Assembly Standing Committee on Utilities and Energy

Good afternoon. I am calling to order this hearing of the Assembly Committee on Utilities and Energy. We're here today for an oversight hearing to discuss utility wildfire spending. This hearing is the first in a series of four hearings that the Committee has planned to dive into energy affordability and identify solutions to lower costs for Californians.

Before we begin with the hearing, I have a couple of housekeeping announcements to go over. First, as always, public comment is welcome. There'll be an opportunity for public comment here at the end of our panels. Public comment can also be submitted online via the Committee's website. As is customary, we will not accept disruptive behavior.

We will apply Assembly rules to maintain order and run a fair hearing today. With that, we'll go ahead and jump into the topic at hand, utility wildfire spending. So from Paradise to Sonoma to the Pacific Coast, Palisades wildfires have ravaged communities all across the State of California.

As the climate crisis continues to intensify, we know that these risks will continue to grow. As one of the witnesses in our hearing that was held two weeks ago noted, at some point, every acre in the state will burn. That is the reality, a very sobering reality in indeed.

And in the face of these risks, we know that the cost of doing nothing is enormous. And the cost of doing nothing has an impact that is absolutely catastrophic. So we applaud the efforts of the first, of our first responders, of our utilities, and of the state as a whole to address these risks with urgency.

Over the last five years, California's IOUs have made stabilization, substantial investments in wildfire prevention and mitigation. Our IOUs have invested $27 billion over the last five years in wildfire mitigation. This is the single biggest driver of rate increases that Californians have seen over the last five years.

These costs have increased monthly residential bills by approximately $24 a month for PG&E customers, $18 a month for Edison customers, and $13 a month for STG&E customers. So the purpose of today's hearing is to examine these growing utility wildfire costs to understand what measures have proven to be most effective.

And lastly, and I think very importantly for us to start to examine whether wildfire mitigation activities should continue to be funded through rates, or should we begin to Fund those through other means? I'm pleased to welcome my colleague, Assemblymember Bennett, who chairs the Assembly's Budget Subcommitee on the Climate Crisis, Resources, Energy, and Transportation. Thank you for joining us. Assemblymember, would you like to make an opening statement?

Thank you. Thank you very much. Chair Cottie Norris, Chair Petrie Norris I'm sorry to say, first thing I'd like to do is compliment you and your staff. This is a complicated topic and that was about as good a staff report as I have read in the four years that I've been here. But really well done with a very complicated topic.

Well, thank you Assemblymember, and a good opportunity to just thank and acknowledge our incredible Committee staff and our phenomenal chief consultant, Laura Scheibert. Thank you, Assemblymember.

Thank you. This is a fiendishly difficult topic to try to come up with solutions to. There's no question that over the next 20 years in California, electricity and water will keep going up faster than the rate of inflation. It's just the nature of all of the investments that have to be made.

The question is are there things that we can do to try to mitigate that to some extent. But those are the two essential utilities. People can't live without water. People can't live without live without electricity.

As we convert more and more to renewables that those renewables are going to be delivered through electricity, we're going to more and more people will become all electric and electricity rates will be very important. But the capital investments that we have to make to deliver just the new electricity, besides the wildfire risk, are significant.

I would like to point out from my perspective as I'm participating in this, that the burden of proof to break the payer of somebody using something away from the responsibility to be the ones that pay for that has to be in this situation.

In other words, we have to come up with a very compelling reason to make the change from funding wildfire mitigation from rates to something else. I'm not opposed to doing that, but I'm just saying we have to be careful.

Whenever you disconnect the user of a resource from the price they pay for that resource, you have the potential to dislocate the market in a number of different ways. You can if you disconnect all the way, you can really have people therefore overuse a resource.

And it you want the price of a product as much as possible to reflect the true cost of delivering that product. And if the true cost of delivering that product, if getting the electricity transported around the state has a fire risk involved in it, that's one of the true cost of delivering electricity.

Same thing's true with water as we're doing things. But we will have steadily in a democracy you have people that always want utility rates to be something that we artificially hold down and we have to be careful. So I'm very interested and I hope we can find it.

So I'm not trying to throw cold water on it, but I'm saying the burden of proof is going to have to be be there from that standpoint. And I'll finish with just one other comment, and that is there's potential technology and improvements that could be made that might be able to significant reduce the cost of trying to fireproof our electric grid.

Hopefully, we'll find all of those, but it doesn't look like there are many of those on the immediate horizon, and we have this immediate risk in terms of trying to move forward.

The other side of the equation is if we could try to make sure that when wildfires break out we don't incur substantial property losses and losses of life, that we drive the rates up for what the utility companies would essentially have to pay.

So there's two ways for us to look at this, and one is let's decrease our losses. Everybody benefits from that. We get lower insurance rates. People don't have to go through all the problems that are associated with having their houses burned down.

And the electricity companies don't have to raise rates because they don't get caught in lawsuits where they have to pay billions of dollars out there in terms of damages. So thank you very much. I appreciate the invitation and the opportunity to make some comments.

Well, thank you, Assembly Member. Appreciate you joining us and appreciate your partnership in this work. With that, we're going to go ahead and begin with our first two panels. We've asked our panelists from panel 1 and 2 to please come come up to the dais. We'll go ahead and invite panel 1 and 2.

Together we will be discussing wildfire mitigation investments to date as well as how those investments have driven risk reduction. What I've asked is for all of our panelists to provide opening remarks and then we will open it up for some Member questions.

And we'll begin with Forrest Kaser, who is the Chief Deputy Executive Director at the California Public Utility Utilities Commission. And I've asked Mr. Kaser both to begin with his comments as well as to help frame the broader conversation that the Committee will be having around affordability and drivers to rate increases in recent years. So the floor is yours. Thank you.

Great. Good afternoon, Chair Petrie Norris and honorable Members of the Committee. My name is Forest Kaser. I'm the Chief Deputy Executive Director of the California Public Utilities Commission.

And I'm honored to be here today to share some information with you about CPUC's oversight of utility Wildfire spending Given the numerous speakers we have today, my remarks will be brief, but I also wanted to note that some of the details will be covered by other panelists in this panel and in the subsequent panels.

So I will start Next slide please so I will start with this graph which shows the categories of electric costs that go into the three large IOUs combined revenue requirement over time from 2016 through January 1, 2025.

So the bar on the farthest right represents the total costs we expect to recover from PGE, SCE and San Diego Gas and Electric ratepayers starting January 1st of this year. You can see that the largest driver in recent cost increases is captured by the red rectangle which represents distribution costs.

This is where most wildfire mitigation costs like vegetation management show up. It is noteworthy that over the past year the rate of growth in distribution and wildfire costs has slowed down, which is evident in the graph. This is partly due to some large wildfire related costs rolling out of the rate base.

Utilities submit standalone applications to recover wildfire and catastrophic expenses related to specific events and these costs are recovered in rates for a specific length of time and they drop out of rates, which leads to rate reductions throughout the year. Some costs roll out of rates and other costs can enter rates so rates can trend up and down.

Next slide. So on the next slide I'm going to step back and provide some context for the trend in the distribution costs that I just showed you. First, I'll provide an overview of recent milestones.

In 2014, the CPUC started requiring utilities to systematically evaluate their risks and incorporate proposals for addressing those risks into the major spending plans that they propose to the CPUC every four years. Their General rate cases we call this requirement to consider risk the CPUC Risk Based Decision Making Framework.

This is about all types of safety risks, from earthquakes to wildfires to climate change, employee safety, and equipment failure. In 2017 and 2018, the state saw numerous catastrophic wildfires, as noted by the Chair in both Northern and Southern California. The extreme nature of these events drove the development of a new approach to specifically focus on wildfire risk.

In 2019, the Legislature established a new framework through AB 1054 and related bills for overseeing wildfire mitigation activities by IOUs. In 2022, the Legislature added a new element by requiring the CPUC and the Office of Energy Infrastructure Safety to create an expedited pathway for power line undergrounding. That was SB 884.

From 2019 to present, we have seen accelerated Spending by utilities on wildfire mitigation contributing to electric Bill increases. This is due to California's changing environment, impacted by climate change, the increased possibility of catastrophic wildfire once sparked in those environmental conditions, and the financial and safety risks posed by wildfires. Okay, next slide please.

So next I'd like to focus in on the current wildfire framework established by Legislature in 2019 as it pertains to investor owned utilities. There are a few key elements that I wanted to highlight here. Number one, a requirement that electric corporations develop and implement comprehensive wildfire mitigation plans subject to regulatory oversight.

These plans detail the IOU strategies for mitigating the risk of utility involved wildfires. To implement the wmp, a new Department separate from the CPUC was created specifically to review wildfire mitigation plans and ensure they are being implemented effectively. That's the Office of Energy Infrastructure Safety.

Number two, a wildfire insurance Fund was created to provide financial security to those impacted by wildfires. The wildfire Fund is administered by the California Earthquake Authority. Number three. Under the framework, the CPUC continues to oversee utility spending, including wildfire mitigation spending, and continues to have the authority to undertake enforcement action when appropriate. Next slide. I think we'll.

In the interest of time, we'll just skip the next slide and we can go to. That just shows the increase in wildfire spending that was on on the very first chart. So we can move on to the next slide. Okay, so utility investments in wildfire mitigation span a range of categories.

Each utility articulates its own specific strategy in its wildfire mitigation plan which are all publicly available on the utilities websites. So I'm not going to read this list, but hopefully this is one point of reference for you to understand the broad categories of wildfire investment.

All those dollars are going into purchasing these things which produce benefits for ratepayers. Okay, and then next slide please. So I'll wrap up by considering some of the strategies that we have successfully implemented and potential strategies for reducing the costs associated with wildfire mitigation. So there are two strategies that CPUC has already successfully implemented or overseen.

One is self insurance. Utilities set aside funding to cover themselves in the event of a loss instead of purchasing insurance on the market. This strategy has saved ratepayers an estimated 467 million from 2018 to 2023 and is expected to continue to deliver that scale of savings in the future years as well. The other is securitization.

This involves allowing utilities to bundle costs into a bond backed by ratepayers thereby lowering interest rates. So far, the six securitizations over the period of 2020 to 2024 have saved ratepayers an estimated $2 billion. Two strategies hold promise for containing wildfire mitigation costs but require additional work.

Both of these strategies are included in the CPUC's responses to Executive Order N524 that Executive Director Peterson mentioned in the last hearing. One potential strategy is to better align the process of wildfire mitigation planning with the process for reviewing and approving utility spending plans, their General rate cases.

And another potential strategy, as alluded to in the opening comments, is to use external non ratepayer sources of funding to pay for wildfire investments. With that, I'll conclude my remarks. Thank you.

Thank you. We will now hear from Randy Howard, who is the General manager of the Northern California Power Agency.

Thank you Madam Chair and Assembly Members. Thank you for convening this important hearing. As mentioned, my name is Randy Howard. I'm the General manager of Northern California Power Agency or a joint action agency or power authority. We have 16 Members serve about 700,000 meters in Northern California.

In addition, I am the publicly owned utility representative and co chair of the Wildfire Working Group with the Electricity Subsector Coordinating Committee. That's a lot that's jointly with the Federal Government.

So we on a regular basis in our Committee meet with the agencies of the Federal Government to talk about wildfire mitigation activities and how we can work together to streamlined to make that process more efficient. And so I represent the publicly owned utilities throughout the nation.

As mentioned, the wildfires are kind of growing in intensity and frequency across California, destroying both the forests, grasslands and our communities. The risks that are posed out there to our communities and economy also are hitting our electric grid. Remember, about one out of 10 fires might have been ignited by a power line.

Nine out of 10 are not. But 10 out of 10 seem to burn our infrastructure down. We also have a lot of cost associated with infrastructure loss associated with wildfires that are burdened sometimes with our ratepayers as well.

We're seeing more and more devastation caused by these wildfires and in areas that were historically deemed low risk, the risks are changing dramatically for us.

Where we had a focus before on high fire risk tier areas, we see now urban fires becoming a more frequent thing and more devastating and that's due to some of these extreme weather events that were incurring. California POUs like our investor owns have active wildfire mitigation plans.

We continue to grow our budgets for wildfire mitigation activities, but we continue to encounter numerous hurdles and delays when undertaking wildfire mitigation, Grid hardening and wildfire recovery actions to protect Protect the electric grid and the communities that we serve. For example, the electric utilities with electric infrastructure on state and federal lands.

Our ability to mitigate wildfires and respond quickly in emergencies is jeopardized frequently by delayed agency approvals for routine vegetation management, hazard tree removal operations, and recovery after a wildfire event.

We also encounter delays in approvals to create right of way access roads needed to bring equipment in for vegetation management or to help harden infrastructure, such as replacing wooden poles with metal poles or undergrounding lines. Agency approval to remove even a single hazard tree in advance of fire season sometimes can take us months or even years.

Further wildfires and their associated liabilities can significantly impact the electric utilities, resulting in financial distress and potential bankruptcy. It's not just the IOUs, it's the POUs as well. And electric utilities, as you've seen, are often sued for damages following wildfires, even when their infrastructure equipment is not the cause of such fires.

And for small public power utilities, which have far less resources. We can't self insure. We don't have an ability to self insure. We're also not part of the state's backstop system. So this goes right back to our communities in which we serve. Further exacerbating that financial risk.

Many of us are challenged by any ability to get wildfire insurance or sufficient quantities of insurance. Some of our expenditures similar to the IOU community, We make similar investments. But fuel treatment for vegetation management, Truckee, Donner, PUD, they increase their expenditures from $500,000 per year to $2 million a year.

At our GEO plant for NCPA, we're now budgeting $890,000 per year for just clearances around our powerhouse and our substations. That cost has gone up almost four times in the last five to six years because just having sufficient folks available out there to do the work for you and the cost of doing that work and prescribed fire applications projects such as transmission line inspections, insulation, hardware replacement for NCPA.

Last year we spent 3 million on just one of our lines. That again doesn't improve the efficiency of the line. It doesn't increase the flow or capacity of the line. It doesn't produce one additional kilowatt hour to a customer. There are incremental cost to mitigate wildfire risk on our system.

That's where assemblymember Bennett, where you indicated, is it truly a burden of the Cost. In some cases, these investments are being made because the forests around us aren't properly managed. There aren't sufficient resources to extinguish a fire once it was started.

So we have to make additional or incremental investments to support those efforts to protect the residents and the communities in which we serve. Other examples the City of Redding. The City of Redding made a conscious decision after the Carr fire, where a number of citizens perished in a lot of structures.

And that was related to an actual car pulling a trailer on the I5. But they Fund now equipment for vegetation management within the Reading Fire Department. They Fund 15 firefighters.

They Fund additional equipment for the park Department to clear brush and trees away from poles, substations, and they Fund also some of their General public service Department with additional or incremental equipment. The difference with the POUs being combined and embedded within their cities is they bring the entire city together. We're not a standalone utility.

We're part of a city infrastructure, typically. And so we work with all the various city departments and determine how best to deal with a wildfire plan and a mitigation plan for that community. And so for the City of Reading also, power polls high risk.

So in 2021, the City of Reading was treating those poles to reduce the risk in case a fire came through. Now there is some new technology and they're wrapping poles. So in 2022, they wrapped over 500 poles, 230 in 2023.

And we're continuing to get all those Poles wrapped up there to reduce the fire risk of losing those Poles or having problems there. They also have a community where they utilize goats. They have fleets of goats that go around on their rights of way in that community and reduce the wildfire risk near their lines. Our utilities do unique things and different things, but very similar to the IOUs, we continue to spend money too on research.

It is a key component for us in the risk and that's really trying to improve the near term and the long term situational awareness, including mapping tools, weather stations, thermal imaging cameras and satellites, and trying to develop more granular and highly predictive weather models to better inform our operations.

Many of our utilities have not yet adopted PSPS plans, but they're starting to. Our recommendation to all of them is put one in place. You don't know when you might need to use it. Hopefully you never have to use it, but it's critical.

These extreme weather events are well beyond anything our infrastructure was designed for or built for in many cases. And we need to be able to shut that system off when it's appropriate to try to protect our community.

The POUs also believe the state needs to adopt additional long term policies that help electric utilities mitigate for wildfire and respond quickly to the emergencies by expediting both state and federal agency approvals for routine vegetation management and hazard tree removal, creating right of way access roads for necessary equipment, enabling hardening to the grid, such as again replacing Wood poles with metal poles, covered conductors and undergrounding lines.

Such policies would include things like amending CEQA and supporting our efforts many of us are working on to amend nepa. The state is surrounded by federal lands as well as some state lands and we have a lot of our infrastructure that goes through those properties and we need to get more efficient.

We need to have some urgency as to our ability to do some of the work. NCPA has one project. We've been working on the permitting of it for five years and it's a high fire risk. Five years to get the permits through the federal forest. That shouldn't be the case. We know it's a high risk.

There should be some urgency to it and we've been working hard to move that. But we need to ensure that the state is also supportive of those efforts at the Federal Government.

But within sequel reviews as well, the POUs also believe the state should reasonably limit electric utility liability for wildfires to ensure the reliability, affordability and resilience resilience of the grid. Similar efforts were approved last year by the Utah Legislature and are currently pending this year before the states of Washington, Oregon, Montana, Idaho and Alaska.

Putting a framework around liability risk. As we know, in the end, it's not PG&E who's paying it. It's not Edison who's paying it, it's the rate payers that are paying. And we need to find a better framework for that liability and risk.

So there is a need for urgency and accountability for all stakeholders that have that opportunity, if not an obligation, to address the wildfire crisis in California. I thank you again for holding this hearing and I look forward to any questions you might have.

Thank you, Mr. Howard. We're now pleased to welcome Chief Brian Fennessy who's joining us from the Orange County Fire Authority. Good afternoon, Chief.

Thank you very much. Good afternoon, Chair Petrie Norris and honorable Committee Members. I'm Brian Fennesy and I serve as the Fire Chief of the Orange County Fire Authority. I'm also the President of the California Fire Chiefs Association and I chair the Firescope Board of directors. In 2020, University of California at Irvine researchers issued a report based on data from thousands of wildfires over 100 years.

And the bottom line was summarized by the report's author. Each new year of the 21st century has been a record breaker of wildfire damage in California. Around the time of that study, I approached Southern California Edison to share two facts.

One, all of the wildfire weapons we have, none are more effective than overwhelming aerial suppression on initial attack. And two, despite our ongoing advocacy to employ the most effective aircraft to do the work, we in the fire service have been unable to secure appropriate funding.

Meaning our air operations sections were tasked with protecting life and property without the most effective tools to do so. I'm sorry. Yep, skipped a page here.

Those conversations with SCE led to the creation of the Quick Reaction Force, or what we call the QRF. It's a public private partnership that provides the OCFA, the LA County Fire Department, and Ventura County Fire Department with the largest, fastest and most effective firefighting helicopters on the planet.

The CH47 Chinooks, aircraft that can hover, fill 3,000 gallons in 90 seconds. It drop on precise targets day or night. The QRF also includes a Sikorsky 76 command and control intelligence helicopter and a mobile retardant base that can mix 18,000 gallons of retardant per hour.

Funded by SCE, the program launched in 2021, fighting over 50 wildfires, including countless fires that were hit so hard and fast they never made the news. Achieving our goal to keep wildfires at 10 acres or less 95% of the time. And many fires weren't stopped during initial attack, were suppressed by the QRF during extended attack.

You probably don't remember the Tuna fire in Malibu in July 2021. That's because in just two hours, one of the QRF CH47 Chiduck helitankers dropped 37,000 gallons of water in a narrow canyon at night, saving billions of dollars of homes in a way that no other aircraft on the planet could.

Despite this success, the QRF was funded only during peak fire season in its first two years, meaning that six months of the year, the aircraft were unavailable. Then, In May of 2022, the Coastal Fire in Orange County destroyed 20 homes, and the press and public had a question. The question was, where were those QRF helicopters?

Telling people who lost everything that the aircraft that may have saved their homes were unavailable because we weren't in peak fire season was heartbreaking and further confirmed. That what we used to call fire seasons have been replaced by what is now a fire year.

So in 2023, we worked with Edison to expand QRF year round, empowering US to respond 24/7/365 with the largest, most precise and only aerial firefighting force in the world that drops retardant at night. Why is that night part so important?

Fixed wing firefighting aircraft are grounded at night for safety, but typically that is the best time to fight wildfire. As temperatures and wind decreases and relative humidity rises, the QRF aircraft not only fight fires at night, they do so with even more precision than during the day.

In this way, QRF has been doing what no other aircraft can do. Hold and suppress fires in the critical first night of the firefight, even when fires escape initial attack and continue to burn out of control.

The QRF aircraft has had its victories, including during the LA fires on which QRF dropped almost 1 million gallons, perhaps most notably through dozens of precise drops that helped save Brentwood live on television. To date, the QRF has responded to nearly 250 wildfires dropping 9 million gallons and benefiting the entire state.

That includes those outside Edison service area as well as evidenced by numerous cost analysis reports demonstrating the QRF as a public benefit, saving not just lives and property but billions in taxpayer dollars. SCE must be lauded for investing more than $100 million to Fund QRF these past four years, well beyond any reasonable proof of concept timeline.

And while SCE is funding QRF through 2025, they have been transparent about the need to transition the funding from SCE customers to a more sustainable financial model, particularly in light of the company's continued progress in various other wildfire mitigation initiatives.

Thus, we are grateful to Assemblymember Petrie Norris for introducing AB 275 and on behalf of the OCFA, LA County Fire, Ventura County Fire and the 10 million people we serve, we are proud to join her and this Committee in working to create a state focused funding method to keep the QRF protecting life and property well into the future. Thank you very much.

Thank you Chief. Our remaining three panelists are going to speak to risk mitigation strategies that they've deployed and how they are working to maximize investments. We will first be hearing from Caroline Thomas Jacobs, who's the Director of the Office of Energy Infrastructure Safety.

Good afternoon and good afternoon and thank you Chair Petrie Norris and Chair Bennett and Committee Members. My name is Caroline Thomas Jacobs. I am the Director of the Office of Energy Infrastructure Safety. Thank you for inviting me today to this to this hearing.

Energy safety was created in 2020 through Assembly Bills 1054 and 111 in response to the tragic fires of 2018 and 2017. Our job is to push California's electrical corporations to better understand their wildfire risk and to prioritize their investments to address that risk.

When the Legislature created us, they did so in recognition that the risks were too high and the environment evolving too fast. To enforce wildfire safety through the traditional regulatory process.

Governor Newsom and the Legislature created the modern Wildfire Mitigation Plan Framework to expedite and prioritize utility safe safety investments of the grid statute does this through requiring utilities to develop and implement wildfire mitigation plans. Energy Safety evaluates the plans to make sure utilities are addressing that risk, maximizing effectiveness and continuously improving Year over year.

Once we approve a plan, Energy Safety conducts inspections and audits to make sure that the utilities are following through on their plan. We make sure that they're doing what they committed to do.

And we have a number of other work streams to push utilities forward that I believe you have a handout that lists out those additional work streams, so I won't go into the details there, but the Wildfire Mitigation plan is the core regulatory tool.

Given the cost of investment in wildfire mitigation, the first question certainly is, is it working? I can confirm that the investments made to date are improving how utilities understand and address their wildfire risk. But we still have a long way to go.

As we have been painfully reminded, one spark in the wrong place under the wrong conditions has the potential to create a catastrophic fire.

Through the Wildfire Mitigation Plan review and approval process, we have required utilities to develop a more detailed understanding of where their infrastructure is located, what equipment is on their poles, and how that equipment fails and potentially causes an ignition.

They have replaced tens of thousands of aging and ignition prone equipment and developed new techniques for identifying potential failures and potential ignitions. The reality is, our legacy grid was not built to avoid all sparks. For example, historically it was common practice to install fuses that are designed to drop hot material on the ground when they operate.

Normally, it was, and in many circumstances still is, common practice to run equipment to failure. Through the Wildfire mitigation regulatory framework, we are driving the utilities to reimagine how they build, operate, and maintain the grid. And I, like the rest of you, I'm very interested in discussing today how we can reimagine, how we Fund that work.

Affordability is a crisis, and it's clear that the traditional model does not work for the speed and quantity of work required. While I'm not a financial expert, I'm on the safety side. I don't have easy solutions to offer. I do, however, like Chair Bennett referenced, know that we pay for it on the front end or we pay more for it on the back end.

So as I close, I want to say that Energy Safety is a small team of engineers, scientists and analysts who are laser focused on driving utilities to do better and move faster to address wildfire risk. We're committed to working with you to make that happen.

Your commitment to us and this mission has been unwavering over the years and we deeply appreciate your support. With that, I'll close my remarks and I look forward to your questions.

Thank you, Director. With that, we're going to turn to Carla Peterman, who is the Executive Vice President and Chief Sustainability Officer with Pacific Gas and Electric Company. Hello.

Thank you. Good afternoon, Chairwoman. And good afternoon, Members of the Committee. Chair Bennett. Wildfire remains our highest utility safety risk and I appreciate the opportunity to comment. At PG&E, our rates do reflect the value that we deliver on safety.

But we also recognize that delivering this value has led to a steep increase in rates and that has been challenging for many. We do not take that lightly. Looking ahead, we expect electric rates to be more stable in 2025. Average electric bills are lower now than this time last year.

But we recognize there is still more work to do to put PG&E's wildfire risk in context. Our service area is larger than any other utility service area in the country. We face more wildfire risk than all other California utilities combined. Over 50% of our service area is designated as high fire threat.

Yet even with this extreme risk, we've made progress on risk and cost. We have had no catastrophic wildfires in the last two years. We've hardened more than 2,000 miles of lines, installed cameras and weather stations that provide immense public safety benefits. We've minimized public safety power shutoffs, created more than a dozen micro grids.

We've also saved millions in insurance costs. We've reduced undergrounding costs and we've lowered vegetation management costs while working a record 1.73 million trees just last year. There still remains a significant funding gap to address risk. Investor owned utilities invest approximately 6 billion annually in wildfire prevention, while the state typically contributes less than 500 million annually.

PG&E has been a strong advocate for state policies and funding like Cap and Trade and Proposition 4. And we continue to work closely with the California Wildfire and Forest Resilience Task Force to advance critical initiatives. Every dollar the state invests in wildfire risk reduction helps lower the burden on utility customers and strengthens California's insurability.

To further reduce risk and improve affordability. We do need to explore several solutions. As noted in the Committee paper, we do need to pursue more efficiencies that deliver long term savings. And we're doing that. It's why we support strategic undergrounding as cost effective solutions in the highest risk areas.

Since that allows us to reduce reliance on costly vegetation management and reduce reliability losses. We do still need to ensure that customers have reliable power. Last year we had over 100,000 customers with more than 5 outages due to the fast trip and operational controls that we use. Undergrounding is key to making that better. Moreover, we've got to rationalize regulations that will potentially increase costs with new requirements from multiple agencies.

So including proposed regulations we are engaged with right now with the Board of Forestry and the State Water Board, both of these regulations, if they move forward, would add hundreds of millions in veg management costs to customers if approved while at the same time we've been working hard to reduce those costs.

We also support assessing moving wildfire costs out of rates. We recommend increasing state funding for vegetation management that would reduce PGE bills by about 10%. Also, near term support PG&E's application with the CPUC to refinance past vegetation management expenses. This could reduce bills by 7% in the first year.

Create additional state funding opportunities similar to the Department of Energy loan program that could provide lower cost financing for grid hardening. Lobby for federal eligibility for FEMA disaster relief to be extended to investor owned utilities just as it is available for publicly owned utilities.

Importantly, improve the regulatory process between the Office of Energy Infrastructure Safety and the CPUC in a way that continues to leverage our utility's world leading expertise. Expertise on wildfire risk mitigation incorporates new innovations and ensures funding and compliance requirements are transparent and aligned to meet yours and customer expectations of safety and risk reduction.

Finally, the state must better align its and other entities investments with the annual 6 billion IOU spend. For example, why not have others like cities do mitigation plans? Why not have insurance companies have requirements that incentivize such actions? PG&E remains firm that catastrophic wildfires must stop and energy must be affordable.

Unfortunately, even with our cost savings, electric bills will include higher costs this year because of market concerns that California is not ready to address wildfire risk in a comprehensive way.

The January wildfires, even though they were not in our service area, have increased PG&E's utility debt borrowing cost by over $500 million over the life of new loans we will pursue this year. And that lack of confidence is spreading to public entity borrowing costs as well.

The good news is there is a lot that can be done with state direction and participation of everyone who has a role in reducing catastrophic wildfires. Thank you for the opportunity to comment.

Thank you, Ms. Peterman. Now we will move to our final speaker of this panel, Mr. Duncan Callaway, who is the Professor and Chair of the Energy and Resources Group at the University of California at Berkeley. Thank you.

Thank you Madam Chair, Chair Bennett and Committee Members. As Chair Petrie Noris. My name is Duncan Callaway. I'm a Professor of Energy and Resources at the University of California, Berkeley and I'm gonna try to tell A good new story today in the midst of lots of sobering information about wildfire.

If you go to the next slide, I'll start with one of the most compelling pieces of data that we've worked with in our research.

A little bit hard to see with the size of the screen here, but if you look at the bars actually on the far right, you're looking at in the 2013-2018 period, followed by the 2019-2023 period, the number of structures burned per year due to sources other than lightning and the electric power sector in California.

Some of you will remember the CZU lightning complex in Santa Cruz and San Mateo counties in 2020. There's an enormous number of structures burned in that period. And so you can see that the recent last five years have a number of structures burned there.

The very compelling story that I want to talk a little bit more about is the yellow bars here which show structures burned per year in California from sources ignited by the electric power sector. You can see that in the period from 2013-18, we were looking at about 5,000 structures burned per year.

And it's just plummeted down to well under 1000 since that time. I should note this is up to 2023, the most recent year that we have data for.

If you go to the next slide, one of the things that we've been doing in our research is to try to understand what's the source of that reduction and can we attribute it to specific measures that utilities are taking. So in our work we've been focusing on Pacific Gas and Electric Service territory.

I should say in large part because the data that are available from PG&E are quite good for doing this kind of work. Much better than what we found from the other investor owned utilities. And we've also focused on the distribution system because 95% of wildfire ignitions in PG&E service territory are focused there. So omitting transmission.

So what we're looking at in these charts is by year and by month, an estimate of wildfire risk. And the black line is actually on top of a red dotted line, which originally they're the same because they're measuring the risk both with and without the interventions that PG&E has been taking to try to reduce wildfire risk in their footprint.

But as you move along in years, you could see in the top right that the red dotted line is a little bit higher than the black one. And that's because there was a tremendous number of public safety power shutoffs that occurred in 2019. And that's coming from that red bar there that you can see in.

I believe it's September. October. Wildfire risk was significantly reduced in that period due to public safety power settings shut offs. So I'll move all the way over then to the bottom right figure, which is 2023, the most recent year we have data for.

What's happening here is that there's just been a tremendous reduction in wildfire ignitions Coming predominantly from an innovation called enhanced power system safety settings, or EPSs fast trip.

This is a setting where circuit breakers, existing equipment in PG&E service territory, is given a setting to be more sensitive to any sort of disturbance at the cost of customer reliability. However, what we see in our research is that it reduces ignitions by about 82%.

So there are other bars that you can see in the figures Predominantly coming from enhanced vegetation management and undergrounding. And I'll talk a little bit more about those on the next slide. But first, major point. These fast trip settings jumped onto the scene in 2021 and 2022, and they've made an enormous difference. Okay, next slide.

These fast trip settings we have found are tremendously cost effective, but very important caveat. Undergrounding, of course, completely or nearly completely eliminates risk on the circuits that do get undergrounded. So if you look at these charts, what we're measuring is the dollar spent per avoided structure burned according to our modeling.

And if you actually start with the darker green plot or bar, that's enhanced vegetation management. Our finding is that enhanced vegetation management is the least cost effective of the measures that PGE has used in recent years. So their decision to stop that program is supported by our results. And so we support and agree with that decision.

If you look over on the far left, fast trip settings, significantly less expensive per avoided structure burned. And then undergrounding in the light green comes in somewhere in the middle. The dark red bar is showing you a combination of these fast trip settings plus public safety power shutoffs.

So those are the operational interventions that you know are going hand in hand. Far fewer public safety power shutoffs in recent years. So. But I do want to stress this very important point. Of course. Enhanced these EPSs fast trip settings, reducing ignitions by 82%. Whereas undergrounding completely eliminates where you can do it.

Okay, so final chart to make my last major point in terms of what we're seeing in our research is that these fast trip settings due to their cost effectiveness. If you go to the next slide, please. Have completely changed the calculus of the value of undergrounding.

I want to emphasize that we are not saying in our research that undergrounding should not happen. But this recent innovation is extremely important in terms of changing how much undergrounding should be done to achieve a certain level of risk.

The way to look at this chart is I'll focus on the 8,000 mile number which you can see there's a vertical line that comes down to 8,000 miles. If you think about PG&E, they publicly announced a target to underground 10,000 miles of distribution infrastructure that corresponds actually to 8,000 miles of overhead distribution infrastructure.

Because a mile overhead actually has to be a little bit longer underground to get around obstacles. And so the way to read the chart then is to say, okay, on the left axis we've got avoided structures burned over a 40 year period according to our models.

And you can see that without any intervention, the models indicate about 20,000 structures burned over a 40 year period. Bring in that 8,000 miles of overhead underground and you bring that down below 5,000. That's the top dotted line. Now let's say what happens if we introduce the enhanced power system safety settings, these fast trips.

The amount of avoided ignitions that you get from that undergrounding is significantly less. Or actually rather avoided structures burned because the enhanced public safety, sorry, the fast trip settings, I should say are doing just an enormous amount of work to reduce that risk. What we're not saying is no more undergrounding.

But what we are saying is that there's really an incredible success story here. That innovation on PG&E side has really changed the calculus in terms of how much capital cost has to go into reducing wildfire risk. And rather it's done with operational interventions. Okay, so last slide.

I'll say just in terms of action, I want to once again just say I think there's another, a fourth success story, if you will, which is that the data that have been made available by PG&E to PUC and third parties such as UC Berkeley, that needs to continue enabling, continuously evaluating risk management mitigation actions.

So we do think that utilities have a number of incentives that do favor complete elimination of risk, including inverse condemnation, rate of return regulation. We understand there are a lot of measures to address those things, but we think continued oversight is extremely important. For these reasons, I should say covered conductor is something I haven't mentioned here.

And that is in large part because we and our data don't have enough to really fully evaluate the effectiveness of covered conductor. We'd like to see more deployment there. To Chair Bennett's point, we think that further innovation, enabling further innovation, going all in on Every possible measure is extremely important as evidenced by this fast trip setting.

And we would recommend that taking as much as possible a step by step approach on capital intensive investments like undergrounding is prudent given that we don't know what the future holds in terms of the innovation landscape for reducing ignitions due to these operational interventions.

And then the final point that I'll just say is that communicating these kinds of risks, grappling with these highly uncertain risk benefit decisions, are incredibly difficult to do even by experts. But we think that.

I welcome the Committee's perspective on the best way to communicate these kinds of things to the public in order to engage as many people as possible in these kinds of conversations. Thank you for your time.

Well, thank you so much. And I do appreciate that you shared a little bit of good news. I think we could use that in this. And as I said to Laura, I think this is more math per minute than we've ever seen in this hearing.

But the good news is you have several Members of the spreadsheet Democrats on this Committee. So we're very excited. Okay. So with that, we'll go ahead and open it up for questions from Committee Members. Assemblymember Bennett, did you have any questions?

I'll try to rip through these things quickly. Your vegetation being the least effective expenditure of dollars per structure. Could you just elaborate a little bit more about how confident are you in that evaluation and statement?

There's a tremendous amount of data in terms of, and a tremendous amount of work that went into enhance, I should emphasize enhanced vegetation management in PG&E service territory. So we feel, we feel confident that we're capturing the effectiveness of enhanced vegetation management, which I didn't mention. According to our models, it's about reducing ignitions by about 56%. Great.

Your confidence level, pretty. I know, I know. The chair wants us to move fast. Okay, I'm going to jump over to the, to the fire chief and that is the QRF helicopters, can they fly in higher wind conditions? And fixed aircraft, fixed wing aircraft, they can.

And probably more importantly, they're able to hit their targets much more effectively. You know, a fixed wing aircraft has to be much higher off the ground. When the wind is blowing a lot, that retardant or water they're dropping will blow off, whereas the helicopters can actually get, get lower.

And what is the wind speed that they are generally are grounded at?

We look at anywhere between 35 and 45 miles an hour sustained with gusts maybe to 50 to 60. It's a little dicey after that. And a Lot of it is pilot preference.

Good. And if I could turn you were identifying the various strategies out there. I didn't catch where does the funding come from for the Wildfire Fund.

So the Wildfire Fund is half funded by ratepayers and half funded by the shareholders of the large investor owned utilities.

Okay, great. I have one other question. In the report, GRC was referenced. What is GRC?

General rate case.

Thank you very much. Thank you, Chair Bennett, Assemblymember Harabedian.

Thank you all of you for the very helpful presentations. The report was excellent as well. I agree with Chair Bennett and I just have a few questions. I do think that one thing that came through in the report and it was touched upon from the representative from the PUC is really the, I think very intricate, to put it as nobly as I can, way that many of these costs are financed.

If I had to count, there's I think six different ways that you can finance it. General rate case, wima, Cema, lipa, outside financing. There's just a host of different ways that these costs can be captured, financed, et cetera. How did we get here?

And I know the PUC has recommendations, but why do we have a system that is so complicated to finance these measures?

Sure. So I think some of the mechanisms that you're referring to and that were in the excellent report arose initially in response to extreme events that happened.

And the need to allow utilities, a vehicle to be able to respond to those extreme events more immediately than they would normally be able to respond if they had to wait for a whole nother General rate case cycle to come around.

So that that created things like the CEMA account structure where utilities are allowed to between rate case cycles, book costs that they're incurring as they're responding to an active event. It could be an earthquake, it could be a wildfire, it could be a storm.

You know, when they respond to those events, they incur costs to, you know, restore the power, replace power poles, string up new conductors. Numerous, numerous labor and equipment costs get incurred.

They, they needed a way to track those costs in order to be able to eventually potentially recover them to the extent that the Commission finds that they were reasonably incurred. So I think it was piece by piece responding to different types of emergency situations that arose in the state that allowed us to build that structure.

But you're right that it is, there's quite a few different accounts and it becomes hard to track at times.

Well, and I think it leads to really negative results for ratepayers. Right. PG&E for example, it's noted there were six rate hikes in 2024 for PG&E customers. And I think that that is something that should be avoided at all cost.

I know the PUC has recommended consolidating streamlining these expenses into the General rate case, which I think is a good recommendation. I want to just say very quickly that the other question that I have goes back to the recommendation by the witness from PG&E.

And you mentioned that insurance, the insurance market doesn't do enough to incentivize some of this. I'm just curious, what exactly should the insurance market be doing to incentivize wildfire mitigation at this level?

I understand there can be home hardening and things like that at the individual level, but at a systematic level, we what can insurance companies be doing?

Thank you for the question. Well, I think you touched upon it, which is they are writing policies for most people in the state. And so for example, as part of writing that policy, are they expecting or confirming that people are doing a certain amount of vegetation clearance around their home?

I mean that can be even lower cost than talking about hardening themselves, but making that a part of it. Because these insurance companies, they need to make sure that these properties are as safe as possible. And then if there is a fire that is associated with utility equipment, the insurance companies then come access the Fund.

So part of their responsibility is to make sure that they are doing what they can to make sure that that damage never occurs. And sir, may I respond a little bit to your previous comment around the different cases and the different rate changes? I think notably this past year, as you noted, we had six rate changes.

One was a decrease and three of those, well, two of those reflected costs that recurred back in 2020 through 2020. So it's taken a while for that spend to actually go through customer bills, but we're actually seeing that decline in those costs come out.

Now, in terms of the recommendation to align the wildfire spend more with the General rate case, generally we are seeing that happen. But one of the things we need to be aware of is making sure that there's opportunity to still have innovation.

For example, when PG&E did the innovations around fast trip, it was the same year that we also made innovations around undergrounding. Being able to innovate and change quickly to end programs when they're not working to start new programs is important.

And if you have a four year rate cycle and we prepare those cases two years before we file, you just want to make sure that you're Incentivizing still continuous innovation and cost savings and appropriate cost recovery.

Appreciate that. I appreciate that feedback. And my last comment, it's really not a question. Would just be that I do think that with undergrounding and I do think Fast Trip has, has changed some of the calculus.

But I think that to the extent that undergrounding continues to be a focus throughout the state, I think that it does help the system, but it particularly helps the IOUs implemented.

If we do some of these recommendations of actually, you know, authorizing some sort of coordination with the other utilities, with the other construction projects, I think that that is just something that should be done and is overdue. Right.

If we are, if we are doing construction projects and it doesn't come from the IOUs, but someone, another agency is doing it that should be coordinated so it does reduce costs for the undergrounding so that we can actually underground where we need to. And the ratepayers and the shareholders are paying less for it.

And I think that's something that is long overdue. I think the recommendation is great. And so I hope we can focus on that to make everyone's life a little bit easier to the extent that we're doing a lot of these underground projects going forward. So thank you for being here today. Thank you, Madam Chair.

Thank you, Assemblymember Rogers.

Thank you, Chair. I appreciate the presentations and I appreciate the questions and comments from my colleague. It actually triggered a couple of additional ones for me. I really wanted to start really with the Wildfire Fund.

It's always a bit of a sore topic, I think, in my community in Santa Rosa, because the Wildfire Fund was developed in 2018 after Tubbs, after the campfire, and our constituents were excluded from it. And instead we were paid out from shareholders stock, PG&E stock.

And our recovery was directly linked to the financial outcome of PG&E, which means that our constituents are getting about 50 cents on the dollar from what they lost.

So I think just in this Committee, as we talk a little bit about that Fund, I think it's good to remember that not everybody has been made whole from past fires as well. And it is something that we're interested in continuing to explore on how we make all of California whole.

Especially because now with the new Fund, our folks who already weren't made whole are paying into this Fund and actually are helping to Fund recovery for other folks while still struggling with their own. So I did want to just make that comment as well.

There was a comment that was made about innovation, and I'm hoping you can talk a little bit because what I haven't heard much discussion about and it is really topical in my district is micro grids.

That perhaps the best and cheapest solution and most effective resiliency measure for a lot of folks, particularly when you have to go miles to the home and your obligation to serve might be to just establish micro grids in different areas and not actually have to worry about the undergrounding of lines.

No, thank you. Great, great question. And we have developed about 14 micro grids and we really look at all the solutions. And so we look at micro grids, we look at Partial Micro Grids, for example, providing backup power batteries. That's something that we do in many communities.

We look at overhead undergrounding and so we analyze it all and look at the cost benefits and look at the wildfire risk. And so that definitely is a part of the solution set.

Is there something that the state can do to help to incentivize that? Because not just from a wildfire safety perspective, but it also helps us to meet our clean energy goals the more that we can make those investments.

At this point there are existing programs for micro grids. So I wouldn't say there is an additional need at this time, but I'll continue to think about that.

Yeah, I think that that's. Sorry. Go ahead, sir.

No. So assemblymember just north of you in Santa Rosa at the City of Healdsburg, that entire community was evacuated. I think it was the Kincaid fire where the entire community had to evacuate as the fire came down on the community.

And it was a real challenge obviously when PG&E instituted a PSPS on the broader grid as needed to happen. But that community trying to evacuate. So that community made a decision with NCPA to implement floating solar system on their ponds there. And obviously it currently supplies about 8% of the city's power needs.

So helping meet the clean energy goals, but also meeting kind of that micro requirement there so they can sustain some emergency services during incidents like that into the future.

Yeah, actually Healdsburg and the town of Windsor have a fun competition over their float of systems to see who could be the most effective. So it has been fun for us to see. Chief for the QRF fire copter. Can you give us a ballpark figure on how expensive they are to purchase as well as to operate year round?

So we're operating a total of four helicopters and all of those are under contract. We've got a mobile retardant base and ancillary positions, program managers, that sort of thing. It's running right now about $37 million a year. For all four? For all four. And the everything. Everything involved, Madam Chair.

And the purchase price on the purchase.

Price for one of these helicopters are probably between 30 and 35 million dollars.

We have a similar fleet in PG & E as well.

Do we have any type of a ballpark on how many of these we would possibly need for an effective overhead fighting force? If we were talking about California wide and not just specific to one of the IOUS.

Yeah. You know what, I think the difference in how we're operating is in Southern California is a bit different than what. CAL FIRE is doing in Northern California right now. CAL FIRE has six large heli tankers spread throughout central and Northern California that they deploy not only during the day but at night.

This is their first year kind of getting into that. Whereas we're using them more because of the, because of the geography, the population, we're using them more as surge.

The program was developed because so many of us remember fires that you know, if we'd have had a little bit more then we might have stopped that from being a big fire fire. If we'd have been able to continue.

To drop retardant at night after the air tankers, fixed wing air tankers go home, we might have picked up that fire. So we're using them very differently than say CAL FIRE is. We're using them as surge. We're using them immediately on initial attack. And we're continuing to drop retardant at night. Again, we're the only ones that are.

Dropping retardant at night right now.

Great, thank you. And then my final. Just a comment going back to the the chair's opening talking about different ways to Fund all of this. I'm open to those discussions. But there are two important factors that I want to consider when we are talking about that.

One is that some locations have already started to Fund their own enhanced firefighting and vegetation management. Sonoma county passed a full scent sales tax measure to bolster its services.

So if we are going to talk about the state taking on some of that, I'd like to talk about kind of a self help county type status that we have for transportation for folks that are already doing it.

And then the other one, and I don't quite know how to approach the conversation, but you do have a system where the broader public feels like the IOUS for decades didn't invest enough or under invested in some of the technologies.

And now the idea of having to pay for that when shareholders or profit, the profits went towards the investors rather than into the work means that there is going to be a discrepancy there on how the public feels about now paying for that same work that most of us feel like should have already been done or at least had been under underway.

So I'd like to make sure that that's part of the discussion as well.

Yes, absolutely. And I think we'll dig into that a little bit more in our final panel when we talk about small alternative funding options. But certainly there's a lot for us to consider and unpack. Assemblymember Irwin and I'm gonna try to.

Stay within the time limit that the. Chair has given me. I really great conversation today. And I just wanna say with the micro grids, I appreciate you bringing that up because in our area, I think it's very important to look at that. With all the pspss that we had. Especially in the last fire.

So I've just quick question for either Ms. Peterman or Professor Calloway about the difference in cost between Fast Trip and undergrounding. And then how much adoption do you have of Fast Trip and PG and. E territory and then the other IOUS. I don't know if I missed that part of the conversation so I can start.

And so Fast Trip is an operational control. And so it's a device that we have to operate and turn on every year. And we have it in our entire hire fire threat area. So it's a much lower cost than undergrounding, which is actually replacing the power line.

But when you have Fast Trip, you still have to maintain the power line. So you're still doing the vegetation management, the power line maintenance and have the other IOUS. Director?

Yeah, I can speak to that. Caroline Thomas Jacobs, Director of Energy Infrastructure Safety. I don't think believe you were here when I spoke. So that's who I am. So when we review the wildfire mitigation plans of the other utilities, the answer is yes. The other, other large utilities, some of the small utilities, no.

But Edison and San Diego, through our wildfire mitigation plan review process, they had been using a version of Fast Trip, they call it different. They each have their own name, but they've been using a version of Fast Trip to manage wildfire risk during certain periods. When PG and E implemented that, and it was in the.

The first pilot was in the fall of 21 when PG and E implemented that. When the other utilities saw their implementation, they did, I would say enhance their program a little bit, given that it then became sort of a bigger known operational control. But it had been in use before with other utilities.

Okay, thank you. And then Mr. Howard, you were talking. About California and inverse condemnation that a number of states are looking at other ways to look at liability. Could you just mention what other States are doing. And how much of a cost savings do you think that would be for?

Certainly it wasn't specific to inverse condemnation because that's a unique California issue.

It's really place, I should say what they are currently. I'm saying that's what we're doing. But what are they currently doing and. What are they looking to move?

Most of the other states that are looking at implementing legislation this year are focused on legislative framework that puts some caps to liability and it requires utilities to ensure that they have these wildfire mitigation plans. They're certainly working those. And. And if they do, then they have some provisions as to putting some caps.

It also puts limitations as to cost recovery of somebody who might have a damage. If you lost a house, you lost your possessions, there's a cost recovery, but there's not penalties. They can't assess penalties, so plaintiff attorneys can't pursue, which happens a lot in California.

10 times the amount of the cost recovery or other factors that are really boosting. So right now the insurance companies have a challenge of determining liability for us because the unknowns in California liability.

But in Utah, they've already seen reductions in their cost of insurance, their ability to get insurance, as well as their bond ratings because just as Ms. Peterman said, they had loss of value even though they weren't involved in the Southern California fires. But all the POUs are also being put on watch in California for our bond ratings.

And that just means all of our ratepayers are going to have to pay more for our cost of borrowing for any of our projects going forward. But I would be glad to share the language that was approved in Utah. What's being proposed in Oregon and Washington as well.

All right, thank you. All right, thank you, Assemblymember Hart.

I had a question for Dr. Callaway. If the Eaton fire costs turn out to be the result of SCE infrastructure failure, does and you put that into your calculations about the cost effectiveness about undergrounding versus other interventions, would that change the trends or conclusions, those enormous costs? Your data ends in 2023.

And we have this incredible event that just occurred. How would that inform your analysis?

We haven't done the analysis waiting to see what the actual determination is on the cause of the fire. I will say it's a transmission in Eden Canyon. So if that's the ultimate cause, it's a much harder Proposition when it comes to undergrounding.

And the only other thing that I'll say is that at least in our research, we do what we can to think in terms of probabilities and long term averages rather than individual events and so hard to know, hard to speculate.

Okay, thank you, that's fair.

Assembly Member Boerner.

Yes, thank you so much. And I hope this question, if it has already been answered, you could give me the very quick 30 second answer. But rate payers are funding IOU wildfire self insurance. So I have a couple questions related to that. What is the coverage of the insurance of these plans?

Is there a cap or does the insurance make victims whole in the event of a utility caused wildfire? And how much of this cost is being passed on to ratepayers for the coverage?

Well, so I can answer generally and then I can turn it over to PGE to answer specifically for PG and E. So as I mentioned in my remarks, the self insurance actually we calculate saves rate payer money as opposed to the utility going out and buying insurance on the market.

So we found utilities have found that insurance on the market is so expensive that it's actually not in the public interest, not in the ratepayer interest for them to purchase it on the market. So that's sort of the justification for having allowed them to pursue it on an individual basis.

So as to the specific numbers, I'd have to get back to you on the other utilities. It's possible that PG will be able to give you some specific numbers on there.

Yeah, so I want to look at you, but I'm also trying to get into the mic. So assemblymember, the cost of insurance is a typical cost of doing business that customers pay for. So we found ourselves paying 800 million for every 1 billion of insurance.

And we knew that the system was safer than the insurance companies were estimating it to be. So we went forward and reached a settlement with consumer advocates to do self insurance.

And so in our last rate case, and so through self insurance we're able to save our customers 1.8 billion, we estimate over the life of our rate case, which is 2023 through 2026. And we're required each of us to have 1 billion of insurance before claims can go to the Wildfire Fund.

So does it make the victims whole at the end of the day?

So I mean first of all, I mean victims first go to their own insurance companies to maid hole and then the Fund is available to pay victims. And so at this point the Fund hasn't been sufficient, hasn't been tapped to pay victims. But the idea is to provide an opportunity to socialize those costs.

I can't speak to any individual particular wildfire victim at this time.

And can you speak to how much of the cost is being passed on to rate payers?

So for the self insurance, it is 100% of the cost. But why it's a savings is because typically with insurance you're paying a premium every year whether you use it or not, and then you lose that premium and you pay. Again, with self insurance, we collect for the first year premium.

But if there's not a catastrophic fire that year, then we continue to be able to have that same money available to pay for the next year. So we're not paying year over year. So ultimately again, it becomes a savings for customers relative to how typically insurance is done by utilities.

Thank you, Assemblymember Chavo.

Thank you. So, Professor Calloway, on the fast trip, is there, is there other emerging technology that you see as promising to bring down the cost of this?

Because, you know, my biggest concern is that a lot of times, you know, especially in the last hearing, I felt like undergrounding was the holy grail that was going to solve everything.

And we have to be realistic about how much it costs and you know, two and a half to $5 million a mile or if it's transmission lines, it's up to $139 million a mile, which is all paid by, you know, ratepayers.

So, you know, I think that realistically we have to be strategic about where and when that is used. But you know, are there other, are there other ways in which we can get to some of the safety that we need through new emerging technologies and innovation that may be coming down the line?

And are you aware of any of that?

So I'll comment on a few things. I welcome comments from others as well.

I'll say that some of the things that I know PG and E are pursuing are perhaps not innovation and technology, but public private partnerships with regard to vegetation management, Even outside of PG&E, the right of way just to reduce the sort of potential destruction if an ignition occurs.

I do think that reliability and efforts to improve reliability via storage and micro grids is extremely interesting and worth looking at. If we think about the ultimate method to reduce ignitions would just be to shut the system off. But of course that's not acceptable.

We need customers to have power to the extent customers can have power, at least for periods of time with distributed generation, and if that can be done cost effectively, I think that's an extremely. Important path forward, if I may answer as well.

So as part of the wildfire mitigation plans that we've implemented since 202020. We've always required on an annual basis the utilities to explain to us what types of emerging technologies that they're piloting. Because this was sort of an emerging risk and an emerging capability.

At the Utilities, we knew that innovation was a key element to be able to understand and address this risk. So that's been in the works for five years and there's numerous new technologies that have been tested out and now many that are being implemented operationally across the grid, just to name a couple.

In addition to fastrip, which I would say is, that's not even necessarily an innovation, that's just a new way of doing something that already existed.

But there are definitely technologies that have been created in the last five years that actually can be put onto the grid to sense both pre and post fault, if you will, Anomaly, if you will. So that the utilities can really. And that goes to changing how they operate.

The grid is they're becoming smarter and the grid is becoming more. Having more moments of detection so that utilities can anticipate potential failures or potential faults and have a more quick reaction if one does happen. So early fault detection, distributed fault anticipation.

There's new device drones, I was going to say they've also innovated on how they do inspections, aerial, they do drones, lidar, satellite. So there has been numerous innovations that I would say going back to what Ms.

Peterson's comment was in terms of the repetition and the importance of that ability to constantly innovate and then adjust operations and techniques in a very fast paced way so that we can be most efficient.

Stop doing the pilots that aren't working, increase the pilots that are and operationalize them and we review all of that through the wildfire mitigation plans. That's great. I'm really glad.

If I could just add something quickly, I have to give credit to the Department of Energy has been funding a lot of these innovations and they've been doing it through the federal labs.

And so many of us in the room or the utilities have been working directly with them to pilot some of them as they've been working on them. And so California has been a place where they've decided to use a lot of those innovations to determine whether those pilots will be successful, should be deployed in a broader sense.

But they have been the ones kind of funding a lot of that work.

Great. Shout out to the Department of Energy funding for this. We hope it continues. Don't send us brooms to sweep up the forest. Yeah.

Additional comment. In addition to all the comments made and Even in addition, with an undergrounding, there's a tremendous amount of innovation happening. One of the benefits of SB884, allowing for a 10 year plan is that we would have that long term commitment to a certain amount of miles and that results in innovation in our suppliers.

So because we are driving a lot of the market innovation, so being able to do, for example, the trenching and digging with automated vehicles, for example. So we're continuing to innovate even in the more traditional ways, like how we put up poles, for example.

Thank you. And two more quick questions. And this is up for whoever knows the answer to this. On abandoned lines and idle lines. We had some conversation about this at the last hearing. What I found out is that there's no deadline for removing abandoned lines.

Apparently the lines near the Eaton fire have been there since the Vietnam War and so has that, like how important is that in mitigating fire risk? And is there conversations about actually putting some kind of timeline and requirements when it comes to abandoned lines and idle lines?

So I'll just. Having worked in utilities for a lot of years, I would say there's. From my perspective, there's no such thing as an abandoned line, at least from the fire mitigation activities.

You're still, if a line's not being fully utilized but it still is energized, you're going to do all the things you're going to do on any other part of your energized line to reduce fire risk. That's just part of our wildfire mitigation plans.

So if it's not energized, then I'm not worrying about it so much as a fire risk, then it's just utilities don't have an obligation typically to get that out. You know, some of our problems, you'll see a lot of lines out there that don't seem to be utilized any longer.

It might be where an electric utility has chosen the underground and the other utilities, such as cable television phone, have chosen to keep theirs on the pole. And you might think it's a power line and it might not be a power line at all.

I mean, I would just say it's worth. I don't think they all should be treated the same. Right. If there may have been a situation where power jumped from an energized line to a non energized line and maybe that wasn't a safe situation that should have been addressed. So, you know, I think we can't.

It's not all apples and apples.

Assemblymember.

Zero I just, I just wanted to say with PG and E lines that are considered idle or could be idle, we continue to expect and maintain them. And it remains a conversation with the communities because sometimes communities want you to not totally remove the line in case they want to grow demand in the future.

But it is something that in our high fire threat areas, we talk to the communities and have a preference for removing.

Yeah. And thank you for the question, Assemblymember. There is a requirement in Geo95 that utilities look at lines and if they plan to abandon them, if they've had these conversations and they decide, you know what, there's absolutely no foreseeable use for that line, there is a process whereby they are supposed to remove those lines.

The question is, you know, when does it go from something that's idle to something that's truly abandoned? So there's, there's some ambiguity there and that requires, you know, fact, specific analysis of the individual cases. But I would also just add that, you know, in thinking about the.

I don't interrupt you, but we're going to. We've got to keep the panels moving. So if you've got one more short.

Question, this last one's very fast on the fire copter. Do you. I heard you say how much it was. I've also heard that there's a huge backlog of how long it takes to actually get one, even if you have the money to order one.

And that there's only like one or two manufacturers when it comes to some of the, the air support purchasing. Do you know what that situation is when it comes to this one?

Yeah, there's a couple operators that are taking excess property, military, you know, Chinooks or Blackhawks or other helicopters. And it does take generally a year to two to build those up. And it's, you know, by demand. They just don't have them on a. Lot where you can go pick one out. So it does take time.

Thank you.

All right, thank you. Assemblymember Zbur.

Thank you all for being here today. I really appreciated the presentations. I had just some questions about this chart on the utility operating costs, mainly from the perspective of understanding where we should be sort of focusing. So the first question I had was there was a suggestion that we.

One of the things that we should be focusing on would be potentially limiting liability. I'm wondering where that would be reflected here in the operating cost and really what the magnitude has been in the past of potential liability that has actually hit rate payers.

Yeah. So the, you know, liabilities that are that Are incurred by utilities that have been involved. Their equipment is involved in a wildfire, and then they've been sued or otherwise, They've been pursued to recover the costs of the damages to the extent that the costs are considered recoverable.

So they come to the Commission and they request permission to recover costs. So there's a formal proceeding before the Commission with litigation and opposing parties and arguments.

And so to the extent that there's costs that are treated as recoverable, Then, for the most part, those costs would be appearing in that distribution category, to the extent that the wildfire Was something that was associated With a distribution line. So I think that's. That's.

That growing red distribution line Is where you'd expect to see the liability costs. As well, I assume.

So is there a way that we could get a handle around what. How much of this growth. Growth and the distribution is that?

I don't have those numbers right off the top of my head, but that's something we could look into and get back to you about.

Second, could you describe for me just briefly? You know, I see, when I'm looking at this, I see both the transmission and the distribution columns. Distribution obviously growing very rapidly. So what generally is included in distribution versus transmission?

Right. So generally you think of the cutoff between distribution and transmission as being like voltage. It's not exact different utilities kind of divided up differently, but say around 6970 kilovolts is the sort of a rough rule of thumb separation. So we have power lines that are operating higher than that.

Those are generally much taller towers, Although not always. You do have smaller, Just wooden pole structures that support lower voltage transmission lines. But for the most part, when you. When you're thinking about the large sort of lattice towers, those are the transmission lines, and then the wooden poles Are the ones that are supporting distribution lines.

And so what are the. The categories of. What's. What's accounting for the growth in the distribution category? I mean, if you could just summarize it, what are the. What are the main buckets that we should be looking at?

Sure. Yeah. And the slide that I had that lists all the different types of categories of activity that are involved in wildfire mitigation. So those are the types of activities that are being allocated to that category. So it includes capital costs like undergrounding and cover conductor replacement, Includes operating costs like vegetation management.

So that's a pretty significant expense when it comes to wildfire mitigation. And that's a big part of what you're seeing in those red lines.

More than half of our distribution. And is the transmission only going down because the others are going up so much?

I'm not sure if the transmission is actually going down or if it. But. Well, I would have to look at the very. I don't have that information on the top of my head in terms of the specific drivers of the transmission costs. Yeah.

The last question I have is where does NEM fall in this bucket? Yeah.

So that's a great question, Assemblymember. So when we think about nem, it's, you know, there's a fixed cost to the system to run the system. So customers that have a NEM rate don't have to pay the same share into that fixed cost that customers that are not on NEM have to pay.

So you look at that red distribution costs, those are allocated disproportionately to customers who don't have NEM rates versus customers who do. So that's where it comes in. It has to do with. It's not like a unique new cost that's added on.

It's how that red and all the other costs are sort of distributed across the customers in utilities service territory.

Okay. Okay.

I think I understand that.

Thank you. Sure.

Assemblymember Davies.

Thank you, Madam Chair. This question is for Ms. Peterman. In your opinion, has the California Legislature. Imposed any mandates on utilities that have made wildfire mitigation more expensive for taxpayers. Or ratepayers? I should say.

All right. So yes, but I wouldn't necessarily say those are bad, but just acknowledging that that's what's happened.

So, for example, more broadly, the direction to go very quickly when we're seeing the catastrophic fires, especially come after 20162017 did result in all of the utilities going to market very quickly to do enhanced vegetation management, system hardening, et cetera. And then there was legislation also during a couple years after that to increase the wage for.

For vegetation management workers. And again, good reason for that. But that increased the cost by several 100.0 million, for example, for us to do vegetation manage it for several of the costs we were seeing going into those different WEMA accounts, et cetera, reflected that higher than expected veg management cost.

Do you have on average about how much that was?

Let me. It's a few 100.0 million. Let me get back to you with the exact information. Thank you, Madam Chair and Assemblymember Papna.

So I'll just be brief. First of all, thank you all for being here and thank you for the enlightenment. I want to just follow up a little bit on micro grids being we've all concurred. We're sort of fans of them.

Are there plans in place to increase the number you mentioned a number of 16 that doesn't in context.

I'm not sure what to make of it but and I know my own city, while we don't have a publicly owned utility, we certainly when we were building city buildings, we made sure that they were able to be micro grids within certain neighborhoods. So I'm just wondering are there, are there General plans in place to expand it?

You talk about innovation and that sounds to me like we're testing stuff. But we know micro grids are good. So I'm wondering if you could kind of I'm looking at PG and E, you're in my hood, so I figured I'd ask you first.

Happy to be. Happy to do that and continue to be. So we look at microgrids relative to all the other technologies that could serve the same purpose and we're going to pick what is the most cost effective.

So microgrids are valuable, but they necessarily aren't always a cost effective when in the combination you're trying to provide reliable, clean energy, you can do that in most cases with some of the existing grid resources. So we'll continue to deploy micro grids where it emerges as the most cost effective solution. And there's variations.

Sometimes you have micro grids, but they don't 247 operate as a micro grid or fully islanded. So we're always keeping that consideration, but we're agnostic because ultimately we want to do what is the most cost effective and the right solution for that community.

Okay. And then just one more quick question, Madam Chair. How are we going to keep ratepayers fees down? And I know all that we're talking about has resulted in expenses and I know they go to you, Mr. CPUC, for rate increases. But and you may not want to answer this, there may not be an answer.

It may be too General a question. But we are really hearing about affordability and how expensive it is for folks.

So I'm just wondering as we go through trying to improve and that's the nature of this hearing, certainly as we go through trying to make things safer, is there a way that we can give some to relief to ratepayers without turning to the taxpayers?

So I would welcome the opportunity to respond. Riddle me that. Go ahead. And so first and foremost, I do believe it's important to look at the entire Bill. Right. We're talking about wildfire spend today, but we've had other hearings where we're looking at all the other different Bill drivers.

And as Chair Bennett said, we want to prioritize in the customer Bill what is necessary to deliver and transport energy. That's about 55% of our Bill right now. So there is about 30% of our Bill that reflects different good policies, whether it be NEM or other policies, but aren't necessary for the direct delivery.

So first of all, I think we have to look at every part of the Bill and say what program should we continue doing, what program should end? And then if there are programs that have social benefits but aren't directly tied to providing power, then we need to revisit how should they be funded.

And then we also need to be driving down the cost of everything that we have to do. What I didn't mention is that PG&E took 1 billion in expense out of the customer Bill last year. So we're looking for cost efficiencies across everything. And we're forecasting 2026 bills to be lower than 25.

So I do think we are at a period where we're seeing several costs come to the customer Bill at once. But regardless, we've got to look for everywhere to focus. But this conversation on Wildfire spend is important because it has been the biggest driver.

And if I could just quickly add just I know we have limited times, I'll just mention that the Commission did and working with the Office of Energy Infrastructure Safety, produce a report in response to the governor's Executive order that lists a number of different ideas and thoughts about ways that we could potentially bring costs down.

So I just refer you to that report. And definitely, you know, we're eager to work with Legislature to find solutions to these challenges.

If I may, can I just offer a quick comment in the wildfire mitigation plans because that's where all the expenses of these activities are talked about. You know, we've been on a five year journey. That five year journey. This is explaining it crudely, but I think it's generally it's appropriate.

You know, those first few years were, you know, throwing everything at wildfire mitigation that they possibly could and trying to innovate and come up with different mechanisms. The last couple of years the utilities are really sort of dialing in these new methods that are more effective.

And I would expect over the next five years we're going to see as they dial in, many of those new ways of doing business are actually probably more cost effective than the old ways of doing business.

I think that there will be Opportunity to explore what are potentially things they had to spend money on in the past that they can now focus and do in a less expensive way around wildfire mitigation. Yeah.

Can I take a moment? Sorry. So, as I mentioned earlier, we're going to have a lot of these mitigation activities for years to come.

And I think if the state were to adopt some categorical exclusions related to CEQA and we get some of these NEPA things, we're going to be able to shave the cost of these efforts 25 to 30%. That's what we're spending now.

And we're getting delayed years on some of our most dangerous lines because we can't get them done when we need to get them done. So those are just some simple measures we can do to reduce the cost of these things that we know we're going to have to do.

I'm going to say something else that I'm probably going to get in a lot of trouble for, but these wildfires have been putting out a lot of emissions, much more emissions than any of our power plants put out in the state. And we're doing all of this renewable activity.

My take is if we could do a little pause here and focus more on these wildfire mitigations, I can do more for the emission benefit than I think some of our other measures.

And I hate to say that, but it is true right now because we have so much pressure on our ratepayers trying to do both these activities are hitting the bottom line and we might need a pause.

Yeah, thank you. And I really appreciate that question, appreciate those answers. And, and I think, as we said, this is the first in our four part series on affordability. And we're going to be digging into some of those other drivers and those other elements. And coming back, Mr. Kaiser, to you mentioned the governor's Executive order on affordability.

All of the Recommendations from the CPUC are either legislative changes or recommendations for OEIs. Does the CPUC not foresee any strategies that you could directly implement, like your soft cap on vegetation management from 2023 or something similar?

Yes. Thank you for that question, Chair. You know, I think all of our actions take place through formal proceedings. So we're certainly open to looking at options within those formal proceedings to be able to entertain, you know, proposals for ways that the Commission could act on its own to reduce costs.

But certainly it would have to go through our normal process of taking entertaining positions from different parties that might have a stake in whatever policy we're thinking about. Formulating and litigating that out with evidence and argumentation. So we're definitely open to that. Okay.

So no, not right now, but stay tuned. Is that a summary? Yes, stay tuned. All right. Also from the I think it was the CPUC's recommendations from the Executive order. There were a number of efficiencies that OEIS might explore to save ratepayer costs.

Do you have a timeline for implementing those activities or those recommendations or for coming back to the Legislature regarding whether you are indeed going to implement this?

Yeah, sure. Thank you for the question. So in the and we collaborated with PUC on that. So all of those operational efficiencies I think you can see in Senate Bill 1003 from last session, we there are some legislative changes as a new organization.

We as we were implementing 1054 and 111, we've found some opportunity where we can actually be more efficient in the risk reduction methods that we're doing by maybe tweaking some of the requirements.

So for example, what was put forward there in terms of giving us on substantial veg management audits that are statutorily required right now we're required to do it on all nine IT independent electrical corporations. We've got three independent transmission operators that have practically no vegetation. One of them literally doesn't have any a single tree.

But we still have to do work on that because staff totally required. So if we had some discretion to be able to focus our audits on vegetation management in the utilities that have vegetation management work that would be we'd be able to be more risk informed and risk focused, probably be able to give audit even more attention.

So that's an example of one that I think that we would love to be able to be more efficient in the work that we do today.

Okay. Look forward to continuing that conversation as well. And I think the other thing that I want us to put a pin in for follow up or the comments from you, Mr. Howard, and I think also from you, Ms.

Peterman, regarding some of the regulatory barriers and hurdles and if we really have an opportunity to clear some of those in a responsible way and save ratepayers 25 to 30%, let's please do that this year.

I do though, before we we transition to the next panel have what I think is the I mean for me it's the big looming question. So whether we're talking about businesses or public policy, what gets incentivized gets done and IOUS receive a rate of return on capital investment.

So just by definition, IOUS are not incentivized to deliver the lowest cost solutions. And that's actually not so much a critique is it is just a statement of fact. So I guess help us understand, Ms. Peterman, how your Executive team actually is focused on delivering.

I guess why would you be focused on delivering Low cost solutions when that's not how you earn money? And what do you actually do demonstrably to evaluate the cost effectiveness of the solutions that you're implementing?

And then to the Puc, can you give us, and in the five minutes we have, can you give us an understanding of how you are evaluating cost effectiveness?

I think there is sometimes a sense, not just amongst Members, but I think by outside observers as well, candidly that the PUC is sort of outgunned in terms of resources and expertise when it comes to evaluating rate cases and challenging whether in fact those are delivering cost effective results for rate payers.

Thank you for raising it because I'm sure what you said is on many folks mind. And let me offer just a couple of reflections.

First of all, it is in investors interest that bills are affordable so that customers keep paying their bills and that we're continuing actually to be able to continue to do the work and get a reasonable return for doing that work. So it is broadly in the interest that the system works.

You know, specifically as it relates to the executives at PG and E, for the senior executives, most of the compensation is at risk and it is tied to performance on certain metrics. And at PG and E, disproportionately majority tied to safety metrics.

And those safety metrics are approved as a part of our safety certification that we receive as a part of our process for being able to annually tap the Fund. So there is inherent incentive built in for us to be driving safety metrics. And then in addition, as Mr.

Kazar mentioned, anytime we go in for a approval of a project, it is reviewed, is reviewed about throughout. There's a whole framework for looking at risk assessment, cost effectiveness. We think that's a good data point, but it's not the end all be all. But everything is reviewed from a perspective of the benefits and the cost.

And one of the things I would not want to lose in regulatory harmonization is the first priority focus on safety. Because at times we have not seen that at least that assessment been done. What is the safest thing to do?

And then there's a conversation about are we as a society willing to pay for that level of safety reduction? But inherently where we are as a utility, we have some folks telling us do safety at this level do cost at this level and we're trying to figure out where we land in between.

But but ultimately it is what is the risk appetite of this Legislature on behalf of customers. And so those are just some examples, but happy to provide more detail.

Sure. And I know our time is limited, but I really appreciate the question.

And I would like to just start by saying I'm really proud of our staff and I think our staff does a really outstanding job looking at the information that comes to them, both in General rate cases and in the ramp applications that precede General rate cases.

So we have a lot of really smart folks that really do look very deeply at the data that comes with. We find errors in utility submissions and we do ask for corrections on a regular basis. So I do think we have a strong framework in place.

And going back to the first, the second slide I presented on the timeline, the risk based decision making framework that we have in place, which Ms. Petermans was just referring to as well, requires that utilities present the mitigations that they propose for addressing any risk, whether it's wildfire or, you know, pipeline safety.

They're required to present the mitigations in terms of the risk benefit gained for the dollar spent. And so any party, any Member of the public can look and see what mitigations utilities proposing look at the risk, the cost, spend, risk, efficiency of those proposed investments.

And that can inform, you know, the ultimate decision the Commission makes on what to approve. And actually this happened just recently in PGE's most recent rate case where they presented a plan for system hardening. And the ultimate outcome based on analysis of that kind of information was different from what PGE proposed pretty significantly.

So I do think we have a strong framework in place, but it could be strengthened through some of the measures that I mentioned. And that's in our response to the governor's Executive order. So more comprehensive review of these proposals in a uniform General rate case framework as opposed to, you know, the separated way that it currently happens.

All right. And I think that is going to be the last word with this panel. That's all right. We're going to go ahead and say thank you to all of our panelists for joining us, for offering your insight.

And as I said, I think there's a number of things from the conversation that we will follow up on in the days and weeks ahead. With that, we will go ahead and welcome our panelists from our panel on alternative funding options.

It.

Hello. Thank you so much for joining us. All right. We are going to go ahead and kick off our final panel with Helen Kerstein, who is the Principal Fiscal and Policy Analyst from the Legislative Analyst Office.

Thank you so much, Chairs and Members, for inviting me to join you today. I'll be speaking from a handout. I think the sergeant's just passed out copies to everyone here. Also, it's available on our office's website for those of you who are tuning in from home. I'm going to try to go relatively quickly.

I'm going to cover kind of two main topics in my discussion. One is a little bit of background on the state's expenditures on wildfire mitigation. And then I'm going to talk a little bit about other funding sources that the state has to support these activities.

If you turn to page one, the main point of this page is really to highlight that state spending on wildfire mitigation has generally increased over time in recent years, although it hasn't been monotonic. It's gone up and down a little bit, but generally it's increased.

You can see that there's a figure here on that page that shows CAL FIRE spending. So they're one of several different departments that have roles in wildfire mitigation, they probably have the chief role. And you can see again that trend, upward trend, but some deviation from that.

And you can see that historically, back 10 years ago, we weren't spending much at all, well under 100 million. And then we've sort of ramped that up. So now we're in the hundreds of millions in most years. Again, other departments are also involved.

If you turn to page two, we highlight some of the reasons for the growth and expenditures from the state on wildfire mitigation. There are two main things I wanted to point to that's driven that figure I was showing. The first is some legislation. SB 901 was sort of a chief piece of legislation.

And then there was subsequent budget trailer legislation as well that committed $200 million annually from the state's Greenhouse Gas Reduction Fund for wildfire resilience activities. So that provides sort of a sustained funding stream for these activities in a way that hadn't been the case in the past.

And then the second thing I wanted to highlight is that in 2021 and 2022, the state passed a couple of different wildfire and forest resilience packages as part of sort of our broader packages that the state passed when we had a really good General Fund surplus.

So that provided one time funding that was General Fund as well as that GGRF. So altogether those two sources of funding have provided about $3.6 billion of additional funding over a nine year period. So substantial funding, but not nearly what we've seen on the, on just one year for the utilities. Right, we just heard about that.

Maybe about $5 billion a year on the utility side over the nine year period. We're talking about less than that. I do also want to highlight that there's some funding going forward as well. Prop 4 that the Legislature passed and then the voters approved provides $1.5 billion for wildfire resilience activities.

And there's some money, 35 million, that's to reduce wildfire risks on electricity transmission specifically. So I wanted to call that out. A little bit less than a quarter of the funding for Prop 4 is anticipated to be appropriated or is proposed to be appropriated, I should say by the Governor in the budget year.

So if you turn to page three, I wanted to highlight a couple of funding sources that the state has that it can use to support these activities should they be a priority for the Legislature. And I've already sort of talked about them and talking about the history, but I'll highlight them again in a little bit more depth.

So the first one is the Greenhouse Gas Reduction Fund. I think probably all of you are pretty familiar with this Fund. It receives the proceeds of the sale of allowances of the state's Cap and Trade program. It generates between about 2 and $5 billion a year and historically it supported a range of different activities.

You can see here on page three the figure, it's a pie chart. It shows the different types of programs that have received funding. So you can see Forest health is in there, SB901, but it's been a relatively modest share. More of the funding has gone towards transit, housing and high speed rail as well as other programs.

I would also note that a lot of the funding, the GGRF funding, the Greenhouse Gas Reduction Fund funding is statutorily directed, about two thirds and a lot of that is continuously appropriated. So it's not going through the annual budget process in the typical way. And then of the discretionary piece, what's remaining.

The last two budget agreements allocated or sort of committed a lot of that funding up for the next few years. So there's not a lot of sort of unspoken for money in GGRF at this point.

If you turn to page four, we highlight the other main funding source that the state has used in recent years for wildfire resilience which is the state's General Fund. As you all know, that's the state's main operating account. It's a big Fund, but it has lots of calls on it.

So one of the main things I wanted to also point out is that both our office and the Department of Finance are projecting pretty substantial deficits in future years for the General Fund in excess of $10 billion. And you can see here in the chart that in some years it's well in excess of $10 billion.

So that's going to probably limit the capacity of the General Fund. Should these projections be accurate. And of course, there's a lot of uncertainty when you're projecting this, the future budget condition. But should they be accurate, really, there's going to be probably a very limited amount of funding available for new commitments.

So the final point I want to leave you with is that there really are these trade offs. And, you know, if we want to, there's clearly, you know, a lot of interest in getting lower rates for utility ratepayers. That's a priority. That's important.

But there are trade offs with that, because the money you spend on that is going to come at the expense of other priorities as well. And when you look at the amount of money that the state has been spending on these activities in the past, it's been relatively modest compared to what the utilities are doing.

So if you were to fully offset what the utilities are doing, it would represent quite a substantial increase in the state's expenditures in this area. So the Legislature could certainly do that, but that would be a shift of priorities.

Thank you. And we'll go ahead and hear from all of our panelists and then come back with Member questions. Next up, Nathaniel Skinner, who is joining us from the Public Advocates Office.

Good afternoon. Chair Petrie Norris, Chair Bennett and Committee Members. Thank you for the opportunity to speak. I am Nathaniel Skinner, Program Manager for Safety with the Public Advocates Office at the California Public Utilities Commission. Briefly, our office is the independent consumer advocate at the Commission working to ensure safe, reliable and affordable service for utility rate payers.

Specifically, with respect to wildfire issues, our office is responsible for analyzing and providing recommendations to utility wildfire mitigation plans and spending proposals to protect ratepayers from unnecessary or excessive costs while ensuring effective risk reduction strategies.

Our office has published several policy memos on strategies to lower electric bills for ratepayers, and today I will touch on a few of those recommendations as they relate to utility wildfire spending, which continues to make up a significant and growing share of customers utility bills. If we can go to the next slide and the next one.

So these are the four themes I'm going to be speaking to briefly today. First up is maximizing risk reduction. Wildfire mitigation strategies must be based on reducing risk as fast as possible and at a reasonable cost. We need to ensure ratepayer funds are used in the most effective way possible to maximize the greatest amount of risk.

To give an example that's been discussed today. Undergrounding versus covered conductor. Undergrounding is undeniably the most effective tool of reducing wildfire risk mitigation. The problem is it costs about 3 to 4 million dollars per mile. On the other hand, we can put up covered conductor and fast trip on four miles for the same price.

We can harden a lot more of the system for the same cost to ratepayers. covered conductor and fast trip. Very effective. Utilities have reported 90% plus effectiveness of these tools and mitigating wildfire risk. That's getting very close to undergrounding, but again for a quarter of the cost.

And you can do it almost twice as fast as you can do undergrounding. When we talk about PG&E's proposal to underground 10,000 miles or remove 8,000 miles of overhead service, the price tag is going to be somewhere around $30 billion in the direct investment for customers.

That's only if you did it on the riskiest parts of the system, addressing half of the risk. What are we going to do with the other half of the system? The other 17,000 miles, covered conductor? That's still going to cost a lot of money when it's 17,000 miles to protect. Fast trip? already deployed, lot of risk reduction.

But there's half the system that we haven't yet addressed and we've already spent $30 billion to get there. We must also ensure that the work is not paid for twice. So we've heard a lot of claims that undergrounding eliminates vegetation management costs. It does for a lot of the routine tree trimming.

But you still have to maintain that right of way. And if those costs are being used to justify ratepayer expenditures today, then we need to back it out of what ratepayers are paying for vegetation management. As soon as that undergrounding goes into effect.

We can't let it linger in customers bills for something that we've built because it was going to reduce and save rate payers that money. Turning to the General Rate Cases, Mr. Kaiser from the Commission talked about that quite a bit. We agree wildfire mitigation costs at this point are well known.

The General Rate Case is nothing more than a budget. It's a utility planned expenditure that ratepayers provide the money for. We all need to live within our budget.

The more things we can put inside our budget, the more comprehensive a picture we have, the more we can do those trade offs and make sure that we have those efficiencies, the efficacy in the programs that if we have a lot of wildfire expenditures today, maybe we cut back on a little bit of other programs to make sure that we stay within our budget.

That's the way that any business operates. They make a budget, they need to be able to stick to it. Right now, the way that the system works is that the bulk of a utility's budget no longer passes through the General Rate Cases. It comes in through memorandum accounts like we talked about earlier.

The CEMAs, the WIMAs, they come in through other measures. Historically, the General Rate Case covered just about everything. It covered the safety, the reliability, all those costs we budgeted for it. The utilities ran safe, reliable systems that included the new capital expenditures, the things that they're planning to do today, tomorrow, in 2026-2027.

There was a need to allow cost recovery outside of the General Rate Cases when catch up was happening. But again, we know we need to do undergrounding, we know we need to do covered conductor. We know we need to do fast trip.

That should be baked into those cost projections and the final budget authorized by the Commission, not coming in through other venues. What happens right now is the utilities do not have to take responsibility for their going over budget. Those costs come back onto ratepayers.

There's no fiscal restraint because the system is set up to go outside of the General Rate Case and allow those costs to come back onto customers. So if we shift the burden back to where it should be of making a proper forecast, we will start to get budgets and affordability back under control.

Turning now to lower financing costs, another key way to drive down the cost of electric utility spending is to look at a broader use of securitization for these types of massive capital expenditures. There's been a lot of discussion about lowering costs for transmission. We haven't had those same discussions about lowering the cost for the distribution.

And that was the red slice of the budget that was presented earlier. That is large and growing ever larger. For example, the utilities have already received over $6 billion in undergrounding cost recovery authorizations in the last three years. Six billion.

If we were to use securitization to finance that, we would see a reduction of 60 million in the first year. By the third year it would be 300 million. And that's only on the first 6 billion we've spent. That benefit accrues to customers year after year for 30 to 40 years until these capital programs are paid off.

And we're talking about spending 30 billion plus just for PG&E. What about all the other utilities? How much money can we save by allowing those distribution investments to be securitized? There has been discussion about using securitization for routine expenditures like vegetation management. We should not do that.

We pay for those each and every year out of customer bills. It is a one time expense. In that year we've already paid for it. Securitization might grant relief today, but we're paying it back with interest tomorrow and every year for the 5, 10, 15, 20 year duration of that securitization.

Every 1% reduction that we can securitize is small, but it adds up over time and saves ratepayers billions of dollars over the lifespan of these projects. Lastly, in terms of optimization, utilities need to take a smarter, more strategic approach to infrastructure work. Trenching and where applicable, repaving are major cost drivers.

And utilities including communications, water, sewer, electric, gas should coordinate on long term planning. So we dig once, we fill it back in once and we repave it once and then we're done.

Right now, customers might pay for trenching once for a utility, electric utility. They might pay again for the sewer company, they'll pay again for the communications company and again for the water company. So that undergrounding or rework of underground infrastructure already existing, we're paying for four times.

Let's pay for it once, dig it, let's do it efficient in that same trench. Get everything put in there safely, split the bill. It'll make this all a lot more affordable.

And so in closing, and if we can go to the last slide, then I'll tie this all together to some of the themes we heard from the earlier presentations.

By prioritizing cost effective risk reduction, improving coordination across infrastructure projects, enforcing disciplined budgeting and leveraging lower cost financing tools, we can both significantly increase safety, reduce ratepayer expenditures on wildfire safety and help ease the affordability crisis. So this slide right here, it's lines I've heard earlier that quite a few Members are in the spreadsheet side of things.

So three things you need to understand about this slide. The first off is the red line. This is what PG&E's view of risk was a couple years ago. The steeper that line is and that line is comparatively steeper than the Blue Line. The more for your dollar you get when you do a more expensive mitigation measure.

Simply put, the steeper the curve, the more the risk underground that. Absolutely. You get a lot of value for undergrounding that as that slope becomes flatter, there's less value in undergrounding. It's less risky. The Blue Line is their most recent assessment of risk. It's a lot flatter. That means undergrounding per dollar spent is less effective.

So we need to look at these other mitigation tools. And so just to recap with PG&E's proposal for the 10,000 miles, $30 billion in direct costs at current financing mechanisms, $150 billion in total costs over the lifespan of this project. If we securitize it, that cost comes down over time. We save ratepayers billions of dollars.

But then we have the other question. What do we do with the other half of their risk and the other 17,000 miles that need to be hardened and protected? Thank you for your time and I'll welcome questions later.

Thank you. All right, and then our final panelist for this session is Sam Uden, who is the Co-Founder and Managing Director at Net Zero California.

Thank you. Greatly appreciate the opportunity to be here. So I'm going to talk about options to pay for wildfire prevention at scale. So just so next slide. Sorry. So just for context, how big or what scale are we talking about here?

So we estimate that California must, that the cost to achieve the state's wildfire resilience goals is at least 6 to 7 billion dollars per year. And that spans actually I've got a slightly updated slide, but that spans kind of three categories here. So there is vegetation management, which is about 3 to 4 billion dollars per year.

That's a fairly robust estimate with a few different sources. There is a, called here WUI hardening or kind of a community resilience category, which we would sort of an emerging estimate is around $3 billion. Depends kind of how far you want to go.

And then a third kind of key bucket, which we had as a question mark, is kind of utility spend, which really depends on the extent you do undergrounding versus kind of other innovative options. So as it relates to utilities, IU's are responsible for some but not all of the wildfire prevention that's needed to be done.

So the main takeaway is that we need new options to stack with what utilities do spend to kind of get to go. Next slide. Thanks. So we did an analysis recently that looked at five new or alternative options and we rank them based upon our view of their reliability and scalability as funding options to do wildfire prevention.

I'm not going to go through all of them. I'm going to go through.

If you go to the next slide three that we saw as more promising, which is the Greenhouse Gas Reduction Fund which has been touched on something called Vehicle Miles Traveled mitigation banks, which I'll talk about. And then the opportunity to stand up a new biomass economy in the state. Next slide. Thanks.

So the GGRF, which I'll be brief because it's already touched on, this is a funding pool from Cap and Trade auction proceeds that's in recent years about 4 to 5 billion dollars. It has sort of specific allocations today, but one of those is There is a $200 million continuous appropriation for wildfire prevention.

So an option is to increase that. And so you know, we see this as a, it can provide near term benefit. So it's kind of a moderate stable source. But to keep in mind obviously that as you expand it you start to trade off against other options, which is also mentioned. Next slide.

So the next idea is what I mentioned before, Vehicle Miles Traveled mitigation banks. Now this is an idea for wildland urban interface areas. And, and so just before I go through the slide, the background is open space on the periphery of urban areas is commonly developed into housing. It's just urban sprawl.

But from a wildfire resilience perspective, it would be more ideal to retain that open space, which would be a defensible space, and then do more infill projects for housing. But the issue is that you need an incentive or to create an incentive to retire that land from development to do that.

So this is an idea to do that where what you would do is you would create a credit that measures the avoided vehicle miles traveled, which is a greenhouse gas measure from what would have occurred if that open space was turned into developed into housing.

So that is a kind of a common calculation that's done at different agencies for kind of different reasons. We have a, and we can share this, a kind of a preliminary estimate from ICF, the consulting firm, that you could generate 500 million to a billion dollars per year for these kinds of wildfire prevention strategies in the WUI.

But you know, there are some policy needs to do with CEQA which I can happy to answer a question on, which could be done administratively we think, but also legislatively. Okay, next slide.

This is my final slide which is on what we probably view as the most scalable opportunity which is to stand up a new biomass economy in the state. So we think, and others also see this as having the potential to cover the entire cost of the vegetation management need. And how it works is sort of fairly straightforward.

When you do and this is sort of forest focused kind of strategy. When you do a fuels reduction treatment like a thinning, you get a lot of biomass waste, so forest residue. So if you can collect those and turn them into products and sell them, then you create income for the next forest treatment.

So the, you know, more information on that. So like, you know, right now we, there's already a lot of, if you do a thinning treatment, the waste today is primarily just left in a pile or it's open burned.

And with our goals for forest treatments, it's going to become a, it's already a problem, big problem today, become a significantly worse problem and then yeah, those residues are just left or open burned. In terms of product options, there's new technologies that are here and there are actually projects in development in the state, although they face constraints.

You can turn the biomass into hydrogen, aviation fuel, different kinds of building materials. These are non combustion technologies. And then again for these we've identified some key policy needs related to establishing incentives and overcoming some hurdles to feedstock supply. Yeah, that's my presentation. Happy to answer any questions and again appreciate the opportunity to be here.

Thank you. Thanks to all of our panelists. Questions from Committee Members? Assemblymember Boerner.

Whenever we talk about biomass here, there's always an area like my area probably doesn't have a lot of biomass or recycling ability and there's a Southern California, Northern California kind of split. So how would you think about the biomass economy for the different regions in California and how that would fit in with the.

I think you're proposing it fits into the GGRF, correct?

No, we see it as a separate strategy. So the biomass is, you know, more relevant to forested regions. And so something like the VMT strategy could be more relevant to kind of more urban areas. And so yeah, it wouldn't be applicable everywhere.

But where we need to do vegetation management, which is primarily the forest, that's where you do your, your biomass strategy.

So my district doesn't have a forest. I have like 25 Torrey Pines.

Yeah, this is, this is..

I am not advocating for anybody to touch any Torrey Pines. Sorry.

And I'll say, you know, this is by no means like every option that, you know, we organization realize this is a big problem. Want to get some what we thought of ideas that we've worked on for some time together. And so there may be others, but this is just what we have, our area, you know. So, ya.

I think it's, and it's probably likely that whatever we advance as the state, whether now or in the future, is going to be a combination of different strategies that reflect the complexity and diversity of the state. All right, Assembly Member Harabedian.

Thank you, Madam Chair, thank you for the presentations. Again, very, very helpful. Going back to Mr. Skinner about securitization of capital projects, obviously, to the extent that the savings that we're talking about are true, very compelling. How does it actually affect shareholders of the IOUS?

It would potentially lower the returns.

Okay. I mean, that's what I thought. I just wanted to make sure that while it saves the, the ratepayers money, it affects the other side of the ledger for the IOU's, which, which would make this difficult maybe practically to actually do that.

There are certainly challenges to it. One way to think of it is that they're still getting plenty of returns. We're going with the bulk approach just because there is so much system hardening that there still is very healthy amount of returns still available to shareholders.

Even if you were to look at securitizing, because we're just doing so much work. If you're securitizing 30, 40, 60, 100 billion dollars worth of work, if you're earning 6% rather than 8%, that's hundreds of millions each year in savings for ratepayers, let alone the project savings. But there's also plenty of returns for investors.

Thank you for that, Mr. Uden. 200 million from GGRF to do some of the work that is otherwise being paid through the General rate case, and the IOU's doing it. I'm just curious, though, if we do any sort of funding from the state, whether it's GGRF, whether it's the General Fund, how would, how does that actually work?

Do we just give the IOUS the money to do the work, or do we? Because we can't do the work, right? The state can't do the work. So how would that work?

No, so that's. Actually, I should have probably clarified this. So, you know, the numbers I established early on, the 6 to 7 billion and all, you know, they are the state's goals based upon sort of outside of utility, taking the utility hat off.

It's, you know, the resources agency saying we planned it, we think for state kind of level Wildfire resilience, we need be treating, you know, 1 to 2 million acres per year. So it wouldn't all just be the responsibility of utilities to do that.

That's just all kinds of different projects, local governments just, you know, so the 200 million could, could, could go to different local governments and different kinds of other entities that do kind of forest work. It wouldn't just directly go to the utilities. It's just to kind of make the entire state's forest system more resilient. So.

And you think it's, it's an alternative form of funding because somehow it's going to offset what the IOU's would have to be doing otherwise.

Yeah, it's like, I guess it's indirect. So it's just, it's an alternative form of funding to do the work that needs to be done. But you know, as I said, so utilities are not responsible for all the wildfire prevention work that needs to be done just kind of in their area.

So I guess it's possible you could kind of target it to support them or you could just target it to support the broader mission of wildfire resilience in the state.

Got it. Last question. The VMT mitigation play. Who's paying that credit? So it's all about a credit, but who's actually paying?

So that would be. So if you are a land use developer building any project in the state you have under CEQA, you have your impacts and you have to mitigate them. And one of those environmental impacts is greenhouse gas emissions.

So it's those other land use developers that would then be purchasing the credit to meet their obligations for their separate project.

Hmm, interesting.

Say again? Sorry?

Land banking?

Yeah, almost like a land trust. Like a land trust, yeah.

And so I didn't, I can just add to that one of the key policy needs we think there is relates to for you all to consider is to establish a net zero greenhouse gas standard under CEQA.

So right now if you build a shopping mall or you know, whatever, you know, really depends on the lead agency, which is commonly a local government that tells you what level they want you to mitigate for, to kind of get your CEQA approval. And that is not standard in the state.

So some local governments may say 40% emissions reductions compared to some counterfactual, and others, you know, may say more.

But if the state established a net zero standard for CEQA projects, which would be consistent with state goals, then you would establish a significant increase in demand for mitigation which could be provided by some of the defensible space projects.

Assembly Member Bennett.

Thank you very much, Chair. My question for you on your five alternative funding options. The very first thing you knocked off was avoid, avoided wildfire. And I guess I would word that a little bit. Avoid electric emissions started wildfires the way to reduce rates. But why did you knock that off?

Sorry, I should have. So that is avoided wildfire carbon credits. And the reason we, Yeah, no, sorry.

Yeah, just a little different.

Sorry, sorry. Yes. No, no. So that's kind of like a carbon offset type strategy, which we could be kind of scalable. But the issue we have with it is that it's, you know, the modeling is subject to extreme uncertainty.

I'm going to drop that part. I'm going to drop that part.

Because you now, of course, got me heading down a different direction. And that is, I have to say, after hearing the presentation, as I said at the beginning, this is fiendishly difficult to try to figure out something that's going to work.

I'm not convinced that we've made a good case to change things away from the ratepayer doing it. And I'd just like to offer that I would hope we could find it. But I'm not convinced at this point in time because of a few things that I heard. One is we had this shock to the system.

You know, we had the fires in 2017 and 18. We told the utilities, by gosh, you can't let this keep happening. And they went all out right to do that. And now you've heard them say, hey, things are going to stabilize here now. Right. And you heard they think rates aren't going to be so bad.

So I hope we don't have the knee jerk, which is oftentimes what happens in the democratic process, a knee jerk reaction to one problem and then create another problem because we're trying to fight that last thing when we could get it to go away. That's one too.

I put a lot of stock in, trying to link price to the actual production and consumption of a product. It's just the most efficient way. And I'll give you the classic example. The chair asked that great question about how do you incentivize, you know, the utilities?

And she said, well, we get bonuses based on how safe we are, right? That was an answer. So my immediate thought was, well, if I, if I get a bonus on it, I'm going to spend a lot of money to make sure we're safe. Because why do they do that?

Because the stockholders don't want a big fire that then a judgment gets made like has been done in the past. It says you've got to eat some of this, right? That's not necessarily the best way for us to get the most efficient solution.

It might be the way for us to get the most comprehensive fire solution, but not the most efficient fire solution. An incentive to underground, maybe more as being pointed out. So that's just an example.

And you could take that example a million different places every time you break links away and I'll just use one more and that is high electricity users. You if they are for some reason causing more cost, you don't want them to have a discounted price. Particularly if they're, you know, data centers or high income places.

You want them to have a discounted price for the delivery of their product and then that incentivizes them to actually use more.

So let, let me just say that what I heard from my standpoint in terms of what's the best funding option? The best funding option is to replace your chart with avoid the electric emissions wildfire starts in the first place. And I'm serious when I do this because look what we just learned with the fast trip.

Look how much that dramatically has reduced the wildfire prevention cost just right there. Tremendous effectiveness right at a much lower cost. Lets stay the course and try to get there further with that. Let's make fast trip and those kind of technologies even better. Lowering the cost of avoiding the wildfire in the first place.

And then the other point that I wanted to make was that was this final point that you get this advantage, you lower the cost and you don't have as many wildfires. And that's how we keep rates down.

Lower the cost of prevention, have fewer fires and you have lower wildfire costs because the IOUs are not paying billions of dollars for cost recovery and all the other things they have to do after a wildfire. Thank you.

Thank you, Vice Chair Patterson.

Great, thank you. Had a couple coinciding activities today. So I missed part of the presentation, but some interesting, unique ideas that I hadn't heard before.

But I wanted to dig in a little bit to this Vehicle Miles Traveled mitigation banks because I'm also the Vice Chair of Housing Committee and you know we do have significant competing interests that also impact affordability and that's the availability of housing stock.

And in my own district right now we have this beautiful wooded Oakland, you know, that's basically zoned for multimillion dollar mansions. But if Rockland were to not develop that property Then it's not meeting its RHNA obligations. It's literally the dumbest thing ever.

But you know, so we on one hand, I think we should encourage that kind of activity of not developing in those wildland urban interfaces if we can avoid it. But in terms of creating some kind of,

I know there are other laws that have passed this place, you know, that create the net zero greenhouse for you know, developments and we'll see how you know, that shakes out in the long run.

But just kind of appreciated a little, you know, thinking outside the box a little bit whether I loved all the, all of it or not. You know, it's like we gotta, we gotta start thinking about that. And question for the Public Advocates Office is that just,

Is it the position, because I did come in in the middle of your presentation. So is it the position that bonds and securitizing these infrastructure charges or even wildfire mitigation, that's something that should not be considered?

So for capital projects it absolutely should be. So for undergrounding, covered conductor, all those kind of issues that are long term capital intensive, we should not be securitizing the short term vegetation management type things. Those are already funded at the right price and rates today.

So we'd be basically taking something we've already paid off, putting it on a credit card and now we're paying interest on it for the next 5, 10, 20 years.

Well, you know, there's maybe not now, but maybe in the future. And just something to consider is, you know, like I'm probably never going to move out of my house because the interest rate is so low.