Assembly Standing Committee on Utilities and Energy

Good afternoon, and welcome to today's hearing of the Assembly Committee on Utilities and Energy. I would like to convene the hearing. Before we move to the agenda, I have a few housekeeping announcements to make. As is customary, I will maintain decorum throughout today's hearing. In order to hear as much from the public within the limits of our time, we will not permit disruptions that impede the orderly conduct of legislative business.

Any individual who is disruptive may be removed from the room. Today, we have 18 measures on our agenda. Four are on consent. As a reminder, testimony is limited to two primary witnesses in support and two primary witnesses in opposition. Each of our primary witnesses will have two minutes.

And as a reminder, primary witnesses in support must be those accompanying the author or who otherwise have registered a support position with the committee. Primary witnesses and opposition must have their opposition registered with the committee. All other support and opposition can be stated at the standing microphone when called upon. And at that time, please simply state your name, affiliation, and position. Alright.

With that, we do not have a quorum, but we'll go ahead and commence as a subcommittee. I see we have an author waiting. Welcome, Senator Archuleta.

Okay.

Well, thank you, Madam Chair and and, member. I appreciate the opportunity to present my bill, and I'm really excited about the progress we've made in on Senate Bill 804. And once again, I thank you. I'm pleased to present Senate Bill 804, the Hydrogen Pipeline Safety Act. I would like to start by thanking the Chair and her staff for working with me on this bill, and I will be accepting the committee suggested amendments.

Members, you may recall that this bill was heard in this committee last year and passed with bipartisan support. Following that hearing, my office worked extensively with the governor's office and the office of the state fire marshal to incorporate a series of technical amendments. Those amendments are reflected in the bill before you today and ensure that the office of the state fire marshal has clearly the authority to appropriate and enforce and has the tools of enforcement and a fee structure sufficient to administer the new program.

Hydrogen is a key to part of California's climate strategy, and we know there is a certain sectors of our economy where hydrogen will be essential to achieving climate goals. These include heavy duty transportation, porch, maritime shipping, aviation fuels, and other industrial manufacturing applications where electrification alone may not be sufficient.

To support these uses, hydrogen must be transported safely and efficiently from where it is produced to where it is needed. For large scale deployment, pipelines are widely recognized as the most efficient, lowest emission, and most cost effective method of transporting hydrogen. However, hydrogen presents unique safety challenges. Hydrogen is the smallest molecule in existence. It can permeate materials directly differently than natural gas, behaves differently under pressure, and requires specialized engineering and safety standards to minimize leakage and ensure safe operations.

The Federal Pipeline and Hazardous Material Safety Administration recognized these unique characteristics and began work on hydrogen specific regulations. However, that effort has stalled. And today, hydrogen pipelines remain subject largely to the regulations originally developed for other gases. At the same time, California is actively investing in hydrogen production, fueling infrastructure, and industrial applications. In short, the deployment of hydrogen infrastructure is moving forward, but the development of hydrogen specific safety regulations is not.

That creates uncertainty for communities, regulators, and project developers alike. Current California law does not clearly identify which state agency is responsible for regulating the safety of hydrogen pipelines. In fact, the California Public Utilities Commission has acknowledged that its authority over hydrogen pipelines has not been clearly established. Senate bill 804 closes that gap.

The bill designates the office of the state fire marshal as the safety regulator and enforcement authority for ultra state hydrogen pipelines that directs the fire marshal to adopt hydrogen specific safety standards that reflect the unique characteristics of hydrogen.

Importantly, this bill does not mandate construction of any hydrogen pipelines. It does not approve any projects. It does not create a hydrogen deployment program, and it does not circumvent environmental review or local permitting requirements. What it does is ensure that if hydrogen pipelines are built in California, they will be built and operated under a clear, consistent, and accountable safety framework administered by the California State Fire Marshall recognized as the pipeline safety experts. This is exactly the approach that California is taking in other emergency industries.

Establish the safety rules first, then allow deployment and development to proceed within a practical and regulatory framework. That is essential. That is good for public safety, good for environmental protection, and good for responsible economic development. Most importantly, it is much easier and less expensive to establish strong safety standards before the infrastructure is built than it is to retrofit an entire system after deployment. If California intends to be a leader in hydrogen, then California should also be a leader in hydrogen safety.

Senate bill 804 ensures that California is the safety leader. For these reasons, I respectfully ask for your aye vote and here today for voice support. I've got Scott Wech on behalf of the California State Pipeline Trades Council and Mike Monaghan on behalf of the state building and construction trades. And I will tell you that this is a giant leap forward for safety and hydrogen and its development. And this bill simply ensures that as California grows its green economy, that it's done safely.

For these reasons, I respectfully ask your high vote.

Madam, Chair members, Mike Monaghan on behalf of the State Building Trades. I'd be remiss if I didn't recognize the perseverance and the efforts that the Senator has made over the last year, not only on this bill, but in the hydrogen space. Totally. We we would be where we were today without Senator Archuleta. I'd like to add something to what he, shared with you about about the bill.

Can't any add anything new, but the motive or the momentum behind this bill will create a hydrogen space in California, which we desperately need if we wanna rechart our climate goals. Thank you.

Good afternoon, Chair members. Sorry to disappoint you. I'm not Scott Wedge. Martin Vindiola on behalf of the California State Pipe Trades Council in support of SB 804. We're supportive of the State Fire Marshall adopting regulations, to regulate these hydrogen pipelines.

Hydrogen, as the Senator has stated, is critical to our energy future in California. It's also critical, to the skilled trades people that work in the pipe trades area and space. So it's important that we demonstrate that these pipelines are safe so that we can build out our hydrogen energy infrastructure. Thank you.

Thank you. At this time, we'll hear from additional witnesses in support. If you'd like to testify in support of SB 804, please approach the microphone at this time.

Thank you, Madam Chair. Hunter Stern with the Coalition of California Utility Employees and IBW 1245 in strong support.

Thank you, and good afternoon. Kendra Begley on behalf of the City of Burbank in support.

Thank you. Alright. Witnesses in opposition, if you'd like to testify in opposition.

Thank you, Chair and members. Ryan McCarthy with Wideman Group here on behalf of Air Products. Air Products is, strongly supportive of the author's intent here to establish clear hydrogen safety, jurisdiction for the state fire marshal. And we've supported previous versions of this bill. We have a few concerns with the amendments and have reluctantly shifted our position to oppose unless amended.

Air Products operates the only hydrogen pipeline in California. We have been safely operating that pipeline for decades without incident under an existing effective federal regulatory regime. We are concerned with some of the specificity in the amended legislation, which primarily derives from approaches taken for other liquids and gases. We feel that a dedicated regulatory process that focuses on developing hydrogen specific rules would be more appropriate.

And that process should include specific consideration of the only pipeline operating in the state and consult consultation with the only hydrogen, pipeline operator in the state.

As the sole hydrogen operator, we are also concerned with the open ended fee language in the bill, which would presumably have air products put the bill for the entire development of these regulations. We very much appreciate the committee's recognition of this issue and other proposed clarifying amendments, and we look forward to reviewing those and continuing to work with the author on this bill.

We're deeply grateful, for the time and collaboration that the author's office has extended to us throughout this process, and we very much look forward to continuing that work. We hope to be able to get back to a supportive position on this, and we look forward to playing a central role in any future rule making process at the office of the state fire marshal. Thank you.

Thank you. Alright. At this time, we'll open it up for additional witnesses in opposition. Anyone come into the mic? Seeing none, bringing it back to the committee.

Assemblymember Rogers.

Thanks, best Chair. Just as a point of clarification, because I understand the concern around the open fee structure. I I believe didn't one of the committee amendments address that concern directly? Right. And Senator, if you'd

Yeah. And and here's the issue, and all due respect to the opposition, anytime a new industry starts, the cost of Wharton is an issue. No doubt. But what is the cost of safety? This is the safety act.

And, again, that's why it's the hydrogen's pipeline safety act to establish the ground rules of not just the one company that's in existence today that has taken that leadership role, but others will develop. California is a competitive state. And as we open up the doors for hydrogen, we're gonna open up the doors for many other aspects of energy and everything else, and it will get competitive. But when it does, to that point, the rules have gotta be set. Safety first.

Fees? Okay. Competitive? Yes. But overlooked by who?

The expert. The fire marshal. And for the last two years, we've been debating back and forth who is gonna take the lead to oversee the safety of the pipelines and everything else. The production that and the manufacturing and delivery and everything else. And it was negotiated that the fire marshal, the experts within that department would be the right one.

So fee shouldn't be an issue. It should be part of the process that will grow. And as time goes on, those fees will be adjusted, and they'll be competitive.

No. I appreciate the answer, Senator. And at the appropriate time, I'll be happy to move the bill.

Yeah.

Thank you.

Thank you. Alright. I'll just also, echo, I think, the comments of one of your witnesses. And thank you, Senator, for, your commitment to and your leadership in this space. Like you, I'm a firm believer that as we work to achieve our clean energy goals, we need to advance in all of the above approach.

And so you've really, championed this. You've been a leader and grateful. Would you like to close?

Well, thank you so very much. Once again, members and madam Chair, I've said it once before a few years back that California has a treasure chest of energy. And we open it up, and it's gotta include everything we can think of. And hydrogen must be one element because it's essential to our future. And I'm so proud and honored that this bill will become the umbrella of safety, and that's what we're going for.

And I respectfully ask your eye vote.

Alright. Thank you. We are awaiting the establishment of a quorum, but we will certainly take the measure up at the appropriate time. Thank you.

Thank you.

We are also now awaiting some Senate authors, senators with bills in Assembly utilities and energy committee. We have 14 remaining bills on today's calendar. We have a motion to adjourn from the vice Chair. So, staff members watching from your offices, track down your members and hustle them along to Room 437.

File item 2 is SB 886, file item 3, SB 887, both by Senator Padilla as file item 4, SB 905, and file item number 5, SB 913, both by Senator Becker.

So, senators, we eagerly await your arrival in Room 437.

Good afternoon. Welcome, Senator Becker.

Great. We've got two measures for the committee for SB 905.

Number file item number 5, SB 913. Not on the microphone. Welcome. Welcome, Senator Becker. Alright.

First step is file item number 4, SB 905. The floor is yours.

Well, thank you, Chair, members. SB 905 is about fixing some of the structural problems that have led to unaffordable electricity bills. As much as utilities say the right things about trying to reduce rates, there is a trust problem. Utilities earn bigger profits and utility executives do earn bigger bonuses by spending more money. Given those incentives, it's hard for the public to trust them not to favor expensive investments like, say, 10,000 miles of undergrounding, rather than finding more cost effective solutions that earn less profit.

So this bill makes several changes to improve those incentives. It will focus utilities on spending money better, not spending more money. As we know, anyone who's run a business, it's all about aligning the incentives. That's what we're trying to do here. So this bill, first of all, aligns the personal incentives of utility executives with keeping rates affordable for our constituents.

It requires 20% of annual compensation for anyone VP or higher to be tied to keeping rates from rising faster than inflation. If our bills keep going up, they won't earn those bonuses. It also includes other good government stuff, like tracking significant metrics and increasing transparency. It requires the PUC to establish clear performance metrics on things we should know, like reliability, system utilization, greenhouse gas reductions, how well we're doing for any wildfires, etcetera.

And that will make clear what our expectations are for expectations are for good performance.

In particular, utilization metrics, something we've talked a lot about, you know, in this committee and over in the Senate, It will push utilities to get more value and infrastructure we've already built and paid for before proposing new spending. SB 905 also authorized a PC to give utilities, a lower return on equity for certain category of investments with lower risk, but where investor gets other benefits. Underground is a good example of this.

So that has benefits to shareholders because it helps prevent wildfires, wildfires, which, is the ultimate risk right now for utilities is bankruptcy risk. So there might be incentive to spend more money on that than say, hey.

Another transformer that will serve more customers. And because, again, there are other benefits to that the, say, the undergrounding, they may require a lower return on equity, for that. And this really came out of some hearings we had earlier this year. Finally, given the low growth we're expecting from EVs and data centers, sometime, new infrastructure will be needed. In that case, we still wanna continue to look for cheaper ways to pay for it.

And SB 905 requires the POC and utilities to evaluate alternative financing options that would save taxpayer money, something that you, Chair, and I worked on last year in SB 254, the $6,000,000,000 to securitized debt, which is leading to $300,000,000 a year in savings already. Recent polling from bold research, for example, shows what we've all heard from our constituents. 83% of voters across the political spectrum think utility profits are too high.

The polling also asked about a couple other provisions in this bill. That's 86% supported time, executive compensation directly to affordability, and requiring utility to show they're using the grid more effectively.

I wanna thank the Chair and committee staff for all the time they put into reviewing this bill. I'm accepting all of the committee amendments. As I've said many times, and I think we'd agree, there's no one silver bullet to making electric bills more affordable. The utilities are saying a lot of the right things, and and they're doing some of the right things as well. We should make sure that we have the incentives aligned.

This bill will do that. With me today, I have Matt Freedman from Tern and Michael Boccadoro from the Agriculture Energy Users Association.

Thank you, Senator. Welcome, gentlemen.

Thank you, Madam Chair, members of the committee. My name is Matt Freedman. I'm a senior attorney with the Utility Reform Network, and we're here to enthusiastically support SB 905. As everyone on the committee knows, residential electricity rates have skyrocketed in recent years, creating a crisis of affordability for many families across the state. According to a recent poll, of the governor's race, voters say that utilities are the second biggest strain after housing on household budgets.

The top strain on household budgets was housing, but it was followed closely by utilities, which were seen as more significant than health care and groceries. In its 2025 report to the legislature, the Public Utilities Commission forecast average annual rate increases of six to 7% for each utility over the next few years. The primary driver of these increases is increases in utility spending, particularly on their distribution system due to wildfire mitigation.

To get a handle on rates, the utilities have to have their incentives better aligned with the goal of minimizing spending, optimizing the use of existing grid infrastructure, and finding less expensive methods of financing grid investments. SB 905 addresses the affordability crisis through a series of long term accountability and cost reduction measures designed to improve the performance of investor owned electric utilities and to lower customer rates.

We appreciate the bold approach taken by this bill that addresses several of the root causes of the current affordability crisis, including out of control utility spending, the high cost of private capital, and the growing burden of wildfire mitigation and policy costs. And we ask for an aye vote on this bill. Thank you.

Thank you. Welcome.

Thank you, Michael Boccadoro. Madam Chair and members, they've stole a lot of my thunder on the poll after poll, survey after survey tells us that affordability and the cost of living are the number one issue. It's a well documented fact that energy affordability crisis, we have over 2,000,000 customers today who are behind on their utility bills, and the amount they owe is continuing to increase on an average basis. It's not just a residential issue.

I'm here to testify on behalf of the business community and the agricultural community.

It is an issue that is having broad implications for both food processing and agricultural businesses in the state, farms, dairy farms. We are losing food processing and often citing the high cost of doing business in the state. We've lost the Prino Foods. We've lost Del Monte Foods, and the list is continuing to grow. We can and have to do better.

I've been working on general rate cases and utility issues for over thirty years here in California, and I've been in this committee, you know, at least for the last, half a decade complaining about rising utility costs. Unfortunately, they're continuing to escalate. PG and E has done, an admirable job of telling the media and telling their customers that they are gonna hold rates to inflation. Let's hold them to their word and hold them to inflation and, tie their compensation, to keeping rates down here in California.

On behalf of the ag and business community, respectfully request your aye vote.

Thank you. Alright. We'll open it up for additional testimony in support. If you'd like to testify in support of SB 905, please approach the microphone.

Alison Hillier with the Climate Center in support. Thank you.

Good afternoon. Scott Hawks on behalf of Ceres in strong support.

Jon Hart with CALSSA in support.

Will Breiger with Climate Action California and 350 Humboldt in support. Thank you.

Chair, members Alicia Priego on behalf of San Jose Clean Energy in support.

Good afternoon. Marissa Hagerman with Traton Price Consulting registering support on behalf of California Environmental Voters. Thank you.

Rocky Rushing on behalf of Corporate Energy Buyers Association, AKA CEBA, in support.

Arnab Powell, Deploy Action, registering support.

Meredith Alexander with the Coalition of Large Energy Users, in support.

Michelle Canales with Union of Concerned Scientists, in support.

Good afternoon. Dylan Hoffman on behalf of Advanced Energy United in support.

Thank you. Oh, one more.

Ignacio Hernandez, authorized to register support on behalf of the California Large Energy Consumers Association.

Thank you. Alright. Is there anyone here in opposition to SB 905?

One last support. Ada Waelder with Earthjustice here in support.

Good afternoon, Madam Chair, members. Brady Van England here on behalf of Southern California Edison in respectful opposition to SB 905. First, I wanna thank the committee for their thoughtful analysis on the bill. The recommendations do address many of the concerns that we had raised in our opposition letter. However, we do still have some significant concerns with the bill.

One of the first things I wanna raise is that the reduced ROE on an application specific basis is inappropriate. We look at this at an enterprise wide level on a training on a triennial basis right now, part of our cost of capital proceeding. In doing so, an enterprise wide level allows you to assess from a broader perspective rather than that narrow perspective or one activity over the other. In the presentation that the the author, Senator Becker gave, he had mentioned undergrounding as an example.

One thing to note with undergrounding is that the state may have some the state may have a certain perspective on undergrounding.

OEIS and the PUC have both taken steps to to, I guess, encourage us to underground where necessary, but we're not done with that work yet. So until we're done with that work, the conversation about less risk being associated with our system is a little inappropriate because it's it's kind of taking it in a snapshot perspective rather than looking at it holistically.

Moving on to some of the other provisions, we appreciate the committee analysis on the alternative financing section and the recognition that moving forward on a performance based rate making without first understanding the potential impacts of that decision could prove detrimental to our customers. And we look forward to working with the author and, other key stakeholders as that as that conversation continues. Additionally, we appreciate the committee's recognition that not one, but several metrics will be needed appropriately understand grid utilization at the system level.

It it's that's a complicated and it's been an ongoing ongoing process we've had over it's been a multiyear process conversation at this point in time. But, you know, I just wanna make clear that the movement of any of those metrics up or down

Keep a map.

I'm here to say, but I'm I'm just gonna stop there and say that, you know, clearly, there are a number of concerns that we have with this bill. Two minutes isn't going to cap capture that completely, and, we respectfully are opposed to the bill.

Thank you.

Good afternoon, Chair Petrie Norris and members. Jon Kendrick from Cal Chamber. We oppose the version of SB 905 in print.

I think, you know, there's a lot that the support testimony I agree with. Right? Everyone in the room shares the same goal, improving energy affordability. Electric rates shape real world decisions, whether businesses expand in California, invest in new equipment, electrify operations, continue to hire, whether they can continue to absorb the cost of the rising faster than their ability to pass them on.

Energy affordability is directly tied to competitiveness, jobs, tax base, and California's ability to attract electric load needed to put downward pressure on rates by spreading fixed system costs over increased usage.

So we appreciate the work that the committee and the author have put into this bill. The amendments proposed in the committee analysis move in the right direction by stepping back from rigid legislative mandates that deprive the PUC of flexibility it needs in a quickly changing energy landscape. That flexibility is crucial to how California balances affordability, safety and reliability, wildfire risk, electrification, and numerous other energy challenges.

A decision that appears to reduce one category of cost on paper can increase costs elsewhere if it increases financing risk, delays needed investment, or constrains the commission's ability to evaluate facts in a full evidentiary record. And that's kind of our concern with SBA 905.

Even as amended, the bill still moves California towards statutory preferences around utility financing, returns, compensation, and grid utilization. The statutory preferences may ultimately distort the decision making needed to keep the system safe, reliable, and capable of serving new load. Now I I heard, some testimony about, tying executive compensation is about aligning incentives. But, ultimately, if you are tying compensation to an arbitrary benchmark like CPI, you are actually creating a perverse incentive to underinvest in the grid. So we we definitely have some concerns there as well.

Look forward to actually seeing what the amendments look like in print. I do, again, really appreciate the efforts of the committee and moderator. Thank you.

Okay. Opening it up for additional witnesses here in opposition. If you'd like to testify in opposition to SB 905, come on up.

Scott Wetch, on behalf of California Coalition of Utility Employees, we appreciate the amendments of the committee. It's moving in the right direction, but, we, still regret regretfully opposed.

Valerie Tirella with Pacific Gas and Electric Company also remain opposed to align our comments with Southern California Edison. Thank you.

Good afternoon. Hunter Stern with IBW 1245 aligning my comments with Mister Wetch. But we do appreciate the amendments that the committee offered. Thank you.

Thank you. Okay. Bringing it back to committee. Questions, comments? Assemblymember Rogers.

Thank you so much. So Senator, one of the concerns that's expressed in some of the opposition letters was around this idea that in order to hit those benchmarks, the utilities could shortchange in other areas. One of it was, employee compensation, for instance, that it could harm the ability for employees to actually negotiate their contract if what the utility is able to do is to keep their pay low in order to keep that that metric lower.

Can you talk a little bit about how you've accounted for that in the structure?

Yeah. Well, I'd say a couple things. You know, there's nothing here saying that they can't use shareholder money, for example, to a backfill. If they decide somebody does, you know, warrants an additional bonus even though it's not accounted for in our bill because it doesn't you know, they haven't kept the rates low enough, they could still do that. Right?

They could still do they could choose to use shareholder money in that regard, apparently. So we've seen in recent campaigns, there's there's a lot of shareholder money going around, so they could use that to do that. And and I just say it's really exactly why we need to pair this with performance metrics so we can see that they're getting the work done on budget and without cutting corners on the priorities those metrics are tracking. So it's not one or the other. We're really doing both here.

And the committee members exclude by the the PPP charges from the inflation metric because they really are outside the IUs controls. We've accounted for that, we think, as well. And members also point out that IUs can always, again, backfill any lost rate payer funded comp by using their shareholder dollars. But having performance metrics around safety and reliability, being explicit in the bill, will help pair with that, I think, very nicely.

Yeah. No. I appreciate that. And that was exactly the the concern is, just that the in order to meet the bonus that the work would either cut corners, which is not good for the consumers, or, harm the employees by keeping the employees' pay artificially low. So I appreciate that you put in those performance metrics to be able to quantify that and evaluate that as well.

Thank you.

Assembly member Patterson.

Great. Thank you. Well, thanks, Senator Becker. I think, you know, I think, you know, your your goals are definitely, you know, something that, you know, make a lot of sense, which is, you know, trying to get some metrics around, you know, delivery. You know, sometimes I've introduced bills before that I I like I swear are good ideas.

And then once I go through the committee process, I'm like, okay. Maybe, you know, maybe I'll scratch that one. But and I feel like, you know, this one, I have some concerns, you know, and and your your witness had mentioned, you know, less expensive methods of infrastructure.

You know, I infrastructure. You know, I I'm always interested to hear what those ideas would be, but, you know, these are companies with for one reason or another, you know, very low bond ratings. You know, we've had to do a lot of things around here to, you know, I think, help out and, you know, especially when it comes to wildfire mitigation, but a lot of other things.

But, you know, when when you reduce equity, that makes it even less likely for people to wanna invest in in the company and, therefore, the infrastructure itself. And so I have a lot of concerns on something that would reduce equity and make the company even less, you know, interesting from from an investor standpoint to go in there.

I'm also very concerned about comments from your witness about the growing burden of wildfire mitigation costs. I too am very concerned about wildfire mitigation costs. I don't consider it a burden. I consider it a necessity. I think there's questions about whether it should be part of the general fund or part of utility rates that are very interesting.

And then lastly, I just wanna say that, you know, we've made a lot of decisions in this building. I mean, utility rates are insane in this state. I mean, there I don't think anybody disagrees with that. It's one of the it is, I think, the number two issue that I get from people in my district office that they can't afford their utilities.

I'm personally seriously concerned about it, but I'm also concerned about decisions that over time, over the last couple decades, we've made in this building to drive up the cost of utilities.

You know, we don't count large scale hydro towards a new portfolio standard.

We don't use nuclear you know, we don't have nuclear is going offline in the state. I mean, we got some that we're trying to keep alive. We're moving away from combustible biomass. Hydro nuclear, some of the cleanest energy sources in the state.

And then we've also added wildfire mitigation to the bill, which has definitely driven up costs. But that has been a policy decision, not the fault of utilities on that. And I think we can always talk about how that's done. But but I think a lot of the reasons for how expensive utilities are, you know, some of it does come from decisions from this building. A lot of it does.

But I do wanna say that I'm the at the end of the day, I'm very concerned about reducing equity. And I understand the sort of that's trying to create some incentive there, but I think the net effect, and feel free to respond to this, is gonna actually make it more expensive to invest in infrastructure because there's gonna be no capital coming in to wanna invest in utilities to put in to the infrastructure. And feel free to respond to that.

That was just a Joe tirade, but, but you're welcome to respond, obviously, as the author.

Yeah. Well well, I'll start by agreeing with you on a couple of things. One is, as you mentioned, wildfire mitigation, you know, right now, it's estimated about 20%, according to February report, about 20% of the PG and E bill and put around 15% of, say, Edison bills. And there was a part of this bill early on.

We had a power fund to create that infrastructure to start getting some of these things out of rates and into the general fund that I agree with you should be general fund.

And if you probably agree with some of the opposition here on that, they probably like that part of the bill. And, you know, and I think we should look at if we do have a big surplus next year after certain IPOs, you know, we should look at putting some of that aside so we can take some of these costs out off of rate pairs, which is incredibly regressive and and have that general fund because it really does benefit the whole state.

So I'll be with you on that. And, you know, we just had a bill looking at nuclear over in the Senate energy that I voted for that This is pulling, so other sources of clean from power, I'll agree with you on some of those as well. I just wanna be clear on a couple of thing.

One thing about the this return equity piece, we're not touching overall return equity. I hear you about the investabilities of utilities. It is kind of on edge because of the wildfire exposure right now. But we're not touching overall return on equity. We're just adjusting it to lower you know, if they could consider lowering it for spending that is less risky than normal.

Right? So, overall, return of equity, we're still talking about 10 plus percent guaranteed return. Right? That's the thing. They're these are regulated monopolies.

They get a guaranteed, rate of return, and we're just saying that investors already have extra incentive to do things like undergrounding. And we're not saying underground is always wrong, but there's extra incentive to do it, and they'd be willing to do it even for a lower rate of return. Since are we supposed to be based on what the market requires. Right? That's all point on return equity is what the market requires.

We're just saying it's financially correct to offer a lower rate of return for something that they has other external benefits for them. So I I hope that's clear and happy to discuss more on that. I see my team is taking fierce notes. Maybe you wanna quick comment on is it okay?

Please, yes. Thank you, Senator. Assembly member, in response to your concern about equity, it's important to know that the utilities are currently on a massive capital spending spree. If you're concerned that maybe there'll be no equity left to invest and that we're gonna be taking all of those opportunities away from the utilities through this bill, Let me just assure you that's not a remote possibility, really not much of a possibility here.

Oh, of course.

PG and E, for example, through 2030 is projecting $73,000,000,000 in capital expenditures, 9% annual increase in its rate base.

This bill would do a couple of things, but one of them was be to direct the Public Utilities Commission to explore methods of alternative financing, which have come up in front of this committee before, including, public financing, using public bonds, and securitization with the idea being that we can find cheaper sources of capital for some portion of these future capital investments.

Given the massive scale of capital investment that's being forecasted, I think it makes sense to look at less expensive options, and they simply would not crowd out opportunities.

Which I've supported by the way.

Sorry? I've supported those efforts, by the way.

And it simply would not crowd out the the appetite for PG&E to, deploy investor capital, which I think was the the core of your concern. Yeah.

I think, you know, we have to well, I mean, with our infrastructure with our needs for power in this state, we're gonna have huge infrastructure spend. And so this is but this is kinda, like, what I'm getting at is that I think that the I the idea that we do kinda create this weird incentive on infrastructure in, you know, in this state.

And I and I understand that in a way, you know, because, you know, if you invest a certain way, there there is a there is a rate of return. You know? And I think we, as policymakers and the PUC, look at that and take that very seriously.

And so that's why I think, you know, the the concept of the bill, you know, the you know, sometimes when I I have these bills, like, ideas when I'm on a jog or something, I'm like, this is such a great idea. You know? And then, then I come up at this place. I'm like, okay. Other people disagree with me.

And I just feel like I'm kinda at that spot with this bill, where I kinda, you know, I know I I understand the intent of where you're trying to go on this. I'm just very concerned about, shaking the investability of the utilities, which is why I can't support it today. But, again, I I don't think your idea and concept is a crazy one. You know?

I just I'm I'm very concerned about the unintended consequences, largely because I'm not smart enough to understand, you know, what they all might be.

But, but thank you for bringing the bill and answering my my questions, by the way. Appreciate that.

Thank you, Mister Vice Chair, Assemblymember Zbur.

Thank you. I had sort of the same, sort of, areas of concern as, as my as our colleague, in the areas of, you know, the areas of the bill that, sort of reduce the return on equity for certain categories of, of investment. And, you know, I think, you know, generally, one of the things that I think happens is that we are doing things to try to direct in some pretty specific ways to try to bring down cost, which is, of course, you know, a laudable goal.

But we end up, I think, injecting sort of instability in terms of the market and then it results in increases in capital cost on borrowing. And so that is sort of when I look at the bill, and those aspects of it, I guess the question is what remains after the after the amendments about the ability to reduce the return on equity for certain categories of utility investment?

Because I'm nervous about that, you know, you know, introducing these sort of preferences for reduced returns, the the signals that it sends to the market and whether or not that's gonna result in the capital markets increasing borrowing costs for the utilities, and we end up having a counter results from this. So I'd just like to see I I'm just Yeah. I'd like to tell what remains in the bill and then actually

Sure. The thing I witnessed because there've been a a broad discussion, but I'll say in at a high level, it encourages the PC to consider it, but does not require it. So that's just one thing just so you know. But the thing I just wanna say before I turn real quickly is that I think we have to recognize and in other areas that we'll also deal with coming here in the next towards the end of session is that the status quo is not good. Right?

Because, again, the stat point is the status quo is out of whack. The status quo encourages investment, say, in that next mile of underground as opposed to the transformers that the next transformer that we all want to serve our customers. So, again, we're not saying underground is always bad in every situation. As you you said, you know, we we want it in cases where we need it. But we are trying to bring the incentives into alignment because right now they are misaligned.

Right? Because there's extra benefit. You get the same return on equity for everything and there's extra benefit to shareholders for certain things. There's gonna be a bias towards doing that. In terms of where it is right now exactly, let me turn it over to yeah.

Thank you, Assemblymember. The bill in print directs the PUC to assign a reduced return on equity for the identified categories of costs. The committee amendments modify that so that now the commission is required to consider whether to take that action. And the commission is directed to issue written findings for each of those categories based on a series of potential rationale. So there's an opportunity for all parties, including the utilities, to argue about whether it would be prudent for the commission to take this action.

Sure.

So I think the best way to understand the amended version of the bill is it tees up a conversation at the PUC where they are directed to take the hard look at this issue, and they're certainly free to consider some of the concerns that you've identified in your comments, but it does not require a particular outcome.

Okay. If if the Chair if I could ask the representative for medicine, is it your sense that that, sort of less mandatory approach what what is the likely what what do you gauge as the likely response of the capital markets to that? I mean, to me, it still seems like it's sort of signaling less predictability in regulatory treatment and that that is part of the issue.

And what I was told last year, and I noticed it it not sure if it's true, was that after we passed some of the bills last year, the result of when those were signed, it increased borrowing costs for all the all of the IOUs. So where we achieved some reductions on some of these bills, we paid for them in increases in borrowing costs at the tail end.

And so we may have ended up in the effort to become more affordable, you know, have more affordable rates for folks who may end up end up sort of running counter to that. So I just like to get your sense of that.

Thank you, Mr. Zubr. That's a that's a great question. Regulatory certainty is informs a big portion of our credit ratings. So all the credit rating agencies do look at regulatory certainty, or in in some cases, uncertainty depending on, you know, where we are. And at the end of the day, you know, we're we're one of many, many, many investor owned utilities across the country.

So we're all competing against a variety of other people to, you know, access capital. There is not an unlimited amount of capital that can come to California. You know, there's there at some point in time, you know, the tap gets turned off, and there is just not enough investments that can be made.

But what happens if you know, to your to your question, though, more specifically, what happens is that if there is a signal that there is regulatory uncertainty within the state, our credit rating will go up, which in turn impacts our borrowing costs. When our borrowing costs go up, then we have an it has a negative impact on our on our ability to you know, on our rates effectively.

So it's a cost of service.

I appreciate the committee amendments and in part because I I didn't have an opportunity to sort of get behind this bill until this morning. I'm gonna support it today, because I don't surprise anyone and I think the goals are good. And so I'm gonna vote for it today, but I'd actually like you to continue looking at that piece of the bill. So thank you.

Can I say one thing in response to that?

Please do, Senator.

Yeah.

Just that it's one thing is a 100% clear. The primary driver of the market requirements and borrowing cost is wildfire risk. So when I'm just looking back on a few look at, say, the the history here. When we did that bill, we we did require some securitized debt, but we also did things to shore up the wildfire fund. It actually had a positive impact overall.

So that's really the key driver of of the is is wildfire risk.

Alright. Okay. Seeing no further questions from committee members, just I have a a couple of comments. So, you know, I just wanna say thank you, Senator, for your, I think, very real focus on energy and electricity affordability in the state. I think everyone, whether it's your, you know, proponents or the opponents, I think everyone acknowledges that our sky high skyrocketing rates are, you know, simply unacceptable and really, really not sustainable.

So I know that all of us have been taking a very hard look to scrutinize our constituents' bills to understand where are their opportunities to drive down costs in both the short and the long term. And I think the conversation we've just had between committee members reflects why that's hard. Right? I think sometimes we'd like, like, the bumper the bumper sticker slogan would be easy. And I think if we could all wave a magic wand, we would do that.

But your your bill doesn't attempt to wave a magic wand. Your your bill really is getting into the weeds and trying to understand some key drivers and where there's opportunities. And to the point, to the conversation around return on equity, that is certainly a topic that has consumed quite a bit of committee conversation over this session and in years past. And I think we all understand that we are in a moment of making truly generational investments to build out California's electricity grid.

We need a 350 increase in transmission capacity over the next twenty years, maybe a 300% increase in generation capacity.

We need to make sure that we're doing these things cost effectively. We also recognize that utility health is important for California and important for California rate payers. Because as some of the members articulated, as the opposition witness articulated, if utility health is in question, then borrowing costs go up and rate payers are ultimately the ones who are then bearing those costs. So, it's not as simple as just saying, oh, we should have an ROE of x.

And that's why I think that the approach that now is being taken in this bill, ensures that the CPUC does retain their kind of core rate making discretion.

But I think the question being posed is a very important one. And and I think a lot of us, while we recognize, we wanna make sure that utilities are earning a fair return, earning a return that is adequate to attract necessary capital, given that it is a guaranteed rate of return. Does it make sense for it to, in fact, be uniform where some of these investments feel like perhaps it should be it should be different.

So I think it's an important question to ask the CPUC, an important question for all of us, both as policymaker, you know, us as policy makers, frankly, us as, like, utility customers to really understand. And lastly, I think it's important that incentives continue to be aligned between our utilities and, you know, the customer's your foot in the belt.

So we know that this is certainly not the last word, but, you know, certainly, I think look forward to continuing to work with you both on this bill and on future efforts to continue to bend the cost curve and deliver savings for Californians. So with that, would you like to close?

Yeah. I wanna thank you, Chair, and I thank the committee for your partnership. As we said, there's not one silver bullet here, and there's probably many things we do agree on, actually. But, and we do want utilities to invest in in necessary infrastructure. We had transmission streamlining as part of February last year, and, you know, I've supported streamlining, getting things built faster, as well.

A lot of this bill really is the wonky good government, material, and I do appreciate you diving into this. And I guess I wanna just also thank the business customers for weighing in on this as well. But at the end of the day, it's really about clear performance metrics, aligning the incentives. It's one piece of getting in the is is gonna help us get to where we need to be. So with that, respectfully ask for an eye vote.

Thank you. We are still one short one member short of a quorum, but, we'll take the bill up at the appropriate time. And then you've got one more. Yes.

Yes. I do.

Thank you. Thank you. Alright. Next up is file item 5, SB 913.

Well, on 09/2005 was about aligning utility incentives. 913 is about using our existing grid more effectively. This bill creates a viable pathway for distributed energy resources to fairly compete to offer low cost capacity reserves for the reliability of our electric grid. Electricity demand has remained fairly stable, but as we just discussed in the last last bill, we project that to change.

The CC projects that that energy demand will rise between 42-61% in the next two decades, and you're all aware that the grid only reaches its maximum capacity several hours on the hottest days of the year.

But as demand on the grid grows overall, it also tends to make the highest peaks in demand higher, and we require utilities to maintain enough capacity to meet demand on these peak load days. That's the right thing to do. It's how we ensure reliability, but how we create that capacity is up to us. And I think you've probably heard me say before the Walmart parking lot analogy.

You want build the Walmart parking lot for you don't build it for, you know, January 7 at 10AM on Tuesday.

You build it for the Saturday before Christmas, and the result is you have a lot of excess capacity most of the time, and that really is the status of our grid. So we have two choices. We could build more power plants and more transmission lines just to handle those few hours a year when we need to meet that higher demand. And, of course, we will have to continue to invest as we discussed.

But and or we could make better use of the grid we've already built using devices installed in our homes and businesses to shift demand away from those peaks and save a lot of money.

And we're not trying you know, in some ways, California, in a lot of areas, we're leading. Actually, in this area, we've now seen other states start to leapfrog us about using this infrastructure, more effectively. It's already in people's home. The CPC reports that about 3,000 megawatts of customer side batteries are already installed in the state, and a 100 megawatts of new customer side batteries are installed every month. That's enough new capacity every month to replace a peaker plant.

The problem is that most of these customer side resources are currently sitting on the sidelines. That's because the rules for entry participation in the RA, the resource adequacy program, and CAISO's energy markets have not evolved with development of these new technologies. SB 913 asked the CBC to update these rules to align more closely to those that have enabled the CEC's highly successful demand side grid support program.

And I'm gonna wanna thank, Assemblymember Erwin, other members of this committee for leading on support, rallying support for the DSGS program. It enabled that program to sign up more than a thousand megawatts of those customer cited resources.

This bill levels the playing field by ensuring rules don't create barriers to customer enrollment. It allows customers to roll multiple devices, allows performance to be measured device level, and allows customers to export energy back to the grid. These changes will allow these resources to compete on even playing field with new utility scale generation to see which resources can meet the grid's needs at the lowest cost. Not letting these resources compete would be a wasted opportunity to save ratepayers money. I'm happy to accept the committee's amendments.

And with me, I have Allison Hilliard from the Climate Center and Eric Leon from Renew Home.

Wonderful. Good afternoon, Madam Chair and committee members. Thank you for the opportunity to provide testimony in support of SB 913. My name is Allison Hilliard, and I am the government affairs director for the Climate Center. And we are very grateful for the committee amendment and work on this bill and grateful to Senator Becker for, championing this.

The climate center is a think tank do tank working to turn bold ideas into action for a climate safe future for all. We are cosponsoring SB 913 because, as we all know, the state isn't experiencing an affordability crisis, and everyday Californians are paying the price. We believe that SB 913 can help address this crisis.

Unlocking the value of customer side of solar, storage, smart thermostats, and other flexible appliances and devices through SB 913 can help lower California's utility bills by allowing these resources to fairly compete and ensuring our grid is fully utilized. This would save money because these aggregated resources would only be selected if they are the least cost option in the resource adequacy market.

We also know that the climate crisis is accelerating, and along with the projected super El Nino, we are going to be experiencing the hottest

year ever. Instead of firing up a polluting gas speaker plant in an overburdened community to meet the the increased electricity demand, we can rely on clean local resources that are already available in homes, businesses, schools, and government buildings. Currently, these resources are limited from fully participating in the resource adequacy market, but SB 913 would level the playing field, like the Senator said, for these resources to meet the demand and maintain a reliable electricity grid when they are the lowest cost option.

The California demand side grid support program, the nation's largest virtual power plant, has demonstrated that these aggregated energy resources can and help, avoid grid emergencies both reliably and cost effectively. SB 913 would give these these clean, small scale resources a long term pathway to participate in the state's energy market acting as a tool in the toolbox to address our affordability crisis.

For these reasons, the Climate Center is in strong support, and thank thank you for the opportunity to provide comment and respectfully ask for an aye vote. Thank you.

Alright.

Good afternoon, Chair Petrie Norris and committee members. Opportunity to provide testimony today. My name is Eric Lyon, policy lead for California and the West at Renew Home. Renew Home is an aggregator of smart thermostats and other residential distributed energy, resources with active participation in California's energy markets and utility programs. California has spent decades investing in customer located solar, storage, smart thermostats, and other flexible appliances and devices, but has not been able to fully unlock the value of these resources.

When these distributed energy resources are aggregated, they can offset traditional power plants, just like Allison said, and hundreds of thousands of these resources have already been deployed at homes and businesses. Previously, I worked at the California Energy Commission where I was a primary author and designer designer of the demand side grid support program. This program has successfully demonstrated that these small aggregated resources can provide dependable capacity, but that program has always operated in a silo on the periphery of California's energy systems.

SB 913 builds on the successes and lessons learned from DSGS, particularly the options for smart thermostats and batteries, and provides a pathway to better integrate more of them into California's core energy processes or the resource adequacy program as Senator Becker mentioned. This integration is critical.

Allowing these resources to compete will help the state harness hundreds of megawatts of existing capacity without the need to build out expensive infrastructure. But DERs cannot compete and bring down resource adequacy costs from a silo. Nothing in this bill presupposes any outcome. It simply directs the CPUC to make changes that will create a more accessible market pathway. Aggregators like Renew Home would still be required to ensure that our capacity can deliver, that it is cost effective, and that it is clean.

Our industry is confident that we can compete in the market with traditional generation, and this bill simply gives us a fair shot to do so. For these reasons, Renew Home is in strong support of SB 913. Thank you for your time.

Thank you. Alright. Moving to additional witnesses in support. If you'd like to testify in support of SB 913, please approach the microphone.

Jon Hart with the California Solar and Storage Association in support.

Good afternoon. Christina Scaringe with the Center for Biological Diversity in support.

Will Brieger for Climate Action California and 350 Humboldt and 350 Sacramento in support. Thank you.

Good afternoon. Scott Hawks on behalf of Ceres in support.

Leo Dale on behalf of Environment California, Affordable Energy Campaign, and Voltus in support.

Good afternoon. Kendra Begley on behalf of the City of Mountain View in support.

Jim Lindberg, Friends Committee on Legislation of California in support.

Good afternoon, Chair members. Tiffany Phan on behalf of the California Efficiency and Demand Management Council in support. Thank you.

Chair members, Alicia Priego on behalf of San Jose Clean Energy in support.

Good afternoon. Gabriela Fosseo with Sierra Club, California in strong support.

Good afternoon. Adam Hatefi on behalf of Generac Power Systems and Ecobee Smart Thermostats in support.

Arnad Pal with Deploy Action. We support.

Good afternoon. Meredith Alexander, the Coalition of Large Energy Users in support.

Good afternoon. Dylan Hoffman on behalf of Advanced Energy United in support.

Craig Schuller on behalf of AVA Community Energy in support.

Good afternoon. I am Madhikit Maiano with NextGen California, and and sup and we would like to clarify that NextGen's position is now support if amended to remove the NEM exclusion amendment. Thank you.

Thank you. Alright. Moving to any witnesses in opposition. Do we have any a primary witness in opposition? Come on up.

Hey. The floor is yours. Okay.

Hello. Valerie Turello with Pacific Gas and Electric Company. Our position on AB 913 is a a post unless amended. PG and E is very excited by the potential for explicit, RA value for DERs as as, we agree with with the author on that, excitement and potential. We appreciate the conversations we've had with the author and his staff.

Appreciate the work of the committee on the bill. We are concerned that this use case that we're all excited about is is not proven. It is also the subject of three open rule makings. But, again, we do wanna get to the same destination, and we might disagree on the journey. We're gonna continue to look at the amendments and continue to have conversations with the author.

Thank you.

Thank you. Alright. We are gonna pause for one minute just to establish quorum. Madam Secretary, please call the roll.

[Roll Call]

Alright. Moving on with additional, testimony in opposition. If you'd like to testify in opposition to, SB 913, you can approach the microphone.

Alright. Moving on with additional, testimony in opposition. If you'd like to testify in opposition to, SB 913, you can approach the microphone.

Oh, or come on up.

Hello. Sara Fitzsimon, with the Independent Energy Producers Association. I wasn't sure if I should stand and do a me-too and oppose, or come up here. We have been opposed to this bill, but we're very appreciative of the committee's work on this bill and the author's work on this bill. And in light of the amendments being accepted, we actually would like to remove our opposition and go to neutral.

So we're in support of the amendments, and we really appreciate the work on this bill.

Wonderful. Thank you so much. Alright. Is there anyone else who'd like to provide me too testimony in opposition?

Brady Van Engelen, SoCal Edison. We are opposed on file, currently reviewing the proposed amendments and the committee analysis. Appreciate the thoughtful committee analysis, and hopefully we'll be able to remove our opposition after we've had a chance to look them over.

Thank you.

Thank you. Alright. Bringing it back to committee. Questions, comments? Seeing none, Senator, would you like to close?

Well, thank you for the work of the committee. This has been a long time in coming, and it's it's complicated topic. But, really, it's about, again, using our existing grid more effectively. And then how do we, get all these distributed resources that now we're recognizing that distributed resources can be part of our critical infrastructure and how do we bring them into play? This bill is better for the work of this committee in respect to ask for an aye vote.

Thank you. Alright. I think we need a motion. We need a motion and a second. Second. Thank you. Alright. Madam secretary, please call the roll.

[Roll Call]

Okay. Eight zero. That bill's on call, and we'll leave the roll open for absent members to add on. Thank you, Senator. Thank you, Chair.

Alright. Let's go ahead and open the roll on the consent calendar. We need a motion and a second.

Right? Motion from Assemblymember Rogers, second from Assemblymember Zibur. Madam Secretary, please call the roll. Item number seven, SB 1008. The motion is do pass to appropriations.

Item number 11, SB 1168. The motion is do pass to appropriations. Item number 15, SB 1337. The motion is do pass as amended to appropriations. Item number 17, SB 1366.

[Roll Call]

9-0. So the consent calendar is on call, and we'll leave it open for absent numbers to add on. Let's call the roll on file item number one, SB804. Do we have we have a motion? Over Rogers?

We've got a motion from Rogers. Do we have a second? Second from Assemblymember Schiavo. Madam Secretary, please call the roll.

[Roll Call]

Alright. 9-0, that is on call. We'll leave the roll open for absent members to add on, and then file item number four SB 905.

And we need a motion.

We need a motion and a second for that. SB 905.

Okay. We've got a motion from Assemblymember Hart. Second from Assemblymember Erwin. Madam Secretary, please call the roll.

[Roll Call]

Alright. Seven-one, that measure is also on call. We'll leave the role open for absent members to add on. And we have reached another lull in our programming, so I'll make a further public service announcement. Senators, if you have a bill to present in Assembly utilities and energy, please make your way to Room 437.

We still have, I don't know, like, 12 measures to be heard, and it's almost 03:00. So please either provide us an update on your whereabouts or come to Room 437 by 03:05. Thank you, senators. Okay. Just a little further update for senators and senators' staff.

So we are going to wait here until 03:05 for Senate author to show up. If we do not get a Senate author by that at that time, I'm going to be respectful of the Assembly member's times, and your bill is going to be put off until next Wednesday. So please send the message to your boss.

Alright. We are back in action.

Welcome, Senator McNerney. Thank you so much for joining us. Alright. The floor is yours. We're gonna go ahead, members, and move to file item number 12, which is s B1196.

Thank you.

Good afternoon, madam Chair, Petrie Norris, Vice Chair Patterson, distinguished members of the committee. First, I wanna say that I am accepting all of the committee amendments. And I wanna thank the committee and the staff for working closely and cooperating with my staff on this legislation. With the committee amendments, SB 1194 no longer focuses solely on utility hookups for accessory drilling units. Instead, I'm a little out of breath from running over here on your

We appreciate it. Is that right? We appreciate it.

We're about to get it.

And said the new bill the now the bill now concerns hookups for small energization projects, including ADUs, EVs, chargers, home backup batteries, and so on. So it's basically extended expanded. So this not just focus on ADUs, Smaller energization products are defined as those that do not require infrastructure upgrades by investor owned utilities. The committee that's a pretty simple idea. The committee amendments also significantly narrow the legislation by removing some of the bills most required timelines.

During the past few years, California has enacted laws to accelerate the energization of new houses, transportation, and more. But homeowners who have completed small projects, including adding ADUs, an EV charger, backup batteries, and so on, remain frustrated by the extremely long delays. In some case, applicants have been waiting up to a year for energization once they have completed the project. These long delays not only place an undue financial burden on homeowners, but also exacerbate the state's housing shortage and frustrate California's electrification efforts.

SB 1196 streamlines small energization projects by allowing applicants to submit a request for utility hookup at the same time as a request of building permit.

So in the past, you have to wait until your permit was approved to apply for the utility hookup that added delays months of delays, basically. This bars utilities from canceling service connection applications without the application consent. That's another pitfall. If utilities get behind, they just cancel your projects and then say, well, we are behind because we don't have these projects. So this bill bans that.

It also directs the CPUC, our friends at the CPUC. I wanna emphasize that. A clear creates a clear timeline for IOUs to process utility service connection requests and establishes penalties for IOUs that do not timely process intergestation applications. And with me today, I have Sylvia Aguilar of the Casita Coalition. Sylvia?

Thank you, Senator. Good afternoon, Chair and members. I am Sylvia Aguilar, programs and operations manager for Casita Coalition. We are a nonprofit dedicated to advancing middle housing solutions, including ADUs and JADUs. Our founders cowrote the 2017 law that legalized ADUs statewide.

With the with the committee's amendments, SB 1196 no longer focuses solely on ADUs and JADUs, but now includes all small energization projects that do not require infrastructure upgrades by an IOU. Since that definition includes most ADU and j ADU projects, we remain in strong support of the bill. From 2016 to 2024, the number of ADUs permitted in California has grown from 1,300 a year to about 30,000. ADUs are known as naturally more affordable, and most are used as long term rentals.

But as Senator McNerney noted, homeowners and ADU builders are increasingly facing a significant barrier, incredibly long service connection delays with waits up to nine to twelve months for energization.

PG and E estimates on its own website the energization for a home addition can take up to a hundred and eighty two days. Many homeowners can't afford long delays for a service connection as they need to begin renting the ADU to begin to cover their costs and recoup their investment. IOUs also add delays when they prohibit homeowners from applying for the service connection until the building permit is received. As Senator McNerney stated, this problem alone can cause months of delay.

Some IOUs cancel small energization applications without the applicant's consent, prompting even more delays.

SB 1196 addresses these problems and adds timelines for IOUs to process applications for small energization projects, such as when the homeowner might only need to add a second meter.

Thank you. Can you go ahead and wrap up? Sure.

SB 1196 is common sense legislation that will ensure California can meet its electrification goals and get low cost housing, projects online faster. I respectfully ask for your aye vote. Thank you.

Thank you. Alright. At this time, we'll open it up for additional witnesses in support. If you'd like to testify in support to this measure, please approach the microphone.

Looks like I had good timing. Good afternoon, Chair and members. Karen Stout here on behalf of Southern California Obtainable Housing as well as California and B, both in support. Thank you.

Thank you.

Good afternoon. Monica Salas on behalf of Housing Action Coalition in support.

Alright. Turning to opposition testimony. Do our opposition witnesses wanna

Save my steps. Okay. Madam Chair, Israel Salas with San Diego Gas and Electric. We have an opposed position on the bill, but with the committee amendments, we will be re removing that opposition. So we do appreciate the author and the staff for working with us as well as your your committee staff.

Thank you.

Thank you.

Brandon Eback on behalf of Pacific Gas Electric. Echo the comments of San Diego Gas Electric, particularly working through all the technical issues on this one. We will be moving to neutral. Thank you.

Thank you. Okay. Bringing it back to committee for questions or comments. Alright. Assembly member Pappan.

Well, I I would just like to thank you for for bringing the bill. As someone who went through an addition that delays, I I very much appreciate the pragmatism with which you approached it, and congratulations. I'm happy to move the bill. Thank you.

Thank you. Alright. Senator, would you like to close?

Well, I don't have a closing statement ready. But I'll just say this this is common sense. If you're gonna spend money on a hookup, an ADU hookup or some other hookup, and doesn't even require the utility to come and do anything except put a tag on it, then let's make sure that that happens expeditiously. I'll ask for an aye vote.

Thank you. Thank you, Senator. Alright. We have an Assembly member we have a motion by Assemblymember Papan. Second from Assemblymember Hart.

Madam Secretary, please call the roll.

Item number 12, SB 1196. The motion is do passed as amended to appropriations. [Roll Call]

7-0. So that measure is on call, and we'll leave the roll open for absent members to add on. Thank you, Senator. All right. Moving along to file item number six, SB 931 by Senator Laird.

Welcome. Welcome, Senator Laird.

Thank you, Madam Chair and committee members. I'd like to begin by accepting the committee amendments, and I really want to thank the staff and the Chair for working with me on them. With the committee amendments, Senate Bill 931 reauthorizes the Essential Services Mitigation Fund, or ESMF, through 2028. For the years since Diablo Canyon has been a nuclear power plant, there's been a unitary tax or an Essential Services Mitigation Fund that has provided support to local agencies related to hosting the Diablo Canyon plant.

The fund itself was authorized in 2018 with bipartisan support through SB 1090 by then Senator Monning.

And under SB 1090, the community program funding provided money with regard to impacts associated with the plant's accelerated closure. The funding was scheduled to end with Diablo Canyon's closure date in 2025. However, the plant's operations were extended to 2030, and this fund was not extended. In particular, there's a school district that has a large amount of support from this. It's going to go over a fiscal cliff without this renewal.

Communities in San Luis Obispo County have relied on this funding, both in the form of the unitary tax and then later the mitigation fund, to support essential public services, emergency preparedness, fire protection, public safety response, and other things necessary to host Diablo Canyon. Continued operation of Diablo without a restoration of the funds places a disproportionate burden on the communities. The reauthorization, given the amendments that were taken, will be paid through the volumetric performance fees that are already being collected.

Therefore, there's not a ratepayer impact with regard to this bill, which is, I think, very significant. And in closing, I should say one thing, because I know that every time I talk about the subject, people get a little confused.

This is not an extension bill. The extension has passed the legislature and the governor signed through 2030. This is just affecting that extension. There quite possibly will be an extension bill, and various stakeholders and legislators are talking about it. And I'm committed to ensuring that Diablo Canyon's host community is made whole for whatever period of time that might be enacted by the legislature. And so with that, at the appropriate time, I would respectfully ask for an aye vote.

Thank you, Senator. We have a primary witness in support? No. Okay.

Madam Chair, members, Paul Yoder on behalf of the San Luis Obispo County Board of Supervisors. I want to thank Senator Laird again for carrying this vital piece of legislation. Diablo Canyon is a critical component of the clean energy portfolio in California. Continued operation absolutely, in fact, has impacts on the local communities. Emergency preparedness there is arguably unlike anywhere else in California.

We all need that emergency preparedness. I want to thank the committee Chair and the committee for the thoughtfulness. Urge your aye vote. Thank you.

Thank you. Additional witnesses in support, go ahead and approach the microphone at this time.

I'm Maeve Holden. I'm a parent and have my son and a bunch of other students. I mean, I'm getting emotional of SLC USD and all the staff and families that have been affected by this, and I urge and aye and strong support from our school district.

Thank you. All right. At this time, we'll turn to opposition testimony. Is there anyone here to testify in opposition to this measure?

Seeing none. Going once, going twice. Okay. Bringing it back to committee. All right.

I'll just say, Senator, I think, like all of us, you are a fierce spider for the constituents that you represent. You know, appreciate your commitment to your community and appreciate the the approach that we're taking with this bill. So would you like to close?

Just, I appreciate that comment, and I appreciate all the work. I got to the point that we aren't having this animated hearing that was going to be when I first introduced this bill. So I respectfully ask for an aye vote.

Thank you. All right. We have a motion from Assemblymember Rogers, second from Assemblymember Hart. Madam Secretary, please call the roll.

[Roll Call]

All right. 5-0. That bill's on call, and we'll leave the roll open for absent members to add on. Thank you, Senator. Welcome, Senator Stern.

Come on up. All right. I think you've got two or three.

We got a 3 for oh, my four. Wow. You've been busy.

Beginning with file item number 10, SB 1158.

Great. Small tweak to this joint reliability power assessment bringing before you all members. We've been doing this since we had some grid infrastructure challenges a few years back, and we've had a really good coordination between PUC, CEC, looking at weather predictions, looking at what kind of capacity we're gonna have online. Right now, the the reports are done quarterly, and this bill would say that you only have to do it twice a year as opposed to four times a year.

We think that the pace of the projects that are being developed can, be be sort of accurately projected on on this sort of twice a year timeline as opposed to quarterly.

So that's literally all the bill does. We think it'll it'll save some money, but still get the same quality of data that we were looking for. With that respect, we ask for an aye vote. Move the bill.

Thank you. Witnesses in support. If you would like to test you, I don't think we have a primary witness.

I might not.

If anyone would like to testify in support of this measure, please approach the microphone at this time. Seeing none. No. Anyone here in opposition? Anyone would like to testify in opposition to SB 1158, please approach the microphone.

Seeing none, bringing it back to committee. Alright. Senator, would you like to close?

I expect to ask your high vote. I'll try to be efficient here.

Madam Secretary, please call the roll.

Item number 10, SB 1158. The motion is do passed to appropriations. [Roll Call] That's 6-0.

6-0. So that bill's on call. We'll leave the role open for absent members. Moving on to file item number 13, SB 1245.

Okay. Let me just get myself situated. So we are barreling down the road at what we call, according to CEC, the mid transition period, and it is a wonky way to describe a harrowing time where our drivers are at the whim essentially of what happens in the Strait of Hormuz every single day.

And I think this state, thanks to legislature and the work of this administration, have started to look at diversifying our strategies and ensuring that we have all options on the table in this state as we approach what I wish would be the last time we had a conflict like we're having in Iran right now, but I fear it won't be. And I don't think we can afford to rely on the way we've been doing things.

This bill puts a few tools on the table to offer, largely leaning on the transportation fuels assessment that came from the Energy Commission. But we, you know, ultimately, we feel that we ought to be expanding in general the moving from an analysis into action from that assessment. And in this bill, we're asking them to go deeper on things like CARBOB. But we acknowledge that there are other elements to that assessment that are going to be critical.

And they're all kind of uncomfortable conversations to be having, whether you're looking at things like flow reversals of pipelines, marine imports, more domestic production in state. There's no easy conversation. Even demand disruption and looking at deploying more ZEVs is ever more difficult as the president has just submitted the four way waiver request to Congress to permanently undo our Clean Air Act authority in the House. So the stakes are very high.

We're hoping that the tools we offer on the table here for the CEC to keep moving forward are good. I think they've earned our trust and ought to be empowered in this regard. I also think that the Department of Petroleum Market Oversight needs further support, direction, and frankly, a more stable resource set.

Although this bill is not addressing necessarily the fiscal dimensions of what DPMO has faced, we do think they have to take a harder look at the retail market. And that's really what the bill is putting forward is saying, you've done a lot on the refinery side, but we also wanna look at the retail side. Look at these disparities. You've heard them in many hearings.

We know some of the contracts are being collected, and we are starting to get better data thanks to CDTFA and looking at some of these dealer tank wagon contracts, making sure that these mystery surcharges are not so mysterious anymore. But we think that DPMO is the right place to be doing that analysis, but we do want to, we are open to and trying to figure out sort of the best dimension to be doing that analysis in.

Right now you can do analysis for analysis sake, but if you're finding things that are worthy of consideration for say things like price gouging, where the president himself today accused the entire oil industry of price gouging. It sounded like a press release from our governor from two years ago. Strangely, though, it was you just strike one word out and add Trump to it, and suddenly, it's dawned on him that there are issues.

So I feel like this should be a bipartisan approach. It's actually lighter handed than that and much more focused just on the retail side. And so we're hoping that combination of tools are worthy of your support today, and we recognize that there are gonna be other aspects of this conversation that are important to have both in this session and in the coming year. So with that, I respectfully ask for your aye vote. And thank you, Madam Chair, for working with us on this.

Thank you. Welcome.

Yes. Jeremy Martin from the Union of Concerned Scientists. Thank you for the opportunity to testify in support of SB 1245 on behalf of the Union of Concerned Scientists. My focus is on California gasoline regulations called CARBOB. But before offering solutions, a few words about the problem.

Bring the microphone up a little, I think. Maybe just bring it a little closer.

Okay. A few words about the problem we're trying to solve. California's gasoline market is broken. Gasoline prices are persistently higher than in other states even after accounting for differences in taxes and fees. This is the so called mystery gas surcharge. The latest update suggests it's about 60 cents a gallon.

And, of course, California also suffers from periodic supply disruptions and price spikes. Other states don't have these problems, and the root cause is a lack of competition. California suffers from consolidated market power and vertical integration and its unique CARBOB blend and physical isolation leave it cut off from the rest of the US market and forced to rely on international imports that slow down resupply during supply disruptions.

Integrating California into the broader US market can increase competition, and allowing the use of non CARBOB gasoline can facilitate that integration. UCS analysis found that allowing the use of non CARBOB gasoline to address occasional resupply challenges together with a mitigation fee used to replace a small number of the oldest, most polluting cars on the road is a win for consumers because it reduces price spikes.

It's a win for clean air because it gets the most polluting cars off the road, and it's a win for low income drivers of older cars that upgrade to a newer used EV and don't have to buy gasoline at all. WSPA opposed this flexibility and argues that imports would undercut in state supply and could lead to more refinery closures.

In other words, they like the broken market just the way it is, with inadequate competition leading to inflated prices and price spikes that benefit WSPA members. Yeah. Fuel regulations are just a piece of the puzzle. SB 1245 can help restore competition across the entire fuel market. Thank you. We respectfully request your aye vote.

Thank you. Alright. At this time, we will open up for additional witnesses here in support. If you'd like to testify in support at SB 1245, come on up.

Allison Hilliard registering support for The Climate Center. Thank you.

Will Brieger representing Climate Action California. We believe in competitive energy markets. Thank you. Support.

Marie Liu for APEN in support.

Good afternoon. Marissa Hagerman with TrattenPrice Consulting for California Environmental Voters, NextGen California, and Environmental Defense Fund. Thank you.

Thank you. Alright. Let's move to opposition. Do we have a witness here in opposition? Come on up.

Chair and Members, thank you. Alessandra Bricchetto on behalf of the California Fuels and Convenience Alliance. We respectfully oppose SB 1245. Members, every study has a cost. The question is who pays for this one?

One of the policies this bill directs CPMO to examine is divorcement, a policy that multiple empirical studies have already found increases retail gasoline prices, not lowers them. But our greatest concern today is what it will take to conduct this study. To analyze private contracts, pricing practices, market competition, and potential policy solutions, DPMO will will inevitably have to seek confidential business information from companies throughout California's fuel supply chain. Small, medium, and large, branded and unbranded in every single market.

And 60% of gas stations are operated by someone who owns just one station.

Now imagine you're a husband and wife who own a single unbranded gas station. You don't have a legal department. You don't have a compliance officer. Then one day, the state serves you with subpoena demanding years supply agreements, invoices, pricing records, contracts, emails, and financial documents. Now you're hiring outside counsel, you're spending thousands of dollars in legal fees, you're pulling employees away from running your business just to respond to the state's demands, all while trying to keep your station open.

Every business that receives one of these requests will bear that burden, but California's smallest operators, especially independent unbranded stations, are the least able to absorb it. For some single site operators, complying with one broad subpoena won't just be another business expense. It could be the difference between staying in business and closing their doors. And that's the irony of this bill. It's intended to study competition, but the study itself could reduce competition.

Every independent station that closes means fewer competitors, fewer choices for consumers and more concentrated market. And when competition shrinks, prices go up. Members, a study should not put the very businesses it is studying out of business, yet that's exactly the risk this bill creates. If the legislature wants its analysis, it should rely on publicly available information wherever possible and include meaningful guardrails for any confidential business information that is requested. For these reasons, we request we we respectfully ask for your no vote unless amended.

Thank you.

Thank you.

Thank you, Madam Chair and members. Zach Leary on behalf of the Western States Petroleum Association in respectful opposition to SB 1245. I wanted to address a couple comments that I heard, from the Senator about this mid transition. I think we need to be honest and realistic with the public about where we are actually at as it relates to the demand for petroleum products in California. We are nowhere near mid.

The transition is potentially in its infancy when 90 plus percent of vehicles on the road still need our products that our refiners, both in Northern California and Southern California provide. We do see a a very small decline in gasoline consumption, but we are at 13,000,000,000 gallons a year. That's 35,000,000 gallons a day, and that is the fuel that our refiners produce and provide. We are also seeing a growing demand for jet fuel. That is the fuel that our refineries provide.

The proposal suggests that we should be, having a trigger for when to sell non car Bob fuel into the market. If you all remember, car Bob was adopted to address air quality issues mainly in in LA. The days of smog are largely gone due to the investments that our refineries made to design their refineries to yield the most carbob to make to meet the demand in California. And so the backslide on fuel standard has not been the proposed solution.

We know that we are the least competitive refineries in the world.

What we are asking the legislature to do is focus on areas to make us competitive so that we can continue to operate. And it's really up to you to decide where do you wanna get your fuel. Do you want your fuel to be imported, or do you want your fuel to come from California refineries with California jobs paying California taxes? Thank you.

Thank you. Alright. Additional witnesses here in opposition to this measure. SB 1245 come on up.

Madam Chair, Members, Mike Monaghan on behalf of the State Building Trades in opposition.

Madam Chair, Assugantelas on behalf of California's Business Roundtable in opposition.

Thank you. Okay. Bringing it back to committee. Questions, comments? Assembly Member Hart.

Thank you, Madam Chair. I just wanna thank the, the author. His leadership in this space is really appreciated. And this committee has spent a lot of time and information hearings on this subject. I really appreciate the work, of the committee staff and the Chair to highlight these issues, you know, whether we're in the mid transition or the infancy of the transition.

We are in a transition. We need full transparency on the information that is of vital importance to all the consumers in California who need gasoline. Gasoline supply is not a regulated utility, which is what we talk about a lot in this committee. And as such, you know, there's a dynamic between the private sector and the public interest that has to be navigated carefully. It is gonna require a lot of cooperation and a lot of, patience.

And, our our consumers and customers and constituents are we're gonna rely on us figuring this out and getting information is critical to being that to making that effective. The idea that that this, effort in its modest way is gonna put, gasoline suppliers out of business is frankly absurd. And this is long overdue. I really appreciate the the research that doctor Martin has done.

It's, I think, pressing people to get outside of their silos and think a little bit more realistically about what we're gonna do and how we're gonna do it.

And, I support this bill and really appreciate, that we're having a hearing in in this context. This has been a a fascinating journey from the bill that I introduced to the bill the Senator has introduced. We've all learned a lot in the process, and change doesn't happen rapidly, but hopefully, it takes incremental progress. And this is one of those steps, so I appreciate it.

Thank you. Assemblymember Zbur.

I gotta say that I'm very torn on this bill, because I know that the the the goals are, really important, obviously. And, you know, there's a part of me that's sort of, you know, we're we're making it easier to sell gas that's more polluting, in order to do that for sort of affordability.

You know, I originally had some misunderstanding about the bill and thought that, you know, what we were trying to do is get, you know, supplies in that would allow for, you know, modifications to the refineries to allow the the non car fuel alternative to be, to be provided. But, as it turns out, what I understand is that this would allow for periods of time for us to actually increase increase imports of fuel that's actually refined outside of the state of California.

So it makes me there's two things that I'm nervous about.

One is that it's less, you know, it's worse fuel from an environmental perspective, and it feels like we're exporting jobs outside the state. And so for that, I'm very I'm just really torn about this bill. And so I just wanted to give you an opportunity to respond to that.

Look. Fair point. I'm torn about it all too. And it's a I mean, it's such an interesting reversal where, you know, the environmental community in support of a bill and the oil industry on the other side of a bill where your your argument about, you know, should we have the clean fuels? I'm sure at the time that the car Bob Stearns got started, it was the exact opposite.

We're prop probably sitting on, you know, industry pushing for it. If we weren't in such a jam, we wouldn't have to look at all all these options. This doesn't sort of leap towards that step. I'm not trying to say to you that this bill passes and we're off to the races on CARB. Right?

There's still CCS to go through a whole process. I mean, there's a lot of stage gates. There's a lot of permitting. There's just there's a lot to go on. And Mister Leary may have a a comment on that point too.

But so this isn't sort of a straight green light. But that said, I think that this doesn't make sense in isolation. I think if we only did this piece, it wouldn't I think it's necessary, but it is not only insufficient, but it's if we don't have the kind of protections we need for leakage around how we find fuel in the state.

I've already stepped out on them last year, but I think if we don't have domestic production in the state under the February agreement, I think that's a problem. I think very good news coming out about folks finally starting to utilize our in state pipeline system and get fuels to market from nonforeign suppliers.

Right? I mean, Sable has essentially occupied all the pipe coming to Southern California, and we can't get anything out of current to our refiners. But now that CRC has bought San Pablo pipeline, we have a shot at some more at at bringing competition from in state. I think if you don't if you don't bolster that as well so I guess I wouldn't I wouldn't ask for you to take to to say that this should be adopted in isolation.

I think if you're voting for this, you should vote on in the context of a broader strategy that you're saying, okay.

We have to have that option on the table. We have to look at things like flow reversal in the Western Gateway. I do. I get that that's uncomfortable to bring potentially refined gasoline in from Texas or or refiners in Arizona. Frankly, we'd rather have that than Iran right now, and that's kind of the alternative we're looking for.

So, I mean, the the one thing I will take issue and maybe the opposition will, like to comment, but to to imply that we're that our state's refiners are our domestic energy strategy, I think, is a little bit of a misnomer because a lot of the crude coming in to be refined at at these refineries from Ecuador, now increasingly Venezuela, I think Iraq is number two. So it's not as if, like, our workers are still exposed to those foreign oil entanglements under the existing system. Yes.

This is more American supply potentially coming in, but I guess that's how I would it is a quandary, but I think it does make sense in if we sort of embrace the full strategy. That's what I'd say to you.

I'd like to hear what the officers want to ask you about.

The one the one thing that I mean, what can you tell me though about the bill that put some guardrails to make sure that we're not actually importing, dirtier fuel from outside the state when we actually have capacity that that we're not that is not gonna result in reductions of refinery work happening now and a reduction of jobs. That it's it's something that is not gonna replace cleaner fuel that could be refined here, either by having temporary periods or something like that.

It may not just just sort of seems like allowing dirtier fuel to come in where we know it's ex where we know that it's exporting jobs. How do we prevent those things from happening? And then can you do something in the bill to to address it?

Yeah. You wanna jump do you wanna go take a shot at it?

Yeah.

Okay.

Yeah. Yeah. Obviously, we wouldn't be supporting a bill to increase pollution. And so the the idea here is that you allow the use of non carb fuel with a mitigation fee, and the fee is important for two reasons. One is to make sure that on balance, air quality is improved, but the other is that, you know, the current mitigation fee is is 15¢.

Most estimates are that the price to produce, carbob is less than 10¢more than conventional gasoline. And so in state I mean, carbob is still gonna be the most cost effective fuel when it's available. So what this is really about is when there's a refinery outage and you're waiting, you know, could be six weeks to get and this isn't about, you know, that there's fuel available in a California refinery, but you're just gonna import it instead.

This is about instead of waiting six weeks for somebody overseas to make a batch of car bomb for you and ship it, that you say, let's use the fuel that we can get more quickly to get the price spike resolved quickly.

So So that's really what it's about, and and the the fact that there's a a mitigation fee, both protects, public health and air quality, but also ensures that this isn't gonna undercut the market, and that when there's available fuel, that'll be the most effective way to address the supply.

And, actually, before we hear from the competition, because I think there was, you know, there's sort of two parts of your question, and I believe you're responding to the second part. I would also like doctor Martin to just clarify, like, where we are, in our non car bob journey as it were. So I know the opposition used the phrase, we're going to backslide on our fuel standard. Mr. Zuber, you asked about, you know, concerns that were, you know, bringing in more polluting fuels.

So it is my understanding as we've dug into this bill that, when we established car bob standards some thirty years ago, the Delta between car bob and non car bob was, significant. As engines and technology has moved forward over the intervening three decades, that Delta has narrowed. So it is a very important question at this juncture for all of us to be asking, what is the cost benefit analysis?

If the environmental impact is enormous, that cost benefit calculation is very different than it is today, where the environmental delta is, as I understand it, very narrow. So perhaps the scientist, doctor Martin, can say that.

And can you just speak to what is the actual differential in terms of non carbon and carbon fuel simply related to some of the environmental concerns that have been raised by the opposition and some by some members.

Yeah. Thank you. And and so we did some analysis, which is cited in the in in the report, and so you can find all the details. One of the really important things is that the Federal Government essentially adopted something very close to California standards. And so when California implemented CARBA back in the nineties, you know, federal gasoline was maybe 200 parts per million sulfur, and California was going for 15.

And and now California and the federal standard is 10. Likewise for benzene. And so the differences between federal gasoline and California gasoline are much smaller than they were. And and most importantly, the cars are so much cleaner that it's really only an issue in these very old cars. Right?

And so it's these pre 2004 cars which account for the lion's share of the pollution. And so, really, the question here is if it's a small number of cars that are generating the pollution, then the best strategy is actually to try to help the people who are driving those cars get into something cleaner.

So that's the idea with the mitigation strategy is that getting a small number of those oldest cars off the road is more important for the environment than keeping these unique fuel blend, which turns out to, you know, make California's market more vulnerable because it can't use the same fuel and it can't use the fuel that's available. It has to get special order fuel, which may take weeks to arrive.

Thank you. And that's helpful. And then, I believe for the second part of your question, you wanted to hear from Mister Leary as well.

Yeah. So Assembly member, I think you you're asking a a real tough question. We're trying to meet multiple different goals. The state has set really ambitious climate targets, and the Air Resources Board is tasked with minimizing leakage. But and leakage is when there's still great demand for a product, but you don't make it here in California because the rules are so onerous that it's too expensive to operate.

That is what we are experiencing in real time. We are seeing refineries leave now no longer under the jurisdiction of carb, so you're no longer accounting for those emissions that are trying to meet that climate goal. That is when you're importing a product that you once made here, that is leakage. And that leakage is occurring because of state policies. And Senator Stern mentioned that we're in a jam, we're in a conundrum on fuel supply.

Well, that jam was by design. The state has been by design through policies adopted through multiple decades trying to push the oil and gas industry out. I think to his earlier point that we can't rely on the way we have been doing things, we would agree. We have to work together to make California refineries competitive with the global market. And that is where we do not see that this bill lowers our cost of doing business, doesn't lower our compliance obligation.

It doesn't make it easier to do business for us in California. It only allows for, really, our foreign competitors to come in with a fuel that's not to our standard, not refined under California environmental laws or labor laws. And so that is our concern as the refineries who remain is how do we continue to operate in this market if the goal is to just allow more imports as the strategy moving forward? There was a discussion about fees.

So the mitigation fee, you're really gonna have to nail it on air quality impacts, GHG impacts.

I mean and you gotta wonder, does that create more uncertainty in the market when you have refiners who are trying to produce as much compliant fuel for you as possible, and then there's some trigger that's developed by the CEC to say, oh, now we can bring in non carob fuel. What how do you plan for that type of uncertainty in a market that is very dynamic? And we think it's gonna be a a big challenge and create more problems than it would help.

I do think that last comment you may be conflating this proposal with Mister Hart's prior proposal. There's nothing in this related to a trigger.

So under the it says implement a strategy to facilitate sale of gasoline with alternative specifications that consider a trigger mechanism for when those alternative gasolines are gonna be sold.

Understood. Yes. Which they that they would not again, I think the complexity of this is this issue and the challenge of this issue is one of the reasons that the proposal doesn't just tomorrow do anything. Right. What it does is in our existing law, we've asked the CEC to study this as part of the work that we've already asked them to do.

This would give them then the authority to take action once that city is done. So that, you know, is it a trigger or not? I think is very much an open question. Or would it become statewide policy for a full stop? Would California refiners be able to produce non Carbob fuels?

Those are all open questions that need to be answered as part of the CEC's work.

And if I may respond, madam. Sure. I think, having something on the books of this nature that gives broad authority to CEC and carb to change fuel specifications is much like the the, the policy that was passed during the special session on a margin cap and penalty.

So the fact that that margin cap and penalty is on the book and could change at any time while the CEC put it on pause, which was a good decision, there is still that fear, that investment uncertainty, that that could be triggered at any moment. Same with same with the policy here, that it could be triggered at any moment.

And when investment decisions are being made today, tomorrow, creating this more uncertainty in the market is not helpful for investment decisions.

Thank you. Mister Zbur, did you have an additional follow-up?

Yeah. I mean, that that was helpful. I mean, I support our journey to a clean energy economy. And, of course, there's gotta be we've gotta we've gotta move towards that, obviously. And I I am Aye, you know, continue to be nervous about something that actually results in us exporting jobs that should be here.

And so I know this is just a study, right, that we've got a study with no.

Let him do this one. If I can it's the CEC is still studying it. We've already authorized that study. We're giving them more power to act on that analysis, but it's not done. So they're considering things like these mitigation fees right now.

They actually haven't arrived at that conclusion. They have they actually haven't arrived at the conclusion of whether it makes sense to move forward. I think some of that's supposed to come this fall, winter when they when they finalize what they call the TFA. But it's giving them a little more power, than just just studying. Don't wanna hide the ball from you.

Yeah. So but but can there can we put guardrails around the the actions they're taking so that we're, you know We're we're looking at the job the potential job loss. I mean It just it just you know, from my perspective, again, moving towards dirty dirtier fuel where we actually are undermining the jobs that are here or from our refinery workers is something that is not a good outcome. And it seems like we should be able to deal with that as part of the legislation.

So I'll be supporting the legislation today because I wanna continue allowing you to work on that.

But, but I do you know, I'm gonna look at this again, when it comes back to the floor and Okay. Encourage you to continue working on those issues.

Okay. And I would, I would welcome both your input and the committee's guidance on looking at other things right now in the in the framework we passed last year on jobs, analysis, things like that. Do we need something new here? Do we need an extra piece? I know there's, like, discussion about task forces and things like that too.

Could be other venues to kind of But how long? I think if we're not going through that that that analysis on the job side, then this is totally incomplete. And and we're we're not gonna go in blind like that. So you have my commitment. We're not gonna and if there's not something rigid strong enough on the current books, we will

And looking at things and looking at other things, like, how long can this function so that we're not undermining current refinery jobs? I mean, I just like to see more in the bill that's I mean, that's protecting our workers.

Committed. Work with you on this.

Thank you. Yes. Thank you. Alright. Assembly member Patterson.

Great. Thank you. You know, my you know, I remember we had this hearing with the DPMO, and it's like, you know, I'm finally here to tell you why gas prices are more expensive in California than everywhere else. And I was, like, super excited about it. And it was that branded is more expensive than unbranded after, like, eighteen months. And, you know, so I think so I said Cheetos are more expensive than cheese puffs was actually my example.

That's what we determined after, like, a year after this office was established.

And, you know, my impression has been that, there are too many biases within the DPMO to to, for me to trust that office to come up with, not just recommendations or a report, but actually maybe some kind of trigger or actual action to take place because I mean, just candidly, I just I think I think they're very biased and not really interest and has with an extreme interest on penalizing the oil companies in a way that I think is gonna increase or decrease affordability of gasoline.

And so because of my lacking of confidence there, I unfortunately, have to, I can't support the measure today. So thank you.

Thank you. Assembly member Irwin.

Yeah. I just wanna make a comment. I've known, Senator Stern for many, many years as such a avid environmentalist way back to, the Fran Pavley days and I think even before then. But, you know, we are facing facing very hard realities now and, whether it's, affordability and, you know, refinery capacity. What are what are the next steps?

And I do think that it is really important to explore alternatives. So I commend you for this. I know that based on your background, these are not not easy discussions to have. So thank you.

Thank you.

Alright. Thank you. A couple of questions. I want to first follow-up with the California Fuels and Convenience Alliance. You mentioned that some of the information in this study is already publicly available.

Actually, I guess I want to ask the Senator to to respond to some of the concerns that were raised about that aspect of the bill from the witness. If you want her to remind you of of the concern, she can, but you're probably taking notes.

Yeah. And if you don't mind, redirect me. There was one particular you were talking about divorcement? I think it's in Section 6 AB, 6 a two.

To assess one of the potential solutions as to

So what I would say is they have this existing authority study, this work already. This is a this is micromanaging that a little bit. I will admit to that. Current the current law would allow them to go look at these, issues. We just didn't direct it specifically.

I don't think maybe you maybe you have a different view, but I think it was very broad authority under the February framework that we came up with. And so this isn't necessarily, like, new data gathering power for the d t DPMO. This isn't new subpoena power. This isn't saying you're gonna have access to that you have some new authority in that regard, but it is telling them specifically to study a range of options. I get that option is an uncomfortable one and look.

There's litigation going on right now. That's a very uncomfortable issue too under the under the Tweaks to the Cartwright Act we made last year under an IVR Curry bill. There's currently a lawsuit against some of our biggest retailers in the state. We're using a software called Calibrate that's supposed to actually or it's been they're being accused of price collusion. So that is under current law.

So this wouldn't even change any of that existing litigation posture. We get it's a very sensitive subject, though, at the moment. So but I I still think it makes sense to study the uncomfortable things here. I think it's important for us to give that surgical level of direction versus the sort of open ended directive that we have at DPMO right now, which is really implying stay way, way upstream. And I think I I think they need more direction there.

So that'd be mine.

Okay. And what I was asking about specifically is that our our opposition witness raised a point that, some of the, I guess, questions that are being posed here and the conclusions that you want them to do a bunch of.

Oh, right. Then I'm typically

It's already it's already publicly available. I think the analysis says that if the CFCA actually has some publicly available data, perhaps you would wish to provide it to the author for further consideration. And can I just I guess, perhaps what I'm asking, Senator, is Understood?

You know, to the ex like, I I do not believe that you are trying to send DPMO off into an exercise that would be both costly for California taxpayers and burdensome unnecessarily burdensome for the CFCA in order to find conclusions that have already been studied. So, can you commit to talking to the CFCA and narrowing the scope of that work to uncovering new information rather than things that we already know?

Yes.

Okay. Thank you. Alright. And then just more broadly, you know, I think this is, as the vice Chair noted or somebody noted, we've we've talked a lot about, this topic in this committee, and with good reason. So, you know, I think thirty years ago, legislators got to to come up to Sacramento, and they could pass bills.

And they could say, in forty years, we're gonna do something super, super hard. Then they could have a press conference, pat themselves on the back, and move on. Sadly, those chips are all, like, coming due now on our watch. And so as we are trying to navigate, again, whether you call it a mid transition, an early transition with the petroleum fuel sector, as we build out our clean energy future, it is very hard.

And I think we have to all acknowledge it is hard and it is complicated, but we need to have tough conversations as part of that.

And I think, Mr. Leary, you asked, like, where do we want to get our fuel? I think that we've made it very, very clear in this committee, and I think the same in Senate Energy, that number one, we want to make sure that we shore up California production and that we protect, to Mr. Zuckerberg, your line of questioning, we protect California jobs. But we also know we need to have a liquid market and a diverse fuel supply.

Like those are two conclusions we have reached. So we have to navigate those transition in a way that makes both of those true. So I guess what I would ask of you, you know, and other, you know, folks who have registered opposition is to the extent that you're, you know, you look at this and say, oh, my gosh, this is gonna cause all refineries to close and we're gonna lose all of all of these California jobs.

Help us understand what is necessary to establish a level playing field so that both of those things can be true, So that we can shore up existing California production while also ensuring that we have adequate market liquidity to protect California ratepayers from price spikes and, you know, exorbitant prices. So that would be my ask of you as we continue to have this conversation.

Seeing no additional I don't think any questions or comments from committee. Senator, would you like to close?

I appreciate the deep dive and thorough conversation here, and very committed, talking with friends at c CFCA, WISPA, labor. None of this is easy. I I do have a bias, and it's it's towards California. And, I how we how we define foreign oil will will become an interesting concept, I think, for us to wrestle with going forward. Is Texas foreign oil, or is Iran foreign oil, or is it all just foreign?

And how do you weigh the trade offs of how we currently receive our inflows? I would love to see our refining sector favor domestic producers more. When I hear and I'm channeling the manager of Shannon Grove right now. So if you wanna see me do my Shannon Grove impression, why are my folks in Kern County getting 20 getting 25% below Brent when they're selling, and why are the marines getting a premium? What is that?

And and why are our domestic producers hurting? These are the kinds of questions I think that sort of loom over the whole conversation. Again, I think there's a piece of it, but I would just pledge you all. I'm willing to have I get these are uncomfortable aspects of the strategy, but I think on the flip side, again, when it comes to production, when it comes to embracing things like the MDI under the carb rule, which we know has been controversial, we've embraced that.

We are going there.

We are trying to shore up leakage. We are trying to to meet we are trying to embrace refinery retrofits in this state. We are trying to say yes to efforts to bolster storage capacity. And so we have to say yes here, but we're just gonna have to say yes to a lot of things. So that respectfully, yes.

We're out of luck.

Thank you. Alright. Wait a moment. I think we need a motion and a second. Alright.

Motion from Assemblymember Hart. Second. Second from Assemblymember Rogers. Madam secretary, please call the roll.

Item number 13, SB 1245. The motion is due passed to appropriations. [Roll Call]

Five two. So that bill is on call. We'll leave the role open for Absent Members to add on. Moving swiftly on. Alright.

File item 14.

K. Set up time. K. Thank you. Yeah.

Yeah. Please. Thank you.

Alright. File item 14 SB1295. This is the Henry Stern show.

Oh, boy. No, please. The most boring show you could ever turn your tune into. You wanna go to sleep? Yeah. Watch my show. Yeah. Hang on. Good thing. I'm sorry. 1359 or 1295? 1295. Oh, there you are. Yes. You're 12.

I got you. I'm right here.

If I may, madam Chair? Okay. Thanks. I just wanna start off by accepting committee amendments. Thank the staff for their work, and we get that this bill is is now as amended before you, really a a planning bill versus a doing bill.

But there's there's big work to be done in this arena. We're sort of in this either you might consider it a a lonely part of the grid or the Goldilocks part of the grid, depending on where you look at it. This is not a bill about behind the meter storage. This is not also a bill about big, big batteries in your communities. This is a bill about the in between.