Assembly Standing Committee on Natural Resources

[Background]

Oh, beautiful. This marks the beginning of the Assembly Committee on Natural Resources. Madam Secretary, it appears a quorum is here. Can we call the roll?

[Roll Call]

Now. Thank you so much. There is no consent calendar. There is just Senator Becker. And you may begin whenever you're ready. Motion and a second.

In lieu of a long presentation, I've developed an interpretive dance. But no, there's a lot in this Bill. I really appreciate having the opportunity to be here. I know that conversations are going to be ongoing, particularly around the pieces around permitting and streamlining. I look forward to those conversations. I think they're important conversations to have.

I think we share the goals of clean energy, but ultimately, obviously, as we've, we've always worked to strike that balance and particularly here in this Committee. And so I know those conversations will be ongoing.

I saw some of the suggestions that, you know, many of which, which look good and, you know, we'll have the, the chance, I think, to have further discussions. That's obviously one piece of the Bill.

There's a piece of the Bill here around the climate dividend, making sure we get it targeted at the time of year when people need it and have increased resources for care and fair customers. There's a part here around rate setting. There's a part here around wildfire and making sure that we're getting the bang for the buck.

That's a really big part of the Bill. It was just making sure we're getting the bang for the buck on our wildfire spending. And then there's pieces that really get to kind of public funding of infrastructure and some other things that we've discussed in the Energy Committee. So happy to take any questions or discussions.

I don't think I have a witness. Do I have a witness? Unless the last ones that come up. Yeah, happy to have any discussion.

Are there any persons here in the hearing room in support?

Morning, Mr. Chair and Members. Trent Smith on behalf of the California Municipal Utilities Association in support and look forward to work, working with the author on future amendments here.

Thank you, Mr. Chair and Members Jason Ikerd on behalf of the California Community Choice Association also in support. And also looking forward to working with everyone.

Good morning. Michele Canales with Union of Concerned Scientists in support.

Good morning. Raquel Mason with the California Environmental Justice Alliance in support if amended. Also asked to register for Leadership Council for Justice and Accountability.

Thank you so much. Any persons here in opposition.

Good morning Chair Bryan, Members of the Committee. I recognize I might be the last thing between you and flights today, so I'll try to keep it relatively quick.

We share your concern about affordability. Right. To get a clearer picture of what's driving those costs, we recently commissioned a study by the Blue Sky Consulting Group.

State mandated policy costs are the single largest component of the average residential IOU customer's Bill. They are 36.5%. It's about $69 of the average $188 Bill. That's more than customers are paying for distribution. That's more than they're paying for generation.

So in this context, we feel that this Bill is missing the mark if it's primarily centered about affordability, it's well intentioned. But it's primarily shifting and masking costs. We feel that it introduces new reliability risks. Now, your Bill does recognize that state policy costs are a significant component of bills.

You've got the Power Fund at the CEC to reimburse utilities for some of these costs, but those costs should never have been in rates in the first place. And shifting them back and forth based on the state budget creates instability. So without a reliable funding source, you're going to have rate whiplash.

You know, I know that you've talked in the past about how we've done this before with the Wildfire Fund.

Lower bills in good years followed by sharp increases when times are tough and families and businesses are struggling most. We also have significant concerns about $15 billion in mandated expenditures that utilities can't earn a return on.

But that approach is more of a break glass in case of emergency. It shouldn't be a regular policy tool. We shouldn't be doing this every single legislative cycle.

Credit markets and investors are pricing this as risk. We recently heard CNBC had a segment specifically calling out this Bill as something to warn off investors from California IOUs.

We have a problem with the inflation-capped GRC. Now, it's not a true cap, right? You're saying, hey, you're going to present inflation cap scenario while you also present your other scenario. But realistically, the key cost drivers don't observe inflation.

Wildfire hardening, transmission expansion, decarbonization, all of the legislative mandates, the things that the Legislature are telling the PUC to tell the IOUs to put into rates. So a presumption that rate increases track inflation could lead to underfunded maintenance, delayed upgrades, greater risk of outage.

It's not just a utility issue. This could disrupt day-to-day operations throughout California's entire economy. Now at 161 pages, there's a lot of other issues that we could get into, but I'd like to close with the notion that a financially sound utility sector is not a luxury.

It's essential to a reliable modern grid and it's essential to California achieving its climate goals. We urge a no vote. Thank you.

Thank you, sir. I think that was more impactful than an interpretive dance, personally. Any of the persons in the hearing room in opposition?

Good morning. Connor Gusman on behalf of the Utility Workers Unions of America. In opposition unless amend. Thank you.

Mr. Chairman. Oracio Gonzalez on behalf of California's Business Roundtable in opposition.

Mr. Chair, Members of the Committee. Valerie Turella Vlahos. Opposed unless amended here on behalf of Pacific Gas and Electric Company.

Thank you, Mr. Chair and Members. Joe Zanze with San Diego Gas and Electric Company and Southern California Gas Company. We have an opposed unless amended position. Thank you.

Good morning Chair and Members, [inaudible] working with Axiom Advisors on behalf of LS Power. Oppose unless amended. Look forward to working with the author and others. Thank you.

Hello. Allison Hilliard with the Climate Center here in support. Apologies for not getting here fast enough. I was trying to get here quickly. And thank you so much for support.

Thank you. And for our primary witness in opposition. You didn't state your name or organization. Would you like to do that for the record?

Oh, my goodness. So that is a problem. This is Jon Kendrick on behalf of the California Chamber of Commerce. Thank you.

You are Jon. We just want to put you in the books.

Yeah, yeah.

Appreciate it. We'll now turn it to Committee Members. Any questions, comments, concerns?

Just briefly, Mr. Kendrick, thank you for being here. I did move the Bill. I actually studied this fully for utilities and energy. So I just wanted to explain why I'm so quick to make the motion.

But appreciate you being here end of session and hope the conversations continue between you and the author when he's not doing his interpretive dance. Thank you.

Mr. Connolly.

Thank you. Appreciate the author's work on this. So a series of questions maybe to dig a little bit deeper. So kind of broadly, how would accounting for wildfire mitigation costs using the Power Fund separate from utility costs, benefit ratepayers and help California meet its climate goal.

Well, the Power Fund is one we've had for several years now, which is ultimately, and I'm just sure I understand the connection to the Wildfire Fund. But ultimately we agree that these things, we don't want these things in rates.

It's a very regressive way to do, say wildfire pay for wildfire spending or even the public, you know, the care and fair program. So the idea is actually establish this Fund now, get the structure set up, and then when we have money that the Legislature wants to appropriate, then we can appropriate it.

But the idea is ultimately we do want to get those costs out of rates.

Yeah. How would these new provisions affect the climate credit within the cap and trade program?

Yeah. So this, and we'll have a number of discussions, I'm sure, on the climate credit going forward. This proposal says 100% of that money that electric utilities get from the cap and trade program will go to customer credit, as opposed to 85% in the past.

And then it also, you know, can changes when the, when, when the money shows up and then finally allocates larger credits to low income care and fair customers.

Great. What is the rationale behind having less frequent wildfire mitigation plan reports?

Well, I think this another Bill 326, which is kind of the coordination around the wildfire plans. So again, the whole piece is really around the bang for the buck. And so we feel we can do that with a more coordinated structure, but in a more sort of strategic way.

But you know, the fact is like if we're looking at undergrounding, when are those cases we really need to do undergrounding versus other, other pieces.

And then finally the Bill provides streamlining for projects reviewed with a quote with, and quote, other environmental document, end quote. What type of documents does this refer to and how can you ensure that these documents provide adequate environmental review for various utility projects?

Yeah, there is. The Bill does direct the CC to create one or more programmatic environmental impact reports for sets of similar projects.

So, you know, the idea there is to speed up the CEQA review by requiring each project to consider only project specific issues, rather than rehashing the same issues that apply to say like every wind and storage project. There's a bunch of kind of smaller changes on that.

But I think, I think that hopefully answers your question where it's really, that part of it's focused on the programmatic EIR.

So in terms of just kind of drawing down a little bit on adequacy from your perspective, how, how can you provide that assurance.

Yeah, I mean, I think the, the, the, the notion is that, you know, you again, rather than just having this once, you know, having to do a separate document for each one that you, say, look at an area and sort of assess the area and then you're only looking afterwards only on project specific issues rather than, you know, there's similar issues that apply to every wind project, every storage project, but we wouldn't go through those.

You would just look at the specific, you know, the kind of, the specific pieces of that location.

Mr. Muratsuchi.

Thank you. Senator Becker, I recognize a lot of components of your Bill are similar to less placement that I had introduced in the past. Last session I introduced a Bill calling for a Climate Equity Trust Fund, which the original proponent of that was Senator Laird. And so this Power Fund sounds like the latest version of that basic idea. Okay.

And to the chambers point, given that such a one of the biggest drivers of electricity rates going up are the wildfire mitigation costs being passed on to ratepayers. If there were. It sounds like there's consideration that GGRF funds would help fund this Power Fund.

Why wouldn't those dollars be better spent just spending more on wildfire mitigation rather than sending it to a climate credit?

Well, I think the make sure I understand your question. I think, I mean you obviously understand the construct and you carried this idea last year. I mean, the idea is that we kind of create that, you know, take, I think there's about $10 billion in wildfire spending about across IOUs every year.

And, and the idea is we start to take as much of that possible out of rates through this structure, especially when we have budget surpluses and we can put some money away for it. So that's, I think the core idea, but I'm not sure that's answering your question.

Yeah, I mean, you know, if, if they're, well, you, you talked about a bunch of surpluses which don't sound like they're in the, the cards then in the next couple years, based on the forecast that I'm hearing.

And so if, you know, if there's going to be any discussions related to the cap and trade reauthorization, you know, for GGRF funds to be, to help fund this, Power Fund, why wouldn't those funds instead be better spent to more on wildfire mitigation so that we can lessen the impact on ratepayers that are paying for the wildfire mitigation?

Yeah, I mean, I think, you know, in the last negotiation of the Governor on the budget, there's already about a billion dollars of GGRF that's going to go to CAL FIRE and such. So I think decision could be made in GGRF outside of this to spend money. I don't think it's mutually exclusive.

I think the idea is just to the extent we can and whenever we can, you know, know, plus up this fund, it's just going to give us again, resources to, to, to take it out of rate. So I don't think this precludes us spending, you know, even in this current year GGRF funds on Wildfire.

Okay, last - I know I'd explored with Michael Weara and, and others on. On trying to streamline transmission grid corridors. And specifically looking at the model that the State of Texas, they had dramatically and rapidly expanded their transmission grid in like, I think it was a 7, 8 year time span.

Is that, is that basic idea of trying to identify the streamlining of transmission grid corridors part of your, your streamlining proposal?

That's not, that's not specifically called out here. I do think that's, you know, an idea and I think we'll probably, when we come back, we'll have a robust discussion given the federal budget Bill and the timelines that it set.

You know, how again, how collectively we can speed things up. So happy to look at that. But that's not called out specifically.

Okay. All right. Thank you.

Yeah. I like the idea though.

Any other questions from colleagues? Sure, Mr. Ellis? Okay, seeing none, Senator Becker, would you like to close?

Thank you. Look forward to working with you and the Committee going forward. As we, you know, specifically on those streamlined permitting parts and, and everybody on the rest of the Bill as well. Thank you. Respectful ask for an aye vote.

Thank you. And want to thank the Senator for including us in the future conversations around this Bill. Colleagues, it's not a common practice of this Committee to let a Bill go through untouched, especially one that has urgency, that didn't have to be heard today.

But because of the author's demonstration and commitment to get this working, and because of conversations that are happening between both houses, we thought it was important to send us off into recess by passing this Bill. Has a do pass recommendation today. Madam Secretary, can we call the roll?

[ROLL CALL]

That Bill is out. Have a good recess.

Thank you. Appreciate you all.

This meeting is adjourned.