Assembly Standing Committee on Utilities and Energy

I do also want to take a moment to mention two bills that were originally set for today's hearing. SB 237 by Senator Grayson and SB 540 by Senator Becker. While those proposals are not on today's agenda, I. I want to be very clear about my commitment and the Assembly's commitment broadly to address these critical issues and challenges.

There is also equal urgency to ensure that we get these policies right. The stakes are simply too high for us to either advance a solution that is inadequate or for us to fail to advance a solution whatsoever.

There is too much at stake for the reliability and affordability of California's energy system, and I also believe there's too much at stakeholders for our economy and the future of the state as a whole.

So I am confident that together we will find solutions to both of these policy issue areas and look forward to continuing to work with my colleagues in the Assembly, our partners in the State Senate and the Governor's office as well, to ensure that we land the many important climate and energy planes that we need to land before we break session on September 12th.

So with that, I think we are ready to begin. We do not have a quorum, so we're going to go ahead and get started as a Subcommitee. We also do not currently have any authors, so here I will be. Otherwise, we are ready to roll. All right, the.

All right, we are going to go ahead and begin with file item number one. Welcome. Senator Becker, the floor is yours.

Wow. Okay. Oh, how are you? I appreciate the flexibility here at the Assembly Energy.

Indeed.

And I don't need to tell a lot of you this because I know you've been focused on this throughout this entire year. But you hear all the time, we hear all the time from our constituents and I hear all the time from my wife about rising energy bills.

Over the last 10 years, residential rates have gone up 82% for SDG and E customers, 90% for SoCal Edison customers, 110% for PG&E customers. Edison's and PG&E customers have seen an increase of 50% last three years alone.

Now, I will say, you know, that we've seen some good signs from this year of things starting to move in the right direction. But of course we're still hearing from our constituents about the increases in the previous years.

A couple pieces around really the short term impact around the climate dividend to devote 100% of the money to customer credit. We also allocate larger credits to low income care and fair customers. And that's part of the short term impact.

There's a piece here around having at least one spending plan that is below the rate of inflation which we think will help the PUC to keep rates low. Public justification every time there's a rate increase that are really important. There's a whole piece here around wildfire spending make sure we're getting bang for the buck.

And wildfire spending and part of that comes through was fairly negotiated last year but didn't make it over the finish line. So there's a large part of the bills on wildfire spending. And then two things that we help think will have a big impact.

And actually I like your approach about some of the things that you focus that, that, that on and then also around the public funding of infrastructure and the potential savings there. And again thank you for your leadership in that area as well. There's other parts here.

And so we have a number of pieces here related to that, that we think, we think can really help. But always open to more suggestions either from the Committee or from the continue to work with stakeholders what's actually going to get things to move more quickly with that.

[Roll Call]

All right. Great, we have a quorum. The floor is yours.

This bill contains a series of significant measures designed to reduce long term utility spending and ratepayer costs while also providing badly needed short term rate relief if expected. We think this bill would have a material impact on the affordability of electricity over the coming decades.

In particular, we support a number of the key provisions of this bill, including establishing a clean Energy Infrastructure Authority capable of financing and owning new grid infrastructure, including electric transmission. Public ownership of transmission using low cost public financing can reduce the long term cost passed on to ratepayers by more than 50% compared to private ownership.

Total ratepayer savings from public ownership of new competitively bid transmission projects could amount to $3 billion per year. To pursue this approach, the needs to empower an agency or an entity that can serve as the lead sponsor for publicly owned transmission.

We believe that this could reduce cost to ratepayers by more than one third and it's appropriate in response to the massive increase in capital expenditures proposed by the three investor owned utilities that are proposing $90 billion in new capital expenditures through 2028.

To get a handle on rates, spending must be subject to greater scrutiny by the Public Utilities Commission. And this bill tackles this problem in a thoughtful and balanced manner. Additionally improving the review of wildfire mitigation plans to prioritize cost effectiveness and timely risk reduction.

Creating the Power Fund mentioned by Senator Becker, administered by the California Energy Commission to channel external funding sources to cover costs that would otherwise be recovered in rates. Additionally requiring the PUC to provide detailed annual reporting on utility profits, rate based capital structure and rate of return.

Thank you. All right, we'll go ahead and open it up for additional testimony in support. If you'd like to testify in support at SB 254, please approach the microphone.

Thank you, Madam Chair. Members Jason Ikerd on behalf of the California Community Choice Association similarly looking forward to continuing to work with the Senator and yourself as we support this bill moving forward. Thank you.

Allison Hilliard with the Climate Center in support, like to register my our support. And apologize for not getting our letter submitted by the deadline. Thank you.

Thank you. Melissa Cortez on behalf of the California Wind Energy Association in support.

Melissa Romero, California Environmental Voters in support.

Margie Lie on behalf of the Southern California Public Power Authority in a supportive amended position. Thank you.

Good afternoon. Raquel Mason with the California Environmental Justice Alliance and the support if amended position. Thank you.

All right. See no one else wishing to speak in support. I will move to opposition. Our lead witnesses can approach the dais. Thank you.

Thank you, Madam Chair. Members Kent Kauss on behalf of Southern California Gas Company and SDG and E. We remain opposed to SB254 and would note that the bill has not been amended since First Policy Committee. We remain committed to working with the author but would like to see some improvements to it.

Back in 2022, the Joint Legislative Audit Committee was approached with the idea of creating a study to look at cost drivers. That report was issued almost 24 months ago. Next month it'll be two years ago. Since that time the LAO has issued reports. Other agencies have issued reports.

The Governor issued an Executive order calling on the PUC to report on cost saving opportunities. They all carry this common theme that utility rates are driven largely by legal requirements, regulations and state and federal mandates.

At a minimum, we'd suggest striking the provisions relative to gas corporations. The affordability discussion is on electricity. I think we should focus there.

Electricity services are fundamentally different than other goods and services as operate as utilities operate under an extensive web of state and federal laws and mandates beyond safety and reliability, forcing utilities to propose rates untethered from actual costs which undermine the wide variety of public policy programs including wildfire mitigation and clean energy goals.

Madam Chair Member Scott Wetch, on behalf of the California Coalition of Utility Employees and the State Association of Electrical Workers, we are opposed unless amended. We have been working positively with the author since the outset. We've given him some amendments. There's as Mr. Kauss pointed out, there hasn't been any substantive amendments since his first policy Committee.

Things like costs that are outside the utilities control because they're affected by tariffs. 50% tariff on copper that was just adopted this week. Labor costs, other regulatory related costs. On the securitization, we think there should be a prioritization. We can't securitize everything.

Wildfire liability and making sure that victims of wildfires are paid should take a precedence over before other securitization is done. And finally there needs to be, in all due respect to turn. We have not seen an economic analysis that points to a seven and a half $1.0 billion savings done by any sort of independent sort of entity.

And now that we have a summer recess, we should be here. We all get things wrong. Turn supported AB 1890 and said it was going to save a whole bunch of money. And we ended up in an energy crisis. So we would like to see some independent analysis. But we look forward to working with the author.

Thank you. Moving to any additional testimony in opposition, please approach the microphone.

Madam Chair. Members Matt Broad here on behalf of the Utility Workers Union of America with an opposed unless amended position. We align our comments with the opposition. Thank you.

Clifton Wilson on behalf of the Fresno County Board of Supervisors with the position of opposing less amended. Thank you.

Good afternoon. Chair and Committee Members Molly Corcoran with Axiom Advisors on behalf of LS Power opposed unless amended. Look forward to working with the author Chair Committee. Thank you.

Lee Cameron with the Rural County Representatives of California. We have an opposed unless amended position. We have concerns related to the OPT in CEC AB205 certification program. Thank you.

Good afternoon Chair Members. Matt Clavenstein, on behalf of the Center for Sustainable Energy. We have an opposed, less amended position with regards to one section of the bill. We appreciate that was called out in the analysis and look forward to continuing. Conversations with the Committee and the and the author. Thank you.

No, I'll make a quick Sorry I didn't hear most of the testimony but I, I did read, I did read. The bill and there is a whole. Lot in there and wow you one of the few but thank you and plenty of opposition. But I do know that this is.

Part of a bigger conversation so I will be supporting the bill today.

First, I want to thank the author and commend him for his focus on affordability.

You know, whenever you put together a big bountiful bill, there's a lot of things in it and I think there's some good things in this and there's some also some things that I have been very concerned about and did not vote for when it was in our House and similar bills on our side concerned about some of the things in the bill that I think have potential to destabilize, stabilize the financial markets and could result in I think, increases in costs to rate peers and consumers.

I think you're going to have the votes to get this out today. But you know, I really do think that this is, you know, doing a bill like this we should be able to consider each of the pieces individually because they're all pretty significant. And because of that I'm going to to be laying off today. So.

All right. Seeing no other members wishing to ask a question or comment, I guess before I, you know, jump in with a little bit of my commentary. Would you like to respond to the concerns that have been raised by the opposition?

I appreciate first of all, I'll say I certainly appreciate folks including the IBEW who've come forward with with creative proposals and certainly list, you know, willing to listen and includes ius as well listening to any proposals that folks have because I think this is well, it's a by necessary a bit of a confrontational process.

Now the question is what can you do in the short term versus what can you do in the medium and longer term? I do think the having one rate case, it just has to be one you can have multiple rate cases, but one rate case where inflation just sets a standard.

So people see, okay, what would that look like and I think will be helpful to the PUC going forward. I mean, some of the concerns raised on the specifically around permitting and streamlining, again, those are complex parts of the bill. Looking forward to engaging on those.

I mean, I think the point is that there's and again, I do see this as a package to me, at least personally with some of the 541, which I'll discuss and 540 how do we use our existing grid more effectively? How do we make sure we provide the right incentives and how do we deliver for customers?

We have to tackle the rate case process. We have to speed up development, which I think is something we probably all we would certainly agree on. We have to that's one thing that adds significantly to cost, all of our delays in the process. So, you know, again, a lot in here.

No, there's a lot to land here in the next, you know, whatever, six weeks. But look forward to working with you.

Well, thank you for that. And you know, I too, want to start by thanking you for your focus on affordability. And the bottom line is that Californians expect us to take a very hard look at their bills and identify every opportunity, bring down costs in both the short and the long term.

So, you know, look forward to continuing conversation in order to harmonize those efforts. I know that we start from a shared goal of doing everything we can to deliver real results and real savings for California families who are struggling right now.

So thank you for your leadership and thank you for your partnership as we, along with opposition concerns, turn this into a package that is going to deliver real savings. With that, would you like to close?

Yeah. Well said. I'll just echo what you said. I look forward to working with you and the rest of the Committee and respectfully ask for an aye vote.

All right, thank you. All right, we do. We have a. We need a motion. Okay. Motion from Assemblymember Irwin. Second from Assemblymember Harabedian. The motion is do pass Natural Resources. Madam Secretary, please call the roll.

[Roll Call]

All right, 6-3. We'll put that bill on call and wait for absent members to add on. Next up is SB541. Senator Becker.

And so it's really about 45 hours a year that the grid is under severe strain. About 45 hours a year. And the rest of the time we're using on average about 45% of the grid's capacity. And those are not, you know, those are public numbers.

I was at an event with the COPGE also talking about the exact same thing. And so the question really is, how do we go about addressing that?

And so the point of 540 with the regional grid, that I'm sure that we'll have the chance to talk about eventually is for those 45 hours a year we want to be able to trade.

But obviously we can't do that too often. We don't want to rely on that. So this bill is really about that. Other part is how do we shave the peak and how do we get the information even necessary to do that.

So again I would say up front I'll be accepting the Committee's amendments, thank the staff and, and working with many stakeholders, many allies in many cases who just trying to understand how this is going to work. Again. We only started writing this bill this year, so it's been a bit of work in progress.

But I really appreciate everyone's work. So the first part of the bill is really a transparency measure to see how much progress we are making towards the goal that we have as a state. The CC's goals of 7 gigawatts 7,000 megawatts of load shifting by 2030.

The second part of the bill is focused on taking advantage of load flexibility at the distribution level to increase the amount of demand that can be met with our existing substations and other poles and wire infrastructure where it's cost effective to do so.

But that would be a way to avoid spending as much over the coming years to upgrade all that infrastructure to meet growing demand. Low flexibility can also open up headroom that will allow new housing, EV charging depots, other new customer load to be powered up sooner without overloading the distribution grid.

Because the thing is, we discussed yesterday my commitment. We have volumetric rates, so we're trying to get more load on the grid. That's going to bring down costs for everyone. But right now we don't really know where to bring, where's the best places to bring that new load online.

So the second part of the bill directs the CPU, CPUC to develop a strategy for capturing those cost savings via low flexibility where it's cost effective.

Thank you. Good afternoon. My name is Ryan Leddick. I'm a principal with the Brattle Group, an economic consulting firm. For the past 18 years, my research has focused on opportunities to improve the power system by incentivizing households and businesses to become more flexible consumers of electricity.

If developed, that capability could save California households more than half $1.0 billion per year. Participants in low flexibility programs would be compensated for the services that they're providing to the grid and non participants are. All Californians would benefit from a reduction in the overall cost of meeting the State's energy needs.

SB 541 is an important step forward in this regard. First, as Senator Becker noted, its data reporting requirements create greater transparency around the state's progress toward achieving its load flexibility potential. With that information, we'll have a better understanding of what's working, what isn't, and how to fix it it.

Second, the bill will address critical bottlenecks on the distribution grid. In the past, attempts to use load flexibility as a distribution system resource have had some limited success, but SB 541 is different relative to those past efforts. The bill requires that load flexibility opportunities be considered earlier and more comprehensively in distribution planning.

Thank you for your time and the opportunity to speak about the benefits of SB 541.

Madam Chair Member Scott Wech on behalf of the California Coalition of Utility Employees and the State Association of Electrical Workers, Longtime critics and skeptics of some of the programs that have been attempted in the past want to thank your staff and the Senator, particularly for the amendments that are moved quite away.

Hello. Allison Hilliard with the Climate Center in support.

Glenn Garfunkel on behalf of Climate Action California Climate Reality Silicon Valley Humboldt350 Sacramento350 we support.

Juliet Lazard on behalf of Coalition for Community Solar Access in support.

Melissa Romero, California Environmental Voters in support.

Brandon Knapp representing NEXAMP in support, thank you.

Good afternoon. Tiffany Fan behalf of the California Efficiency and Demand Management Council or SAD Mac in support thank you.

And our primary concern is that essentially while our members are always ready to decarbonize and in fact it's fairly embedded within the DNA of the CCA movement and while some of our members, in fact, as noted in the analysis, have actually already made significant investments in load reduction and shifting, primarily the example and the analysis on page seven, the AgFit program, which is being operated by Valley Clean Energy just down the road from us today, the reality is that there can be some serious cost effectiveness issues with load shifting strategies.

And so we believe that any mandate in this regard would be incredibly premature, especially given that the CPUC and the CEC are already doing extensive work on that issue and we'll be continuing to analyze how those issues could be or how those strategies could be deployed.

So some of the specific things that I guess I'll give a few examples of that we are concerned about is some of the incentives for these resources. This seems like a semantic type of language, but leveraging the resources in our planning process and our very in depth process is different than incentivizing.

So we're hopeful to see the amendments. And like I said, we hope that it complements a lot of the initiatives that PG&E and of course, the other utilities have in this space and just hope that we can get to a place that recognizes complexity of the policies here. Thank you very much.

Thank you. Moving to additional testimony in opposition. You can go ahead and approach the microphone.

Good afternoon, Chair and Members Derek Dolley on behalf of the California Municipal Utilities Association. We're opposed to the bill in print, but appreciate the amendments and look forward to reviewing them. Thank you.

Anthony Tannehill, California Special Districts Association. Also opposed to the measure as in print. Also looking forward to seeing it as amended. Thank you.

Kiara Ross, on behalf of the City of Burbank, I feel like I should say echo opposed to the bill in print. Happy with the new amendments and we hope to remove our opposition with those. Thank you.

Number two, incorporates cost effectiveness language into the assessment of load shifting programs being evaluated and enacted by the state. And number three, specifies the intent to apply lessons learned from past der efforts.

So I do think that perhaps we'll have a different conversation once you all are able to review the amendments in some detail and appreciate the author's engagement with our with our Committee staff as we advanced those questions or comments from Committee Members. Okay. Question from Assembly Member Irwin.

So if it's done the right way. I think this is great policy. I guess I didn't quite understand the First Amendment. We had a lot of the POUs coming to the office. What is your thought on their opposition? That they are doing a lot of this themselves already?

Well, I think. And thank you. We had your bill up in our Committee too, along these lines. So I appreciate your work in this. I think the questions are the granularity. So I think there was one suggestion that we just look overall by type, like how much are CCAs doing versus how much?

But it does say specifically in the bill that this section does not impose a binding obligation or otherwise mandate the procurement of load shifting technologies by retail suppliers.

The section is not intended to bridge or otherwise supplant the authority of the governing boards of community choice aggregators or local public unions to set rates, establish programs and create goals. So. So we're trying to be pretty clear on it.

Thank you, Assembly Member Harabedian.

Thank you, Madam Chair. Thank you to the author for being here. I think it's a important bill, obviously. I think the intent and what you're trying to accomplish is extremely important. My only question is, and happy to support it today, how is this affecting behind the Meter Der incentivization? Obviously.

I just had a bill in front of your Committee that got out about virtual power plant aggregators and how we can do more with those. It's not clear to me whether that's just complimentary with this bill or whether it incorporates it. And some of the definitions aren't like retail supplier, I don't think would include a VPP aggregator.

Yeah, well, I don't see my witnesses any thoughts on that too, but very much aligned. And I was sorry I was running around when you presented your bill. I would have commented with the work that you're doing on virtual power plants. I think it's super important, Phil. It's very complimentary with this bill.

Virtual power plants are not retail suppliers. So again, I think those efforts are very complementary with our efforts here. Part of the impetus we thought about this is, you know, there's, I think, what it's like something like 7 gigawatts or something behind the meter now. Batteries that we're not calling into play.

We're not asking anything of them during these peak times. And I know that's partly what your bill gets at, and so I think it's very complimentary. Okay, thank you.

Thank you. I appreciate the bill, and I'm going to be staying with opposition right now and look forward to seeing the amendments.

Okay, thank you. All right. See, no additional questions or comments. Senator, would you like to close?

Yeah, I appreciate the. The. Appreciate all the comments that were made and. And including the. The comments here made at the table. As I said, this. This is something we really just thought of this year. It's been a work in progress. I think it's come a long way and.

Thank you. All right, the motion is due passed amended to Appropriations. Madam Secretary, please call the roll.

9, 1. So that bill is on call and we'll leave it open for additional Members to add on. Thank you, Senator. Okay, so 123 we have five measures left on our agenda. Five Senate authors that need to come join us in room 437, please.

It. Welcome. Oh, there we go. Welcome. Senator Stern, we are going to move to File item number 5, SB 453.

Not just who's in the middle of a fire zone, but it's who's on the periphery of that with no access to power and who need it most. We built a micro grids program in this state a few years back under legislation I passed and put some money aside for the most at risk communities.

And this Bill is really just about getting pre existing dollars that were ratepayer funded spent down and if those don't get spent down, sent back. So that's simply what the Bill does. I'm happy to answer your questions.

All right, you got a motion and a second. Do we have anyone, do we have a witness here in a primary witness in support?

We might not. I'm going lean, no notes. We're just going to go. We can, we can string.

Tweener.

But we just didn't want to cut off anybody. We've already awarded funds to in flight. So appreciate the work. Thank you. Thank you.

Christina Scringe for the Center for Biological Diversity in support.

Thank you. Madam Chair. Senator, great bill. Really common sense. And if you're looking for a co-author would be happy to jump on. You are.

Appreciate it. Just want to keep the lights on here and got to get creative about doing so small is sometimes big. Respectfully ask your aye vote.

Okay, you've got a motion in a second. The motion is do pass as amended to Appropriations. Madam Secretary, please call the roll.

All right, 12 0 that bill is out and we'll leave it open for absent members to add on. All right, moving to file item 2, SB 292 by Senator Cervantes. Welcome.

Thank you so much, Madam Chair. I know we all have juggling several committees, so I appreciate the flexibility here. I'm here to present SB 292 and I want to thank the committee staff for their work with my team on this bill.

Senators, I have worked on the amendments and so they're outlined on page seven of the analysis, which I am accepting. Just going right into it: although only about 1% of wildfires were ignited by power lines in California, half of the 10 most destructive wildfires can be traced back to energy systems.

Since then, power utilities began to develop and integrate new strategies for significantly reducing the risk of igniting wildfires by power equipment while avoiding possible wildfire liabilities. To bolster public safety and avoid significant wildfire losses, California's electric utilities have invested heavily in ignition mitigation.

While PSPS addresses the immediate risk to power infrastructure, it raises concerns about the broader societal implications, particularly for vulnerable populations who heavily rely on the availability of electricity. I had a situation in my district in which we had a PSPS shut off for up to 10 days.

And so, this bill is in direct response to what we saw in the heart of my district, where many of those affected were seniors, residents of mobile home parks, individuals on fixed income, small businesses were also impacted.

However, many residents noted that the map did not include all outages. Some residents have stated that Edison relied on out-of-date information on their grid, leading to employees being sent out to repair electrical equipment in wrong locations or residents receiving conflicting and incorrect automated notifications. During the PSPs, some cell towers lost electricity.

During this event, residents experienced disruption of medical necessity equipment, subsequent hospitalization, lack of access to drinking water, and an inability to leave residents, their residents, those that have limited mobility. And that's what my team and I were responding to during that time.

In short, my district, like many others, have faced sustained PSPS events and they must be treated with the delicacy of an emergency response. This bill will be helpful not only to our local governments, nonprofit organizations, but our legislative body as we allocate funding for resilience.

It is crucial that all utilities, whether they are investor owned, publicly owned, or part of an electric corporation cooperative, are mandated to provide transparent, comprehensive, and easily interpretable data. The data should be accessible at the granular level of census tracts.

This will help us to ensure that coastal, inland, urban, suburban, rural, and tribal areas will be taken into consideration as this would enhance reliability, empower all users, including local governments and community organizations, to respond more effectively during outages.

Today I have Bethany, a scientist and PSE Healthy Energy - at PSE Healthy Energy who focuses on resilience and energy equity, to testify and support.

Reporting at census tract level makes it possible to assess economic and demographic conditions at a scale that is obscured within current reporting while still protecting customer privacy. For example, large reporting areas may hide that a rural community might be experiencing long outages because current reliability statistics are weighted towards a more densely populated urban area with fewer outages.

California has more than 40 publicly owned utilities serving both urban and rural communities as well as almost 40% of California's disadvantaged census tracts.

Some of these utilities have millions of customers but are currently not required to report on outages or reliability, which can make it incredibly difficult for communities to invest in resilience building systems that protect their most vulnerable members. Ultimately, I found that current reporting requirements are not always granular enough.

Thank you. At this time, we'll open it up for additional support testimony. If you'd like to testify in support of SB 292, you can approach the microphone. Seeing none. Moving to opposition testimony. Is there a lead opposition witness? If so, come on up. Or if we just have me-too opposition, go ahead and approach the microphone at this time.

Thank you, Madam Chair and members. Joe Zanze with San Diego Gas Electric. We had opposed we have an opposed unless amended position on the bill in print. The analysis, the amendments, and the analysis look like they address some of our concerns.

We just want to see the language in print and then continue to work with the author to make sure that there aren't any duplicative reporting mandates that we're already doing but understand where the author's coming from and hope to continue working together. Thank you.

Thank you.

Brandon Ebeck from Pacific Gas Electric in alignment with San Diego. Thank you.

Thank you.

Lynn Trujillo with Southern California Edison in align with PG&E and San Diego. Thank you.

First, I want to thank the author for really her focus, I think, on some of the challenges that your community has faced.

You know, I have some concerns about the bill mainly because I think some of these issues are really more appropriate for regulatory rulemaking and there's some open rate cases that I think are dealing with some of these things. And so, when I was listening to your, to your author, they're the kinds of your witness.

They're the kinds of things that are very, very technical and I think generally should be done at the regulatory level because they're scientific and you need to understand those kinds of things.

You know, that said, I'm going to support the bill today and encourage you to sort of think about what should actually be done at the regulatory level rather than putting things in the bill that are very specific and, you know, could have unintended consequences.

No. Thank you for the comments from our colleagues. Certainly, you know, happy to have continued conversation on that and those who are shared their concerns in the room today. That is what we do within every committee and as we move forward and thank you for the work as well with you, Madam Chair, and your willingness to help us get this through today, I respectfully asked for your aye vote.

[Roll Call].

Okay, 12-0; that bill is out. We'll leave it open for absent members to add on. Just a quick, I guess air traffic control update for committee members, file item number 4, SB 445 by Senator Wiener is first being heard in Local Gov so we need to wait for that measure to be presented in Local Government and it will then be presented here. And we are awaiting the arrival of Senator Padilla to present SB 473.

All right, we are back to our regularly scheduled programming. We're moving to File item number 8, SB 643. Welcome. Oh, hold on. We just. All right, come on up. Oh, all right. Subject, I guess. All right. I guess he got in just in time. So, subject to an agreement between the Senators, I guess we're moving in.

File order to file item six, SB 473. Yeah. All right.

Okay, let's do it.

Signed into law by the Governor in 2022, SB 473 is a common sense Bill that directly and meaningfully will impact water affordability for millions of Californians. Providing safe, clean drinking water to Californians is a complex task. Requires maintaining critical infrastructure, all of which requires stable funding for maintenance and improvements.

This removes the incentive to sell as much water as possible and instead allows the state and the utility to promote conservation and efficiency. Decoupled rate structures were initially introduced as a pilot program for water by the CPUC.

Data showed that during that pilot program utilities had implemented, decoupling averaged a 29% decrease in customer waters used from 2009 to 2021, while those that did not decouple experienced only a 24% decrease. Decrease the difference of about 11 billion gallons of water.

Despite the success of the pilot and the passage of SB 1469, which required the CPUC to review decoupling requests. The CPUC has denied all decoupling requests of regulated water companies, discouraging programs that help make water bills more affordable directly resulting in higher bills for customers, which motivated this bill.

By creating tiered rate structures, water Utilities are able to shift more of their costs to higher use higher income households. In the years that the water utility collects more revenue than projected, the utility will issue a credit back to the consumer.

When compared to other rate making strategies, decoupling allows for lower water rates, lower use for lower use and medium use customers.

For example, in areas just in my district in Calipatria and nylon in the Imperial county where decoupling has now been denied by the CPUC, water rates for the bottom tiers of water users have gone up by as much as 116% while top tier water users are seeing bill reductions of up to 17.9%.

This is sending the exact opposite message that the state is trying to send on both affordability and on conservation.

With me today, I'm pleased to have Scott Wech with State Pipe Trades Council and Rami, forgive me if I mispronounce this right, Kahlon with the California Water Service, who also, as many of you may remember, played a prominent role at the CPUC himself.

And when the CPUC decided in 2020 to no longer follow its own Water Action Plan, the ensuing results were inevitable. And higher rates and higher bills for low user low income customers with rate benefits accruing to high water users and the conservation signal diminished. This was a predictable result.

As we just heard from Senator Padilla in his district, decoupling caps utility revenues and it's a two way mechanism that returns dollars to customers when revenues come in above projections and vice versa. Decoupling benefits customers and utilities equally and does not allow for excess earnings or profits. Utilities only receive revenues that the CPUC authorizes.

I respectfully request your aye vote on this important bill. Thank you.

Under decoupling there's an annual true up this that trigger either a credit to ratepayers or a surcharge. Example calam in 2023 under collected by $21 million. The very next year in 2024 it over collected by 15.4 million. And there is no mechanism to really true that up. It is these wild swings that decoupling prevents.

The Bill states an authorized decoupling mechanism shall be designed to ensure that the differences between actual and authorized water sales do not result in the over recovery or under recovery of the water corporation's authorized water sales revenue on on the very next page. Excuse me.

Decoupling increases conservation as you heard by allowing aggressive usage charges or tiers that. Mr. Wetch, if you can. Yes. That mean that you use more, you pay more. Lastly, and just one final point, Madam Chair.

A recent decision by the PUC that was supported by the Public Advocates Office for Southern California Edison's gate gas utility operations on Catalina Island.

The CPUC held in their decision supported by the public advocate and it states quote it is reasonable to allow Southern California Edison to establish a revenue decoupling mechanism, remedy any under or over collections in order to ensure that Catalina Gas has sufficient income to meet its revenue requirements and operates safely and reliably. We'd urge you to vote.

Thank you. Madam Chair. Members Kobe Pizotti on behalf of the City of Thousand Oaks and strong support. Thank you.

Good afternoon. Chair Petrie Norris and Members John Kenrick on behalf of the California Chamber of Commerce in support.

Good afternoon. Caitlin Johnson with Political Solutions on behalf of California American Water in support. Thank you.

Melissa Sparks Kranz with the League of California Cities in support.

Mckay Carney on behalf of Golden State Water in support.

Okay, bringing it. We're going to go to move on to opposition testimony. If you are here to testify in opposition. If our lead witnesses can go ahead and approach the dais.

Thank you, Madam Chair. My name is Annabel Hopkins and I am the Deputy Director of Government Affairs at the Public Advocate's Office. We are the independent consumer advocate at the CPUC. It is our statutory responsibility and honor to advocate on behalf of ratepayers in the State of California. We are here in respectful opposition to Senate Bill 473.

And first, just want to thank the author and his excellent staff for taking the time to meet with our office to hear our concerns. We have acted as a voice of ratepayers over these last many years with a specific focus on water rate making policy.

Rather, they will pay for the amount of water that their water utility forecasts that they will use. So here's what that will look like because there's been a lot of information on this bill. A water utility, in its general rate case, will forecast how much water its customers will use and pay for in the future.

Over the course of 10 years, RAM, as implemented by half of the CPUC regulated water utilities, increased costs to ratepayers by approximately $1 billion. To be clear, based on data collected over the span of 10 years, this bill increases rates. Thank you for your time.

Thank you. Thank you, Madam Chair. My name is Richard Rauschmeier. I'm the Deputy Director of Water and Communications at the Public Advocate's Office at the California Public Utilities Commission. As Annabelle mentioned, these mechanisms were studied at the Commission over a period of 10 years from 2009 to 2019. Two mechanisms in particular were studied.

But as Annabel mentioned, there was a significant difference in the cost to ratepayers with the full ram revenue decoupling costing ratepayers approximately $1.0 billion more. So having customers pay for water that they didn't actually use, it's not an effective way to incentivize water conservation and it undermines both customer affordability and utility accountability.

Thank you for your time and I'd be happy to answer any questions you may have.

Thank you. Moving to additional testimony in opposition. Go ahead and approach the microphone.

Good afternoon, Chair and members Lori Johnson, on behalf of the Monterey Peninsula Water Management district and its 92,000 ratepayers in strong opposition.

Thank you, Madam Chair.

Certainly. So the the argument from the Public Advocates Office is is is a bit of a canard because if you look at the pilot program, it was a 10 year pilot program that was during California's greatest and most historic drought ever when water costs were at an all time high.

During many of those years, credits were given to ratepayers because there were over there were over collections and decoupling worked. If you look at it in the aggregate over that 10 years period of time. Yes, there was. The the true ups led to surcharges that were- were greater than what was originally charged to the customers.

Fixed costs average about 70% of the total cost of a water utility. 70%. If you don't have decoupling, what will happen is the utility in order to hedge against risk and the exposure of this volatility will adopt a very significant fixed charge that disproportionately hits low income low water users.

No, I think you answered that very well. And I'll just say that on the forecast for water utility usage, that is a forecast that's adopted by the CPUC. That's not a, you know, utilities forecast, the Public Advocates forecast, but the forecast is adopted by the CPUC.

And I just also point out that in the bill I read the three sections that absolutely categorically established that there can be no over collections whatsoever. So if you have an issue, if they have an issue with what the revenue limit is set, that's to be determined through the general rate case and that's with the PUC.

The company gets what the PUC gives to them. And now this bill will ensure that there are no over collections which is not the case today. We just had a case where Callaham over collected by 21 almost $21 million and that should have been could have been returned to the ratepayers with this bill it will be.

Thank you Madam Chair. I appreciate the answers and I do appreciate Senator Padilla coming down to protect present this bill. I think it's a good bill and it helps afford officials at least for constituent in my district as well. So with that if it hasn't been moved, I'll be happy to move the bill.

Sure. So the way to the way to and by the way the data is clear. We've given this to your offices during that 10 year pilot program. When you look at the four regulated utilities that did not decouple and you look at the four that did the four that did had significantly higher conservation rates.

That's a matter of the record. So the way you affect conservation in water is through aggressive tiered rates. If you use more, you pay more. That's why for lower income, moderate income households who are more cost conscious, they don't wash three cars, they don't have a swimming pool, they don't have a lot of landscaping.

They see a benefit for folks like the Kim Kardashians who spend lavishly on their water and don't care, they pay the highest rate. The problem is if you don't have decoupling, the risk and the exposure of that volatility to the utility is so great that they have to hedge by, by putting a large fixed charge. Right.

If you have decoupling as your backstop because you know you're going to guaranteed get whatever the PUC said you could collect, then you can be aggressive in those tiers and that's what leads to conservation. Thank you.

Assemblymember Kalra.

Thank you Madam Chair. It's working with or without. Forgotten. Anyway, it's just a hot mic. Thank you. Thank you Madam Chair. A question of the public advocate because there seems, you know, there seems to be one thing.

So that that is just those extra surcharges that occurred from the RAM versus Cart over the 10 years. That, and that's the argument as to why I'm presuming the CPUC decided to move away from it because they didn't see consumption changes but they saw rate increases.

So now it's been five years since then. What data, if any or, or can we extrapolate that? If these two methods were put in place, has anyone done that data to say hey, if these two systems were still in place over the last five years, this is what would have happened?

Pilot program, the water utilities who were full RAM, their own consultants and data that was submitted to the CPUC admitted that the data supporting the argument that their efforts were supportive and helped with conservation were inconclusive. In other words, there was no way to prove definitively whether this would help or hurt with conservation.

To date, no water utility has been successful in making the case that RAM would assist with conservation and funding revenues. And my colleague probably can speak a little bit more.

And before he does on that point, and the analysis is excellent and read it a couple of times, the it seems that there was an effort by the CPUC just to phase out RAM altogether. Not phase it out, just end it.

Okay.

And I would just ask you that, wouldn't you want a conservation mechanism to work its best during a time of drought? That's when you really need it.

In terms of the other thing that I heard about the way you effectuate conservation with aggressive rate design, that is exactly the mechanism that the commission adopted in place of the full revenue decoupling.

And that is precisely why the CPUC, in multiple proceedings, studying the record, studying the history, studying the pilot project results, decided to go away from the full revenue ram decoupling towards the other conservation adjustment rate price decoupling mechanism and has done so in the last four proceedings that Annabelle mentioned.

The rate increase was approved, the rate was approved by the commission. It was a matter of collection that's affected by several different factors. But as far as the difference between the two different rate designs, I'll let the former head of the division speak to that.

Yeah, thank you. And thank you assemblymembers. So you know it's difficult to answer your question because it's sort of a hypothetical. We don't have full decoupling for the last five years, so we don't have that. So we, we can't do that comparison.

But I can tell you during the last great drought when the first time in California history the governor said you need to save 25% of water, every one of our investor owned utilities under my direction at the CPUC hit their water use reductions and they were able to hit those water use reductions because they all had full decoupling.

You know what those charts won't show you that those MRAM companies, non full decoupling companies, when the Governor declares a drought and only the Governor can declare a drought and when it's over, they essentially have full decoupling through another mechanism that the CPUC allows.

And in terms of aggressive rate designs, the rate designs are never more aggressive than they are under full decoupling. What we have seen in these last five years is the rate designs getting less aggressive where low income, low user customers are having a higher service charge.

That's what you pay for before you use any water and higher volumetric charges. So yeah, I will disagree with my colleagues.

And to that point, during the drought, were there emergency measures that allowed the cart utilities to operate more as RAM?

Sorry, Assembly Member, who would you like to respond to that question?

All right, let's hear first from the Public Advocate.

Thank you.

So in the case of the Class A water utilities, the large water utilities that we're speaking about now, there is a rate case plan. Every three years they come in, they file a general rate case, there is a robust evidentiary record, these issues are vetted within that, and there is a final decision. Occasionally there are settlements between the parties, but that is in general the rate-making process.

So just like with all the GRCs, the utility submits their proposed general rate case, then the--all the various state interveners--labor, the environmental community, consumers, Public Advocates--all then make file comment.

Most recently, the very most recent decision is the aforementioned Santa Nella gas case where the settlement that was signed on by Public Advocate's Office, which had decoupling in it and praised decoupling, went through that process and then was finally adopted. So the utilities does not control what their revenue limited is.

In fact, oftentimes we go in, labor goes in and argues for a much more robust investment into capital investments on the opposite side of the utility, and you know, it gets haggled out. You know, that's how it works.

Thank you.

Thank you, Madam Chair. Let me just first echo what Assembly Member Kalra said by really giving kudos to the author for bringing this important discussion forward. This is extremely important. I think there are equities on both sides.

And what I'm missing here is which of these mechanisms actually--sorry--actually incentivizes upgrades to capital, and which one doesn't? Because I was expecting both sides to actually get to this.

I think conservation--not to belabor the point--I think it's very secondary in this conversation. Conservation is happening for a number of reasons outside of water rates, okay? What is actually happening with these different rate structures that is actually allowing the infrastructure upgrades that we all need?

We just went through fires, we just went through a lot of soul searching about where we are within our water, our water systems, and how resilient we are. So I want to hear about that and how this is affective. Thanks.

When you have decoupling and you have the utility having the assurances that they will meet their revenue mark so they can complete their capital improvements, then they can go in and implement a capital improvement infrastructure program that they can follow through, which is precisely why the Utility Workers and the Pipe Trades are so supportive of this bill.

I'll just quickly add that when the CPUC does rate-making, they determine a revenue requirement, and that revenue requirement is based on how many capital projects the CPUC believes are needed and necessary to keep your water system in good operation, operational condition.

Through the chair, if we may respond?

Yes.

Thank you. First, I just want to emphasize that the Public Advocates Office advocates for affordable, safe, and reliable service, so of course, public infrastructure is top of mind for us as well. The question is, who pays for public infrastructure?

It's, it's the ratepayers, of course, and so I appreciate the question earlier about general rate case because that's where we closely litigate these line items item by item, and we are a party to that. The water utilities, environmental groups, labor groups, a number of stakeholders have a closely vested interest in seeing these conversations pan out, how we plan for the future, three years in advance, typically.

The challenge is striking a fine balance between ensuring we have sufficient funds for critical public infrastructure projects while also making sure we're not burdening ratepayers with monthly bills that they can't keep up with. And so I also just want to point out that in the last few instances where water utilities have come to the CPUC to ask for full WRAM, jobs have not been a part of that discussion.

And when we've looked at the ten-year pilot program that was done from 2008 to 2019 at the CPUC, we have no evidence--I'm happy to read if there is some that has not been submitted--but there's no evidence to our knowledge at the PUC that WRAM created more jobs.

Thank you. All right. Assembly Member Patterson.

Great. Thank you. Question for the Public Advocates Office. Presumably, should this measure pass, the PUC, I assume, would still be interested and you, your office would still be interested in the reliability, the same goals, right?

I will try to answer and I hope that I answer, but if I don't, please let me know. Absolutely, all of those are questions that our office as well as other ratepayer advocates in this space will continue to advocate for.

A credit back--

It's stated three times in three different places in the bill.

Yeah. So if customers are paying more than they should after--and how does that process work? How will that process work exactly?

This is similar to how it works in electrical and the gas side, and that is at the end of the year there's a true up, and if cost calculations were wrong, for instance, maybe there's an extremely wet year and so water's cheaper or whatever the reasons, various reasons are, then there's a credit at the end of the year that goes back.

Or at least according to this bill, which would prohibit--which would require that?

Absolutely. Would you like to respond?

And when those fixed costs are considered, the full WRAM can allow a utility that's already exceeding its commission-authorized reasonable profit to further exceed its reasonable profit. This has been mischaracterized as somehow capping the profits of utility. Utility profits are not capped. They wouldn't be under an amendment to consider profits--the whole picture as opposed to just the revenues. So I'm glad you asked that. Thank you.

Okay. I don't live in one of the territories of one of these companies, but I was just going through my bills where we have some great utilities that serve our water needs, but the fixed costs are very, very high, and I was looking at one of the bills and out of the $62, nine dollars of it was for use, and I think, you know, I just see where that disincentivizes any conservation at all because if I water my lawn every day, the cost of water is actually quite cheap, and so I am interested.

And so that's why I'm kind of inclined to support this bill today. I mean, if there are other ways to--I like the--I understand sort of the discussion on the, on the profit and also the, the revenue and I think that that is an interesting and very important discussion to have. It's not good news when, you know, at least in the public, when they have one choice and the profits are really high. I mean, I understand that brings a lot of concerns with residents, and so that's always an interesting conversation and I think important one.

And for the purposes of this conversation, I think I'm leaning towards supporting this bill because, just, maybe it's just my experience and listening to the debate here, and I appreciate everybody's input on it, but I mean, my number one priority--and I'm sure yours as well though--is making sure people pay the lowest rate possible. So thank you.

And, um, thank you, Vice Chair Patterson. I do appreciate the member engagement, questions and debate. I'll, you know, say that I have found this to be a uniquely confounding--no, I know there's other folks looking to ask questions, and I will be calling you in a minute--I have found this to be a uniquely confounding topic because as I think Assembly Member Kalra said, we often have disputes about policy matters and subjective assessments.

This does feel to be a fundamental disagreement about the data and the facts, and that is why, while you persuaded me to support the bill today, I did put it before this committee without a recommendation, and I think that I would love, Senator, for you to help us understand.

There doesn't seem to be a misunderstanding about the intent of the mechanism, and bringing it back to the bill, both in terms of what the bill language prescribes and what it permits, with respect to the regulatory process, one that ironically--and it was sort of alluded to by Mr. Wetch earlier in reading from a settlement in the electricity realm, which is sort of an ironic inconsistency, but we'll leave that for another debate--there is in fact a balance of data that's been, I think, reasonably peer-reviewed and interpreted on the question of differential comparisons on whether in fact the application of this mechanism would in fact realize more or less incentive towards conservation or more or less more equitable distribution of incremental costs depending on what's driving those costs.

And I think the balance of the data here seems to suggest the latter. And at the worst-case scenario, due respect to the great work that the PAO does, their interpretation of the data set is focused on primarily the study. The pilot is the word I was looking for.

But to be honest, there's also information that's been provided to this committee and data that's in the record that seems to suggest that the basis and methodology for reaching those conclusions has not been forthcoming and you've also been provided with other secondary sets of data analysis that seem to contradict that.

And so I think as a matter of policy in considering legislative construct, the question isn't trying to pick winners and losers about whose data is best, but the preponderance of the data, does it seem to suggest here that the bill will permit the application of this rate-making mechanism that has a more or less likelihood of even having a chance to achieve some better amount of incentive towards conservation and some better or not impacts to costs? I think the balance of the data seems to suggest that it may well do that, and that's the reason for the bill.

Assembly Member Zbur.

So you're getting actually to sort of the question that I had and that was sort of understanding exactly what this bill does. When I read it, it says: 'upon application by a water corporation with more than 10,000 service connections, the commission shall consider and may authorize the implementation of a mechanism that separates the water corporation's revenues and the sale through the decoupling mechanism.' So this does not require that a decoupling mechanism be approved by the commission.

It basically requires that they consider an application and then they have to go through the typical process where they hear from all of the stakeholders and consider whether or not it meets the goals that they are charged to assure are met, and then of course this bill, I think, includes additional safeguards about the decoupling mechanism, one, that it be designed to ensure that their differences between actual and authorized water sales don't result in overrecovery or underrecovery, unauthorized decoupling mechanism shall not enable water corporations to earn a revenue windfall by encouraging high sales. I see some other language below it.

Madam Chair--and thank you for the question, Assembly Member--would agree. We're not seeking to re-rate the general rate case process here or the diff--or you know, deconstruct the elements of it. Those findings are still part of that process as you well know to your point, so I would agree.

The part about the authorized decoupling?

The stuff on the bottom.

Yeah. 'The commission shall consider and may authorize a water corporation to establish program'--that is existing law, and so perhaps, I don't know if the PAO wants to comment on--the change that would be made here is 739.10.

Yeah. It doesn't require a rate mechanism with decoupling. They still have to go through the entire process. Is that, isn't that accurate?

Madam Chair, if I might--and Assembly Member, to your point, I mean I think the chair just articulated it--it's not prescriptive of an outcome. It ironically is availing this particular application to be applied in the water circumstance. It's already being used in other utility scopes. So it's--and that, the word that was articulated by the chair is the key word that you focused on.

Assembly Member Papan.

Okay, so rate design is a very difficult thing to do.

I want you to speak into the mic just a little louder.

Then you pay say three or for dollars per service tier. Now when you introduce additional tiers--two, three, or even four tiers--that creates a lot of revenue uncertainty because we don't know as a water utility how much water precisely will be sold at each tier.

And if you multiply that over, you know, 500,000 customers, that adds up to be a lot. So that revenue instability that is caused by having tiered rates, decoupling allows you to address that because if your revenues don't materialize for all those capital projects you are planning, then you can go back after the end of the year and true that up.

You mean more fixed dollars?

Yes, but how do you deal with big water users if you're decoupling?

However, it's very difficult to predict how much water will be sold at those rates. We also have seen that when you raise the rates a lot, folks will take out their lawns, they'll stop washing their cars, they'll do other things, so they don't pay those higher rates.

Say but what does that do for purposes of infrastructure jobs that you needed to do and...because you got to do your true up.

That's right. Without decoupling, so those revenues that should have materialized at those higher tiers, they don't materialize. So that means the utility takes in less dollars and you go to your next general rate case three years later and you say, you know what, that didn't work for us, didn't materialize, we didn't have as much money to do our projects, we need to change the tiers. So it creates a lag in the process, if you will.

Did you want to answer?

Or you don't do the project you plan.

Thank you, Madam Chair. All right, I have a couple, I have a couple of questions. So first, how is this different, if at all, how is this proposed decoupling mechanism different, if at all, from the way in which our electric utilities operate currently? Is this the same, Is this proposal before us the same or they're material differences?

Yes. It would replicate identically what's happening in energy rates for water. Yes.

Okay.

And I will just add it is challenging to compare the two just because of the history of energy decoupling. I think the analysis does a really great job of outlining the history of the Sam of the ERAM.

1982, the CPUC implemented, I believe it's 1982 implemented decoupling in energy rates in response to the historical context of where we were with rates and affordability at the time. Obviously, a lot has changed since 1982, the way that we structure our energy rates, our water rates, and the challenges have changed with them.

Okay, and then let me ask a question. Someone asked a question about profits and how profits will or will not change under this proposal. So today, if I go in to make my rate case and I say my forecast is $100, but I only actually end up collecting $90, then I get $90, I don't get $100. Right.

So under this mechanism, if I go in and I say my forecast is $100, I then I'm authorized to sort of set all of my rates and my collection schedule. So I'm definitely going to get $100. What if I only spend $90? Where does that $10 go?

Shareholders?

Yeah, we. The rate making. That's a great question, but it's unfortunately a bit too simple. Simple.

Rate making is done over period. We have a test year and two attrition years. What we do, what the CPU does, CPUC does, is set our test year rates and our next two years rates. However, we don't get those next two year rates if we don't invest as much money as they've given us.

Right, but that's, I mean, everything you said is what happens today. So, and, and, and does this not change that calculation?

Right. Okay. So it possibly creates an incentive for aggressive forecasting on a single cycle basis which then gets chewed up.

All right. And I'm sorry, sir, when did you serve on the CPUC? Was it. When were you on the CPUC?

zero, I never served on the Commission. I was a staffer at the CPUC since 1988. I served as the Water Division Director from 2007 to 2019. I was a co author of the 2005 Water Action Plan which was adopted by the Five Member Commission unanimously. That Water Action Plan was updated in 2010.

That was again adopted unanimously by the Commission.

No, I was not there in 2020 when the CPUC eliminated the RAM? That's correct. Okay. Okay.

All right. But you were there when they were doing this pilot project when we put in decoupling?

Yeah, basically, yes.

And you, you kind of got exactly to my question, and I'm still trying to work through this, but essentially there is an incentive for over inflation of water, the sales forecasts.

But you're saying, Sarah, that you think that that is overblown because three years later when they go back through for their next grc, that that'll be taken into account.

So, okay, let's go to the sales forecast. So water utilities are not incentivized to over forecast water sales. The Public Advocates, consumer advocates are incentivized to over forecast sales. What happens is that. So if you forecast too much sales, you have lower rates. If you under forecast sales, you have higher rates.

The CPUC looks at the forecast that the parties submit, the utilities, the ratepayer advocates, and determines what a reasonable forecast is. Predicting water sales forecasts is really hard work and it's inevitably wrong. It just always is. It's never exactly spot on because we can't predict the weather three years out.

Yeah, I think what I'm still struggling with a little bit, and I think the chair was getting at this as well, is understanding that the forecast is wrong. I, and I imagine many of my colleagues prefer that when a forecast is wrong, that the consumer benefits from it, especially in a private water utility system.

What you doing over there, Gonzalez? So I think just to get directly to the point, how are legislators voting for this going to be feeling sure that they're not patting the pockets of private investors at the behest of either workers or, or, or the ratepayers.

So I'm seeing shaking heads from the public advocate's office if you want to.

And it's not a perfect process, but we have all the stakeholders, including my clients, who participate in that. The PUC sets that revenue limit and if they over collect under this bill, it goes back.

There is a key and important difference between profits and water or profits and revenues here. And I'll just leave it at that.

So I guess my question back to the author is, did you consider that amendment? Because it sounds like what that amendment is getting at. I'm hearing from your witnesses that that's what the intent strikes at. So did you consider that amendment?

So the large for investor owned utilities, the CPUC determines what a reasonable cost of capital is on a three year cycle for them as well. And so that's what you're allowed to earn whether you earn that or not. And it's well documented that most water utilities do not earn their authorized rate of return.

Going forward, you're going to get a lot less. That's why business doesn't operate that way. That's why we don't operate that way.

So again, I'm not sure I heard an answer though. If the intent, as you were saying, gets at that, then why was this amendment not considered or why is it not being considered?

The rate of return is dealt with in a separate proceeding regarding the cost of capital. And it's based on how much you invest during the period of time. The General rate case is based on what revenue they're going to allow you to achieve everything that you need to do and provide service.

If a utility collects more money than what was forecasted.

So I'm a little bit confused. But if a water utility collects more water than what was used under ram, they do not return it. They keep it. And that was what was done under RAM. We have 10 years of data indicating that this is the case.

To that analogy, the alternative is that, yes, the utility charges what the PUC approves in the revenue. If they didn't, if they didn't do what she just described, they would have to make it up by having a larger fixed charge. That's the trade off.

Do you want a larger fixed charge or do you have a decoupled system that allows you to do what we've described here today? And that's the difference is to basically offset the scenario that you just described, you'd have to have a larger fixed charge.

And that's what we're trying to avoid because a larger fixed charge disproportionately hits lower income ratepayers.

Okay, we'll, we'll take one more response and then I think we're probably gonna just, we're gonna just. Yes, we're not going to agree on the facts of this bill. That is one thing that we have.

It actually required the utilities to implement larger fixed charges because the RAM balances had grown so large that the utilities could not collect them fast enough to be in compliance with Commission rules and their own GAAP accounting. That's how bad it got.

All right, Assemblymember Gonzalez, thank you.

A fairly quick one, just bringing it back to where we started. I've said this on this dais before and I represent the fifth poorest district in the state. Customers don't pay rates, they pay bills. So I want to kind of bring it down to that level.

And when we have this conversation about affordability and sustainability and driving policies that should empower, not hinder lower income communities, why wouldn't we give water utilities the tools that they need to lower those costs for low income households who are doing their part to conserve?

So once again, in terms of going forward and speculating and tools need, we only need to look back, we don't need to speculate.

So for 15 years, with all due respect, I think it does a disservice to The Great Other 4 Class A water utilities that had robust low income programs in the state during these 15 years, that had tiered rates that did not have any of the speculative problems that we've heard today. We don't need to speculate.

We have 15 years of the utilities not having this. That was the whole purpose of the pilot project. So with all due respect, I would say that the four utilities that operate without this mechanism actually did quite well at the same time.

Assemblymember meeting all of the very legitimate concerns that you mentioned today in terms of affordability, equity, low income programs, they were successfully met.

I just, I would just look, Senator. Thank you, Madam Chair. We can't argue the pilot as the standard basis for the conversation, and then conveniently pick and choose what elements of the net data we want to accept or reject, and that brings it back to the focus of the bill.

If we had to redesign it today, Madam Chair, as you well know, for the work you've done in this space, we would not design it this way. That said, I just. I want to make sure we don't lose track, all due respect, with the framework of the bill and the data that is attached to it.

Thank you, Senator.

I would. Respectfully, I really appreciate the work and the engagement of this Committee and the work of the public advocate. I would respectfully ask for an Aye vote.

All right, we have a motion from Assembly Member Davies. Second from Assembly Member Chen. The motion is do pass to Appropriations. Madam Secretary, please call the roll.

All right, 10. Zero. So that bill is out, and we'll leave it open for absent Members to add on. Madam Chair. Members. All right, thank you. And Senator Caballero. Thank you.

Welcome Senator and thank you for your patience. All right, you have a motion and a second. There you go.

As you know, climate change poses a severe threat to California. We've all seen it. Carbon dioxide removal refers to removing carbon dioxide from the atmosphere and permanently storing it in a safe and secure location, such as underground geologic formations or in cement.

It's not the same thing as carbon capture, which captured CO2 from the smokestacks of existing industrial facilities that burn fossil fuels. As you are aware, the state's goal is to achieve net zero greenhouse gas emissions, and no later, no later than 2045.

Basically, we make it harder for us to construct projects here in California, so they take our resources and all of the technology and the brain power that comes out of our universities and they move to another state and do it there.

We have not developed sufficient pathways to achieve the CDR targets, and the clock is ticking. To meet the urgent need to reach neutrality, this bill establishes the Carbon Dioxide Removal Purchase pilot project under CARB and directs them to provide up to $50 million in competitive grants for these projects. They include four types of projects.

And then when selecting the projects, CARB must prioritize the potential to accelerate the strategies, make sure the distribution of funds is across multiple geographies and project types, and the strength of the community benefit plans. With me here today to speak in support of the Bill is Diane Duchet with Project 2030 and Dr. Peter Miner with Absolute Climate.

We've been doing this for a long time. You just heard about the CDR targets that CARB included in the scoping plan. We need 7 million metric tons of CDR annually by 2030 and 75 million metric tons annually by 2045, and we are not on a path to achieve these targets.

SB643 is focused on those technologies that have already undergone extensive R and D that are ready for demonstration and deployment and have the potential to scale in California. As we just heard. Unfortunately, many of our homegrown technologies are going to other states because of better incentives.

It's also important to note that over the last five years a global voluntary, multi $1.0 billion CDR market has developed with CDR purchases from companies like Microsoft, Jp Morgan, Google and a handful of others. They have no reason right now to prioritize California projects. And they aren't. We want to change that.

SB 643 gives California the opportunity to do many things to jumpstart our efforts to meet our CDR goals, to set the highest quality standards for cdr, to create a model for community protections and to attract investment capital to create the projects and and the jobs here in California. I respectfully ask for your aye vote today. Thank you.

I was the Director of Science and innovation there. So my job was to be the technical expert to understand the safety and efficacy of these technologies. In that time I saw the carbon removal industry change and develop significantly.

There's only so much learning that can be done in a laboratory. We're at the point where we need actual data from projects to understand how to make this stuff cheaper, how to make it more scalable.

And SB 643 is California putting its money where its mouth is and saying yes, like this is important for our future and we're going to start investing it today and get the private industry to follow suit. The information that we need to show that carbon removal is safe and ready is already here.

Many of the first marine CDR experiments are being done off the coast of Southern California and across farmlands across the U.S. enhanced rock weathering is being done as a substitute for lime to make it a lower emissions process for Growing crops, but also taking carbon dioxide atmosphere. We know this works.

And so California, through SB6043, has the opportunity to be the leaders of the world in this, in showing the rest of the world what safety looks like. When California does something on climate, the rest of the world listens. So let's show them.

Thank you. Moving to additional testimony and support. If you'd like to testify in support of SB643, approach the microphone.

Good afternoon, My name is Deepika Nagabhushan. Today I'm submitting support on behalf of two environmental nonprofits, the World Resources Institute, Restore the Delta, as well as two indigenous coalitions, Partnerships for Tribal Carbon Solutions and the Indigenous GHG Removal Commission. These four organizations support 643 and request your Aye vote. Thank you.

Good afternoon. Martin Radacevich on behalf of Heirloom Carbon, a California based direct air capture company with a facility in Tracy, California in support.

Good afternoon. My name is Declan Madden. I'm here to testify on behalf of Yosemite Clean Energy. And we're also in strong support. Thank you.

Thank you. Moving to testimony in opposition. Go ahead and come on up.

Thank you. Madam Chair and Committee Members, I'm Shaye Wolf, a scientist with the Center for Biological Diversity. And we joined by 12 groups, strongly oppose SB643, which mandates harmful and unverified forms of engineered carbon dioxide removal or CDR, such as biomass energy with carbon capture and storage and marine geoengineering.

This bill commits 50 million of taxpayer dollars and ongoing spending of 2.4 million per year to deploy unverified expensive CDR projects at a time of budget cris. And we have several key concerns. First, this is a CDR deploymentbBill, but it should be an R and D bill.

State agencies should first research and determine the verified effective forms of CDR and map out their risks and costs to taxpayers before mandating them. Second, the bill greenlights bikers or Biomass Carbon Removal and Storage. Almost all BICARC projects are are BECCS projects that involve biomass combustion, gasification and pyrolysis combined with carbon capture and storage.

And the bill's provision that projects are measured using unspecified industry protocols will allow harmful projects to move forward to address the climate crisis.

Okay, thank you. Vice Chair and Members of the Committee My name is Gary Hughes. I work as the Americas Program Coordinator with the organization Biofuel Watch.

We're an international civil society organization and we work extensively on addressing the negative ecological and social outcomes of policy and actions that are justified as being beneficial to the global climate, yet carry with them extensive risks and threats to public health and natural resources.

And I want to really quickly bring up some of those concerns. The first thing is that this bill ignores existing international environmental agreements.

Now, California is an observer party to the CBD. We encourage the Committee to exercise caution and due diligence and put the brakes on this bill. Thank you. Thank you.

Any other witnesses in opposition? Name, name and affiliation.

All right, moving it back to the Committee. Questions or comments from Committee Members? Assemblymember Papan.

Thank you very much. I do appreciate that what we've tried to do is create an alternative for the CARB to be able to look at these, make some analyses as to where we get the most bang for our buck, and to join the market. It's a good market signal that we're committed to removing carbon from our atmosphere.

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[Roll Call] Thank you. That's 14-0. 14-0.

Let's do a quick lap of the bills that we have voted on so we can enable Members who are absent to add on Item number one.

15-0. We'll leave the roll open for absent Members to add on item number five.

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16-0. We will leave the roll open for absent Members.

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14-0. And we'll leave the Roll open.

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When we're doing public transportation, all the that when you have a system that has been approved, environmentally cleared and has funding to move forward. So we as a state or as a community have decided we are doing this project and here's money to do it, that should be enough to just move forward and do the project.

We should have a system that works together, stakeholders that work together to deliver projects that we decided we want to deliver. When this bill started, it was much bigger. It applied to all transit systems, not just high speed rail.

It also, it put a 30 day shot clock on, on all of these permits and permissions, 30 days to to act. And if not the system, transit system could just move forward. As I just said in local government, I thought that was a great idea, but not everyone agreed with me. So we hit the reset button.

And the approach that's in the bill now is requiring early engagement between high Speed Rail and all of these different entities and requiring high Speed Rail to issue regulations to set a structure for how this will work, including binding arbitration when there is a disagreement so we can have quick resolution of disputes.

We are, we've agreed to an amendment to so that utilities will not be part of the will not be in the binding piece of it with the understanding that we do need to structure this so that everyone, including the utilities, are going to be part of the solution.

And so we're happy to take the amendments with the understanding that we're going to keep working to come up with a structure that works for everyone. And the bill right now is only high speed rail. It doesn't apply to any other transit systems because of the time sensitivity activity of getting this project moving.

We are for the future looking at ways that we can help other systems as well, because even though high speed rail has been probably the most prominent sort of victim of this sort of disjointed system, other transit systems also experience it. And so with that I respectfully ask for an aye vote.

Good. Good afternoon Chair and Committee Members. Marc with Streets for All. We're the sponsor of SB we're one of the sponsors of SB 445 because it directly addresses one of the most persistent and costly problems affecting public infrastructure in California.

Third Party Permanent Delays Today, the process for securing permits and approvals from utilities, local governments and other third parties is fragmented, inconsistent and onerous. These third parties, some public, some private, are essential to the delivery of projects like High Speed rail. Yet they often face no statutory deadlines or little incentive to act quickly.

This can mean multi year delays for something as simple as reviewing a relocation plan or signing off on a design. This isn't unique to high speed rail, and LA Metro, for an example, has found that getting permits and clearances from other agencies often adds between 12 to 18 months to project timelines.

These issues can even affect really modest pedestrian and bike safety upgrades. These delays are expensive and deeply counterproductive. Each month of delays increases labor labor costs, inflates project budgets and diminishes the return on public investment. More importantly, these bottlenecks delay the benefit that the taxpayers are demanding of the state.

This bill requires high speed rail to adopt clear, enforceable regulations developed in consultation with utilities, cities and other stakeholders. It ensures early engagement happens. Responsibilities are clearly defined and that projects don't get held hostage by foot dragging or red tape.

Every month that we let third party permitting drag on, taxpayers lose millions of dollars and Californians wait for longer, wait longer for cleaner and faster transportation.

SB445 is the first bill to give high speed rail program hard timelines, early engagement rules and a backstop dispute process, which is roughly the same playbook that Caltrans has used with utilities for freeways for decades, since the 1950s. We respectfully ask for your aye vote thank you.

Thank you, Madam Chair. Keith Dunn here on behalf of the State Building Construction Trades Council as well the District Council of Ironworkers.

I just would like to thank the author for the opportunity to present on this bill for the third time in 24 hours and also the opportunity to work over the summer recess with him and all of you on this. It's a real joy and pleasure. I do want to talk a little bit about the importance of.

It's important that those discussions have some guardrails. We are going to figure this out. We are going to work with the opponents. We need to make sure that high speed rail has the tools that to move forward because as the Senator did mention, this does cause work stoppages. Work stoppages cost dollars.

This project has had chronic overruns and they can be addressed. But we need to make sure that as we move forward with this legislation that we get it right, that we talk with our partners, but also that they understand that we have to have some parameters around those discussions so that they eventually do come to some conclusions.

Thank you. And any other witnesses or public comment and support.

Glenn Garf. Glenn Garf on behalf of Climate Action California, we support.

Nolan Gray, California MB in support. Thank you.

Jordan Grimes on behalf of Greenbelt Alliance in support. Thank you.

Thank you. Any primary witnesses in opposition?

All right. Hello. Good afternoon Chair and Members. Derek Golfing on behalf of the California Municipal Utilities Association, also happy to present on this for the third time in 24 hours as currently in print SB445 would give the High Speed Rail Authority the ability to develop regulations to relocate public utility infrastructure in the project's right of way.

However, we do understand and appreciate that the Senator is taking the Committee amendments today and think that those are going to help address some of our concerns.

We do want to express our sincere appreciation to the Committee staff, all three Committee staff and the the chairs for working with us on this bill and continuing the conversation over the summer. We want to make sure any impacts to this bill do not impact our public utility affordability, safety and reliability.

Thank you. Public Comment in opposition.

Yes. Good evening, Madam Chair Members Brian White, on behalf of Los Angeles Department of Water and Power, respectfully in opposition to the current version of the bill. We'll look at the amendments and see. Where we stand, but look forward to working with y'all.

Thank you.

Good afternoon. John Kendrick, on behalf of the California Chamber of Commerce, we do feel that the Committee amendments are substantial progress. Look forward to working on this. Thank you.

Good afternoon. Kiara Ross, on behalf of the City of Burbank, appreciate the amendments but remain in respectful opposition.

Madam Chair Members Kobe P on behalf of the City of Merced and Vernon, in respectful opposition.

Shane Levine, on behalf of the Northern California Power Agency align my comments with Mr. Golfing. Thank you.

Margie Lee, on behalf of the Southern California Public Power Authority, lighting our comments with CMUA, currently in opposed position. Thank you.

Kylie Wright with the Association of California Water Agencies in respectful opposition aligning Comments with CMUA. Thank you.

Anthony Tannehill with California Special Districts Association. Also still in opposition as in print. Align our comments with CMUA.

Thank you. Bringing it back to the dais. Assembly Member Calderon.

Boy, look at this, all these mics. Thank you, Madam Chair, and thank you, Senator Wiener, for all the information you sent me at 6am this morning. Very thoughtful and articulate and I appreciate it. And I appreciate that you acknowledge that you always start here and then you kind of narrow things down.

And so I know that you're, that's what you've done with this and that you, you mentioned that the utilities are not, aren't part, aren't part of the binding part of this. So my question is, are ratepayers going to be financially responsible for any changes to the preliminary assessments that the utilities conduct?

Okay.

But, you know, but I, the reality is that if we, you know, utilities are going to have to be part of the solution. Right. And we're going to try to work through what is workable. And we would love.

My goal is to get to an agreement with the utilities and what is workable so that we can protect the integrity of the utility assets, protect ratepayers and make sure that we're getting this important project done.

And so the utilities are going to have to participate and help solve this issue, but we want to do it in a way that protects their assets and protects ratepayers.

Yes.

Thank you. Yes. I mean, I can't make people work on it, but we're gonna invite people to work on it.

Okay.

You're very convincing, though. Assemblymember Rogers.

Sorry. I don't want to. I think it's, I think it's a fair conversation that if you have a project that is requiring relocation of utilities. It's a fair conversation to say that that project should be participating in those costs. That shouldn't just be. And I think that's, that's very fair.

It's a problem that we have in California where small public utility districts are bearing the cost of projects that they have absolutely no role in planning or implementing because of the way that state law is written. And so I'd love to see that fixed one in this bill, but also in coordination with this specific project.

The second related directly to that is especially you call out taking utilities out of this, the telecom is still in it. And telecom falls into the same category where they're not the ones typically who are able. They don't own the right of way.

They still have to go through the same challenges that you're talking about with acquiring permits to be. They're riding on the utility lines or in the trenches as they get to. They have very little say in where their projects actually end up.

Well, the way the amendments are drafted, it's all utilities, so it would include the telecoms in terms of. At least for now, they're not in the binding.

Are you sure about that?

That's the way we read it. Yeah. Okay.

That's because telecom doesn't seem to think so.

And I'm not, this is not a criticism of anyone. Everyone's focused on whatever it is they're doing to run their business, to run their organization. But when, but they're. There are times, there are times when there might be something that's really complicated and hard. There are other times where there's just not a response.

So that's not even like a, a burden or cost issue. That's just like, hey, let's all work on this together and have responsiveness. And you shouldn't have to legislate that in an ideal world. But sometimes you do.

And I think from what I hear from groups is that they don't yet know how this bill is going to impact them. So the question is, how are you going to engage stakeholders? How are you going to do that stakeholder engagement during the summer?

Because I know that there is some fear out there that if you're not one of the cool kids at the table, that you're just going to end up having a bill spit out when it comes to the floor with no real meaningful opportunity for engagement or amendments at that point.

Well, as someone who was not one of the cool kids growing up, I'm very sensitive to that. And so we're not just going to limit ourselves to the cool kids.

I can't guarantee that everyone's going to, you're never going to get unanimous support for everything. And if we, but if we don't do a good job, then this bill is going to struggle on the Assembly floor. And so, you know, so, so I, I have my, and I said this in local government. I'll say it again.

My, the plan here is not to be like, okay, we got out of Committee by everyone, like, if we don't have broad support around this, stakeholders from Committee chairs, then it's not going to work. So we really want to build towards as much consensus as we can get. Yeah.

Yeah.

Thank you. And just to follow up on the first point that you were making, there is state law that requires for high speed rail that they pay for any moving of utilities and the amendments are going to point to that, will point to that and Assembly Member.

So I. Know I spoke in transportation and I just kind of want to reiterate to make sure that I was clear as it related to local agencies. So let me get out of the way. Of course understand the need for the bill that I'm not going to dispute at all.

As I mentioned, I have a little concern about the fox with chickens, but I want to maybe articulate a little bit more. High speed rail develops regs that apply to high speed rail, especially as it relates to rights of way and local cities.

So as you work over the summer, I thought I would at least keep that in the back of your mind and I appreciate your receptivity to my concerns about it, but have no, no issue that there is a need for this bill and that it has cost more money, it has delayed and just want to make sure that we don't, if you'll excuse the pun, railroad over the cities as we go through.

Thank you, Assemblymember. Thank you. Assemblymember Davies. Thank you.

I mean we've heard the cities, the counties, special districts, water districts, telecom, cable, IOUS, the public utilities. I mean and we've, you know, labor will be involved. Of course, high speed rail will work with the Administration, work with the Committee chairs.

You're not going to get a vacation, are you?

No Assembly Member Zbur.

And so just want to thank you for it and we'll be supporting it today.

Thank you Assembly Member Schultz.

Yes. Thank you very much Senator for the presentation. Thank you to all the witnesses for your testimony. Just to get right to the point, Senator, I do plan to support your bill today.

Assemblymember Boerner.

Hi. Thank you, Senator, for bringing this forward. Unlike my colleagues, I won't be supporting this bill today. And we, we've gone back and forth and I think between my staff and your staff, you understand why we don't need to make that, you know, rehash all that here.

I do want to flag for you when we're, you're looking at any overlap between Caltrans and the high speed rail and the middle mile, we're getting billions of dollars in federal investment for the middle mile.

And to ask Caltrans or any of the middle mile agencies that will be maintaining that right of way to move it at a later point will be very costly and kind of defeat the purpose of the federal investment in Broadband.

So when you're thinking about that, looking at them, I haven't looked at the overlap between middle mile Caltrans and high speed rail and where those overlaps are, but please keep those in mind.

Absolutely. And my understanding is that that has to be delivered and then that.

Yeah. So once it gets delivered and you want them to move it for high speed rail. That's the problem. Yeah. Who moves it at what cost after investing billions. Yeah, I don't, I don't know if you want to come.

So, you know, maybe there might be some point in which there may be a little adjustment, but I think that they are coordinating pretty well between Calsta, Department of Transportation, this Administration and at least the previous federal Administration. I won't speak for the current, but I do know that there has been discussion and some coordination.

Hopefully this is going to work in partnership to support all those programs.

And the alignment for the high speed rail has been set for quite some time. So there has been a lot of coordination in advance.

I'm just saying. Absolutely. Any movement of the middle mile after it's built will come at the cost of consumers. There's no other, there's no other mechanism in place for it not to be a cost of consumers. So hopefully they won't. But keep that in mind. All I'm asking you to do is keep that in mind.

I would just say that I know what you'll be doing this summer, and I'll let you get to it by making a motion on your bill.

Isn't that a movie?

Okay. Okay. We have a motion. And a second Senator, would you like to close?

Thank you so much. Madam Secretary. Will you please call the roll?

[Roll call]

Thank you. Go back through. So why don't we go back through and give an opportunity for absent Members to add on to the bills, starting with number one. Item number one. SB254. Becker.

[Roll Call]

And that Bill is out 17. 0. Next, item number four, SB 445. Wiener. Is that what we just did? We did. That's what we just did. I think there's no one to add on to that one. All good. What was the final vote count on that one? It's currently nine. Three. Okay, and item number five, SB 453.

That's out 18. Zero. Next, item number six. SB 473. Padilla.

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Okay. That's out 15. Zero. Next, item seven, SB 541. Becker.

That's out 13. 2. And final Bill, item number 8, SB6. 143 Caballero.

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