Senate Budget and Fiscal Review Subcommittee No. 2 on Resources, Environmental Protection and Energy

All right, we're going to call this hearing of budget sub 2 to order. We're going to go a little out of order today. And we're going to start with the Department overviews. So those will be items 12 through 18. Sorry, sorry, sorry. 12, 14, 16 and 18. No, I'm sorry. 12, 14 and 16. So OEIS. Yeah, right.

Energy Resources Conservation Commission. And then, and then PUC. So. And then we'll go to the BCP item. So let's call for a quorum. First of all.

[Roll Call]

Okay, thank you. So we have a quorum. So let's ask the folks from the Office of Energy Infrastructure Safety to come up and present the Department overview. This is item issue 12. So this is page 11 in folks agendas. I think we're going to start with Carolyn Thomas Jacobs, who's the Director.

Great. Well, good morning Chair Allen, Committee Members. Thank you. My name is Caroline Thomas Jacobs, Director of the Office of Energy Infrastructure Safety. Really appreciate the opportunity to speak with you today and I'll provide the brief overview of the Department.

Energy Safety was established as a new Department within Natural Resources Agency in July of 2021 to ensure electrical corporations are taking effective actions to reduce reduce utility related wildfire risk. Our mission expanded in January of 22 to include underground safety with the addition of the Underground Facilities Safe Excavation Board, formerly known as the Digsafe Board.

Within the wildfire safety mission, we are responsible for evaluating electrical corporations wildfire mitigation plans, assessing their compliance to those plans and issuing violations and directing corrective action when they don't meet those commitments. For example, last year we completed over 7000 inspections and issued over 900 violations and wildfire safety concerns.

Year to date in 2025, we've completed over 1600 inspections and already issued over 200 violations. We also conduct annual safety culture assessments and issue recommendations for improvement to the electrical corporations. We conduct annual audits of their vegetation management initiatives that are within their wildfire mitigation plans.

We review and issue safety certifications to electrical corporations that meet specific statutory criteria such as having an approved plan and in and including safety performance metrics in their Executive compensation incentives.

With the passage of Senate Bill 884, we are now also responsible for evaluating large Electrical corporations 10 year distribution Undergrounding plans if submitted and assessing compliance with those plans. We issued the submission requirements for those plans in February of this year and are awaiting the first plan submissions. Within our excavation safety mission.

The Underground Safety Board leads the state's excavation safety, education and outreach efforts, develops safe excavation standards, investigates accidents, and works with partner state agencies to enforce the call before you digest law. The Department has 167 authorized permanent positions and an annual budget of 52.4 million, which are both fully funded through two special funds.

So that is a short overview of the Department and I'd be happy to answer any questions you have.

Thank you. Do we have comments from LAO or DOF? No. Okay, great. Let's open it up to Members for questions, comments, thoughts. I guess I just wanted to get a sense from you, Madam Director, on the question of, you know, when you're looking over, we spoke a little bit about this, we had the chance to meet.

But you know, when you're looking at utilities wildfire mitigation plans, how walk me through a little bit of the the cost effectiveness analysis with regards to different mitigation strategies.

Sure. So electrical corporations, they're required to submit annual plans and we're responsible for evaluating those plans. There are 22 enumerated requirements of specific information to be included in those plans. None of those requirements include cost or cost effectiveness. We do, however, and we can't deny a plan based on cost effectiveness.

We do, however, take into consideration cost effectiveness because of course it's something to think about and we coordinate very closely with the PUC who ultimately has the responsibility to review cost effectiveness in the cost recovery. That said, we do we work with the PUC to include and coordinate with them to include within our Wildfire manipulation plan guidelines.

So what we tell the utilities have to be in their plans to ensure that they include information that will make it transparent how they're assessing cost of the initiatives and then that information is included in the plans when ultimately it goes before the Commission when they're seeking cost recovery. So for example, they use risk spend efficiency.

We reference back to the PUC's risk decision making framework and how they are requiring utilities to submit cost information so that that information is included in the plan.

And while we certainly from a statutory perspective focus on safety and that is the main role that we play in assessing the plans, making sure that the plans are that utilities are adequately understand and building the capabilities to understand their wildfire risk and then address that risk, we certainly are not blind to the cost effectiveness issue in our evaluations.

And there have been instances where we'll call out when we review the plan areas where we want the utilities to think more about how they're doing an assessment of cost in deploying the different initiatives that they have. So for Example, when we issue a decision, we always. And again, this is on an annual basis, right?

So it's all about continuous improvement. We always include in our final decisions, once they get a plan to a point where we can approve it, areas of continued improvement. We call them ACIs. So we'll say, okay, this plan is approved and this is where we want to see you improve for next year in your next plan submission.

So we have instances over the years of ACIs or areas of continued improvement where we'll push the utilities to disclose more clearly and demonstrate more demonstrably how they are addressing cost effectiveness.

For example, in their risk modeling, we assessed that they were doing risk modeling with max consequence, and that was a way that could potentially be leading them towards the more costly risk mitigation. So we pushed the utilities in through our ACIs.

It required them to submit in their next year how they were evolving their risk modeling to refocus on probability. So those are a couple examples of how we'll push in that way. But ultimately, we're assessing the plan based on safety and ensuring that they're building the capabilities to understand their wildfire risk and address that risk.

Yeah, I have another one, too.

Yeah, if you don't mind, Mr. Chair, just a follow up on that, and thanks for letting me be part of the overview portion here.

When we built the, both the 1054 and the 205 framework around this, and even prior to that, I think that my sense is the Legislature has locked in certain pieces of baseline cost, like how work is actually done out there, that as many ACIs as you can put out there, there's sort of still some, like, structural stuff that's, that's built in.

So, for example, my understanding is that the way we're doing veg management right now is much, much more expensive than pretty much any other utility in the country or any, you know, any other state in the country. Is that an ACI you flagged?

I mean, like, those kinds of issues, do you have the discretion or the sort of mandate, I guess, from the Legislature to actually hold the utilities accountable for those things? Or is it. Basically what you're saying is like, you can, you can make some recommendations, but they have to just. They just sort of. That's all they are.

So that's a really great question. Let me just make sure I understand. What we have the authority to do is review their individual plans, but we're not setting minimum requirements that each utility has to meet. Right. So we're not prescribing, you know, minimum safety Standards, if you will like that.

I just want to be really clear in terms of the separations between us. And for example, the PUC obviously has still their general oversight over safety and they set minimum standards. What we're reviewing in the plans is how the utilities are within their unique understanding of their unique service territory and the way that their system operates.

What are different ways they can enhance above and beyond those minimum standards to understand what their risk is and then address that.

One of the ways they certainly do that and one of the ways that all the utilities initially did that right back in 2020, was increase their vegetation management focus in terms of potentially doing what I'll just simplify as enhanced clearances. They all called it different things. But they could potentially cut more, you know, trim farther back and.

Or remove trees at a more. Do more reviews on trees to see if they were hazard trees that they should remove. Our team would then assess the way that they're thinking through that program and making sure that it makes sense.

We have environmental scientists on our team, we have a whole environmental science division that reviews their vegetation management sections and then pushes them to make sure that they have a deep understanding of what their system has and what they need to do.

To be really specific, one way that we'll use ACIs is and just to answer your question really simply, we do not set requirements, but we'll say we think you should go do this. We're going to require you to tell us how you're going to do it or why you can't do it. Right. Why you shouldn't do it.

Because of some information maybe that we don't have.

Have those been heeded?

For the most part, yeah. So we have a whole compliance structure that we do on implementation of all the plans. And this structure is set up through the statute. So the structure of the, of the compliance piece is we oversee the implementation in the year it's happening, meaning we're literally meeting with the utilities.

You said you were going to do X by Y this year. How far are you on that? And if you're behind, how are you going to catch up? So we'll oversee that during the year, then the second year after the year is done. They statutorily are required to submit a self assessment.

They then also have to hire an independent evaluator who we create a list of independent evaluators that they can hire. And that independent evaluator then does an assessment of did you do what you said you would do in the plan? We in that time are also doing our own independent inspections and audits. Right.

So there's kind of three different layers and then we take all of that information and issue a final report on compliance for that compliance year. So at any one time we're looking at this year, we're looking at the year behind, and we're also looking at approving a plan for a year ahead, if that makes sense.

It does. I just. But I'm still trying to understand, just between you and the PUC, the contracts that are being approved are not at OEIs.

Like contract. You mean like for the vegetation management work? Yeah, we're not, we're not prescribing, we're not approving the contract.

But have you assessed the cost effectiveness of how the state is doing that work? Is there a more cost effective way to be doing that veg management while like.

Yeah, we wouldn't, we wouldn't be reviewing. I just want to make sure I'm understanding the question we wouldn't be reviewing. Like is when you say state, the state has, through the general orders, has some requirements. The utilities have to meet those minimum standards.

Anything above and beyond that would be at the utilities discretion that is reviewed by our team through the plan. And then once they get an approved plan, they do have to follow their plan. Right.

So we would be looking at making sure that they actually implemented that additional work that they, that they said they were going to do in their approved plan. But we're not changing the overall structure or assessing. Are there minimum vegetation management requirements that should change?

Right. I'm trying to get it. Is there cost effectiveness at all in your mandate or is this pretty much.

Yeah, in our mandate. It does not specifically call out cost effectiveness when we review plans. Again, we're not blind to cost. Right. We want to make sure we recognize when we're reviewing a wildfire mitigation plan that there's limited resources, that's money, that's people, and that's things. So we do do a review of.

Hey, if you've got a universe of all of these wildfire mitigations you need to do and you understand your risk prioritized this way, how are you leveraging all those resources to make sure that you're maximizing the effectiveness of the risk reduction in the plan, but we do not do a specific cost effectiveness review of the initiatives that is not in our statutory mandate.

Right. So we'd have to change the law to have this mitigation plan start looking at cost at least as it is under your per.

Okay. Okay. Thank you,

Correct.

Senator McNerney.

I thank the Chair and I thank you for the presentation. You're clearly ready for the question on, on economics, on the cost of this, even though that's not your, in your mandate. The thing I'm wondering about is the sort of time frame that we're talking about.

Undergrounding takes care of something for a long time, whereas chopping trees down or whatever, you know, veg management take is temporary, relatively speaking. So does your risk assessment look at risk for just this year or does it look risk for five years or a decade? Or how does the timeframe yeah, thank.

You so much for that question because you're absolutely right. We look at each plan distinct to the plan and the plans are submitted. They're actually, it's a little confusing. They're three year base plans, right. So there was a 2020-2022, but they're required per statute to provide an update.

So they, we get one each year that we have to review. But there's a three year plan. So we'll see. For example, in 23 we reviewed the 23 to 253 year plan. Then we get check ins in in the next update years.

This year we're getting the next three year plan that will be implemented in 26 through 28 and then we'll get annual updates and we, we look at layers of protection. So to your point, you're absolutely right that the long term addressing of wildfire risk requires hardening of the grid. But there are interim layers that you can do.

So vegetation manager is one that they can do immediately. Public safety power shutoffs is another one that a lot of utilities can implement immediately. But then there's also. We look at the middle layers like really changing how the utilities are organized and do their day to day operations to incorporate wildfire risk.

So that on a regular basis, whether it's building something new and how they think about designing it or operating it in today's weather situation or being prepared for new weather coming in, they're looking at all the different mechanisms they have to be able to reduce that risk.

So we definitely, we don't have a prescribed, to answer your question specifically, we don't have a prescribed horizon that we're looking at, but we're looking at each planet for all those layers. How are they evolving their capabilities to be able to understand how to understand what the risk is and then address it?

Well, I mean the reason I ask is because there's a big impact on cost, on rate payer impact. I've heard that even though undergrounding is much more expensive in the short term. In the long term, it's a lot cheaper than having a regular veg management.

Yeah. So I don't want to necessarily comment on the individual economics because it gets very complicated. And again, that's not our particular world. But your general intent of what you're referring to would agree that there is something that needs to be.

When we're looking at how do we reduce the risk in a holistic, comprehensive way that has a long term permanency, I think it's really important for us to look at all of the parameters that the different methods and having a longer term view over the short term impact, I think is an appropriate way to think about it.

Thank you.

Yeah, I want to. I mean, just so one of the. So kind of building on the, you know, hardening issues, there was a recommendation in the Executive order on energy affordability that talked about OEIs doing better, you know, doing more coordination between homeowners and utilities on fuels treatment. And so what can you give me?

So you guys play a role in helping to make that happen? How is that happening? Tell us a bit more about.

Yeah, sure. So this is where, you know, we've been doing this for about five years now, right. Like we were created first within the PUC in 2020 and then became a Department in 21. So effectively this mission has been happening for five years.

So the utilities have matured and we, our statutory structure, the implementation of it has matured to a point where, you know, in the beginning they were really just trying to figure out how do they even understand what's happening with this risk and building an understanding of that within the organizations.

We've now matured to a place where we have utilities that have a deep understanding of what their wildfire risk is and the coordination partners that they need to work with within their communities to be able to amplify everyone's investment in wildfire risk reduction. And I'll give you an example.

Liberty Utility up in Tahoe, they coordinated with the U.S. forest Service and the Tahoe Conservancy and the Tahoe Regional Planning Agency to do power line resiliency work where the utilities made investments, but then also the communities made layered investments around that corridor so that there was a bigger impact in risk reduction.

We're working now with the California Wildfire and Forest Resiliency Task Force to see how can we try and incentivize utilities across the state to use that as a model and leverage building that. I wouldn't say that we. It's not something that's in the statute that says that we have to direct the utility to do that.

But we see that as a step for maturing and being able to better leverage the investments the utilities make because they make huge investments to your point that it amplifies the resiliency that it provides to the local communities when it's layered with more landscape scale approaches with their coordinating community bodies in their region.

Gotcha. Okay. Yeah, Senator. Senator Choi, thank you. I wanted to talk to you more about that in the future. Senator Choi?

Yeah. Thank you for your presentation with the so much wildfire issues that we are dealing with. I come from Orange County and nearby LA County. We also started California wildfire issues. And so I also briefly served on the Orange County Fire Authority. And then even when I was there, my focus has been always fire prevention.

And you have mentioned several different things including vegetation management, undergrounding and following up Senator McNunney's question, undergrounding, cost effectiveness among many other options. I have done a lot of thinking and then also many years I had that plan.

And finally this year I am introducing a Bill for my best assessment for wildfire management, mitigation prevention, anything to do that The Fire Wildfire 2 causes I can identify more than 90% could be more than 95%.

I haven't done actual number analysis, but my guess is that the majority of the fire is caused by high power line Downing and causing the wildfire and the remaining whatever the cost is the arsonist human factor. So separating two issues, how to deal with that.

And I am introducing a bill to require all utility companies with the short term and the midterm and the long term plan. When you talk about the cost of the ground grounding, undergrounding, that's the major factor for anyone to object for that idea.

But have you done any analysis how much we have lost due to the wildfire in Southern California this year alone. Pacific Palisade and Theodoreans of what they eat in fire I read I think somewhere more than $200 billion. Do you have a different figure? But I think that's more than $200 billion.

And then on top of all the property losses or human lives. But when you think about each time every year we face wildfire issues and each year we don't know how much damage we're going to have.

And each fire also says to me not just several years, but I think decades of backwarding our effort for the environmental protection from the fire, especially not from just wildfire. But when homes are burned, I think those smoke toxins are a lot worse than just wildfire.

So I think environmentally speaking, our California has been always placing on top of everything else all the agenda environmental issue has been causing a lot of cost and then also difficulties on businesses. So I think we should take this wildfire issue as a topic priority and not to think about cost and cost.

Because one year alone the total loss is total amount. I think that is probably enough money for undergrounding. So my bill is to mandate for undergrounding or even on the pipelines in the rugged areas. So we can do the necessity. How far does it have to be the undergrounding necessary because of aesthetic purposes?

Some people may object to that. And then how far does it have to be hundred miles from urban residential areas or 200 miles? You know, how much does it take for the firefighters to react just in case? So we think we can put the priority in those areas how close proximity wilderness area will be top priorities.

And then also I heard that I don't know how effective that is insulated power lines, how the cost will compare with the undergrounding. And also happy to hear that utility companies have started undergrounding project and also using insulated lines. And then also that you mentioned a while ago, was it AB884 was dealing with undergrounding.

So how that Bill, what exactly the bill is describing and dealing with the undergrounding. So my suggestion will be for your Department to focus on undergrounding project and comparing the pipeline and insulated lines.

The cost comparisons as the geography dictates which method will be the best and how many over the ground lines in California we have to deal with somewhere I read that 600 something 80 miles. Whether that's true or not, I cannot tell. But the youth Department may have that accurate numbers.

So that's the focus of my deal, my bill to address. We need to address fire prevention and protection of all human lives. Protection of our properties and then also our environment. By stopping, I think totally 99% of fire can be stopped. We deal with this mother nature every year we experience a strong wind.

As soon as the wind comes around, fire erupts. So we know that this will repeat every year. We have to experienced already. But if we have not taken more permanent solution, we haven't taken that action. So I'm so shocked. And I hope that my Bill will take a first step to solve the problem.

Yeah. Yeah. Okay. Thank you. Thank you so much. Appreciate your being here and answering these questions. Without further questions from the panel will go on to the next budget overview, which is receiving. Yeah, that's right. Thank You. Yeah, thank you. All right, so we're going to item 14, I think we're.

We're bringing Drew Bowen up to give a presentation. You may proceed when ready. Thank you.

Yeah, thank you. Good, the microphone's working. Well, good morning, Chair and Senators. My name is Drew Bowen. I'm the Executive Director of the California Energy Commission. Great to be here with you this morning and thank you for your time. This year we are celebrating our 50th year.

Governor Reagan signed the Warren Alquist act into law in 1974, and we were created. So we're excited about that. Today we have six main divisions. Three of them are focused on investing public funds in clean energy, specifically into charging infrastructure for electric vehicles and dispensing stations for hydrogen vehicles.

Second, we invest in the research and development into clean energy and finally the state reliability reserve and building decarbonization. We also have three divisions that are devoted chiefly to policy work. And these divisions license power plants in California.

Thanks to authority we were given by the Legislature a few years ago, what we refer to AB205, we refer to as the opt in legislation.

We have had a flood of applications for power plants in California, which is good news because our SB100 efforts have revealed that in order to get to 100% clean energy by 2045, we are going to build like we've never built before.

Every year we have right now 17 gigawatts of applications either filed with us or in the queue to be filed soon to give some sense of scale, what 17 gigawatts is. The maximum California Independent System operator load a couple years ago was 52 gigawatts.

So we have applications for 17 gigawatts, a third, roughly of the entire power of the Caiso system. This is an enormous amount of work, but we have to build like we've never built before. We also adopt appliance and efficiency standards. We've been doing that for many years.

These reduce energy consumption and the bills associated with those that Californians pay. We have a new authority from several years ago that allows us to not just put together cost effective regulations for appliances and buildings, but to do flexible appliance standards. So in September of this year, regulations we adopted in late 2023 will come into effect.

And every pool pump sold in California will come pre programmed so that it runs during the time of the day when we want them to, when the system is flush with power, and they won't run during the net peak times in the afternoon when desperate for power. This is small in the grand scheme of things, pool pumps.

But we're eager to expand this to lots and lots of other devices. And it generally doesn't cost much or anything for the manufacturers to install these devices. And we look forward to doing more of that. We also manage the Renewable Portfolio Standard program, which involves certifying renewable generators.

If you want to sell your power into California, you have to certify that it indeed meets the RPS standards. We do those evaluations and make those judgments. And then when utilities seek to use those resources in order to meet their obligations under the rps, they then those resources need to be verified.

We do that for the publicly owned utilities and the PUC does that for the independently owned utilities, the IOU's. Excuse me. We also manage petroleum reliability in California following the passage of SBX 12 and ABX 21. And we provide energy demand forecasts to inform statewide energy planning. And those efforts include system reliability assessments.

And as I alluded to earlier, our SB100 process, which is making us feel confident that achieving our goals by 2045, it's possible to do so just quickly. I want to go over a few progress points over the years. The per capita consumption of electricity in California today is about half that of the rest of the country.

When the Energy Commission was formed, we were about on par with the rest of the country. That is not entirely attributable to our building and appliance standards, but they play a very major role and they save Californians billions of dollars every year in reduced energy bills.

From January of last year to September of last year, California's entire electricity demand was served by renewable energy for at least a portion of those days. Some days it was quite a bit of the day. Other days it was a lesser part. But that's a very impressive achievement, I think, for California.

The Darden Project is one of our OPT in projects. This is, I believe, the largest project in the history of the world for solar and storage. Paired it's in Fresno County. It's 2.3 gigawatts. The Diablo Canyon nuclear plant is 2 gigawatt 2.2 gigawatts. So it's on par with that gross size.

And we are obliged by the OPT in statute AB205 to issue our preliminary staff assessment for the public to evaluate and give us feedback on within 150 days of the application being deemed complete. Complete. We hit that last month and look forward to hearing from the public about their feelings on this project.

This past summer was the hottest in modern history and yet we had no outages and no flex alerts. And on petroleum, we've really increased the transparency thanks to the tools the Legislature has given us. And we publicly post a lot of this information. We also published a transportation fuels assessment that the Legislature called for.

And it thoroughly goes through the whole petroleum picture in California, where we get fuel, how it's manufactured, et cetera, what we can do in the future.

And then finally, I wanted to note that in response to the governor's Executive order of some months ago, the Energy Commission submitted recommendations or we identified those activities that we do that are funded by ratepayers. And the staff report you. Your staff pulled together is excellent. It covers those.

I'll just briefly say there's an energy efficiency program, helps us decide which measures we should consider for buildings. There's the Cal Shape program for schools. Most of the money was spent for the ventilation component of it, but there's about $200 million, just shy of $200 million left unspent.

That was chiefly related to the plumbing aspect of it, where the schools just didn't have as much uptake as anticipated. We have a solar equipment list that lists all the different solar panels and inverters and other equipment. And it's relied on by industry, by local governments, planning departments, by utilities.

And a small amount of funding is required to manage that annually. And then finally, our EPIC, public energy research program that advances emerging technologies today. You have a number of budget requests before you and my team is here, and we look forward to answering your question. Answer specific questions. I understand you may have some General ones now.

Yeah. All right. Thank you. Do we have comments from Melio or Department of Finance? Okay. I just wanted to follow up a little bit on the Cal Shape. Your comments. So $200 million left. Yes. Do you expect to, you know, encumber additional funds this year?

Thank you.

We don't think so. We sort of placed new applications on hold last fall, and that's where it resides today. But again, the uptake on the plumbing, which was the bulk of the unspent funds, was just not very. Not very large.

Okay, and then what. What happens when funds are unencumbered? There's a mechanism for giving back to ratepayers.

Yeah. My admin lead could help me out on this, but I believe the funds, if they're not spent by the end of next year or thereabouts, then revert to the Treasury.

Good morning. Damien Mimnaugh, the Admin Services Director of the California Energy Commission. Under current statute, the dollars that are not encumbered, I believe by mid-2026, are to be returned to ratepayers.

Right. And how much does that work out to every ratepayer if that ends up happening?

So, you could do some simple math, you know, about $200 million based on the number of ratepayers. However, the mechanism of getting those dollars out to ratepayers hasn't been determined yet. So the actual amount per ratepayer would depend on the structure and the way that they're returned.

And how is that typically determined?

I believe the statute's silent on that. That's something we can get back to you on. Pretty familiar with this law, and I don't believe there's a specific mechanism put in place.

So, the CEC would sort of figure it out.

Correct? Yeah.

No? Chicken heads back there. Okay. All right. Interesting. Okay. Yeah, I mean, now the flip side is there's obviously a lot of need for. I mean, how flexible is CalSHAPE? I'm thinking about all of the new, you know, fire impacts on a lot of schools. I mean, there's.

There's massive air pollution challenges all throughout the Southland. You know, it's supposed to be all about improving indoor air quality, I think, for the schools. Isn't that right? So is there a way to invest in those kinds of air quality programs?

I see we have an expert joining us.

Good morning, Chair and Senators. Deana Carrillo. I'm the Division Director of the Ready Division. We oversee CalSHAPE. CalSHAPE predominantly has plumbing funding remaining. So, there is two pots of funding, ventilation and plumbing. A majority of the funding has been exhausted in PG&E territory.

So, the funding was submitted based on activity in each utility territory. We can pull up that data for you on what's available on both the specific plumbing and the ventilation dollars. But without statutory authority or extension, it couldn't be repurposed for other uses.

I think that answered the question, but I'm happy to take any follow ups.

Okay. All right. We don't want to spend the whole time on it, I think. All right. I see. Did you? Yep. Senator Blakespear.

I just have three quick things. So, the first is, if you have a default for when heat pumps are supposed to go on, is it when it's cheapest, like at midnight, or is it when the sun is shining the most? At Noon.

That's an excellent question. And just to be clear, these are pool pumps. We're looking at heat pumps.

Sorry, sorry, pool pumps. Yes.

Yeah, I think we need to get back to you on the specifics. I don't know precisely when they're set to go off and of course anyone can go in and tweak the settings and set them however they see fit. But at least when they come from the factory.

Most people like me would never read the instruction manual and leave it as is. But we'll get you the exact time frame that they're set to run and not run.

Okay. I mean, I do think it's a really, as we're still working to have the lowest rates be the time when we have the most sun. Presumably, there are other power, maybe it's other types of green energy. But I still think there's this fundamental tension there that, that's a really a big question. Like, what is it?

Are we prioritizing rate payers paying the least amount on their electricity bill or are we focusing on when there's the most surplus?

I think it's a combination of things. The chief focus is actually when the highest load is and trying to avoid that as much as possible. Then there's options about where that load could be then added to the system.

And I believe it's midday to your point, but I don't want to say that with certainty without checking and getting back to you.

Okay. I do think there's a policy decision in there. So, my second thing is, the Governor's Budget proposes eliminating 30 currently vacant positions. And this Committee's oversight role is difficult when we don't know what those staff are, what their jobs are, what's being reduced, what they did, if it's okay if they are gone.

Because sometimes positions are vacant, but that doesn't mean they're not valuable positions. So, I just wanted to hear a little bit of a response about that.

Sure. I'm joined by my colleague Steve here from Finance, who will take the first crack at that.

All right, Steve Wells, Department of Finance.

Just to say, in regards to the efficiencies that were approved in last year's budget, we are currently working with the departments to, you know, make sure that we are looking at, you know, cross border the vacant positions and to fully understand their impact and fully understand, you know, where it's going to be.

But we are, that's still a process that's ongoing. We will have something, we'll have a collective report on that, you know, before the May Revision.

So, I'm not sensing a lot of alarm or concern about that.

Well, I mean, you know, from a finance standpoint, we don't have a lot of alarm. I think the Department. The Department certainly, you know, might see differently. But no, we are. I think there's been a lot of deliberation, a lot of process that went into this to try to make it as, you know, as seamless as possible.

But then, like I said, we're still trying to put it together so that we have a unified product that we can present you guys, and that will be coming out before may revise.

Okay, thank you. And then my last question is, the CEC administers the Clean Transportation Program, which invests 100 million annually in developing zero emission vehicles. There has been a lot of money that's going into battery electric vehicles, which is great.

And 18 million was appropriated a few years ago to finish the goal of building 100 hydrogen fueling stations in the state. But apparently the contract holder, Shell, backed out during the pandemic and it hasn't been touched since. So, is the CEC planning to use this money on other hydrogen projects or other projects that you could share?

Absolutely. We're still aiming for 100 stations and there's an aspirational goal for 200. Colleague in the back here can give precise specifics if you need them, but we've got about 64,65 stations in California today. Shell pulling out was a disappointment. So, we're still moving forward with that and we've invested, you know, a lot of money. Each hydrogen station is vastly more expensive than a given electric charger.

Okay, so we are still on track and that 18 million will be repurposed for other hydrogen stations?

Absolutely. I mean, you know, we have sufficient funds to meet the 100 goal. It may or may not be those exact 18 million.

Okay. Okay, thanks very much.

Senator McNerney.

Thank you, Director. You mentioned that there were 17 gigawatts of applications, and that sounds like a lot to me. Yesterday in our revenue attacks, we had a long hearing on regionalization and the argument was that it was needed to provide stability and low cost.

So, how does that square the need for regionalization with 17 gigawatts potentially being put online in the next few years?

I think it's an all of the above strategy. Regionalization gives us a lot of benefits that we can't get in California. The vast space, the time differences can have value and the ability to share resources. But regardless, we're going to be building an awful lot of power in California.

Okay, thank you. So, can you explain the difference between the Demand Side Grid Support Program and the Distributed Electricity Backup Asset Program? How are they complementary? And can you explain why the Commission has currently chosen not to flexibly spend any of its demand side grid support money on the Distributed Electricity Backup Asset Program?

I can, Senator, but Ashley, seated here, is much stronger.

Thank you.

Good morning, Chair and Senators. My name is Ashley Emery. I'm the Program Manager over our Reliability Reserve Incentives Branch at the CEC. So, we oversee both the Demand Side Grid Support Program and the Distributed Electricity Backup Assets Program. So, the DSGS program primarily incentivizes the use of existing resources.

So, we're providing incentives for customers that already have resources and encourage them to use them during extreme events. The DEBA Program, on the other hand, is for the incentivization of purchasing new assets. So, we're looking to bring on more clean, efficient resources to support the Strategic Reliability Reserve.

So one, it leverages existing resources, one is meant to spur on more growth and more resources on the grid. And so, they're both kind of complementary and both are needed to support the Strategic Reliability Reserve.

Well, I mean, it sounds like you haven't used the Grid Support Program flexibility in the, a lot of acronyms here. Distributed Electricity Backup Asset Program.

Yes, so we did not use the flexibility. And that reflects the need for the DSGS program which was brought up in 2022. It helped support the state during the summer heat wave that year. And since then we've been working to grow the number of clean resources in the program.

So, by the end of last summer we had over 260,000 participants and over 500 megawatts enrolled. And primarily that was over 200 megawatts in our storage virtual power plant.

And so, as we've seen that program grow, we heard from stakeholders that they really need multi-year funding certainty in order to make a decision as to whether to invest the time and money and personnel and resources in providing aggregation and enrollment services in DSGS.

So, the decision was made to ensure that not only did we have enough money to support incentives for last summer, and looking to this year, but also provide that certainty to encourage enrollment last year as well as ongoing growth.

Well, having been in the industry, I can appreciate the need for long term stability and predictability. So, thank you for that answer. I just want to reiterate, I pointed out an early hearing that Prop 4 funding was intended for new projects and new development rather than backfill.

So, I just want to make sure that that message is loud and clear, Prop 4 funding needs to go to new projects and new spending. My next question, my last question. Mr. Chairman, on Prop 4 again, provide $470 million to offshore wind port infrastructure.

Thank you for awarding the 45 million this last few days. I appreciate that, but. And so, I don't need to iterate, I don't need to harp on that anymore, I don't think. But how do you think that this money will be spent?

I mean, are there a backlog of projects that weren't funded, that need to be caught up? Or how does this look in terms of how that $45 million is going to be spent?

Yeah, go for it. We will be doing a deeper dive on Issue 15 and Part 4. But please.

Great. Appreciate you indulging us in the musical chairs. I've brought up Elizabeth who's very deep in this program.

Good morning, Chair and Senators. I'm Elizabeth Huber. I am the Civision Director at the CEC for the Citing Transmission Environmental Protection Division. So to your question, when the NOPA was released there were five awardees, two in category two, as you know, which is more advanced for the ports and then three were preliminary.

There were a total of eight, total of 13 applications. One was disqualified. So with those five remaining that did not receive an award, with guidance and feedback and meetings we're having with them, they definitely could come back and apply for Prop 4 funds.

We are looking at the Prop 4 funds to be a two step process because these grants, these solicitations are very comprehensive. And so we are looking at step one to provide some guidance and address some initial questions for qualifying for step two. And that's the comprehensive solicitation process. But we are an agency that strives on public process.

So our goal also is to hold informational meetings, meetings, workshops and get the community feedback that we always appreciate in what we administer. So any questions after that? Did that answer your question?

I'll let you off the hook now. Thank you.

Great. Okay, Senator Stern.

Thank you. Mr. Chair. I want to commend the CEC for years of leadership. 50 years is quite a while and you know, there's been ups and downs.

But I would say in terms of just the ability to, to get good public dollars out the door and produce good data and be a trusted steward and an overseer and now even in, you know, petroleum markets and things like that, just Dun Yeoman's work, I think you've got the Legislature's trust.

My questions I want to echo loudly Senator McNerney's point about the backfill issue around this DSGS proposal. I think DSGS is going great. I've been so impressed with the rollout. When I wrote that part of the bond in his office, we didn't anticipate it being budget backfill. It was supposed to supercharge those programs.

So just say that and flag it as an ongoing issue where we're, we're hoping. I mean, I should assume that if you had 50 million in additional money, as opposed to a backfill, you could, you could meet that much more demand and reduce that much more cost.

I mean, is there a way to quantify what 100 would look like versus the. We're basically leaving with the status quo. I think that's the current proposal is leaving the funding and the status quo. Borrowing from Prop. Throwing it in there. But in terms of, like, reach and perhaps it's your, your Division Chief.

But you said 360,000 people under the last rollout of DSGs. I think that's what it was. Yeah, 260,000. So if, if an additional $100.0 million were in that program, how, how many participants do you think you could get? And how much do we think we could actually manage?

Well, I'll ask Ashley to come up again. She's thought about this a lot more than I have, but I think it's a little bit unknown. When we first got this assignment several years ago, we literally had two weeks in the summer to pull together the first iteration of the program.

We've learned a lot since, and Ashley could talk a little bit about how it's expanded. With the expansion, we anticipate more demand. How much more? I think Ashley's opinion is probably far more.

Yeah, I mean, I think that it is possible. I can't give you a specific number, but additional resources could help.

But under your current planning, say it's just status quo and it's just. It's the 50 that you're currently playing. How much do you anticipate to expand just on your current.

I mean, because we're still looking at the performance from last year and we're actually proposing to expand. Expand the program to a new incentive option. We do anticipate growth, but we're trying to be conservative in our estimates. So I don't have a specific number related to that, but we can get back to you.

Okay, that'd be great. On the other piece of the Prop 4 conversation, in terms of the public financing of the clean energy transmission projects. I know that was big priority for Chair Becker. We were discussing it earlier. So I did want to relay question about that.

Specifically the timeline on the electric transmission study and the sort of issue with syncing that with budget cycle timing. I think we're anticipating your study to be complete July of 25 of this year. That a lot is hinging on for the, for the public financing piece.

My concern is I guess if we, we don't get that study till after the budget is complete and we let that, we kick that money down the road say another year or two and then we go through this entire affordability conversation where we're hacking out public purpose programs and doing all this other work.

Have we left, have we left money on the table? Because my sense is from at least right now that I think staff report says that the Federal Dollars, for example the 600 million from the grip will be matched with $900 million mostly from utility ratepayers.

If that money didn't have to come from utility rate payers and instead it could be coming from this Prop 4 pot. Isn't that a big affordability opportunity that we're basically not going to see the fruits of this year while we're having that conversation. So I'm just trying to. That's the issue, I guess.

No, it's a great question. I will defer for Californians who are ratepayers to our colleagues at the California Public Utilities Commission. But we are looking at where they complement between the federal funding that we're finalizing negotiations on that will be able to provide these solicitations for, for interconnection transmission as well as some additional research and development on enhancements for enhancing and expanding existing infrastructure around

grid enhancing technology. .

Exactly Yeah. And then we're working with the California Independent System Operator, the CPUC and us on our, on how all this would be be able to be.

I don't like to use the word streamlined because we do do comprehensive environmental reviews but condensed processes in order to one get the money out but also start seeing the benefits of construction with new lines and expansion. So I hope that answers that part of the question. But the rate pair I'd have to really defer to.

Yeah, no, I appreciate the rate piece of it. I'm just, I'm trying to avoid additional, you know, rate impacts if possible and trying to be timely about getting a budget plan together for the, for this transmission piece. And so is there a chance you finish the report before July?

Possibly, but we'd have to come back, do a little more assessment. Like everyone. It's no excuse, but, you know, we. I have five deadline transmission, you know, leading this report, but they are. Our goal is to, you know, meet the July deadline with SB 319.

And we've been meeting with our energy agencies, our partners, to ensure that that gets done by then.

And that'll roll out alongside the broader 3264 study, right? Correct. Whole cost of energy, all that's in there, plus that piece.

Exactly. That's why we're all trying to coordinate.

I know we said, again, we set the deadline, so I'm not trying to begrudge you for adhering to it and not beating it, but I do think it'll be quite timely for our budget conversation. Is it fair to assume that those GRIP2 funds are here and we've got them?

I mean, they came in August of 24, but have there been any hitches with the Federal Government? Is that in our hands or is that like.

It's so the budget guy can get into the specifics? We do know it's sitting in a pot, but we are finalizing.

Which Pot? Sorry, Sorry to do that.

Good morning again, Damian Mimna with the cec. We have a conditional agreement with the Federal Government, and we're working to finalize that agreement with them at this time. But we signed the conditional agreement, and that gives us a significant amount of confidence that the dollars will appear pursuant to that agreement.

Currently, the dollars, though, are in a federal account?

Correct In terms of how the drawdown process goes, this program, like almost every other federal program, the drawdown takes place on the back end after we receive an invoice from a supplier or when we pay our internal labor costs.

So it's. It's less firm or more firm than like a conditional loan agreement. I mean, are you. Are they contractually obligated to give us those funds if we spend it down? Or could they rescind that contract unilaterally as they've been doing? They just did $20 billion of those rescissions across the board.

I'm just trying to get square on how we plan our budget. If 600 million in. Or is it. Yeah. So do they have to do. Are they contractually obligated to.

So at this point, we have that conditional agreement. Once we have that formal agreement, that would be the more formal agreement that would give us the most assurance that we have. Trying to predict exactly what will happen in Washington is a challenge. Sure. But we look forward to getting to that formal agreement, finalizing that conditional agreement.

And that's with the Department of Energy? that's the account it lives in right now.

Yes, Yeah. Yes. Two funds. The Federal Department of Energy. Okay.

Yeah. All right. Maybe more questions and answers on, on that front I could add.

We, we, we continue to finalize these agreements in good faith with Department of Energy program staff and so that has continued.

Yeah, no, I, they, there are areas that have, that are going to be that the funding is not going to be pulled back on and you know, especially because this has such broad support across the country and it's not really just a California only thing and frankly it's not even a climate related investment so much as a grid resiliency investment.

I'll give it a tiny bit of optimism and hopefully that that comes together. I had one last question for cec. Yes. Do you, do you have programs that Fund micro grids? Yes. Which one is that out of epic? It's typically out of epic. Yes. And do you have programs that Fund self generation?

I guess DIBA would be an example of one. But are there others that just have funded say distributed energy projects, solar storage either behind meter or you know it. I'm trying to think of, I don't know your whole program menu here.

The. At this point there's been legacy programs but at this point chiefly you would see that at the Energy Commission through, through epic.

And so there is generation associated with a micro grid but not, not incentives for, for just General like, like we had a program new solar homes program that provided broad incentives to anybody who owned a home. So there isn't anything like that. But got it.

But, so yeah, but, but how, yeah, doing more of those micro grid projects you've got. I forget how much out the door in, in those kinds of projects, but I think over $100 million in projects. Be fair to say. That's fair. Yes. Over, over the years. So staff capacity to keep doing so were there additional funds?

For example, if some of the public purpose programs through our reforms end up out of Public Utilities Commission world and say over it with say Energy Commission there's staff capacity to be able to handle additional funding for that kind of project work.

You're going to hate this answer, but it depends right how much money, how prescriptive the program is, how much, you know, time and energy. To the extent it's plug and play, it's relatively easy and we can absorb a fair bit. To the extent it's more, more detailed, it depends.

We funded recently a handful of microgrid projects that use non lithium technology and where our view is that we are going to need more than just one chemistry to fulfill our goals. These are early stage ones. So they're being done through the R and D program, through our EPIC program.

And we're learning, you know, a lot every day.

Great. Okay. I'll follow up with the other piece of that then with the Puc, both on the rates and on this front as well. But thank you. Thank you, Mr. Chair.

I think we're gonna go to PUC, which is a nice tee up. Thank you. I appreciate that. And we'll, and we'll come back and talk more Prop 4 in depth a little later. So thank you. All right, let's ask our folks from the PUC to come up. So this is item 16.

So we've got Rachel Peterson who's here to present. And you may proceed.

Good morning, Chair Allen. Is that on? Is that on? Yes. All right. Good morning, Chair and honorable Members of the Committee, thank you very much for the opportunity to be here this morning. My name is Rachel Peterson. I'm the Executive Director of the California Public Utilities Commission.

I was asked to begin with an overview of Our response to Governor Newsom's Executive Order N5. 24. I'm going to do that. You've asked a lot of questions that are very CPUC adjacent, so I will do my best to answer those questions.

And then I do have subject matter experts with me in the house as well, so I'll call them up too. But just to get started. And we did send you a slide deck. I apologize. We did send it late, so I think you have it on paper. So I'll let you know what slide I'm on.

And then we're sending you a PDF of it so you can have it electronically. There's a very cool animation on one slide. And so I really want you to be able to see that. The mission of the CPUC, of course, is to ensure safe, clean, reliable utility services at just and reasonable rates.

We set the policy and rules for the utility services that are essential to modern life in California. I'm glad to have the opportunity to start today with an overview of the response we issued. The Governor's Executive order clearly states that it is imperative to address the rising cost of electricity in California.

And we at the CPUC could not agree more. We've been noting this in our annual rates reports for several years now. I'm going to walk through today what we learned when we did the report. Our analysis at a high level and Our ideas for slowing the rising costs of electricity going forward.

So if we go to slide two, what we learned. This summarizes some of our learnings. We've seen major clean energy successes in California, but we all know that that success is being threatened by the impacts of climate change. The two largest drivers of electric rates and bills today are the rooftop solar tariff structure and wildfire costs.

As you spent some time this morning speaking with Director Thomas Jacobs about that. And in addition, many programs are not required by law to be cost effective. Those complexities lead us to one of the conclusions in the report, which is that there is no silver bullet for for reducing electricity rates going forward.

We do propose some ideas which I'll get to if we go to slide three. This is the slide where you'll see the animation. So the blue pie chart will show you an increasing wedge of people joining a program and reducing their contribution to direct costs. When they do that, the bar chart on the right rises.

And so that means the contribution of everybody else who's not in that program grows in direct proportion. So the entire electric system includes a fixed cost of transmission, distribution and all the infrastructure that we need to deliver this safe and reliable electricity.

This system stretches from the eastern border to our coast through mountains, forests, rural areas, farmland and cities that make our state such a great place. But the electricity does not persist if it's not used or stored after it's generated. And there we all expect electricity to be instantly available when we flip a switch.

That means we have to build a system sized to meet highest potential demand. The system serves nearly 40 million Californians. And the investor owned utilities are going to need to collect 44 billion from customers this year to build and operate the system. And that's where the concepts of fairness and cost effectiveness become really important.

The graphic on this slide is meant to impart the idea of fairness. When some people do not pay a share of fixed costs, all of the other customers have to make up that difference.

This is happening most markedly with residential customers who are on the legacy net energy metering tariffs and to a lesser, lesser extent those using the newer net billing tariffs. And the cost shift does exist with some other programs too, although not to the same degree. Okay, next slide please. I'll say it to my next slide please.

And everyone turn the page. Okay, so this is meant to show the electric Bill cost drivers. We have a few different points we're trying to show on this slide.

In the list on the left we show relative contributions to rates of rooftop solar tariffs, wildfire costs The CARE program and all of the programs that don't have cost effectiveness scores.

And you can see the large differences in rate impacts which we think can act as a guide for how we develop solutions, which are the ideas that develop that reduce the rates most for the most people. Next, the Executive order asked us to evaluate the cost effectiveness of programs. And that's represented in the pie chart.

The pie chart shows the relative amounts by which programs raise rates. And we are lumping a lot of different programs together in order to demonstrate those relative contributions.

And then third, furthest to the right, we wanted to show at a high level which programs are cost effective, are not cost effective, and those that have only been partially reviewed. We've noted that in parentheses next to the program titles. As far as cost effectiveness goes, you spent some time discussing that this morning.

With respect to wildfire costs. I'll just note that evaluating a program for cost effectiveness is very resource intensive. It is very heavily litigated in our proceedings about the assumptions that go into the methodology and the results.

And then second, I do want to note that some programs are set up to achieve specific legislative policy goals other than cost effectiveness. This means that if the statute does not require a cost effectiveness analysis, then that does not necessarily drive our determination about whether to approve approve a program that is funded by ratepayers.

Okay, next slide is ideas to reduce electricity rates going forward. So it has several on here and I'm just going to mention two. One is to Fund programs or any cost shift from alternative non ratepayer sources of funding.

And the second is, as I think you began looking at this morning, integrate all spending forecasts into General rate cases. This would be particularly applicable with respect to wildfire mitigation plans. We included a slide on ideas to reallocate the climate credit because that is also a request made by the Governor in the Executive order.

And the first row shows how the climate credit is going to be distributed to households this year to payments of about $60. The second row shows what would happen if it were allocated to customers on the CARE program and the family electric rate affordability programs fara.

The third directs it to non net energy metering and non net billing customers which would benefit 9.9 million households. And the fourth, this would be a major policy choice, directs it towards CARE FARA customers who live in California's hottest climate zones and do not have rooftop solar. And you can see the high Bill benefit that would deliver.

That concludes my presentation on these slides. I'm happy to answer questions and also take up Some of the topics you were discussing with our sister agencies too. Thank you.

Well, thank you. Do you have any comments from financier dof? Okay. You know, there's so many. I mean, the questions of fairness are vast, you know, and perceptions of fairness. There's a lot of folks, of course, who feel it's very unfair that we've, you know, changed the rules on the, on the, on rooftop solar.

There's also a lot of fairness issues associated with this idea that, you know, we're asking people in Compton to play the same rates as when it's so much cheaper to provide them with electricity and so much lower risk versus people in other parts of the state. So there's a massive fairness question there potentially. Right.

You know, one could also say, well, there's a fairness question when you're charging some people more than others. But, you know, this whole conversation is so fraught because of how all the problems in our system. And of course we're also, you know, trying to encourage more, you know, the transition to cleaner energy.

And that's part of why we came out with such aggressive rooftop solar incentives. And it's a, it's a such a net benefit. And we've seen the downsides of a lot of industrial scale solar.

We just saw the, you know, shutdown of the Ivanpah project and you know, this whole thought that that's the only path with regards to solar generation I think has been proven, proved faulty. So lots of, lots of different conversations here.

But, you know, I will, I am interested in your thoughts on some of the dialogue that was happening before because it is my, you know, I would like to see, you know, moving forward us to be really thinking as we think about the ggrf in particular, more emphasis on really trying to help regular folks put in place good clean energy projects at their homes, heat pumps, insulation subsidies or vouchers or other kinds of things that will help make that work better for folks which could both drive down their own personal costs and also meet our environmental and climate goals.

I think that's something that CEC is potentially really well positioned to manage. So anyway, lots to discuss. PC, of course, is really in the hot seat right now just given its role in regulating an area that's become so immensely expensive.

And people are pretty agitated about where rates are and how we create a better system for the state. So let me just ask a little bit about the energy affordability Executive order that was referenced. We talked a little earlier. You know, they want to.

There's a suggestion in there about identifying alternative funding sources for some of the currently rate payer funded programs. And you know, one of his thoughts from you as to what sorts of sources we should consider. Yeah, let's start with that.

Sure. So the primary one that we have worked on with the ordering the utilities to seek all possible federal funds, and they have, as you just spoke about, they we have received a GRIP grant for California. PG and E is set to receive a $15 billion Department of Energy loan.

And they have are still pursuing and I think have received a few other grants. So federal funding is a major one. And then in our report, we talk about reallocating the climate credit. It's an existing form. It's an existing source that isn't ratepayer, but you can use it if you make such policy calls to redistribute that credit.

Mm. Okay. So who's going to come up with, what's the plan for a plan, you know, in terms of. From the EO.

So from the CPUC's perspective, we only have control over ratepayer dollars. Right, and so we are not in charge of making a determination about using those or developing a different source of funds.

Whose job is it to do that? On the Administration side?

I'd have to speak with the Administration. I don't know. Or maybe I'm not understanding your question, but.

Well, I mean, I guess I'm just trying to get a better sense of, you know. Yeah, I mean, maybe you're not the right person to ask about this, but you know, the Governor came out with the CEO.

I'm not sure I'm the right person.

He's asking for a shift from ratepayer funded sources for a number of these, you know, some of these programs that you currently help to facilitate the funding of. And so if you're not the right person.

Yeah. Okay. Okay. So, yeah, obviously we've had a lot of hearings on this.

There was one, there was an intense one a couple weeks ago on this. On the whole General rate case processes. You know, I think you're going to continue to see a lot of pressure from the Legislature.

I think it's going to continue to ratchet up on the extent to which you're just the processes by which you're evaluating utility spending and cost effectiveness of programs. I mean, if you have some of the thoughts that you want to share with us on that topic or on the, on the previous hearing.

Yeah, I actually we developed an example in order to provide you an example of something that our staff does in order to show you. Aside from the General rate case being heavily litigated by stakeholders, our staff does perform cost effectiveness analysis.

And this goes to your questions that you had for our Director Thomas Jacobs this morning, which I thought was a really interesting and well timed dialogue. So PGE, in their General rate case for 2023, they brought in an initial proposal of 3,346 miles of undergrounding for a total of $10 billion.

This would have been spent over four years plus covered conductor for 320 miles at a cost of $517 million. So $10.5 billion they brought into the case and proposed it.

Our staff conducted an analysis and really looked at how much risk can you reduce with that amount of expenditure for the dollars that you're spending there and found that they could achieve a level of risk reduction by limiting them to 2000 miles of system hardening in which it's not necessarily all undergrounding, but it is the targeted right approach to be selected given the risk in different parts of their service territory and for a total of $4.7 billion.

So reduced their ask by more than half and aside from that, applied a risk, a risk focused work program on them with reporting and monitoring and metrics. So it's an example of what we do inside the CPUC.

When a utility comes to us with a spending ask while the litigation is occurring, we conduct our own analysis in order to help the Commission make a final decision.

Can I jump in? Yeah, please, please. Yeah. Thank you, Director. So on that point, from a budget perspective, that's exactly the work we need to be doing. That level of scrutiny, kicking those tires, doing your own independent analyses, having your own modeling, even you know that, that can write.

I am, I know there's all these other public purpose programs that take staff time at Energy Division. I'm wondering if you have a perspective on, you know, if there were even more intentionality and more focus within an Energy Division on the General rate cases. Could we even, could we go even deeper than we're able to go now?

Because that staff right now is administering, you know, the Microgrid program or they're busy with trying to do SGIP Administration or they're, you know, any of these other efficiency programs, what have you. I don't have a good enough sense of how the PYS break down within that org chart within Energy Division.

But can, I mean, is that something that we could actually get more rate payer savings out of that division if we prioritize staff hours differently?

All right, I'm going to answer you as CEO. Okay, so first off, I'm extremely proud of the work that the CPUC staff does across the board. We are set with some very difficult programs and statutory goals and our staff work day in and day out to achieve clean, reliable, safe utility services for Californians.

I was there. I know. I was one of your.

It was, People were working very hard.

You contributed so many things.

I know. And you, you, you contributed.

Now, every Executive will always, if we're being honest, yes, we can always find efficiencies and constantly look at how can we prioritize our work to achieve what you're talking about, the best outcome for ratepayers. I will note that every program that you named is a statutory program.

Yes.

And so we, as stated in the California Constitution, the Legislature develops the work plan for the CPUC. The CPUC then regulates utilities to achieve that work plan. And so I work very hard to try to make sure we are placing people and resources in the right places, working on the right programs in the right proportions.

We are handed a large work program from the Legislature.

I am responsible for some of that and I think of just SGIP and the Microgrids program, for example, written legislation directing you to do that largely because it was ratepayer funded. So the natural inclination is okay if it's rate the building decarb programs, for instance, that also were running through PUC.

But that's an example for instance of one where we found administrative efficiencies with the CEC administering important parts of building decarb. Now they're off and running. Dollars are actually getting spent down. Whereas, you know, I look at Microgrids and there's still $200 million sitting in there for I don't know how many years.

I mean we passed the law I think in 19 and we're in 25. I think PGE spent a little bit down, but Edison spent under $1.0 million down in their area. So like that money's just sitting there and staff time still being sunk into it.

So if you had a different statutory mandate, I guess, and we took another look through our reforms to sort of, you know, not make that say the obligation of the PUC to administer those funds and let the CEC administer even unspent funds for example, what more I guess with a freed up energy division staff, what more can you be doing?

Like on those GRCs? That's really what I, that's the heart of it. Like what, what is on that menu said if we had all the staff in the world for, for in the GRC world, what, what more could we do?

So I'll start on that question. I do, I will ask Deputy Executive Director Testify to join me here.

But you know, all in all, what, what I notice the trend in the Legislature Is as well, AB 2666 from last year is requiring us to take closer and closer look, look at costs and compare what a utility forecasted their costs were going to be and then what they actually spent.

Now the tension there is that you actually also want to give utilities some, some room to modify and innovate just as Director Thomas Jacobs was speaking about. You don't want them to start a program in year one and stick with it just because that's exactly what they asked for.

When a better solution, say to reduce wildfire risk comes along, they do need to be able to innovate.

But what I Notice from the recent trend is that we are being asked to examine cost forecasts than actuals, compare them and bring a report or monitoring or metric in some manner to the public or the parties who are litigating in General rate cases.

And so if we had more, if we had more resources, we would set ourselves up better to do that activity. If that's enough, we'll stop there. But I do have deputy Executive Director to testify.

I think all curious affordability is top of mind. Everyone's going to be kicking all the tires here. So how's that tire kicking going?

Great, you know, so I wanted to first start by acknowledging from Executive Director Peterson's remarks, you know, the proposal that was included in the EO response related to bringing in the wildfire mitigation work into the General rate cases. Energy Division staff work very closely with our Safety Policy division staff on the General rate cases.

And that is a huge opportunity to bring more cost savings to through the General rate case for wildfire mitigation. So hopefully something that can be closely considered in the next several months. In addition to that, in the General rate case proceedings.

The staff working on those issues, they're never pulled away to work on self generation incentive program building decarbonization. We only leverage the staff that have been allocated via the legislation and the BCP for that, those programs on those issues.

And so all of our General rate case staff are focused only on the General rate cases, given where we have seen the growth in costs for customers, one being wildfire mitigation is the largest driver and the second being net energy metering.

You know, I've already spoken to what was brought up about bringing the wildfire mitigation into the General rate cases. But we also have our staff working on what we call rate design as well as our customer generation program who have been working very closely to try and reduce that cost shift.

And then of course last, the year before last, it was last year actually we brought in the flat rate as well to be able to better allocate costs, fix costs specifically among customer classes. And we did that with equity in mind by including the income graduated approach where our lowest income customers pay a smaller fee.

So those are a couple of things that we've done in the recent.

Yeah, I guess what I'm getting at, like my understanding is that right now we're relying on say, you know, the PAO Cal advocates, you know, ratepayer advocates intervenors to do a lot of the data analysis and really be the scrutinizers. You end up making the Decisions. But yeah, I'm just trying to get a sense.

I get that you, whatever we appropriate to staff the Energy Division is the staff you use. You're not like moving people from a, I get that. I'm trying to talk about the. If we set it up differently and gave you the push or had space to reallocate some of those PYS, I don't exactly know what's in, you know, how much flexibility there is in your program. But scrutinizing independently being able to scrutinize some of that utility data feels like.

And not, not sort of pushing that over to PAO or the advocates be able to do that, like doing that on your own. Seems like we'd, we'd be getting value out of that. I don't know.

No, I take the point, Senator, and we'll absolutely take it and think about it. As I said, we do conduct analysis and we did have an effect. We had a major effect on the PG and E GRC.

Yes. And we want you to keep that up and just want more of it. And you know, the last thing I would just say is this accountability piece. I mean, we've, we spent a lot of time talking about, say, you know, the small, this, these wedges, but not the big.

The big one is still in transmission, distribution, generation, O and M. I mean, that's still over half the costs. That scrutiny and on that big, big piece is going to be key. And I think we're going to be looking at, you know, return on equity and some of the broader issues there.

I think we're going to be looking at vegetation management, some of the costs associated there and just cost effectiveness overall. But on that note, I've been trying to get an answer for a while on this oversight investigation that the PUC has been conducting on the gas market side.

I think we just had President Reynolds in the other day and brought it up. Sounded like phase two is coming. I just didn't want to miss an opportunity to ask timing on that.

I'll go straight to Ms. Tesfay on that. Okay. Yep.

I know you're very familiar, but for others, a little bit of background. So we opened this investigation in response to the gas price spikes that we saw in the markets. Winter of 22, winter of 23.

So far, there was a draft staff part one report that came out in July of last year, which went out for comment, got a lot of comments from parties. And so the final version of that was released in February.

You're referring to the part two, and it's Scheduled per the scoping memo to come out in Q2 of this year. And we are on track to get that out on time.

Who does that? What division within PUC is doing that work?

Energy division.

That's also an energy division, specifically in.

The gas reliability team.

Understood.

And then FERC also released the draft enforcement report late last year where they.

Said that they didn't have any findings. Right. We saw, we saw the FERC report and we saw your phase one.

I guess I am so sensitive and I think of all the other people who, I mean, gas futures are spiking right now because the President has decided to ship 30% of our energy overseas, basically doubling demand for LNG exports.

There are going to be large scale impacts that aren't in this chart or they're sort of, they're embedded in that generation cost, I guess is where they are in that chart. Right. But like if the gas markets double in cost, I think we're at over $4 right now.

How to not get stuck in any market manipulation dynamics that come from a super volatile energy market which we are already seeing is here. And just being so, so ready and vigilant.

I'm pushing hard on finishing that phase too because even if there's not a finding of some malfeasance or something out of that to understand the wholesale market trading dynamics to learn through that investigation to help us learn, I think then we'll know how to be more vigilant.

Especially in an era where we may not be able to Ryan FERC to be that overseer. Granted there are walls and interstate commerce and you know, we can't touch wholesale markets in General, but we can look pretty far upstream.

And I just, I think we're going to have to take that seriously because that piece of this chart, which is not a program we created these exogenous factors that are going to be hitting people hard. They're going to say, well Legislature, why did my Bill just go up 20% more? And isn't that your fault?

Or it's an energy program. So actually it's the fact that we just ship that gas to a foreign country. It's. And so if we don't understand, if we can't explain that, I think to ratepayers we got a blind spot.

And I think yeah, so having the oversight function but also having the acuity about that cost piece, I would just say. And that's, that's for your energy division to think about going forward and, and how we understand that wholesale gas price impact on everything from electricity to gas.

Well, you don't have the gasoline piece, but it goes, it goes all over, right. Anywhere you need to eat.

So we do. We are going to be implementing a couple of bills from last session that are subjects of budget change proposals in front of you that do ask us to take into account the full energy wallet, including the price of gas. So your points are exactly right on.

That's great.

Thank you.

Thank you.

Mr. Chair,I have a question.

Senator Blakespear first and we'll go to you.

Yes, thank you Director Peterson for being here today. There are many things that were said by the Chair and also by Senator Stern that I agree with and I won't repeat them. I think I just want to make a couple of big points and maybe a question or two.

So I think that we've had over many years, through many decisions, a market structure that's given us the highest per capita rooftop solar in the nation. And one of the north stars that I want to articulate is that having energy generated within the already built environment seems to make sense and we should continue to incentivize it.

So having rooftop solar, not just on single family homes, but multi family homes, commercial industrial things that have already been developed and to have a short supply chain so they are stored in a battery that's nearby and not needing to basically develop the back country with this industrial scale solar and the habitat destruction and all of the negatives that come from that.

I believe in that and I know there's a lot of complexity around why things change and what incentivizes what. But I just want to articulate as one Senator that I think of that as something that we should be aiming toward. And so having our various programs and incentives line up that way is really important.

And I also am concerned about community CCEs, CCAs, community choice energy. When I was the mayor of my City of Encinitas, we were part of forming what was the second largest in the nation, the one that includes the City of San Diego. It serves almost a million people, customers in my area in San Diego. County.

And I'm concerned that some of the incentives, like the $280 million in incentives to encourage residential solar and storage, that those are not available under the CPUC guidelines and this has been articulated to me from San Diego Community Power that they're not allowed to benefit from this incentive.

So I'm concerned about us disadvantaging CCA across the state and I wonder if you have any response to that.

Yeah, I'll start on that. And I know Deputy Executive Director testify is very familiar with the program. So per statute we are required to require everyone who's receiving a self generation incentive program incentive to participate in a demand response program. Demand response programs need to be reliable because we need them when the grid is under stress.

And so CCAs have been developing demand response programs that is the gate that they need to pass through in order to then be eligible to deliver the SGIP incentive to their customers. Let's see if you have any detail.

I can provide a little more detail. So that piece about the requirement for demand response was new as part of the new funding source, which. And we were very supportive of that. And so it was something that we had to work through the formal proceeding to integrate that into the program.

So now that that has been integrated, you know, the IOU's have those programs and we want to make sure the CCAs also have those programs so that the batteries that their customers receive are also able to, you know, charge during the best time of day and you know, deploy during the best time of day when the grid is in need.

I do want to make it clear that the funds have not been expended. So it's not that the money is running out and CCA customers aren't going to be able to get access to that money.

So that's on hold right now as we figure out this final piece and we expect to do that in the next few months.

And it's a demand response study, demand response program participation.

So what this means is that, you know, if a customer receives a battery as part of this bucket of funds from the self generation incentive program, they will be required to, you know, reduce their use during times of day of grid stress. And that's also when they'll be relying on that battery.

Historically, the program has not had that requirement. Now, as I say it, it might seem obvious that that should have been part of the program, but you know, it's a program that's been around for over 20 years.

And so that was a requirement as part of this $280 million of funding and we've been integrating it into this new part of the program.

Okay, and do you happen to know if that CCA is pursuing, getting compliant by having this demand?

All of the CCAs are, yes, they are.

Okay, yep. And what is the amount that a customer is? Is it a rebate that they're able or.

Yes, it's a rebate. And it does vary by territory, depending on which territory that you're in. And so right now we have five program administrators, PG&E Southern California Edison CCSE, which is doing the implementation for San Diego gas and electric SoCalGas.

And then we added a fifth new implementer being LADWP to the program, given it's not just ratepayer funding anymore. So they're all getting up to speed on these new rules.

And what does it mean, implementer from the customers consumer's perspective.

The program administrators are taking in the applications, working with customers to make sure that their specific site is meeting the technical requirements of the program, getting safely connected to the utility system and that system is online, and then they get their rebate.

And what's the range of rebate amounts.

Or I'll have to get back to you on that. We can do specifically for your territory, however you would like.

Okay, yeah, I would like to have that information for our territory, San Diego Community Power. Thank you. And then I appreciate your slides and I just wanted to make sure that everybody can hear me while I'm speaking. Yes, thank you. So I appreciate the slides, particularly about reallocating the climate credit.

I think we're really missing the boat right now on utility bills, not the climate credit being at. Not in a month when people's bills are actually high. They're at like April and somewhere in the fall. That's not a spiking month, which I think is really a mistake.

And also they're so buried in the Bill that you don't even. We don't get any credit. I think at the state level or the utility level.

I really think there needs to be a wholesale rethinking of when they come out, who gets them and how they're marketed on the actual bills because right now it just seems like it's extremely ineffective. I would give it a D if I were to grade it.

But I appreciate seeing this data here that shows that, for example, if we reallocated the climate credit to reduce bills for CAER and FARA accounts only, that it would be a Bill credit of $454, because that's a Bill credit that can really make a difference for people.

I really think we should avo, you know, Bill credits of $20. I feel like those are. You can spend enormous amounts of money on everybody for $20 and it has almost no effect on people. So. And then.

But then also this bottom line where if it was only for people who lived in the hottest climates, it would be $445. So this is all very interesting data and I think should be relevant to talk about as part of the GGRF reauthorization and what's happening with that. But I do appreciate this a lot.

And then I also just want to as my final comment, Senator Stern was talking about the graph that you provided and the largest section of it all, remaining revenue, transmission, distribution, generation, O and M. And I do think that it's important that we are looking at that, too.

So I know that it seems like we've really focused on those other slices, but there are things that are happening in that area that are just really critical that are the biggest drivers of rates. So, so just lumping that together and leaving it alone, I feel like that's a mistake.

So I just wanted to make sure and voice that. Thanks very much, Chair.

Let's see. I think there's a lot of agreement on that, on everything she said, actually. Quite frankly.

Well, I guess just first as a communication piece, you know, we were trying with this report, trying to make it legible, and we had to lump some things together. And then on a slide deck, I pushed everything into that pie chart. But I appreciate all the points. We could have broken it out into several slides.

I would say that the way that we really pay attention to transmission, distribution, O and M, is through those General rate cases as we were speaking about. We are, you know, constantly monitoring and reviewing and evaluating utility spending and forecasts in order to reduce those large amounts.

California does have a very large growth program in the form of new load that wants to interconnect and that needs new distribution system investments. We have a large electrification program going on, which is important to our climate goals, also necessitating investments. Transmission is the the jurisdiction is under FERC, so it's a federal jurisdictional component.

And so that is a cost that California ratepayers pay, but is governed entirely by a different federal agency.

So just to give you a few examples of why those costs are so high and then the attention that we at the CPUC pay to them in order to try to keep that trend from growing as rapidly as it does. But I absolutely appreciate the points, Senator Choi.

Thank you, Chair, and also thank you for your effort to basically reduce the energy cost and eventually lower the ratepayers Bill every month that we see. When I see my Bill, electricity Bill, it's so hard, so many, about 5-6 different pages under different titles. I couldn't understand them.

I don't know why the Bill has to be that complicated. The consumers don't care what they offer. All I care about is the bottom line and per kilowatt, how much I'm being charged. Maybe two simple lines. How much I have used per kilowatt charge, how much I'm being charged 18 cents or 20 cents 30 cents.

And what the bottom line is that I have to pay to looking at your first chart, it is encouraging at the same time really discouraging and that generates money. Question.

I'm not an expert in this area but my common sense question is that California has delivered major clean energy successes that we, you know, I'm contributing myself by my own solar panel.

Okay, but now you are blaming that success is threatening the impact of the rising cost and rooftop solar and wildfires are two major largest factors in rising rates. This is to be contradicting. You encouraged and gave me incentives by way of tax deduction for the solar panel. Now. So are you blaming me?

I save money rate pay, you know as rate payer, Low pay. And for those who did not, who don't have solar panels, they are paying higher because I'm using it producing.

I mean if we produce collectively more clean energy, solar energy producing it, then since we have abundance of energy not imported by elsewhere, then the rate should go down. That's to me it's a common sense analysis or expectation. But you are blaming the rooftop solar panel generating the energy.

So I mean how are you going to get rid of. I going to incentify all the rooftop users and you're going to cut the tax credits. What about if you come up with ways that everybody, every home will have a solar rooftop then they can also benefit from this lower rate.

I mean there's no silver bullet to reducing the rate. Then you are the ones experts finding that the silver bullet. But you are giving up. There's no silver bullet in lowering the rate. Then what are we trying to do with all these discussions in the methodology and creating more renewable energy.

So when we create more renewable energy then will it benefit the non rooftop solar panel users? When you talk about the windmills, et cetera, et cetera, that will cost money too. So that will generate probably will charge those costs to repairs. You are not going to print the money to install them. Right?

So we should give up on creating the renewable energies. That's contradicting to me. So can you explain in plain terms so I can understand?

I will absolutely endeavor Senator, and I appreciate it. My, my expertise does not extend to finding silver bullets, but we do, we are trying on many fronts to reduce these costs going forward.

And this I feel like your points are similar to the points from Senator Allen and Senator Blakespear about the difference between the Large renewable projects that are delivering for California and the rooftop solar that's on people's homes, you're absolutely right. They are all part of this clean energy success. It is that big picture of everything together.

The question comes in the balance for what people are being paid for that energy. So the utility scale large projects have contracts with CCAs, with utilities that stretch five years, 10 years, and they're being paid an arm's length negotiated rate for that generation. And we're all paying that.

Then through our rates, when people install panels on their roofs, they're being paid the retail rate, which is the highest rate that any of us pay. And it was when the program began 10 years ago, maybe more. The law does tell the Commission to ensure that the, the solar industry gets off the ground.

That's my layperson way of saying it. But build up the solar industry. And so providing that generous rate for people who installed it on their homes was a way to help boost the solar industry. This is 10-12 years ago.

We've seen, when we say we've delivered major clean energy success success, that's part of what we mean, that so many Californians have adopted rooftop solar because of that generation payment that they're receiving to the point where we feel that the balance could be restruck again, the balance could be changed.

And that's why we introduced the net billing tariff, which requires people to have panels and storage in their homes so that when they generate, they can store it and then use it in the evening hours when the grid needs it. So we tried to evolve the program to meet California's continuing needs.

The customers who joined early on were very interested in maintaining the benefit that they had of the generous rate. And so that's why we have. I'm not going to know the details, but we have grandfathered those customers in.

And that's what we're trying, what we analyzed and we tried to represent in this report the fact that those early contracts, those early agreements with customers are giving them a benefit today that others, all other customers are paying for. And that's where we are suggesting that a different balance could be struck.

Please. Can you please solar top panels to everyone. That may be good generalizing. Everybody fair benefit from that because rooftop solar panel installers were encouraged and incentivized by tax credits. Right.

I don't know whether the program is continuing or not and I don't even know whether my decision was correct wise or not because it was expensive of five years ago. I think it cost over $40,000 in five years. Whether I saved $40,000 from that alone.

But if that is the ultimate goal for California's clean energy production goal and solar seem to be the most desirable cleanest energy form if not continue even so, to help disadvantaged people who could not afford $40,000.

Can government subsidize the solar panels so that everybody can benefit from it for the long term we may achieve the equity at the same time that we achieved the California circling energy goal.

So I'll just say first that, if you're referring to federal tax credits, that's not the CPUC. Right. So we don't have control over that.

But I thought I also the words of state tax credit portion of that.

Thank you for the help. Senator. I don't, I don't know the answer to the question but just to your broader question as far as subsidies, you know, I think that's kind of what we're trying to convey what the Governor asked us and what we're trying to convey with the report.

There are a lot of possible policy directions for us. We're trying to find other ways other than ratepayers to pay for something. If the Legislature decides that something is a societal good and then directs non ratepayer funds toward that. Yes. We at the CPUC are directed to manage programs and regulate utilities within the ratepayer funded universe.

So if there's a different decision to be made that's, that's above my pay grade to use a comment.

Continue trying to find that the silver bullet.

Yes.

Yeah, I just, I want to thank my colleagues for the great discussion as I think we're raising a lot of the concerns that are out there. And I just want to make sure that you're, you're really careful about not letting stones get unturned.

I mean it's my understanding, for example that vegetation management work by the utilities is upwards of four times the cost of another state's.

I heard that dialogue this morning. I'm curious for the source because we've been, I was actually asking some colleagues and we didn't know of a benchmark study out there. So if there's a Source. I'd love to get it.

I don't think it's a. There's no study. We need it. I think it's just a wage comparison based on wage structures. That's the estimate at least that I got based on.

And you know, there.

So that there's other costs in a project, obviously. But.

Okay. And there was a. There is a law. I forget the number of a Bill from 2020/2021 that orders utilities to pay prevailing wage for vegetation management. So, they are paying prevailing wage in California's rural areas. So, it's a job creation and economic development determination made by this body 34 years ago.

Wow. I mean. Okay. How does that compare to other states from your understanding?

Like I said, I don't know. I was asking colleagues while you were having that dialogue. I don't know that there's a benchmark study, but I can get the Bill number and author from 2020, 2019/2020.

Okay. I think we're certainly going to want more information about that. Again, it's all those good things and it's also a major cost driver, I would think.

I think it goes to show all of the split specific pieces that go into the utilities work. That again is. You're right. You're absolutely right. It's contributing to costs and rates and it also has other legislative policy goals embedded.

Yeah. All right. Senator.

Yeah. Just one. One nitpicky thing. From Senator Blakespears line of inquiry with you trying to get that climate credit chart right. I know we're jumping around that final option, the 445. That bottom one is that. I just want to make sure we're reading it right.

So it's non NEM, MBT, CAER, FIRA and customers in the hottest climate zones. Is that statewide CAER FIRA and then. And then adding on customers across the board in hot climate zones. Or is that. Or just CARE FIRA and other customers in those climate zones, in other words, would CAER FIRA.

I know. And my technician is here to make sure I answer the question correctly.

Yeah. Good. Sorry. You didn't know you were going to be put on the spot. It's okay.

He came out of interest to observe and here he is.

Is. It's based on a study.

He can come speak. He doesn't have a tie. We don't want to get him in trouble. Okay. No, no.

He's not allowed.

It's additional. It's additional, Senator. So it's all those customers and statewide.

Statewide CAER. Statewide plus non CAER FIRA in the. In the hot zones.

That is my and non NEM and non NBT.

Yes. Right, right. And we can all, once we get the electronic version, we can click through to this study because that's where we pulled it from. That's footnoted at the bottom.

Yes, Stanford. Stanford was the recent one. Yeah, that's right. Okay, that's in there. Great. Super helpful information. Yeah.

Wait, can I just clarify what was just communicated? So this means that it's basically like Low income people everywhere in the state and then people who live in the hot zones regardless of income.

Right. And people and also do not have. Solar and don't have rooftop solar.

Those are the only people who would get the credit. And if we did it that way, they would reduce their Bill by $445. Yes, yes. Okay. Wow. Okay, good to know.

I just want a little clarification on. You said that. And I don't have rooftop solar. I'm thinking about it right now, considering it, you know, estimates, but that you get paid back at the highest rate.

Is that the highest generation rate or is there other stuff that you're getting a benefit from that people that don't have solar are not benefiting from?

Right. So it's the retail rate, but it's very important that now it needs to be paired with storage in order to get the highest level of incentive.

And so that makes sure that when you are generating solar with those panels and then you're also charging a battery that's on your site and you know that battery is presumably also going to be discharging during that time of day when the grid is in most need and the prices are the highest.

So. But that applies to recent solar installations. Yes. What about the sort of the older ones? The legacy ones. Yeah.

Legacy? It does not apply to the legacy customers.

So when I, when I put solar in and have batteries, then I'm getting a benefit, I'm going to get charged, paid back. The rate that of generation. The rate, the generation.

As long as you have the battery that's connected with that system.

Yeah. I'm kind of struggling for words here, but the folks that have the legacy systems, they're getting more than just generation costs. They're getting all kinds of other stuff. That's in this chart.

That's right. And they also don't have batteries associated with their systems. They're not required to.

So how solid are those contracts? I mean are these contracts that can be. They get them for 20 years. 20 years. And how long ago did that process. End of the 20 year legacy.

So the Commission adopted that decision in 2023, in the fall of 2023. But then we didn't have it get implemented until April of the following year just to give the market a chance to adjust.

So we're going to be paying that legacy cost for 20 years now.

Right. But I'd like to just weigh in here to Senator McNerney's point. So it's not like the, the legacy solar panels that is just being wasted. I mean, it's going onto the grid. So, you know, it's going, it's, it's not being. The household doesn't get to use it.

In a way, it goes back onto the grid and that's why they're paying for it. So it's really up to the utility to decide then what about their contracts that are not clean energy and how much are they taking putting onto the grid in addition to that solar, those solar panels.

So I think it's important to remember that because it's not as if this is just money that's being wasted. It is going to the grid.

It's going to grid, but at a very high rate.

Right, Right. That was what was offered and negotiated.

I wanted to ask about a question that Senator Stern and I submitted to the PUC a couple weeks ago in the wake of the Palisades fires. You know, we were really interested in your thoughts on as we rebuild a community, as we think about rebuilding. And, you know, there's a lot of discussion about the efficacy of electrification.

You know, There was the SB 1221 Bill that came forward a couple of years ago. Of course, that's effectively only, you know, only applicable to Northern California because PG&E works in both gas and electric. But love to get any preliminary thoughts you might have.

You know, there is certainly evidence to suggest that the gas issues contributed to some of the challenges associated with both the fire fighting itself during the terrible night, but also some of the safety issues in the immediate aftermath. And I'd love to just get your thoughts on our letter.

So I think in the first instance, everything about ignition and the wildfires themselves is under open investigation by CAL FIRE and by our Safety and Enforcement Division. So I'm not going to be able to speak at all about.

Yeah, we weren't, it wasn't about ignition.

Yeah. It's about rebuild and looking at under the appropriate underground.

Well, the idea being that the gas folks are just kind of, I mean, the current kind of status quo is to just go back in and just start replacing the gas infrastructure. At a very high cost, which gets passed on to ratepayers.

And should we in situations like this, maybe not in the Palisade situation where it doesn't appear as though the gas infrastructure was severely compromised, but should we be thinking in the future, if there is massive compromising of the gas infrastructure, infrastructure after a major wildfire of this proportion, to consider, you know, an electrification model for that neighborhood?

So one of the things I thought was actually pretty brilliant in SB 1221 is that it acknowledges that communities have to choose.

Yeah.

And they need good information in front of them about pros and cons before they can make that choice. I. And so we're going to. We have a budget change proposal on SB 21 in front of you, too.

But that is, you know, there's a lot of analytical work that we'll do and framework work that we'll do before we get to the place where we can. We're asking the utilities and communities to, say, volunteer as possible pilot areas for neighborhood level decarbonization.

But they really are going to need to have a lot of information in front of them.

Right now, the status quo is they don't get a choice. Right? It just comes right back in and they got to pay all the extra. Everyone has to pay the extra costs associated with the rebuild of that infrastructure and all the complexities associated with having both systems in place.

So there's a choice that happens that we're making for them through the status quo.

And it's partly because status quo has all gas companies, gas utilities as providers of last resort.

That's right. And electric companies, too. So because that's the way California and the United States have grown and developed is with both electricity and gas. So that. You're absolutely right.

Right.

But when we wrote those rules, there was so many things that could not be done through electricity. You know, somebody heating your house, cooking on the stove, or at least not with the level of efficacy that we have today.

I've been surprised at the number of all electric subdivisions that exist around California that date from the 50s and 60s. But you're right, that's a small. A small percentage.

Yeah. Do you have a General thought about this conversation? And again, we weren't being prescriptive in our letter. It was really asking. You're the subject matter experts.

Sorry, I had to consult briefly with Luan, so. Well, first off, I do think rebuild is on a timeline that's probably faster than we're able to allow a community to make a choice because people are anxious to try to rebuild. Right. So there is a more rapid timeline than say, what's envisioned in SB 1221.

They are. But I think one of the challenges when you have a total destructive destruction like this, asking for community input is very difficult. Everyone's diffused around the Southland, if not the nation, in some cases the world. How do you, how do you give a meaningful choice to a neighborhood in a situation like that?

The rebuild also takes a lot longer than people initially think.

Just the basic, you know, toxic debris and then, and then General debris removal is a very long process, frustratingly long for people, and yet necessarily long, unfortunately, even though we've been going much faster than similar removal in the past, I guess while it may not make sense for this particular situation, it does beg the question in the future because I think we're always going to run into the situation if we don't come up with a better suited plan for that evaluation, because I think we're always going to.

If there's a massive catastrophic fire, the next one we have which will we know we're going to have, there's not going to be a good mechanism for meaningfully soliciting community input. And by the way, there's also ways to ensure that people who want to have gas can still continue to have gas.

You can have propane for those that really want it. I think in this particular case it may not. At the end of the day, the balance of, of factors may not merit an electrification process, given what my understanding is of the integrity of the current gas infrastructure in the Palisades, for example.

That being said, what's our, what is our action plan in a future catastrophic fire that might lead to a more comprehensive destruction of the entire utility infrastructure?

And if that were to happen and the entire gas system were to effectively have to be rebuilt from scratch, would we want the gas company to go in at the tune of hundreds of millions of dollars potentially to replace that infrastructure, which they charge everybody for, when there's an alternative for a less expensive all electrification plan as a potential.

So, Senator, I think that if such a scenario were to happen, which sounds even worse than what happened in Los Angeles, then I think the Legislature, all of our state leaders would be examining exactly that question.

But my point is it's too late in some respects, given, you know, you're right, people want to rebuild quickly. They don't want to have a big deep dive into a conversation, a study that might slow down the process.

You know, it's not that we can't have that conversation quickly, but you know, I mean just having gone through it myself, it's, you're just. There's not, there's not time for thoughtfulness in the immediate aftermath of a fire. It's all about response, you know, very kind of surface level response.

You know, it's a, a great scenario planning question. I think we'll, we'll start thinking about that.

Yeah. Because I think, I think the default right now is to say, you know, as you say, provider of last resort. But you know, and I'm happy to hear there's evidence from this 50s of all electric. I mean how are they heating that? What were they doing for heat? They just like space heaters.

Yeah. It was all electric.

Yeah. Okay. Interesting.

It is, I think.

And water heating, it was all done just through normal. Yeah, interesting.

I think it was places where the gas system did not reach at the time and they decided to just go all electric and stayed that way and then never requested a gas utility to extend service.

Right. And the electric options are just so much better than they were back in, back then. I mean, you know, the, the, you know, the induction stoves are just much better than all the electric stoves. And anyway, it's interesting. Interesting. Yes, it's interesting.

Try to maybe finer point on your role in this, in this rebuild effort. Is it fair to say that the PUC, that the discretion as to how that rebuilding works and say, you know, where you have areas of total destruction that you could say prune those pieces of the gas system. Who's the decider on that?

Is that a local, fundamentally a local decision right now are you all. Do you actually have an approval function within the rebuild? Like does the gas company have to come to you to get a.

Not ahead of time. So what happens, the standard process is once a catastrophe occurs. This is. These are catastrophes that are above and beyond what they last forecast in their last General rate case. So they send within a month of the catastrophe, they send me, the Executive Director a notice saying we're starting up a memorandum account.

And I know you know what that is.