that sounds good. So I won't be voting for the bill.

Assembly Member Zbur.

Well, I pretty much was going to say exactly what Assembly Member Hart just said, and I think the only thing I would add is that, you know, when you have Labor, the Chamber of Commerce, the IOUs, and the Sierra Club all having significant concerns about the bill, I think it's something that's flawed and I appreciate that the goal is a laudable one, but I just think this is not the right approach, and so I won't be able to support the bill either.

Thank you. Assembly Member Kalra.

Thank you, Madam Chair. Thank you, Assembly Member Ta, for bringing this forward. It's obviously an issue that we all care about. I know the, the Chair and many other members in the bipartisan fashion are trying to, you know, really see what we can do in a comprehensive manner.

I am appreciative of the committee analysis and the agreement to remove the election part, which I think really, really have been a--I think that that was very flawed because even if an election was won, there are so many other reasons why you can still raise the rates that--the ratepayers would have--we just said we don't want the rates to go up and they would have gone up anyway because of the factors that are in there plus other factors that were raised today that I think would be issues that we would all want to be considered in a more comprehensive look of rate increases. So I appreciate your intention.

I think we all have the intention of trying to do what we can to keep our utility rates low, but I also won't be able to support it today, but thank you for your continued efforts in this area.

Thank you. Assembly Member Patterson.

Thanks. You know, last year I introduced a bill--and Assembly Member Gallagher has introduced it again this year--to mandate the PUC to reduce electric rates by 30%, and I get, you know, sometimes flack for that all over for it not being a serious piece of legislation. Well, I thought it was very serious.

I mean, we have laws that pass this building all the time that say, you know, we have to get rid of gas-powered vehicles by 2035 with really no substance to it. You leave it up to the regulators to do it.

I mean, I just was meeting with car dealers today that have to do something by model year 2026. A certain percentage of their cars have to be electric or, you know, zero-emission vehicles. I mean, this Legislature routinely passes laws that say certain things need to be accomplished that seem unachievable, but usually have no problem doing that.

And you know, this sort of, to me, should--the discussion should continue, and the reason is--actually I really enjoyed the opposition letter from the Sierra Club because they said exactly what's, what's going on here that, they said 'California's bold climate goals are supported by many programs that are funded through rates paid to utilities.'

'Without the ability to raise rates higher than inflation, bold environmental initiatives and low-income rate programs are put in danger of being cut.' And just to do the top line that--and, you know, speak in a way that my constituents would understand is, we want to continue to pass environmental goals onto residents through your electric bills so my constituents who are paying $800 a month and are seniors and struggling to survive can continue to pay for the bold environmental goals of the Sierra Club and sometimes legislation that passes through this chamber.

So, so actually I understand what the opposition was saying in terms of there are a lot of mandates put on the utilities by this body to do certain things, and maybe, maybe if this moves along in the process, we can talk about having the PUC not adopt regulations, particularly on their own, that would cause rates to increase beyond inflation. In other words, they would never adopt another regulation again cuz they just adopt things on their own, it seems sometimes. But I think this conversation should continue because it is the number one source of emails that I get in--

You'll need to unlock your iPhone first. Sorry.

It is. I get--my phone talks to me and so does her's. Her phone talks to me too, but I agree it's not a simple conversation, but if we can set bold goals for the environment, if we can set bold goals for anything else we want to do and just mandate if something happened by a certain date, we can certainly pass a bill that says we shouldn't do this and then leave it up to the regulators to figure out. Why not? We do that for everything else. We should be able to do it to save residents money. I'll move the bill.

Thank you. Any other comments from committee members? Assembly Member Irwin.

I certainly don't think that this is a perfect bill, but it is the first committee, and I think we need to send a message loud and clear that we are working on affordability this year. This is what our residents want to hear, you have put exceptions in there, but I want to relate to my residents that I understand this is the biggest issue for them right now. So I will be supporting the bill and I will second that.

Thank you, Assembly Member. Assembly Member Papan.

It's not only a big issue for my constituents, big issue for me. I know PG&E's in the house, but when I got an email yesterday telling me what my electric bill was going to be, I just about choked. So I agree with Assembly Member Irwin. This is not a perfect bill.

This is a very, very complicated matter when it comes to utility rates. I'm going to support the bill right now. We'll see what happens, but I wonder if it's overly simplistic? But I can certainly hear the affordability song and it's loud and clear. Assembly Member Patterson. Loud and clear. So anyway, we'll go forward. Thank you, Madam Chair, for allowing me to be heard.

Thank you, Assembly Member. Assembly Member Boerner.

Yeah, I want to echo--I guess it's this side versus that side--I don't know--today. Greg, you might be on the wrong side. I don't know. We haven't spoken yet. I do think it's simplistic. I do think our constituents require more affordability, more thought, and so I'd like to ask the author if he could comment in his closing on how committed he is to keeping working on maybe narrowing the focus.

I actually came with a long list of questions about the elections that were really, really hilarious and you guys missed an entire standup comedy skit that was gonna happen here today. My staff and I, we were crying with tears of laughter yesterday. So I'm kind of sad that's gone, but I think it's a good plan that's gone.

And so, really, in your closing, I need to hear in order to vote aye today, your commitment to narrowing the focus, addressing the complexity of the issue with whatever plan you're going to do for that narrow slice of affordability--because I think there is support for a narrow slice of affordability--continue working with the consultants of this committee, who I think are phenomenal, and with that, I could support today, but I would like to hear from you what your commitment would be. You can answer now or in your closing, through the Chair.

Yes. So I'd like to respond to your comment. I really appreciate your comment, and you know, our office, we continue to work with consultant and opposition. I mean, we continue to address all the concerns that they have and we continue to narrow the bill. And actually, you know, we understand the concerns from the opposition.

That's why we remove the whole power of election, and I think that, that, I think that really, really, really eased out all the issue from the, from the opposition. But our office, we are committed to continue to work with a consultant and the opposition in order to benefit.

At the end of the day, it could benefit everyone who live in California, and we, you know, for the last few years, we hear when we advocate for affordability, affordability--we say affordability 24/7. So what is the tool? I want to hear what the tool or what the bill that we go to address affordability. So I believe my bill is really, really fair and my bill have a lot of assumption, but I continue to work with opposition. Thank you.

Thank you. Assembly Member Schiavo.

I want to--thank you for that. I want to echo the questions and concerns raised from both sides of the dais today, but, you know, I agree with Assembly Member Irwin that, you know, this is a time that we have to take very seriously, lowering rates for people. People are struggling.

I have a burning landfill in my district that I'm going to talk about every opportunity I have where people are paying $1,200 a month because they can't open their windows and doors and it is crushing them, for their utilities. So, but I, you know, I have a number of concerns about the bill.

I also, you know, want to encourage you to work with Labor in this issue and, you know, and, and reserve, you know, will reserve my final vote to see how it turns out through this process, but I'm okay moving it forward today to continue that process forward.

Thank you. Assembly Member Harabedian.

Thank you, Madam Chair. Thank you to the author. I mean, obviously you have taken a big bite here and you have brought something forward that has obviously caused a lot of conversation, and my question is more towards the opposition. Do you think that there is, if we were to move this bill forward, is there any compromise position based on the structure of this bill that would be a workable solution?

And I ask that because if we were to move this past this committee, the idea would be that you could work with the author under the constructs of this bill to actually get something that you think addresses the problem of affordability certainty for our ratepayers and I think would bring some reform to a process that needs reform, but is this a vehicle that could actually result in something that would be a workable solution?

Well, the short answer is I don't think this is the vehicle to do it. I think there's discussions going on in the Governor's Office, in the Senate, with working groups in the Assembly that are taking a thoughtful look at affordability and drilling really down.

This year, we're starting--you would have to layer in so many different conditions and exemptions and whatnot that this Legislature would be in the position basically every year of rate-making, and I don't think anybody in this room wants to be voting on rates every year or things dramatically. That's why we have a PUC.

I mean, if you look at the pie of all the ratepayer money, the amount of discretionary funds makes Prop 98, the impact of Prop 98 on you all look small in comparison. Look, it all goes to things that are mandated. The utilities have very little control over discretionary spending. You know what the biggest chunk is? Labor costs.

You do this bill, you screw workers because that's how they balance this issue on our backs and that's why this approach is not the thoughtful approach, what's going on in the working groups really drilling down on what the cost-drivers are and being thoughtful because one of two things are going to happen.

You're either going to do something that just looks like it makes for a nice press release and then at the end of the day, the ratepayers are not going to--there's going to be big press conference, and the press--the reality is that the rates aren't going to change and you're going to have a lot of pissed off people that think they were sold a bill of goods or you're going to do some arbitrary cap and they're just going to take it out of the backs of workers.

That's really because--there's just not that much discretionary money. So if you want to really do affordability, you got to make the hard choices. You got to--look, nobody wants to touch NIM. That's the biggest cost-driver. But there's no political guts to do that, at least right now, but you got to do that.

I mean there's only so many pots driving this, and so you can take the easy way out and pass this bill or you can do the hard work and really make a difference for ratepayers.

If I can just add to that really quickly--

No, thank you, thank you. No, thank you, sir. That's not how it works. No, thank you. And actually, Mr. Wetch, please do not leave because you got your moment, your two minutes in the sun. I have a few things I'd like to say as well. All right, so let me take a minute. I appreciate the thoughtful conversation amongst the committee members, and I wanted to share, you know, my perspective on this bill and, you know, why I am supporting it today.

So I think that, you know, as many have noted, affordability is front and center for all of our constituents, whether we're talking about gas or groceries or your electricity bill or your rent; things are too damn expensive and people are struggling. We're all singing from that playbook.

I think everyone's familiar with the expression, 'a goal without a plan is just a dream.' I'll tell you, a goal without a goal is just total BS, and when we talk about this goal, and I hear the concerns that you've raised, but I think the notion that if you do this bill you screw labor is completely, completely off base. And so here's why.

We've been talking in this committee for the last year and a half about the importance of balancing all three legs of the energy stool: sustainability, reliability, and affordability. You talked about the fact that a lot of the reasons rates are going up is because of mandates from the government.

Gosh, I really wish we knew some people who could change some of those laws. We actually do. They're sitting in this room. So we need to force a conversation about those mandates. We need to force a conversation about trade-offs and understand what are we doing that's driving up those rates?

And without something to--without a forcing function, you talked about maybe we should have done this 20 years ago, Mr. Wetch, maybe we should have because then maybe we would have had those hard conversations rather than be in the middle of unraveling a lot of those bad decisions, which is the work we're doing in these very, very complicated working groups.

This is absolutely not a silver bullet. This is absolutely not a silver--you know, the magic wand. We are all out of magic wands. We need to do all of it and so that's why I'm supporting this bill today. There's a lot of work that needs to be done on this measure. You know, we'll certainly be continuing those conversations, as I'm sure the author will. All right. With that, Assembly Member, would you like to close?

Oh, I--I 'd like to thank the committee staff for their thoughtful analysis. I think the opposition, they already raised all the concerns about the, about the phrase of election, but--albeit we already removed that--but I think that if they still have more concerns, our office continue to work with them.

And I think that my bill is to bring hope to everyone, to our committee, to the residents in the district. At the end of the day, we have to answer the concerns from our community, and right now, the community across California, they have an issue with, you know, the rate and raise.

Every corner of the street, a lot of people they've been contact my office, they've been--every time I go to supermarket, they stop me to ask me how can he pay so high? And a lot of them are senior, they have a fixed-income. We continue to sing the same song, affordability all day long, but we need to do something. If we don't do anything, at the end of the day, everything going to be the same. So I respectfully ask for your aye vote.

Thank you. Madam Secretary. Please call the roll. We have a motion from Assembly Member Patterson and a second from Assembly Member Irwin.

Item Number Three: AB 99: the motion is do pass as amended to Appropriations. [Roll Call].

Okay, 11. zero, that Bill is out. Thank you. zero, and we're going to keep that open for absent Members to add on. Okay, so that concludes the two bills that we are hearing today. We'll go ahead and open up the roles so that yes folks can add on. We'll. We'll start with AB13 by Assembly Member Ransom.

[Roll Call]

Okay, 16. Zero. And we will keep that open for absent Members to add on.

[Roll Call]

Okay, that's 12. Zero. We'll leave that one open for absent Members to add on. Let's go ahead and reopen the consent calendar.

[Roll Call]

Okay 16-0. Once again, we're leaving that open for absent Members to add on. And the adoption of the Committee rules for the 25-26 session.

[Roll Call]

Okay. 15. Zero. Right. Let's go ahead and. Are we still. We're still waiting for somebody. I'm not reopening those again. Okay, this is what we're going to do. We are going to take a five minute recess to regroup.

We will then come back for our second part of our double header, which is our informational hearing focused on the cost of transmission in California. And then we can reopen the roll. We'll reopen the rolls at the end of our recess. Thank you. Five minutes. Five minute warning.

All right, we are back. We're back. And before we transition to our information hearing, we are opening up the rolls for one more time to enable absent Members to add on. Madam Secretary, we will start with the consent calendar.

[Roll Call]

Okay 17-0. Leave it open.

[Roll Call]

17- 0. We'll leave that open.

[Roll Call]

Okay, 12-0. We're keeping that open. Okay. All right. So with that, we are going to. We'll leave all of those rules open and we are going to transition to our information hearing. The subject of today's hearing, as we said, is strategies to reduce California's transmission costs.

All right, I've just been told I need to recess, so we are recessing for 10 seconds. All right, and now we're back. All right. With that, we are really and truly beginning the second part of today's doubleheader, strategies to reduce California transmission costs.

We just had a very lively discussion about the importance of tackling the affordability and cost of living crisis here in California, as well as a conversation about the complexity of doing that work.

Today is the second hearing of our four part series on energy affordability, which again reflects, I think, both the importance as well as the complexity of the work before this Committee.

Our constituents expect us to take a very hard look at their energy bills and identify every opportunity to deliver savings in both the short and the long term. And so that is what we're doing today and what we will continue to do. One critical area of opportunity is reducing the cost of building transmission in California.

As we all know, California has incredibly ambitious and incredibly important climate goals and clean energy goals. Achieving these goals requires an enormous increase in transmission capacity, a 350% increase in transmission capacity over the next 20 years. So it is absolutely critical that we are building this infrastructure in the most cost effective way.

Today we are going to dive into two key drivers of transmission costs. Our first panel is going to focus on financing. Estimates have concluded that alternative approaches to financing could save us as much as 60% of project costs.

And then the second panel will focus on permitting and project delays, because as we all know, time is money and these delays are driving up costs. But before we dive in, I have asked. Let me make sure that I know who's here. I have asked someone to join us from the public Advocate's office. Yes. Okay.

To provide a brief overview of transmission planning in California and really to set the stage for today's discussion and the panels that will follow. So with that, we've got Karin Hieta, am I saying that correctly, with the Public Advocates office? Please go ahead and come on up. We appreciate you being here.

Hi, Good afternoon. Thanks so much for joining us.

Sure. So, good afternoon, Chair and Members. I'm Karen Haida. I'm the Program Manager for the Energy Infrastructure Branch at the Public Advocates Office at the California Public Utilities Commission. Our mission is to obtain the lowest possible rates for customers, consistent with safe, reliable service and meeting the state's energy and climate goals.

We advocate on behalf of customers, both residential and small business, before the CPUC and other forms. So I was asked to come here today to talk to you about the transmission landscape in California, which I'll get into now.

So California's ambitious climate goals require a rapid and extensive build out of the transmission system to support clean energy goals. Transmission projects face significant delays and we have a growing backlog that challenges California's ability to meet clean energy goals. At the same time, the additional build out and delays will increase costs that go into customer rates.

Transmission data is often located in various locations and it can be difficult to get a comprehensive picture of what is actually going on. So we developed what we call the Transmission Data Dashboard to provide insight into transmission issues in California.

The dashboard is meant to provide a comprehensive overview of current, past and future projects approved by the California Independent System Operator, or caiso. The Transmission Dashboard offers key metrics and trends to inform decision makers and interested parties about progress and challenges in expanding the transmission grid.

It identifies bottlenecks and areas where action may be needed to accelerate project completion and control costs. The Transmission Dashboard can be found on our website, although the information I'll be going through today is slightly updated than what we published.

So, first of all, we have a backlog of projects that have been approved by CAISO but not yet built. I provided some numbers on this slide. The key thing to know is that the backlog is large and growing because projects are being approved faster than they're being built.

Since 2000, a little less than half of the approved projects have been completed and 38% of the projects are ongoing. 152 projects have been approved just since 2017, and only 16 of those are operational.

We calculate the cost of completing all of these ongoing projects that have been approved but not yet built at just a little over $19 billion and those costs are not yet in rates.

Now, there's a lot going on in this slide, but the main thing to see is that the yellow represents ongoing projects which have increased recently greatly in recent years. About 77% of the ongoing projects have been approved just since 2017. The green shows the projects that have been completed, which has decreased quite a bit in Recent years.

And the black line going through shows the total annual project costs, which you can see is going up fairly steeply in the last few years alone. Now this chart takes a closer look at costs.

The transmission access charge, or tacit, is a component in the rates set by the Federal Energy Regulatory Commission, and it's added on to customer bills.

The TAC has increased over three and a half times since 2009, and we anticipate that it could increase another four and a half times to meet California's goal of 100% clean energy by 2045. That's shown by the red line. That takes a steep upturn.

Finally, we want to take a look at the transmission project timeline, which takes a little bit over eight years on average. Transmission owners are responsible for a little over 70%, or almost three quarters of the average project timeline. That includes pre application time and construction time, shown in the two blue boxes.

Only 11% of transmission projects require a CPUC permit for those projects. More than a third of the time is spent waiting for the application to be submitted to the CPUC. The CPUC permitting process, shown here in the yellow mustard color, takes only about a quarter of the time of the project timeline.

So, in sum, the transmission dashboard shows that there are significant backlogs. The number of projects is expected to increase quite a bit. We estimate transmission capacity needs to expand by two to three times to meet our clean energy and climate goals and the cost will go up.

As I mentioned, the transmission data dashboard is available on our website. We're working on an updated version using the most recent CAISO planning data. And that version should be available by the end of the summer. So thank you for your time.

Thank you. Thanks, Ms. Hieta. All right. Any questions from Members? Assemblymember Irwin.

Yeah, I just want to go. Could you explain a little bit more the last page page about the timeline for till construction. Can you go into the pre application? How could that be sped up? And then you pointed out the permitting was only a quarter of it. And we're doing. We have a lot of focus on that right now. But do you see that there could be room for improvement there?

There's always room for improvement. The pre application phase is what takes place once CISO has approved a project and before the transmission, the utility submits its application to the Commission for permitting. We don't have a lot of transparency into what happens during that time period. And there are no timeline requirements that they have to meet.

Where is it at that point? You said it's been approved by when. A project has been at that point?

No, it's on the utilities desk.

Oh, okay.

Yeah. So once CAISO determines that there is a need and they approve a project, there is a time period where the utility will then put together their application. If they need a permit from the CPUC, we have no control over that. It's entirely up to the utility. So that preapproval part can take around three years.

We don't have a lot of transparency as to what they're doing. They're most likely putting together the project aspects, the application. There's some work that goes into that, but there's no timeline that they have to meet. So it's entirely up to the utility when they submit their application to the CPUC.

But wouldn't they have done a lot of that work beforehand?

I don't know.

Okay.

And we will be joined in our, technically, our third panel, when we're talking about delays in the transmission pipeline, we will be joined by a representative from an iou. And so we can dig into some. Of that with those folks.

And I did want to address your question about the permitting process. The Commission recently made changes to its General order streamlining the permitting process. That was pursuant to SB 529. So the Commission adopted that decision at the end of last January. We haven't had time yet to see how that streamlining might speed up the permitting process, but we expect that it will.

All right. Okay.

Assembly Member Zbur.

I see on your timeline. First of all, thank you for being here. It's really nice to see you. I see on the permitting transmission timeline that it looks like it's about 2.3 years in the permitting process once the application is deemed complete.

Yes.

I assume that you would agree that if you were able to sort of reduce that to a year or even 270 days, that that would result in reduced costs to the consumer.

We would hope so. I mean, certainly in our experience, project costs go up over time. They don't tend to drop. So labor costs tend to go up, equipment costs tend to go up. So the longer something takes, the more likely it is to have rising costs.

So you're basically. You're speeding it up by a year, year and a half year. You're eliminating the cost increases that happen during that period of time, plus carrying costs that may be born for the project while that's happening as well. Exactly. Okay, thank you.

Okay. Assemblymember Harabedian.

Thank you, Madam Chair, and thank you for the presentation. And I think you do a Fabulous job of laying out the problems of the delays. And, and obviously there's no real prescribed prescription for how to solve it.

And I guess my question would be, just generally speaking, do you believe that the CPUC is still the right body to be receiving these applications, approving them and overseeing this process, or are we at a time where because of the delays and the need to approve at a much quicker and more efficient rate transmission projects, it should be outside the scope of the Puc?

Well, I think it does. The CPUC does play an important role in the approval process. It is the lead agency for the CEQA review and I think that is an important consideration. As I mentioned, only 11% of the transmission projects actually require a permit from the CPUC. So it's a fairly small amount.

Now, that being said, about 95% of the transmission projects are completed by the investor owned utilities. We do think that there's more options to open projects up for competitive solicitation, which would spread out some of the work. The utilities have other obligations that they're doing as well, and, and competitively solicited projects tend to cost less. So those are some options we've looked at.

There are some other things that could be done as well that could help resolve some issues, such as reevaluating the backlog of projects on a periodic basis to see if all those projects are still necessary, looking at how to prioritize transmission projects to really get the transmission to the areas to unlock the most clean energy that we can, and look at the cost of those.

So I think there are a number of things that could happen at once. I'm also interested to see what will happen with implementation of General Order 131E pursuant to SB529 and how that will speed things up. We've already seen the permitting process itself decrease in time over the last few years.

Thank you.

Okay, great. And so this will be our last question for Ms. Hieta and then we'll welcome our other panelists.

Up just on this slide with all the bars, do you have insight into why the number of projects completed has gone down quite a bit? I mean, I imagine some of it is just time. Right. And further out, they've had more time to complete those projects. Beyond that, is there anything else that you're gleaning from this?

Yeah, you'll see a significant drop around 2016-2017 or so. At that time, the CAISO did do a revaluation of ongoing projects, something I just mentioned as an option to help streamline things. And at that Time they canceled a number of projects that they determined were no longer necessary. So there's a dip there shortly following that.

The rise in the yellow bars that you see of the approved projects really is a result of our clean energy policies and our goals for electrification. So a lot of those projects are necessary to bring renewables. In the last couple years include projects approved for offshore wind development.

So the yellow is really a reflection of our expectations of increasing load due to electrification and our need to bring new renewables in to address our clean energy goals. So I think, you know, that's a big reason. You see the huge increase and a little bit of the drop in decline in the green.

The other issue that occurred was Covid, so that did result in supply chain issues. A lot of work stopped. You know, we all went through that together, so we know what happened. So there was some delays and stalls at that time that pushed out completion of projects.

All right, thank you so much for being here and really setting that foundation for the rest of the hearing. We appreciate it. Thank you.

Thank you. I appreciate your time.

All right, we're going to welcome our panelists for our discussion on alternative approaches to financing transmission infrastructure. We're being joined by Neil Matouka, who is from Net Zero California, Dan Adler from Net Zero California, Bill Manheim from Pacific Gas and Electric, and Denzel Hankinson, who I believe is joining us remotely.

Yes, that's right.

All right. Okay. We'll go ahead and start with you, Mr. Hankinson. And what we've asked is for each of our panelists to give some brief remarks to frame the issue, and then we'll open it up for questions and discussion.

Very good. Thank you. Hi. Good afternoon, everyone. My name is Denzel Hankinson. I'm the CEO of a consulting firm called DHInfrastructure. And I very much appreciate the opportunity to speak with you today.

I'm here to share the findings from a report we developed with the Clean Air Task Force, Net Zero California, and UC Berkeley's Center for Law, Energy and the Environment, or cli. We explored in the report how public sector financing or partnerships could help reduce the cost of building out California's electric transmission system.

Something that's really essential for meeting climate. Climate goals affordably. I'm not sure if you can see my slides. If you prefer, I can turn off my. So you can see them. Great. We can see them now. That's great. Great. Second slide. So we focused on a few key questions.

The first was, can the public sector finance transmission lines in a way that reduces the Cost of transmission. If so, by how much? And then what are realistic institutional options that have been used, not just in the US but around the world that could possibly support this? And how would those work?

These are, of course, as we heard before the recess, really urgent questions. California needs to double transmission and triple generation capacity by 2045. But electricity affordability is already a tremendous concern, so reducing costs while scaling the system is critical. So what are the levers for the cost of service?

Transmission costs to customers are driven by four main levers. You could go to the next slide, please. The one is the cost of equity, the next is the cost of debt, then there are tax obligations, and then the big one is capital expenditures or capex.

The public sector involvement can indeed lower capital costs through cheaper debt and certain tax advantages. But the biggest single lever is capital expenditure costs. That's where competitive procurement, as the previous speaker mentioned, really can make the biggest dent through better prices and tighter cost controls on design and construction.

So let's take a look on the next slide at the a closer look at the mechanics of cost reduction. So this, the chart on the, on the beginning, rather at the top of the slide shows a 10% reduction in individual input variables and how those affect the annual cost of a transmission project.

So the biggest driver by far is. Is CAPEX capital expenditure. If we can lower construction costs through competitive procurement, the impact on ratepayers is very large. But that's not the only lever. The second biggest driver is the capital structure, specifically the share of equity and the weighted average cost of capital or wac.

Public sector entities typically would not include equity in their financing mix, so they eliminate the high cost component entirely. And that's another reason why public ownership or public financing of transmission can result in cheaper transmission lines. We also see considerable savings from reducing the cost of equity, the cost of debt and taxes.

Public entities benefit here as well through tax exemptions and access to low interest tax exempt debt. And then all of these levers compound.

So when we apply them together, especially by combining public financing with competitive delivery, we've estimated that ratepayer savings of up to 57% compared to traditional IOU development of the total transmission investment foreseen by the California ISO. So over 40 years you could have a total savings of 123 billion in avoided costs.

Now, you know, I don't think we can suggest that the state could Fund every transmission project that would require a tremendous amount of borrowing capacity. But if California focused public financing on a select group of economically important, but maybe less financially attractive Lines where the market might not deliver efficiently.

This target approach could yield pretty substantial savings for consumers. So we look then at different institutional options, as I mentioned, that could deliver these potential savings. And one is a, you know, the current industrial utility model. Another is a fully public model where the transmission lines are fully owned and operated by a public entity.

And then you have hybrid models which are, as I said, public private partnerships. So you have something which is called a lease style public private partnership or ppp, and then something called a concession style ppp. The IOU model is essentially cost plus and business as usual.

Fully public models can reduce financing costs, but may lack certain operational efficiencies that the private sector could deliver. And then lease type PPPs, which I think are probably the most promising in this case, allow the public sector to finance the line and own the line, but then competitively select a private partner to build and operate the line.

Concessions go one step further, giving the private sector full responsibility for financing, building and operations under a long term agreement. And these types of arrangements are fairly common worldwide. All of these PPP structures assume competitive tendering, which again is really essential.

Consultants at the Brattle Group found that competitively developed lines can reduce capital costs by around 20 to 30%. And that's a key driver of the savings that we model. Next slide please. Thanks. Actually, I think I've gone over this one. This is just a taxonomy of the different models.

If you could go to slide six and I'll just close out here. Thank you. So here's how a lease type PPP might work. You'd have a public entity like a state transmission authority that would issue low cost tax exempt debt and then lease the asset to a competitively selected private partner.

That partner is then responsible for design, construction, operations and maintenance under a long term performance performance contract. One often underappreciated benefit of PPPs is that they also provide a clearer and more deliberate allocation of risk. You have a contract and that contract clearly defines the allocation of risks.

Under the current IOU model in California, wildfire liability often sits in a kind of legal and financial gray zone which has been borne by the utility until it becomes unmanageable, at which point the state may step in if it can or not.

And so in contrast to PPP structure can ensure that the private partner takes on clearly defined insurable risks such as wildfire related force majeure events, which would reduce uncertainty and exposure for the public sector. Importantly, I think it's worth considering that these lease type contracts are not untested.

They've been used successfully and applied successfully for major US Infrastructure projects, including toll roads, social facilities like schools and civic centers. And so you have real world proof that this sort of arrangement can work and will work certain tax advantages. And with that, I'll close out. Thank you very much.

Thank you. All right, Next up is Mr. Matouka.

Thank you, Members of the Committee. Madam Chair, good afternoon and thank you for having me. My name is Neil Matouka. I am the senior manager for Clean Power at Net Zero California. We are a nonprofit project developing policies to help California achieve our climate goals. And I think I do have some slides I don't know how to... perfect.

We came to this issue when evaluating barriers to meeting our 2045 clean energy goals. That's why we think it's so important to have this conversation about building necessary infrastructure in an affordable manner. We commissioned research focusing on the largest transmission projects in California that would benefit from alternative financing strategies.

These projects are the competition eligible projects from CAISO's 20 year outlook. They are within California, are open to third party bids and have a revenue recovery mechanism to the California Independent System Operator and the Federal Energy Regulatory Commission.

We anticipate that these projects would be developed through contracts with private developers, leveraging the expertise of the private sector and the existing skilled workforce. As my colleague Denzel discussed, there are significant savings that can be found in developing transmission projects using alternative financing and institutional models.

We have focused on the public private partnership lease model because this hits all of the savings policies while still leveraging the existing private sector expertise in the transmission sector. The lease model can achieve savings of up to 57% and can be implemented through a variety of state and or local and regional agencies.

When we applied the model in our economics report to CAISO's 202420 year outlook, we found a larger estimated cost for the portfolio at $39 to 54 billion. The public private partnership lease model would see savings of 2.2 to $3 billion annually or up to $123 billion over 40 years.

These cost reductions come from financing and tax savings, not from reductions in quality. These are exactly the same projects at a lower financed cost. There are a variety of state agencies that could potentially leverage this model, including the California Infrastructure and Economic Development bank or I Bank, the Department of Water Resources and the California Energy Commission.

These savings could also be achieved by local, regional or tribal governments as well as JPAs. The key is that any institutional structure that implements an alternative financing model uses the levers identified in our research and you can see those on the screen.

This is a low cost public debt replacing expensive equity, competitive solicitation, tax exempt public ownership and the use of existing private expertise. These levers can be implemented individually, but you would lose the cumulative benefits and potentially not achieve the maximum savings identified.

All right, thank you so much. All right, Next up is Mr. Adler. Thank you.

Thank you very much, Members of the Committee, for the opportunity to join you. I'd like to speak with you about reforms to our transmission development process, about how we finance it and what the implications might be for affordability.

It is no exaggeration to say that a reliable, affordable and clean grid is a centerpiece of our entire decarbonization effort my background until December 2024, I was Deputy Director for Climate Finance at the I Bank, where I led the development of our Climate Catalyst Fund, which had the goal of making I Bank a full service green bank for the State of California, among other opportunities.

In that role, I led the effort of the bank in its transmission engagement in the Salton Sea Transmission project, which partially informs what I will share with you today. But earlier in my career, I also worked on the initial RPS program design at the CPUC, which shaped my perspective on how clean energy markets succeed and fail.

Specifically, it is clear that smart policies can reduce risk and time associated with climate infrastructure projects, which will improve the market's perception of transmission development. These efforts can and often do result in lower financing costs and potentially greater competition because private parties will have greater confidence in our markets.

What the work supported by Net Zero California and others reveals, however, is the importance of additional steps the state can take to directly control our own fate, driving faster and cheaper development in partnership with the private sector, but utilizing all of the tools at our disposal.

First, let me highlight the key role of capital structure which our colleagues at DHI just referenced. It's worth repeating because this is something of a sleeping giant in the entire affordability debate, and one which in my judgment, the state should investigate much more thoroughly Now.

Typically, riskier projects require higher degrees of equity investment because the market believes that the project won't have enough reliable earnings to repay debt beyond a certain level. Providers of that equity expect to earn commensurately more than debt providers do to driving up the total cost of capital and effects on consumers significantly.

This is all perfectly rational from the perspective of a private economic actor. However, the more a project is De risked by public action such as what the state is contemplating here, the more the ratio should shift.

More certainty around the project's performance means a greater ability to take on debt, which again is cheaper by far for the final consumer ratepayers. But this De risking of projects by the public sector historically does not result in a more favorable capital structure, in my view, for no legitimate reason.

The get for the public interest when we take risks out of the equation for private partners should be cheaper capital and the associated savings for consumers. It is well past time that we face this issue directly. Second is the obvious question of where any public provided capital comes from.

How are we going to pay for all of this? One option is an allocation from the General Fund, which is how I Bank entered, however briefly, the transmission market. The volatility of the budget situation in California can make this challenging. There were multiple issues with the Salton Sea transmission project which required significant time to work through.

And the fact that funding can be revoked if immediate progress is not demonstrated makes building a trusted, lasting investment program difficult. We may need a more sustainable framework here. Alternatively, the General obligation bond is a great place to look. Prop 4 is a live exercise and is to my mind the first place we should turn.

Right now there's a dedicated transmission component. There's. We could utilize this as a live exercise to test and demonstrate a new model. Bond issuance is an option. Multiple state agencies can do that. I Bank is one state treasurer's office and DWR.

But I want to stress that the bond market's view of these projects will assume a high degree of risk for all the reasons we're wrestling with here now. So it's not a given that a bond financing will result in cheap capital.

And so without well structured guarantees the balance of public interest against the sentiments of private capital markets, you won't necessarily achieve savings in the cost of capital. The risk perception will dominate. Fueled by the view which this process can attack head on that California cannot build.

I would commend what is happening with the DWR central procurement model as a great example to investigate further. It exists in statute, it's financially sound and achieves the tricky balance of public and private interests in large scale infrastructure finance. It's a guaranteed cost recovery mechanism for public publicly authorized infrastructure expenditures.

And finally, I'll note that the state could consider a relatively modest allocation of capital from a redesigned program that invests cap and trade dollars. Small amounts of allocation to a permanent Fund for the purposes of advancing clean energy infrastructure could be proven in transmission case and extend elsewhere.

We have to build a lot of things, not just transmission over the next several decades. Three points to conclude about how to deploy the money that we do receive. All else equal, Loans are better than grants. We've been giving away a lot of money as a state. We're good at it. We drive innovation.

We have a lot of constituents for this funding. Grants have a role. But anytime we can make an investment that will be paid back and drive private capital alongside us, we should focus on that. We've frankly been wasting public money for quite a while now. Placing any loan funds in a revolving account is a critical piece.

I Bank has this other such programs could embrace it. Any money that comes back in is redeployed. It grows over time. The markets like it, it extremely leverageable and should be a centerpiece and this I want to stress though to be truly catalytic, public financing must be more risk tolerant than private capital or I will stress it will have no incremental impact. This does not mean making stupid bets.

It means that the public investor can work with policy leadership to address risks that private parties can't. A public green bank should leverage its role inside government to evaluate, acknowledge and efficiently address risks to project success.

This is the opportunity for finance and policy to mutually reinforce each other, taking key risks off the board, maximizing the impact of public funds, and increasing the availability of cheaper capital from the private sector over time. Unlike many climate issues California faces, this one resonates nationally. We can pioneer a balanced approach that accelerates grid progress everywhere. Thank you for the chance to comment today on this critical work and I'm eager to support your efforts going forward.

Thank you. And Mr. Manheim, the floor is yours.

Thank you, Madam Chair. I'm Bill Manheim, Deputy General Counsel from PG&E, working on policy and regulatory issues. Really happy to be part of this discussion today. PG&E does a lot of transmission investment and we are very aggressive in looking for alternate ways to reduce our costs.

So we, we've been responsible, we've been involved in 99% of the successful applications for federal funding for transmission and that includes loan guarantees and grants. So I'm happy to share some of the success that we've, that we've realized in some of the strategies that I think can be replicated by the state.

Mindful of the discussion that was happening before here about affordability though, I do just want to note that a strategy like this can address a portion of the capital that is invested on transmission. But as you see, the numbers are huge.

We are still going to need to rely on the investor owned utilities to do a whole lot of infrastructure investment. So we need to be mindful of how can we do that in a way that reduces cost to customers the most. PG&E currently is not an investment grade utility.

That means we pay higher rates for debt than other utilities that are in the market. We just went out for $1 billion financing a few weeks ago and we paid 1% more than what other investment grade utilities paid. That means it's $150 million more in debt costs because of our sub investment grade position.

PG&E this year is going to finance $5.5 billion for investment. So 11, $11 billion of total investment. About half of that comes from financial markets that Delta is $500 million a year.

So you want to save $500 million a year help us find ways to strengthen PG&E's financial health and getting us back to investment grade. So now let's. That's the commercial. But it is a major driver for affordability. So three strategies that we've been engaged in that we think could be really promising for the state.

The first one is the federal DOE loan guarantee program. PG&E has been successful and awarded a $15 billion loan guarantee that will be used to finance at a significantly lower cost for our customers transmission projects. We estimate that the savings to customers over the life of those loans will be $2 to 3 billion.

So the way that works is we submit a portfolio of projects that meet the federal criteria. They verify and they help us to refinance the cost of those projects at significantly lower rates than what we can achieve in the market today.

So having the federal guarantee lower cost of debt, the state could step into a very similar role here using a similar model of a loan guarantee. The second model that we've been successful in securing $400 million in federal grants is through the federal GRIP program. There we received grants that reduce the cost of a transmission project.

So it displaces the money that would otherwise be invested by our investors and would earn a return. So it reduces the costs significantly. Right. For that portion of the grant there's no need for investor dollars. There's no return earned.

So it has a larger impact in terms of rate reduction because you're removing the equity portion of the investment. The third model has been discussed today and that is a public private partnership.

And we were very excited about a proposal we have before the Public Utilities Commission right now which with Citizens Energy, which was founded by Joseph F. Kennedy, one of the good Kennedys, and it is a non public, it is a nonprofit entity that will be investing $1.0 billion in PG&E transmission investment.

The way it will work is similar to the structures that were described earlier today. PG&E will build and own the infrastructure. Citizens will contribute $1.0 billion of the equity. And then we will lease not, not the facility itself, but the financial rights to collect in rates the revenues associated with that investment.

That lease then goes back to Citizens who, who then takes the revenues that we earn over time through our federal transmission rates to pay back their their costs. Under that structure, Citizens has committed to returning $450 million to customers. And that money will be targeted to our most customers most in need.

So PG&E has a program called REACH which impacts 54,000 households and another program called the California Alternative Rates for Energy or CARE program. So the dollars that are earned from citizens are being donated back to help the most needy customers.

This proposal, a similar one which is discussed in the report that San Diego was involved in, was approved by the Public Utilities Commission. We're still waiting for our approval, but we're really excited about this as a model.

And we think this is a model, a variation of the public private partnerships that we're discussing before, discussed before, that would really work well for the state. The state could similarly issue revenue bonds that would offset the cost of transmission.

And PG&E could then lease back the revenues we earned in FERC rates for those facilities to pay off the revenue bonds. The state would then be in the position of returning significant savings back to utility customers.

We think that approach can achieve the greatest economic benefits of the ones that were described today, but they don't involve the risks. And what risks am I talking about? State ownership is not an easy thing.

Some of you may remember after the energy crisis in 21, I'm sorry, 2001, the California Procurement Authority, or CPA was enacted in legislation. Its goal was exactly the same thing that is being proposed today. The state would take ownership of energy infrastructure projects, build them themselves, operate them, and return significant savings to customers. Lofty ambition.

It went nowhere. $8 million was spent trying to set up a new governmental agency and organization. Not a single project was ever financed or approved through that. It's not easy to build a new state agency that is going to run and operate a portfolio of transmission projects.

It's also, I think, something you really want to think about when you think about the risk associated with Wildfire. If the state owns transmission under the doctrine of inverse condemnation, it is responsible for, regardless of fault, for any liabilities that result from Wildfire. Right. That is a huge liability.

That's not taken into account in some of the economic analysis that you've looked at. Under the private partnership model that I've described with citizens, that risk remains with the utility if the utility owns, operates, maintains the other. So sorry. So three models, three variations for the state, all of which I think could have a significant impact.

I did want to talk a little bit about tax exempt financing. That is, you know, one of the, from the earlier presentations. That's one of the key benefits and cost savings associated with, with state ownership. But tax free debt and a tax free entity does have consequences, people.

PG&E pays over $1.0 billion in property taxes and other taxes to municipal entities in the State of California. A tax free entity is not going to be paying those taxes, which effectively means less money for local government that they rely on.

So it's not a free game effectively to pursue an aggressive tax free strategy that means less revenues for the municipalities. One other thing I just wanted to mention is we already have a competitive bid process that the California Independent System Operator operates for the large kind of policy transmission projects that were shown on the screen.

And what that process entails is any entity can come in and bid to build transmission and as long as they can meet the qualifications to show that they can operate reliably, they're eligible. And there have been multiple competitive transmission projects that have been awarded to energy companies outside of California that are not IOUs.

So that process is an effective process for, for creating competition and driving down costs. So I think we don't want to get in the way of that. The question is how can we make that better? And I think the state could have a role in this that could either help or could hurt.

The way it could help would be to offer on these competitive projects identified by the CAISO a financing or a partnering opportunity that would go to whoever wins the bid. That way that could be considered by the CAISO in its evaluation and it would be neutral to whoever wins the bid. Right.

Those benefits would be passed on to customers. The way it could hurt is if you have the state aggressively involved in ownership and you pursue a direct ownership model that then raises all kinds of questions about how does that work with the competitive process? Is the state going to put its finger on the scale?

Is the state going to say, I'm doing these projects and eliminate the potential for competition? It may discourage these out of state utilities who are aggressively investing from California from being part of it.

If we have a new state entity that is saying we're going to take control of this process, something that's working, we don't want to break, we want to complement it and make things better. Thank you very much.

Thank you. All right, we're going to open up for Member questions. I just have one question quickly before I, you know, ask what. What other folks want to want to know. All right, so both Mr. Hankinson and Mr. Matouka, you laid out, you know, some different scenario options.

The both wholly public version, the PPP concession version, the PPP lease version. Those are. Those all would require state ownership. Is that correct? Of the assets.

You want to go ahead, Neil, or. With the lease version of the. Of the PPP that in. Yes. That entails state ownership and private sector operation of the. Which is competitively tendered of the. Of the transmission line, the concession model is a, is essentially temporary ownership for the period of the concession.

And ownership, you know, ownership sounds like an absolute term, but there are, are different rights associated with ownership. So a concessionaire would have like, you know, a transmission line concession for say 30 years, maybe 40 years, although that's probably a bit long. And they would have certain rights of ownership.

So they would be able to dispose of certain assets, they would be able to pledge certain assets for collateral. But then at the end of the concession term, the assets would revert to the state. With the lease. With the lease model, yes. The state is the owner, they're the financier, and they tender out competitively all of the operating responsibilities to a private entity.

Okay. And I think you've given us, you know, so, and I really appreciate all this. I do think the central question before us is do we kind of save a little money by making the debt cheaper? Right. Or do we save a whole lot of money? Do we capture all of these bars?

But that, if I understand correctly, necessitates state ownership of the asset, which, you know, while not unheard of, as others have pointed out, like POUs, they own their assets, other states, that's how it works. It's certainly a non trivial undertaking for us to consider that.

So I guess just as a starting point, what I am trying to wrap my head around is how much do we save if we have a model that effectively just finances the debt more cheaply? Because as you said, you guys have a terrible credit rating. We've got a better one, so we can save some money there.

So can you help me build that this chart? We would save, arguably you maybe would save the capex stuff if you think you save it from more competition and then you'd save the cost of the debt. Would you save anything else? Or do you have to have public ownership to capitalize on all these other opportunities?

I think it depends because there's a variety of ways of implementing this and there's a variety of ways of achieving either ownership. You know, it does not necessarily have to be like a brand new agency that. Right.

You know, so I think if you, for all intents and purposes, if you just swap out the debt for slightly cheaper public debt, there would be marginal savings

If I might add one.

Well, it would be, according to this chart, 2%, which is not huge, but given the numbers that we're talking about, the very least we should be doing that. Right. But if we really want to realize the massive opportunity, that's not it.

Additional point on the financing, there's the cost of the debt and the amount of debt in a project. That's the second lever that is crucial to pull. Given the debt is cheaper, if you're De risking the project, it can sustain more debt, so you drive out the higher cost equity. Those two forces, just from a financing perspective, could be quite significant.

Okay.

Before you get to competition and ownership and project facilitation and all the other things that probably should be considered as well.

Okay, that's helpful, thank you. I have some more questions, but I'm going to let other Members jump in. Mr. Rogers

Thank you so much. And our colleague had to run to another one, but I promise her, I would ask, given what we've seen where public private partnerships have been successful in some other projects the state's tried to do, what are the biggest barriers as it pertains to transmission lines for actually achieving that?

Well, I think for, for right now it's the state's ability to, to actually provide this type of financing, we would need the authorization and you know, as my colleague mentioned, some source of funding to provide that as well as depending on the institutional structure that you wanted to achieve, potentially also the ability to own that type of asset, which we don't currently have.

Gotcha. So now my question for you is sort of given that conversation and to the chair's questions around state ownership, many of us have CCAs in our district, community choice aggregators in our district that have rates that are coming in not dissimilar to the IOUS that could theoretically be bonded against to provide lower cost debt for construction, where then the CCAs would presumably own the assets. Have you looked at that as a model as well, or how that might square the peg with some of our public financed agencies?

Yeah, we're very open to any public agency or entity that qualifies being able to participate in that type of a model. You know, we're very interested in local government CCAs, JPAs, being able to leverage their type of bonding or revenue authority.

You know, to the extent that they already can do that, I think we just haven't seen it. And so we're looking at what are the additional steps the state needs to take to be able to support that type of activity, additional funding, financing or other types of support.

Yeah, just having served on the board of directors for a cca, you've got billions of dollars of rates coming in. It's a stable return. So I would assume that the, the market would actually react well to that type of bonding authority.

Thank you. Assembly Members Schiavo.

I. So I have a Bill for this, actually. And I wonder, Mr. Adler, if you could talk about. I feel like you were kind of alluding to the idea that when there is public financing, the ratepayers don't always see the benefit of that. That's what our Bill is trying to address.

And is that one of the things that you were kind of pointing out or. I know one of the challenges is obviously we see rates continue to go up and up and up and up and up. Right.

And so when there is savings, how do we make sure that that actually benefits customers right at the end of the day?

Absolutely. And my comments were focused just on the sourcing and deploying of money. And there's a lot more to getting projects built on time and on budget or under budget. But you know, this is bending the curve of what we can or we can tell clearly is going to be a huge additional burden on ratepayers over time. We're already paying a lot. People don't like that. But we have to build this stuff.

So having a clear plan going in, all the tools we can use to bend that curve and showing how public capital and the benefits of it flow through all the way to ratepayers and don't get captured elsewhere in the system from equity investors as much as they may have a claim on risk return, driving low cost debt as much as possible and making sure that that shows up as cost reductions for rate payers is relatively straightforward. I would say sitting here at this stage of design.

I have a. Do you have a question? I have a question about. Unfortunately we were going to be joined by someone from. I think it's RETA, which is New Mexico's Renewable Energy Transmission Authority. Has that, from your perspective as observers, has that been successful? Is that a model that we should be looking at?

Yeah, we think so. That was included in the analysis and in one of our reports where they are able to use a sustainable source of funding, at least from our perspective, a revolving loan fund and they can actually access private projects and be able to co finance them and produce those types of large lines that we're seeing.

And they've also done it in Colorado as well.

Anyone else have a view on RETA or other models in other states?

I would just add that there's another layer of service that these entities attempting to provide that's not just capital but project facilitation, community engagement, understanding where the pain points are on the ground.

And you know, the Salton Sea project that we worked on at IBANK for a period of time, hundreds of individual properties that are implicated and who is out there representing the public interest. Describing why this is important, potentially allocating incentives, you know, sharing some of the earnings which I think the, the citizens approach could potentially do.

That's a role for an entity like a transmission authority, even if they're not owning or fully capitalizing. Just the local market engagement, constituency outreach. There's a lot of merit in that as well.

Okay. And so they're kind of combining both the, that piece with the financing piece as well.

My understanding of the New Mexico approach, at least I'm not as familiar with Colorado.

All right. And do you, Ms. Irwin.

Thank you. And you did a. We had a great presentation a couple of weeks ago on this and it seems like there's a lot of promise for big savings for ratepayers.

But I wanted to see if you could address the issue on wildfire liability that was, I mean obviously there's some backstops on the total liability for the IOUs and either way it ends up with the ratepayers shouldering part of that, depending on whose blame it is. So could you talk about that in the PPP lease model?

Yeah, I think Denzel might actually be a good person to talk to that among the risk allocation in the PPP structure.

Well, I mean I, you know, I confess I'm not a lawyer, I'm an economist, so I may not be the best source for this, but one of the, you know, one of the benefits of PPPs is that they is that they do have an explicit risk allocation in them.

And so you don't have this, you know, you don't have this ambiguity as to who will bear the risks if they, if those risks are realized. Instead you have, you have it in the contract and that contract is binding.

And so that's one of the benefits is that you, you know, you have visibility up front as to who, you know, who can insure certain, certain events, who is, who is not able to insure them. And usually the state or the government typically absorbs the uninsurable force majeure as part of these contracts.

But again, I'm, you know, I'm not a lawyer, so I can only speak at a superficial level on that.

And if I may add to that, we think that one of the benefits of this type of model is especially given the savings that we talk about building the same infrastructure at a lower cost. But that doesn't have to be the case.

You can build better, you can harden, you can add in additional types of wildfire mitigation to come to an acceptable level of risk that previously would have been cost prohibitive. PG&E tries to do certain types of wildfire mitigation that don't meet a certain cost benefit analysis at the CPUC frequently.

And having these types of savings opens the door to that. Now meeting that type of cost benefit threshold, that makes it worthwhile or if there is public ownership, makes the public comfortable with the ownership of that type of asset given a lower risk. That's now possible.

Thank you for that. So under state law, inverse condemnation would make the state liable for wildfire risk associated with assets that it, that it holds. There's no getting away from that. I think under most models the state is not going to want to operate those facilities.

So they would probably look to O and M agreements with the utilities or other private companies to do that. But as a practical matter, no private company will step in and take that wildfire risk or be able to do so in a way that would immunize the state.

The other thing to think about is the state is not eligible for the state wildfire Fund. It's not eligible for that, only the investor owned utilities are. It also, I think an important question is would it be required to have a wildfire mitigation plan?

All of the other investor owned utilities, including those who bid on these competitive projects, have to have a wildfire mitigation plan. It has to be approved by the Office of Energy Infrastructure Safety which holds people to the same standards. Right. So if the State is going to be subject to those same requirements.

Well then that's going to increase cost in a similar way. But it also introduces risk for how the system is operated. When you have multiple owners, you cannot have a coordinated response to wildfire. So for example, PG&E has several thousand weather monitoring stations across.

Across our system we monitor weather and we evaluate when a public safety power shut off is required. Right.

Well, what happens when we bring our line down but the state doesn't bring its line down because it may not have the same information or maybe it's not even required to have a PSPS program if it doesn't have a wildfire mitigation plan. Right.

So that not only creates risk for the state and for our citizens, but it's not an effective way to try to mitigate wildfire.

But as you mentioned, ideally it would go back to the utility managing the state owned property. Right. So that you would be able to make sure that you have consistency across the system.

I think it's a fair question whether a utility would be interested in that Proposition because it's asking them to assume a whole lot of risk.

I thought you said that risk is with the state. I mean, couldn't the risk, wouldn't the risk still be with the state even if you're managing it?

I mean, I guess that depends on the O and M agreement, but it would not come cheaply.

So I guess then that's. Have you looked at the maybe reluctance of the IO because really ideally you don't want a balkanized system. You would want consistent operator. And I assume in, in most of these areas it would be the IOUs. So would they be willing to take on sections of state owned transmission lines?

We have not had conversations directly with the utilities.

Okay. And then the one other question is the taxes that are being saved, is.

It just property tax or the taxes in our economic analysis are federal and state taxes, not local?

Okay, you had mentioned property tax. So, so it's property tax also then.

Oh yes, but the financing that we've been talking about as a driver of lower financing costs would also be tax exempt. So the rates are lower because you don't have to pay taxes on the bond income.

Okay, thank you.

That last piece is a federal matter. As a, the income tax at the federal level would be offset so it wouldn't be lost to the state.

Okay.

Some elements of the tax equation could be reduced in California, but the earnings on a tax exempt bond, the tax avoidance is a federal matter.

All right, thank you, Madam Chair.

Thank You. Thank you. All right, I just have a couple of additional questions. One about, we talked about the citizens model and the fact that there's, I think everyone agrees there's sort of an opportunity for the state to sort of play that citizens role. Is that right? Yeah. How much does that save?

So like on $1.0 billion project, how much would that save?

I think it's similar to the projections that were shown for the lease model, the project, private public ownership there. So that's the. I think from your charge you showed that was 25% savings.

I think that's the concession model.

Oh, okay. What was the other one then?

Yeah, I don't remember the name.

We have PPP concession. We have PPP lease. All right, so PPP concession. So you think the citizens model could save us 25%.

I'm sorry, which is the lease one. I don't remember the savings on the lease.

57.

57%.

I think we could approach 57%.

Of savings?

Yes. Because under the citizens approach, the citizens investment is displacing both equity and debt. Okay. So the real question for the citizens model is can it be done in a tax exempt way?

And I would turn to the expert on my left to ask you that, because there have been partnerships where the IBank has issued tax exempt debt pollution control bonds, for example, for utility infrastructure. And I guess I'm not an expert on that. Hopefully he, you know, he can find some really innovative ways to make that happen.

Not sitting here at the moment, I couldn't. But it is, it is true that IBank has and other state agencies have supported the issuance of this tax favor debt for a public purpose. But in order to do that, you have to make sure that there's not a lot of private gain happening somewhere else in the system.

So the true nature of the nonprofit structure needs to be interrogated, segregated and be sound. I think it's possible. But it still has to have a backstop of return guaranteed somewhere because somebody's going to have to buy the bond and they're going to in this case, believe the state, that the state is good for its repayment.

If it's not General obligation, it's associated with project income. Projects have to be working. Money has to be changing hands. So it doesn't obviate the need for certainty. It can reduce the cost of providing that certainty.

All right, so that seems that to me feels like the place we really need to dig in because we right now have the 2% savings scenario and the 57% savings scenario.

So I know we're not going to solve all of that in the space of this hearing, but do look forward to working with all of you to try to figure out how do we make that real and how do we capitalize on that. Then my last question is related to, I think, Mr.

Adler, you mentioned some opportunity with the rather modest amount, but nonetheless amount that we were able to include in the climate bond for transmission financing. I think it's like $350 million. And you mentioned an opportunity to utilize that, if I understood correctly, almost as like a pilot.

Do you have anything, any immediate further thoughts with respect to how you would see those resources deployed in the near term?

I would again stress the revolving Fund nature if it's feasible to do so. And I think we're, we're looking into that. Can it cascade down from a bond into a permanent revolving fund? If that's consistent with bond rules, we need to.

Yeah, well, that's how we, I think that was like, that was the language of the point.

Okay, that was my superficial read. Intent. You could do that. And you're right, it's not enough to Fund too many lines on its own. So what position should that money sit in the capital structure? And that was my point about taking smartly taking risks that private capital won't.

So for instance, on $1.0 billion project, there's maybe $100 million of early development costs that it's really hard to find in the, in the capital markets. It's by definition, not a lot of the pieces are in place. Maybe the contracts aren't there, but the work needs to proceed.

And so that could be an early commitment from a risk tolerant, smartly deployed public debt fund that could then be financed out when the next money comes. You've taken a lot of risks off the board. Private capital says this looks like a good deal, we'll pay back the state and then that money revolves into the next project.

So it's not just the amount of money, it's the speed at which you can turn it over because you've hit a milestone and you've been financed out of the deal into the next deal. That's how you start to get real impact over time.

Okay, great. Thank you. All right. I think as I said, you've given us a lot to think about, a lot to follow up on. And we are now going to say thank you and welcome. Our final panel. As we said, time's money.

So we were talking about the delays in transmission pipeline and digging in, I think that Ms. Hieta from the Public Advocates office. She shared this slide. I'll bring everyone back to this slide which shows that the average transmission project takes 8.2 years. Oh, I'm sorry. Please, panelists, you can please come up to the dais.

And I think as Ms. Irwin, you started to ask some questions about what's driving these delays and how do we start to condense some of those timeframes.

So I think that is really the goal for this conversation is to interrogate this 8.2 year timeline and figure out what can we do, what legislative action, you know, what steps can we take as policymakers to start to compress each of those steps.

So with that we are being joined by Matt Huber from San Diego Gas and Electric, Ralph Armstrong from the International Brotherhood of Electrical Workers 1245 and Jack Wadley from EDP Renewables North America. Thank you for being here, gentlemen. I think we're going to start. Mr. Huber with you.

Thank you very much. Thanks for having me today. Madam Chair and the Committee, I'm Matt Huber. I'm the manager of our major projects group at SD&E. So where we manage permitting, design and construction for capital projects, transmission as well as the renewable generation interconnection projects as well. Next slide.

I'd just like to go over, you know, as SCG&E, you know, our service utility, our service territory, San Diego County and portions of south Orange County. We have about 1.5 electric meters and about 2,000 miles of transmission line, 160 substations and 17,400 miles of electric distribution lines.

So we're fairly small in the state as a investor owned utility. And when we talk about the issues that we have getting these projects online, we typically address those. Mostly we address those internally.

We have our teams that we set up, our project management team as well as engineering and other folks and the same people that work on transmission lines for the, for the Cal ISO TPP projects as well as the generation interconnections. They're typically a lot the same people that we're working on.

So there's some synergy there for us to get the generation interconnections kind of dovetailed in with the transmission work. Go to the next slide please. So right now in our portfolio we've completed about 41 projects since about 2005, bringing on 4,980 megawatts.

Right now we have 28 active projects which is either we have contracts with third party developers or we're negotiating and that's another 7,066. So we've got a lot in the queue right now to complete in the next several years. Yeah, it's almost 150% increase in the megawatts we've done the previous 20 years.

And there's future projects from future, future cluster studies that will bring more projects our way. I just want to go over, you know, typically the timeline for us to complete one of these projects. The studies that are done by Cal ISO and our transmission planning team. It's about 18 to 24 months.

I'm not familiar with what's all involved in the studies, but that's approximately how long it takes. And then once a developer is approved to be part of the study, contract negotiations with the utility US takes about 120 days. And I think that's dictated by Cal ISO.

And then for our part in the utility, it usually takes us 6 to 24 months depending on what needs to be updated within a substation or transmission line to get them interconnected. Most of the schedule is on the developers. They have their timelines, they have their dates that they need to meet.

And a lot of times once LGIA is signed, that's a generation interconnection agreement. There's a large and there's a small one. Depends on the number of megawatts. But once that's signed, we, we typically run with it. We'll go and we'll meet that ISD date. Now the developers, sometimes they're not quite ready all the time.

And I think there's been changes to the Cal ISO process where they're required to have property in the hand before or previous projects. I think that was kind of a struggle with them. But we typically will meet that initial and service date.

A lot of times the developer will get an MMA which is a modification that they get permission to push out that date. But we'll be there ready for them when they're ready to interconnect. And typically I don't think we've had any, missed any dates that the developer needed to hit those. Okay, next slide.

So on the grid hardening projects, we currently have about 6 Cal ISO directed hardening projects out of the TPP that we need to do between 2028 and 2035. At least get them energized. They could impact these generation projects coming online.

We're right now, we currently don't have any projections that we can't do all the generation that we have now as well as these TPP projects. But some of the challenges that we've discussed that could affect us are procurement long lead items for the major equipment, i.e. transformers and circuit breakers.

That is something we're trying to manage now, try to get ahead of that, get some Q positions before some of these projects kick off or fully designed to get, you know, where we would typically order this material. I know permitting wasn't supposed to be part of it, but it's on the local and federal level that does.

Does have issues that cause us delays. Sometimes local agency jurisdiction, sometimes think they have jurisdiction where it's really the CPC jurisdiction. And sometimes we can have some. Take some time to kind of straighten that out. Federal agencies and in our territory, we have a lot of federal land that we cross.

And they typically, from what we've seen, the federal agencies just don't have the resources to support. And especially with all these projects coming online and most of them are on federal land, at least portions of them, that could be a problem for us and meet some timelines.

Not saying it is, but that's something that we're looking at and trying to get ahead of. One other challenge we're looking at is resources.

So with all these projects in the queue, resources could be stretched thin because a lot of these will be going on at the same time, not just in our territory, but also throughout California and then throughout the country.

All right, thank you. All right, we will now turn to Mr. Armstrong.

Good afternoon, Madam Chair and Members. Ralph Armstrong, senior assistant business manager with IBEW 1245, been on staff there for 18 years. Prior to that, I worked for Western Area Power Administration, which is a transmissions agency that the federal transmission Agency. And before coming on staff, before going there, I work for Florida Power and Light.

I'm also the Senate. Senate appointee to the California Wildfire Safety Advisory Board. So just an advisory board position to help look at the wildfire stuff. I was asked to come and speak basically on potential manfall shortages. Things like that, which we do not see anticipate that happening specifically out here. We have not had that issue.

What we do see is the fact that large transmission projects in the State of California.

I think the last one that we actually had here was the Sunrise project in San Diego for San Diego Gas and Electric, which was probably about 10 years ago, but we do a lot of transmission, small transmission projects and a lot of maintenance projects.

About 10-12 years ago, our international office realized that transmission work is somewhat specialized. And we have some national agreements that allow some of our transmission companies are really, really good at building transmission to get resources in and still build internally with our own Members specifically.

And then on top of that as we look to the future, we have apprenticeship programs which allows us to get training people that are in training into these transmission projects early on so we can bring more apprentices on to help supplement that workforce and learn towards future.

And the feeding poles to those are these line schools that are popping up everywhere we can get. I mean just the one in Orville alone puts out about 900 kids a year and that so we can feed into those. So there's a lot of. There's a lot out there which we don't anticipate. We haven't seen any.

With all transmission projects going across the country, any. Any shortages in that. I mean there are delays everywhere. I will tell you from in just not only transmission, but in any project where most of the cost overruns come from is the starting and stopping the mobilization, the demobilization, laying off workers who have.

Then when the project starts again, how do you get them all back together? Because they go someplace else. They're not going to wait around for the work. And so there's this learning curve that goes along when they start back up.

So if you could build a project or multiple projects and keep them working, you're going to gain proficiency and manpower issues. You know, they'll stay there. And this happens in distribution worlds, the transmission world and everything. It's getting people the work group together and continue, just have them continue to work.

You build proficiency, the lines go quicker and you're going to save a lot of money. The mobilization, demobilization, getting ready, getting, laying off, hiring back, retraining, all that stuff are costs that. That are absorbed by the ratepayers. And from a manpower perspective, I believe that is one of the largest cost overruns.

It just try to make sure to keep everything moving.

Thank you and Mr. Wadley.

Good afternoon Assembly Chair and Members. Thank you for the opportunity to speak with you today.

My name is Jack Wadley and I'm here as a representative of the Independent Power Producers of California to really raise the alarm of the impact that the growing backlog of transmission delays is causing in terms of increased costs for California ratepayers and additionally reduction in the reliability of the electric grid.