Assembly Standing Committee on Utilities and Energy

Good evening. I am calling to order this hearing of the Assembly Committee on Utilities and Energy. We are here to discuss wildfire issues, specifically as presented in SB 492. We're welcoming our colleague, Senator Becker. Before we begin, I have some brief housekeeping announcements.

Public comment is welcome here in person. Otherwise, it can be submitted online via the committee's website. As is customary, we will not accept disruptive behavior and will apply Assembly rules to maintain order and run a fair hearing. I also want to recognize chairs of relevant policy committees that this topic touches upon. I think they'll be joining us this evening.

We are joined by Assemblymember Bennett, who is the Chair of the budget subcommittee on climate and energy policy, Assemblymember Brian, the Chair of the Natural Resources Committee, Assemblymember Calderon, who is a member of this committee, as well as the Chair of our insurance committee, Assembly member Kalra, who chairs our judiciary committee and sits on utilities and energy, and lastly, Assembly member Ransom will be joining us, the Chair of Emergency Management.

Before we turn it over to, Senator Becker, just a a few brief comments to kind of frame this conversation. We began our 2025, 2026, session with the devastating Los Angeles Wildfires, which I think brought into very sharp relief for many of us the need to modernize and revisit California's wildfire liability structure and our wildfire response framework. Senator Becker teed up much of that work with his SB 254, and, that report was delivered to the legislature in, I believe, April of this year.

The report really laid out in very, very stark terms the cost of inaction, what it costs the state, ratepayers, and victims if we fail to act.

And that that report really has set the terms of the conversation that we have been having in the months since. Many of you will remember in May, the Assembly as well as the Senate convened informational hearings built on that foundation, with a number of hearings that surfaced a range of topics before the legislature. This is an issue that we've been working on certainly together for the last couple of years. It's an it's an issue and a challenge that has bookended the Newsom administration.

And, certainly, what, we will be diving into today, I just want people to understand, is not the end of this journey.

And so I hope that as we have today's conversation, we certainly wanna dive into, what is in the bill before us today. We also want to, highlight the issues that remain open and the work that, this committee and our body needs to continue to do together. So with that, Senator Becker, appreciate your partnership and all of the work that you have been doing on this incredibly complicated and incredibly important challenge. The floor is yours.

Well, thank you. Thank you, members and chairs of various committees. Look, I'm returning a lot back and forth here. Wanna thank you. Yeah.

I was wondering, I was just wanna thank you, Chair Petrinaras, before we get going. Thank you. It was an honor to work with you on SB 254 and jointly author that bill. And as you'd mentioned, that bill, you know, called for the report and that set off a lot of these different conversations. I think you teed it up well, so I'll go focus on the bill in front of us.

And the bill does a number of very important things. It'll just do high level, and then I'll dive in a few of the details. And, it's about 92 pages. I'm sure you all been pouring over it since early, the early hours of Saturday. But, you know, it really does, center the survivors and victims of fires.

It does a number of ways. Most importantly, one of the key provisions is the fast pay provision. We have to make sure we can have a situation where we have survivors and victims waiting for years to, try to rebuild, to figure out what they're gonna get, to get on with their lives. I'm sure you experienced this as well as I have for many. Yeah.

Every year, the campfire, you know, victims come in front of us and talked about the way before we had any kind of fund where they got, you know, really, on average, I think, 50¢on the dollar you know, 50% of what they should have gotten and how their lives are still dramatically affected. And and that continues to that that they're they're still looking for proper compensation, and we can't have that. So we have to make sure they're paid fairly and quickly.

We believe that this proposal, this fast pay in this bill does do that. Number 2, we make sure that that hedge funds and third party, like private equity firms who have been profiting, in some cases of in, you know, billions literally on the PG and E bankruptcy, that, we don't allow them to profit off the human tragedies that Harabedian unfolding in these, giant fires, and this bill takes major steps on that direction.

Number 3, I think it, well, it certainly does something that I know all of us are very concerned about, which is it makes it clear that CEOs and C suite of executives of utility companies should not profit, should not get their bonuses, should not get that compensation, in years or even years after where their, utility equipment has been determined to cause a major fire. And this bill does that. That's something I think that's been a a near universal call for that.

I do wanna focus on on some of the it's called the wonkier details, but the pieces around wildfire prevention and, you know, I know many of you have been working on these issues and and and as you said, this isn't going away. This bill is not gonna solve everything.

But there are a number of very important pieces there. Number 1, it focuses on getting better data to understand how to prioritize our mitigation efforts. So the data commons idea has been out there for a while, and we're working towards it.

This bill, I think, will codify that, requires CAL FIRE to take the lead in developing a data commons where state agencies, local governments, insurance companies can all contribute data and have access to that combined data set to get a shared understanding of risk and mitigation progress. Second, it will improve coordination among state and local government efforts.

It tasks, you know, with developing a statewide community wildfire, preparedness strategy. I wanna thank all of your work, especially, Assemblymember Bennett. We've realized, you know, if I harden my home, great, you know, God bless. But we don't know if that's enough. We don't think it's enough.

It has to be community wide hardening, and that's something that there are a number of bills outside of this that also work towards that end. But this bill will be helpful in developing a statewide community wildfire preparedness strategy and requiring the state fire marshal to help cities and counties create their own community wildfire protection plans aligned with statewide strategy. There's a number of other pieces of this that I'm happy to go into. But with that, why don't I stop and we'll leave it.

We do have a witness, Mark Toney, from Term.

We'd love to have you join us and then really open up to discussion.

If I may, Chair. Thank you very much, committee members. My name is Mark Toney. I serve as executive director of Tern's Utility Reform Network. We stand in support of SB 492 as an important first step to protecting ratepayers for the following reasons.

One, it does reduce some of the claims against the wildfire fund. It eliminates the ability of hedge funds and private equity funds to purchase and collect on subrogation claims, protecting rate payers, and ensuring that wildfire survivor claims take priority over private prop profit taking. Two, it penalizes utility executives for starting wildfires. The bill requires senior utility executive compensation to be reduced when utility start wildfires, including a 35% reduction in salary and bonuses when a wildfire results in loss of life.

Three, creates statewide community wildfire planning strategy.

It requires a formal state process for planning to implement community hardening measures in high risk fire areas, and this will reduce wildfire spread and claims against the wildfire fund. I just wanna take a second to say that there's a lot more that needs to be done next year to address the issues that were brought up in the SB 254 wildfire study that was published in April.

And I will ask that next year that we have a lot of work to do and TURN will be there. But for this year, TURN strongly urges your aye vote on SB 492. Happy to answer any questions.

Alright. Thank you. And then do we have witnesses who are sort of in opposition or those have amended? Okay. But we've got a tree ball jumping up.

Okay. And sorry.

Madam Chair, member Scott Wetsch, on behalf of the California Coalition of Utility Employees and the State Association of Electrical Workers, I'd like to first prefect Sorry.

Just one second, Mr. Wetsch. Let me just clarify. I think that Mr. Dunoyer was set to speak. I don't know

if you were they assigned.

Are you speaking in support?

No. In opposition, I filed a a position letter in opposition, but whatever the Chair Okay. Feels is

Oh, it's yeah. It's an informational hearing. So if that's and then we'll I think we're gonna hear from from additional witnesses momentarily. Okay. Thank you.

Madam Chair, I I'd like to preference my comments by by acknowledging that all the staff, the members who worked on this, and and the governor staff worked really hard with the best of intentions. Unfortunately, they fell extremely short. Workers got screwed. Ratepayers got screwed. Lawyers and insurance companies win.

That's the story. Already, we've seen the ramifications. You can go home to your districts tomorrow. We'll be back here. In the year of affordability, it's astonishing to me that Tern and the author of this bill presented and never used the word affordability once.

Because the only thing in this bill that helps that addresses affordability is on the wrong side of the equation. We've already seen that. Edison and PG and E lost $20,000,000,000 of of of market capital since Thursday. Hedge funds are already circling both of these, and Edison still hasn't yet to be to be downgraded, which we anticipate. In a matter of weeks, you're going to or months, perhaps, you're gonna have zombie utilities with Edison and PG and A.

What do I mean by zombie utilities? Interconnections, the grid infrastructure investments that, we all need know we need to do, the clean energy projects, and the jobs that go with them will start to slowly grind by a halt. We've already been noticed that it's likely in the next few weeks, our distribution crews at PG and E and Edison are gonna be reduced by 80%. The c e CEA report presented to you was not off the mark. We're looking at upwards of 18,000 lost jobs.

18,000 lost jobs. How so? Let's talk about clean energy projects. Let me just talk about the cost of financing. Currently, long term debt is costing Edison and PG and E roughly about between 67%.

The analysts that my leadership was on the phone with all day today project that those borrowing costs are gonna exceed well exceed 10%.

And I'm sorry, miss Reg. So that is that is two minutes. And so for the additional comments, I think if members have questions, we'll come back to you. Okay.

And then

just And then, Mister Abrams,

Yes.

I think we're we're gonna have to hear from you during the public comment section if that's alright. And then, Mister I could they said we can only hear from so many folks here. And then, Mister Dunmoyer, welcome.

Madam Chair and members, Dan Dunmoyer, president and CEO of the, California Building Industry Association. This is my forty second end of session in California. So I say this with some respect for what Mister Becker and you have been working. And everybody is as my colleague here said so eloquently. A lot of work has come into this.

I'm here today because the spill fails to address the real issues of California's utility, wildfire insurance, and home building crisis. Specifically, what may not be known is we as the California Building Industry Association, obviously, build homes, but we also need utilities to turn our home lights on. We need insurance in order to sell homes. It's just the reality of how home building works in the state. So we really haven't picked sides here.

We have just realized that we have to solve this problem. While this bill takes positive steps in certain areas, make it very clear the results of the failure of this measure to address the real underlying issues of creating a solvent, robust, investor owned utility marketplace means that we're not gonna be able to turn the lights on our homes. Now you may think that's an exaggeration, but we have been here before. This is not our first rodeo.

Specifically, when PG&E was bankrupt last time, it took us six months after homes were completed to turn the lights on our homes.

We now have a 85 success rate with PG&E and turning them on within a few days, same with SCE. So as a result of that, we have seen what happens when the utilities are in a parallel position. Also, just from the investment side of this, you you have our joint letter. Jan gave some great comments there too. We are trying to build our homes and with renewable energy.

We need utilities robust enough to be able to do that. This measure does not allow for that at all. So we would just urge you, madam Chair, and I'll to respect also Mister Becker, this feels horribly to address the crisis we confront, and this will add to the crisis of housing. So we'd urge you to step back and take another look at moving forward with this in a more robust and thoughtful manner to truly solve this crisis. Thank you, madam Chair.

Thank you. Alright. I think we'll open it up for any questions or comments from committee members, have some discussion, and then we'll be able to hear from the the public with public comment members. Mister Bennett, welcome. Thank you.

Thank thank, thank you very much, madam Chair. I think I'm on now. Just make a few quick points. One, the only thing that I think has unified everyone in this, at least everyone in the legislature, is the fact that victims need to come first. That we all feel that way, not just victims, but all of the citizens that are being served by by our electricity utilities.

I would offer that from what I've learned being on the working group for the last three weeks is that victims suffer the most during a bankruptcy. And I don't think that point has been emphasized enough, but victims suffer the most during a bankruptcy. Victims are in last place in the at least in the last bankruptcy. Victims were in last place. Insurance companies got their money, others, but the victims did not.

That's something we have to really pay attention to. And so avoiding bankruptcy, I don't think capture the sense of urgency that it really needed to capture over the last three weeks. Second thing I would point out is that we need education, I think, on three things. One, we need more education about what do we mean when we say victims are in last place. How bad are victims served when they are in last place?

We as legislators need to make sure we get better educated about that. We need more information. Second thing that we just heard is there's bond rating downgrades. Right? What is the effect on electricity affordability of bond rating downgrades?

I've asked that question. I know that if you double my interest rate on my home mortgage, I have a significantly bigger nut to crack every month. And the question is, how much does that translate into actual rates? And I think that's really valuable for us to get get that information.

The third thing that I would offer is we need good data and better education about exactly what the current system is doing in terms of its income effect on people who is disproportionately paying more and who is disproportionately paying less.

And there'll be some subjectivity to that. But that's another issue that I think was revealed in stark contrast during these last three weeks. So, if madam Chair doesn't mind, I'd like to ask just one question because I asked you this question before. But what about the impact of increased, borrowing cost of our lower bond ratings? How much is that going to affect electricity bills from your perspective?

Well and according to thank you, Senator Bennett. We've been on the phone all day to day with the analysts. Currently, as I was saying earlier, long term debt is running about 7%. They projected it's gonna cost north of 10%. The yield on corporate bonds for PG&E and for Edison, we'll use PG&E as the example, have been running between 9 and 11%.

They say that the bond yield, the return on investment that's gonna have to be offered after this week is going to be 15%. So I can run down exactly what that means. So, let's say you have a $10,000,000,000 piece of infrastructure you need to finance. If you finance that at 60% right now, they're capped at 52% equity, 48% debt.

If the if the cost, increases, on the long term debt at to 10% on a 10,000,000,000 on a $10,000,000,000 purchase, where you're financing let's say you finance 40% with debt because of their situation and somehow, you know, we get the cap lifted and they're able to go to 60%.

At 10% debt, that's $500,000,000. The equity piece at 15%, that's $900,000,000. That's $1,400,000,000. That is $2,400,000,000 more over the forty year life of that $10,000,000,000 asset than if you did it the traditional way, which would be 50% equity, 50%, debt. At today's interest rates of 7% on the debt and 10% on the equity.

That's out the door. That's not gonna happen any longer. And in terms of bankruptcy, Q chaired the creditors committee in 2019. So we are a party to all the negotiations in that bankruptcy. We were lucky that we had a governor that wanted to see a healthy PG&E emerge.

So he told them, you're not gonna do any of the draconian things that you that that you could potentially ask a bankruptcy judge to do, like suspend the collective bargaining agreement or do what Pacific Lumber did and just dissolve the pension for existing pensioners. You're not gonna do that. He also said you're also not going to do away with expensive renewable energy power purchase agreements. We're not gonna let you do that. But you know what?

The bankruptcy judge in the Northern District Of California, he decided that he wanted to do away with a lot of the PPAs on renewable energy. And FERC objected and said, you don't have the authority bankruptcy court. Only FERC has that authority. And it was appealed to the ninth district court of appeals. Right before they ruled, we had an all party settlement on the bankruptcy, and so the court said that issue is moot.

But you know what happened last year in the 6th District in Ohio? Same issue. The Court of Appeals ruled with the bankruptcy judge, and then the Supreme Court, denied, review. So if we did have a bankruptcy, it would be a far different situation this time. Our CBA could be completely eliminated.

Pensioners could be put at risk, and all the PPAs, that we have currently could be thrown out the window for coal and all of our climate goals would go out the window. It's a step we do not wanna come close to.

Madam Chair, just one sentence that I made to your question to Mister Bennett for PG&E since 2019 because of their reduced financial status, their rate payers have paid $5,000,000,000 more than they would have otherwise if the ratings have been higher. So it's a profound impact on the actual rate payers.

What does that translate into on a average monthly bill?

I don't have an average, but you can see if those numbers are so large as to what the consumer's paying when you're downgraded as a utility. And that's just the point I think you should see. Those numbers are huge.The CEA report said hundreds of dollars per household.

The only other thing, Madam Chair, I'd like to add is that, if we are going to convert over to a clean economy and a renewable economy, that means we're going to electrify almost everything. And there will be significant capital cost involved in that. I would love to be educated about how much that capital cost potentially could be, but at a later date, just wanna get that out there. Thank you very much.

I appreciate the opportunity.

Thank you. Assembly member Calderon.

Thank you, madam Chair. This question is for Mister Wetch. So you mentioned that the potential to lose 18,000 jobs. How will this affect the employees, the the men and women that keep the lights on?

Well, according to the estimates of the CEA, 55 to 60% of those job losses will be with the internal workforces of the utilities, and the remaining, 40 to 45% will be my members who work for what's called outside line contractors. PG&E's employees and Edison's direct employees don't do all the hardening and all of the infrastructure work. They contracted out to contractors signatory to the IBEW, and that's where the 18,000 jobs will come.

They will begin by cutting back the crews to a to skeleton crews. So people with the highest seniority will retain their work.

The folks with lower will be sent back to the hall where they'll just sit unemployed while they see their benefits run out. And then, eventually, there will be an attrition of jobs, and they'll just shut those jobs down because there's no work to to go with it. Because at even if if the the $100,000,000,000 worth of infrastructure work that has to be done in the next ten years per the CEA report may not even be financeable.

The little bit that they may be able to finance is gonna come in such exorbitant rates that it's gonna greatly diminish how much we get to Assembly member Bennett's point, and that's what's gonna lead to all the massive job losses. The other job losses that aren't even calculated in there is right now, there's over a dozen utility grade solar and, battery projects waiting to be interconnected in order for them to be able to qualify for the federal tax credits.

They will all be getting phone calls in the next two weeks saying it's not happening in 2027 in 2026, sometime in 2027. That will lead to job losses. That will lead to subcontractors and others who are working who will be told to stop, and there'll be a domino effect of bankruptcies to small businesses that are all relying on those projects.

Thank you. And then and and so and I think and I don't know, Senator Becker, if you have have a comment. But, again, I think if I understand, Mr Wretch, your point is not that this bill is going to lead to job losses. I think if you're urging us to act on the structural reform piece.

We don't have a problem with this; it's the signal that it's going to send. It's going to send the signal. I'm not there's I; we're not objecting to most of what's in this bill. But it is going to give the signal to Wall Street that the legislature is done. You can make all the pronouncements and press releases you want, though there's more work to be done.

But they're gonna say, this is what they did. This is what we have to then judge the future on, and all these dominoes are gonna start to fall. If we don't, we'd be better off not passing this bill and sending the signal that we we understand that it doesn't get us there and then redouble our efforts now to do something substantial. Because we're all gonna be back here. We're all gonna be back here.

It's just a matter of if it's gonna be in four months or if it's gonna be before.

Thank you. Assemblymember Rogers.

Thank you, Chair. So I think before I talk about the substance of this bill, I think the only comment that I really wanna make about what's not in here is, you know, we were here a year ago. I made comments from this dais as we were talking about the reauthorization of the Fire Victims Trust and agreed to support that in exchange for talking about the impact that wildfires had had on my community and people in my community who still have not been able to rebuild.

And there was discussion and commitment about trying to address some of that this year. None of that happened. I think when we sit here and we hear the testimony, it is really frustrating as a legislator that we talked about the need to do something a year ago.

We had the report that came out. We did an oversight hearing on it in April, and then yet we still get jammed in the last two weeks of a legislative session. And now here we are with a bill where we're being yelled at that it's inadequate, where most of the members of this committee didn't actually get to see what was in it until the final days before it was too late to actually do anything on it.

And I hear you about the signal that that sends to the market. I think the signal that I, as a legislator, wanna send is if you expect to back us into a corner and then approve something without an opportunity to amend it, to talk to our constituents, to talk to groups that are impacted by it.

This is the outcome as everybody's gonna be angry when we get a bill because these significant reforms deserve their own stand alone bill. If they are such a good idea, you should invite people to have an actual discussion about the language. And I know that a lot of this has to be done behind closed doors trying to put some of it together, but there was no opportunity for most of us to actually talk about the people most impacted.

And so when I sit here and I hear even in this bill, it centers the the wildfire survivors, but I have wildfire fire survivor groups from my district that are saying that this bill is terrible for them and have questions about it. I haven't had an opportunity to go talk to them.

You shouldn't expect my support for a bill. And so that's all I'll say about what's not in here. I'm gonna evaluate the bill based on its merit, not based on what it's lacking. And for me, I have some significant questions about the fast paced system. So I'm hoping the author can get into that a little bit.

Tubbs camp did not have a fast paced system. I think some of my colleagues might be able to shed some light on how did that system actually work in Altadena and in Eaton, and and did it actually serve wildfire survivors better? I talked a lot in the the committee hearing about faster can't equal less. What have the actual experiences of implementing that fast paced system been for wildfire survivors?

Why are we making this mandatory that they have to apply for this before they can go the legal route?

What impact is that gonna have? And I'm gonna kick it over to the author and see if you can start answering some of those questions.

Yeah. We will be relying on our technical assistance as well. We have members of the Pro Tem's team here. So the claim must be submitted with either one year, the date of wildfires determined or the expiration of the applicable statute of limitations if a claim, asserting entitlement damage, was filed in court.

So, I think what was important, you know, one of the key aspects came up in in certainly in our conversations, I'm sure here too, is mandatory or not, or how do you sort of structure it?

So, I think a lot of things were considered looking at 09/11: what happened there, the conversation with various pieces. So what this will attempt to do is say, yes, everyone has to apply for FastPay, but it does not limit the ability to sue. So that's sort of the process. Now it maybe stayed while discovery is going on, but, ultimately, people retain the right to sue themselves.

If I could if I can dive in a little bit, one of the directions that it seemed like some of the discussions were going was a requirement that attorneys had to make sure that their clients knew about the fast paced system and provided them information on it. So how did we move from that to it being a requirement, and what is the thought process be behind being requiring fire survivors to go this route?

Yeah. Again, for the techno assets, we may bring some folks up. But in terms of requiring to you know, a lot of there's a lot of trade offs in, in all of this, right, in structure and, you know, getting after evaluating various systems. My understanding, and you probably clarify better here, Assemblymember Harabedian, is that the fast paced system that Edison ultimately stood up works pretty well. It's pretty intuitive in terms to get the estimate.

Unfortunately, it was set up late. It was set up by Edison at a time there was not a lot of trust with the community at a time when, you know yeah. Mostly that. It was late in a year afterwards or something, maybe a year.

Yeah. I mean, it and I'm sure there's representatives from Edison here. I mean, it it did take a long time. Madam Chair, if I can. Yeah.

Thanks. Sorry. It took quite a bit of time to stand up. It because of that, I think had some structural sort of hurdles because of the trust issues. I do think that a key component of it is it's optional.

I think that it is working well for survivors, and we'll see, I guess, as it continues to progress, how well it how well it does. How many folks actually take the offers and I think the jury's still out. But I think to, Mister Rogers' point, I think a big difference is the optionality. And, you know, I think some of the worries of that program, the Edison program is the caps on non economic damages.

And, obviously, it's gonna be less money, but, obviously, these are trade offs.

So, I mean, that's that's my perspective, and I do think the key difference is the optionality.

So Yeah. My understanding of Edison and I this was data as of, like, a month ago. I don't really know. But that they process, I think, $300,000,000 worth of claims and maybe paid out $150,000,000 or something. So there was some take up even despite all those limitations that we or, you know, continue whatever external factors we just mentioned.

So, yeah, I think the key part here was retaining the right to sue, but but still having people go through through the process.

Yeah.

So that was a trade off that was made.

So couple of additional questions on this. And if you wanna bring up a technical expert, that's fine too. If a fire because I've worked with folks.

They're overwhelmed. They've lost everything. Yeah. They're trying to figure out how to get their documentation back, what they're gonna do in terms of work commitments, school commitments. If they were to miss the opportunity to apply for the fast pay, is there a cutoff deadline to where then they would no longer be able to sue because they didn't go through the fast pay system and deny it first?

How do you account for people who might just be late?

Yeah. Again, I think the I think this extends it up to about a year. So, hopefully, that is sufficient time. But would you any additional comments here?

Sure. Assemblymember, Eric Dang with the Pro Tem's office. So this is obviously a reflection of a three party agreement. Certainly, there has been conversations about the the desire that this be a volunteer program and to kinda try to strive that compromise. Part of the conversation was figuring out how do parties continue to be able to file a claim in court while they're pursuing a claim and during the Fast Pay program.

And so the way that the bill is structured is that allows parties to continue to file a claim. And then while discovery is happening, which is kind of the key step in a a lot of this process, that parties basically can continue to move through discovery process, which can take, you know, months, possibly years. And then once discovery ends, there is a pause post discovery.

And then as long as the party has filed a claim 45 days before that period and has received you know, has actually just filed the claim, they don't have to look at the number. They don't have to accept the number.

They can reject it. As long as they file, they can continue to move forward with that lawsuit.

Okay. And if they didn't file for the the, Fast Pay system?

If they didn't file for the fast paced system, then there would be a stay on their lawsuit while they're moving through discovery.

So one of the challenges that, many wildfire survivors found was that they could only move at the speed of their insurance companies. There's about a 30% increase in the cost of materials, 30 increase in the cost of labor for folks. They didn't know whether or not they actually had enough coming in from their insurance to cover the cost to rebuild or whether that they would need to seek additional funds from other avenues, whether it was a lawsuit or whatever have you.

There was also, as many of my colleagues have heard me talk about, many insurance contracts that would not allow people to rebuild smaller, but they had a like for like provision.

So they couldn't just take that 30% shortfall and build 30% less house. How would the fast paced system account for the speed at which people are able to determine the cost to rebuild, how much their insurance is going to offer, and what their shortfall might be?

Yeah. Senator member again, because of the nature of this three-party agreement

I don't care about a three party agreement.

Sure. I mean, there was a request that during the conversations was making sure that this process had efficient timelines within the the bill. So there is kind of benchmarks in terms of how fast some of these things have to happen. I think there's, you know, at least 45 days. There has to be some some of these metrics in place.

And, certainly, the concern was making sure that in case something is buckling based on the procedures that have been set in place, that there would still be a a chance for the parties to be able to kind of file the litigation and move forward with the litigation. Again, this is kind of the product of kind of the negotiations. Yeah.

Okay. I'll have more questions, but not right now. Then I'll turn it over to my colleagues in a minute. But on the executive compensation piece, where do the executive bonuses come from? Do they come from a general rate case paid for by rate payers, or do they come from shareholders?

Deep there's two categories of executives. The very top executives, a very small number, due to a bill passed some years ago authored by Assemblymember Gonzalez, prohibits ratepayers from paying the the, those salaries. So those are 100%, shareholders. There's another layer of senior executives that are rate payer paid. I am I'll be honest.

I am not clear where the cutoff is in this bill as to which executives will be directly impacted. That's one part that reading the bill. I have, you know, had as much less time than you have perhaps to review it. So I'm not sure of that piece.

Yeah. So so the question is then, if in the event of a wildfire and just as a side note, I don't need to belabor it, but 500 homes being taken as the trigger for most of the communities that I represent. That's the entire community. So it's a pretty high bar already. In the event of a wildfire that takes 500 homes, we don't know or it's unclear if that's coming from rate payers or shareholders for the bonus.

And if it's coming from shareholders and they don't pay out the bonus, do they retain that as shareholder value that gets paid out to the the folks who've invested? Or is there any requirement that that money still be used just in mitigation, vegetation management, whatever shortfall there is?

Right now, it requires the electric utilities to have compensation plans. These plans will have to get sign off from the Office of Energy Infrastructure Safety to have real teeth there, and the plans, have to specify exactly how it will be implemented. So there might be a little bit left where investor owned utilities lose all of their short term incentive compensation for the two years after the equipment, causes a, a significant fire.

So so they will develop plans to make this clear how this will happen, and the office of energy infrastructure safety has to sign off on that. Okay.

Alright.

Assembly member Zurr. Is it Zurr?

So first of all, I wanna thank you. Aye, I know that a lot of hard work has gone into, coming, you know, putting this bill together. You know, I had some amount of optimism after having some conversations with our insurance Chair and our UNE Chair in the last couple days that we might be able to do something that was significant. I have to admit that I'm just really disappointed in where we are.

I think this is a disaster that we are, coming up with a bill that does not result in any structural reform.

I do think that our governor has brought us a an issue that is a real one. And I think if you look at the stock price of all our major IOUs that just tanked in the last couple days, it's pretty clear that we have to do more than what's in this bill.

And Aye, you know, I I do you know, we I think it's a fair point that the amount of time that we actually had to reach consensus was too short, obviously, and that's I don't think that's anyone's fault. I think, you know, when we've got a big issue, we've gotta sort of tackle it. But it's also something where I don't think that this kind of problem is something that can be solved in individual bills.

It's something where everyone has to be brought to the table. You know, we do have to have our victim. It it does need to be a victim centered approach, but it also needs to be centered on our ratepayers and people who are actually paying for the cost of insurance and losing their insurance. And all of those entities need to have skin in the game and need to be brought to the table, and everyone needs to give up something in order for the greater good.

And so I'm just really disappointed in where we are.

It's it's not a good thing that we have the potential for all of our IOUs, bonds going into junk status in the next couple weeks. It's not good that we are gonna have significant losses in employment for people working at the utilities. We cannot let the signal be that we're done. And I don't you know, it's a bit above my pay grade in terms of what the path forward is, but, the path forward cannot be just passing this bill.

I think there are good things in the bill, but, you know, we're nibbling around the edges, and we're not dealing with the structural issues.

And so with that, I'm I'm just really disappointed, but that it doesn't take away any of the I I know that everyone coming to the table was working hard and trying their best. Aye, you know, I I can't tell you the number of times I met with our UNE Chair and with, our insurance Chair, and I was really optimistic that there were things on the table that were were gonna result in some structural reform.

And why that didn't happen, I don't know, but I'm disappointed in it. And, you know, know, I will be looking to our leadership about direction about how we move forward.

Okay. Assemblywoman Papan?

So I I would just dovetail on, Assemblymember's comments. But let let me, if I may, take it out 30,000 feet just for a moment. Now it is such that the utilities need some reduction on future exposure. I have that right? For wildfire damages.

Right? Okay. And when they didn't get some reduction in the risk, the exposure you know, the risk of exposure for wildfire loss, that has an impact on their financial stability. Got that right. Okay.

Because and and I I know you're all gonna say yes to these questions. They're very leading questions, but I'm doing it for a reason. And that is there it is lost on a lot of folks that you need to convince that this risk somehow can't be eliminated, and that's not on the table. But it didn't get reduced enough by this bill. And while we might reference that it's a three party agreement, this bill doesn't meet the mark.

I think as three parties, we could do a whole lot better to reduce that risk. And, again, we're not looking to eliminate it. I I wanna be very clear because there are are are folks that that need to get reimbursed along the way, but it can't be all on the backs of rate payers. So while we might all get that in this room and we sit on these committees with a lot of exposure to these concepts, that doesn't necessarily translate and leave this room.

So I don't think I agree with Assemblymember Zbur.

We haven't gotten there. And when we wake up to the markets, we woke up to today. Now let's talk about that. When the markets look on you disfavorably, you are correct, Mister Wedge, that that means what? More expensive money.

And what does that do to rate payer? Somebody has to pay for that, and that's all the other people that we go home to represent or we come here to represent, I should say.

So I I just wanted to, you know, take it one step at a time so that somehow the message gets out there that there needs to be not nibbling at the corn at the edges, but some real real modification of the equation, keeping people that are injured at the forefront, recognizing they don't do well by a bankruptcy either.

That was very interesting comment certainly to make. But the liability has to be spread out a bit more because we did come here to affect affordability, and I'm not sure this gets it done. So I I agree with you. I had conversations along the way, and I thought we might find something palatable to the carriers. We might make something more reasonable for ratepayers, but that that's just not happening.

So I I'm disappointed as well, and and we're gonna press forward with this. We'll see. But and one more thing, Mister Dunmore. Your your contention is we're gonna try to build homes, but if we can't build homes where we connect electricity because we have utilities that can't give you all that you need, that interferes with housing. Right?

Is that why you're here today?

Miss Papan, exactly. So when you look at this issue, when a utility when when you have to make these tough financial choices, you first focus on your existing customers, which makes total sense. But then the whole issue Mr. West brought forward is then you don't build out the future of the utility. You don't build the new transmission lines.

We are building all electric homes now. We're building zero emission buildings. These rely heavily on electricity, which is great. This is what we've been trying to do with our climate goals. But when you have to make tough choices as a utility, then you're gonna effectively have to push these other projects off, push these jobs off.

And for us, it means they'll literally tell us, please don't build any more homes until we can figure out how we're gonna build a new transmission lines, the substations, and move this clean energy to your homes. And this is north and south in our state. So we'll just push the pause button on our homes. But even more tragically, we'll push the pause button on our clean energy transmission lines. And, of course, as Mister Wedge said, so articulate leads gonna stop jobs.

For us, it's also jobs. All the framers we hire, we hire 900,000 people. So those are all pushed so called pushing the pause button. Again, I just wanna reiterate what the Chair said. We're not it's not that this bill is a bad bill.

It's that it really is signaling that we haven't solved this problem. We have not looked at the underlying crisis issue and addressed it. And that's just very troubling. Our hope is before you leave, and I realize you're gonna leave shortly, but maybe you come back, you address these issues so we can't we these issues can be solved, but this may take a few more days.

But this is what needs to be done if we're gonna build more housing, build more transmission lines, keep these jobs going, and keep our utilities in place.

Thank you, miss Papan, for asking that.

So, again, it all comes down to how much more risk is out there. And there's gotta be some way to reduce the risk so that these guys look better to Wall Street.

Yeah. They look good better to Wall Street, but more importantly, when you have to increase your basically, the cost of money. Yep. And then keep in mind, everybody talks about shareholders like they're bad people. Everybody here, myself included, who work for the state of California is a shareholder in these investment and utilities.

It's called person stirs. It's not like the shareholders are bad people. You think of big massive billionaires. I'm not one, but I worked in the legislature. I worked for the governor.

So that that piece of shareholders is not just billionaires. It's actually state workers, state employees, teachers. So it's the whole picture. We have to look at this holistically. This is not a one person's a boogeyman.

This is a solution for the whole state.

Thank you. And yes. And I'll just say, I definitely went to, certainly Senator Becker to respond. We are, we are being asked by the speaker's office to, do our best to swiftly conclude, so that we can resume with sessions. So I know there's three members with questions, if we can keep those questions as tight as possible and the responses as tight as possible, that would be good.

And I can Mister Becker.

Address that all in close.

Oh, do you wanna address some of that in your close or do you wanna okay. Alright. So with that, Mister Wallis.

Thank you, madam Chair. I will go ahead and skip half of this because it sounds like we've already adequately addressed it. Aye, you know, I do have concerns about how this is gonna help victims with this bill. I think fast pay program without stabilization of the fund is obviously concerning, but I will just move to my opposition questions then.

Mister Wetch, I've heard my colleagues suggest that utilities should just have the shareholders fund all the capital work and that IOUs can spend their quarterly profits to to get that done.

Do you have a response to that, or can you speak to that?

Yeah. This is the biggest one of the biggest misnomers, that I hear in the capital this year. PG and E has a 1% dividend. Okay? The industry standard for healthy utilities is 6%.

13% of their net earnings goes to dividends. Where does the other 87% of net earnings go? Goes right back into investment into the system. I don't wanna sound like Gordon Gekko. Profit is good because it lowers the cost to rate payers when they do that, and they have been doing that.

Appreciate that. And then I have one more for you. Do do you think utilities are at a risk of bankruptcy, and and what does it look like if that were to happen? Let's just say it's just one or more at some point.

I'm very concerned with the fact that in the next week or so, we're gonna see the Elliots of the world, some of the worst, vampire hedge funds swoop in and seize, and look. Elliot took 6% of San Diego Gas and Electric a decade ago and controlled the utility. They don't do that for ratepayers, and they don't do that to protect workers. That's what's gonna happen, and then it's a slippery slope into bankruptcy because then they can really gut the utility.

And that's what we're we're what we're afraid of.

Alright. Thank you very much. Thank you, madam Chair.

Thank you. Assemblymember Irwin.

Thank you. I will, go quick. I I agree with, a lot of my colleagues. We just didn't meet the moment here. And, I think it is a, it is a big, disaster that we were not able to come up with that structural reform.

So I just wanna ask one of the things that's being pointed out. It was great that we have fast pay in here, but that was available before. So what does this bill do that is going to improve the FastPay situation?

Yeah. FastPay, previously, as mentioned, Edison, I think it was took maybe a year to, set it up. And, of course, it was run by Edison, which, was not a reassuring, I think, to to many people initially. So this is independent, and it gets up quickly. We talk about the exact timeline, but, this will not take, you know, what would happen there.

So it's really quite different.

So it's increasing the it's it's shortening the timeline then.

Yeah. Shortening timeline for sure and independent, which is critical as well.

Okay. And then just quickly for

Even Edison, even after all that, as I mentioned, I think they processed they said 350,000,000 awarded, and they've given out about half of that.

Okay. And That was a long time ago.

But when I said we didn't meet the moment, it certainly wasn't for lack of effort from the Assembly, the staff, our our Chair, you, yourself. I it's just it it it didn't come together. So I just wanna ask Mister Wedge, when will, rate payers start to see an increase in their bills? Because it it seems that's the direction we're going. And how long does it take to recover if, if the legislature doesn't start to deal with this issue before January?

Well, the the the rate peg rate impact on rate payers will not come for for some time. You know, there's a $100,000,000,000 that's supposed to be invested in the next ten years. I think this coming year, PG and E has somewhere north of 12 or 13,000,000,000 should be invested in grid improvements. They will finance some of that at exorbitant cost, and that will find its way into rate payers bills when they, know, when they do their true ups, you know, in in a year or so.

It's it's hard to predict because we don't know it's it's so unstable now.

No one can predict, even the analysts, you know, how this plays out over the next several months. I think the CEA did a pretty good job. Everybody recognized that, and they pegged it at, you know, you know, hundreds of dollars beginning in 20 '27 per household.

Right. Thank you.

Good. Thank you.

I know we're gonna address.

Yes, please.

Some of this in in a close. And, you know, some of the risks raised are real. I don't wanna, you know, between those. But, you know, we should be pretty clear that I mean, even the 2,400,000,000 over 40 years is that's about 60,000,000 a year, which is in the scope of the utility spending, which I think the PG and E revenue requirement is itself is in the 20,000,000,000, you know, plus range just for electric. So, I just wanna put that scale in perspective, what we're talking here. And then I'll.

Assembly member.

Madam Chair, thank you. In interest of time, just wanted we gotta get back to the floor. I I just wanna say thank you to you, to our Chair, Chair Calderon. I I mean, the last three weeks, you folks, the working groups were literally in conference rooms nonstop. And the amount of work that you put in really was, courageous and admirable.

And, you know, it's the old Vince Lombardi saying of you didn't lose, you just ran out of time. And I think that really happened here. And I think we had great minds in those rooms. Many of us were trying to help. And it just didn't come together.

But I I think that the hysteria and sort of this idea that somehow today is the the end of the process really just needs to be refrained. We we aren't many of us, other than, you know, one person here. And if you're on the Senate side, we're coming back. And we are committed to getting this right. And I think that the market had false expectations.

Frankly, whatever the market is reacting and how it's reacting now was because folks miscalculated exactly what could get done, over that period of time. And they need to be better at their jobs. And I think that we are doing a very good job, and I'm not trying to okay. I mean, that is kinda funny, but that that was that was a miscalculation on the market.

And the market should know that we have so many people, including the chairs of our working groups respectively, and I wanna thank the senators as well as well who are committed to getting this right.

My community demands it. Mister Rogers said it very well, and I align my comments with him and Mister Zbur and everyone else. We don't have the choice but not to get this right. And I think the system and everyone involved, requires us to. But I just wanna thank the people who were involved with this because I think that for the average person, no one knows just how much work has been put in.

Not only the last three weeks, yes. But we've been talking about this for for years. I mean, since I became an Assembly member, this has been a focus of this committee, the insurance committee, your respective committees. So I just wanna take a moment to elevate the work. And the the outcome may be disappointing, but the process was very enlightening.

And I think many members up here, especially Mister Bennett as part of the working group, the problem that we need to solve became a lot clearer. And I think that is a victory. I think a lot of people around the status and on both of those floors now understand a lot more clearly just what that problem is. And so that wouldn't have happened but for the two authors of this bill, the chairs of the working groups, all the working group members.

So I wanna thank you for that.

That. And, work to be done. And the market should hear that. Hopefully, they're listening. We will continue to work.

Thank you, Assembly member. And with that, Senator, we're we're gonna do is we're gonna hear a closing statement from you, and then we will open it up for folks in the room to provide, public comment.

Great. And we were trying to so I'd like to close now. Let my my please close as well, if that's okay. Yeah. Listen.

I wanna reflect number 1. We're here to do the job in front of us and look at the bill in front of us, and I appreciate comments, good questions, about the bill. There might be some things further to flush out, maybe some things to, you know, come back and clarify or or or work on next year on the the pieces of the bill in front of us right now.

I just wanna say, and I think some of the member just let, you know, her beating whose comments. There's a lot of discussion.

I know in the Senate side and your side, and a lot was unclear. And then we will have to, hopefully, now get better data on. For example, ending insurance subrogation. On one side, some folks said, you'd have very little impact on the side. Folks said it would have a massive impact on insurance rates, you know, possibly 20%, 30%, 30 40% in some reasons in some regions.

So, you know, we didn't, you know, really have the time to get clarity on what that real impact would be, just as an example, just on taking one issue. But I know this is very personal for so many members, you know, certainly here in the Assembly, in the Senate, we've had people who've literally their own homes have been destroyed. Their own neighbors have died. And other folks that they're very close with have lost everything. And it goes from down south all the way up to north.

So we have to get this right, as was said. You know, this has Been subject of large discussion as you know, in this in Senate. I would personally participate in three hearings on the SB 254 report. You know, I think the report came out in mid April. By that time, you know, we were a little stuck in, you know, the the the all the back and forth of just, you know, bills, but also budget.

So it made it a little hard to get through. But there was a lot of discussion on a lot of these, points, and we will have a chance to do more on affordability. My bill, SB 905, for example, that came through this this committee, has some significant pieces on affordability. Some of the work we did last year is just taking effect, in 254. But we have the chance to do work on affordability outside of this bill as well.

A couple points, you know, again, I don't wanna, you know, minimize risks that are that are out there. But just, again, for perspective, PG and E debt right now is at 6.8%. The worst utility in the country right now is at 10%. So, yes, you know, is the increased borrowing cost real? For sure, it is.

Is it, you know, as dramatic as at least, you know, as as was portrayed? Right now, it's not. You know, again, even 2,400,000,000 over 40 is about 60,000,000 a year, which is, you know, something, but not a lot in the scope of utility overall spending. I think the big question is fund longevity. You know, one thing for Wall Street as some of them have been you know, for Wall Street to hear, we still did create another $18,000,000,000 fund last year in 254.

So that that is out there. The Altadena, you know, the Eden Fire, we, you know, can we don't quite know yet officially if it's usually caused. We don't quite know the impact, but it is unlikely, I would say, that it's gonna exhaust the original $21,000,000,000 fund and, that fund as well. So, you know, certainly, we all have to worried about another fire, you know, happening, this year.

We're doing a great job in California, better than other states, in terms of our the, you know, our air resources, everything we've done.

And this bill will help with the community wide hardening as well. So I did wanna mention a few pieces. I did wanna turn it over, allow my my witness to close as well.

I think I think I'm gonna need to have your close be the be the last word Okay. In getting the the hook from our the speaker staff. So bring it home, Senator.

Yeah. That that's what I had to say. A lot of goodness in this bill. I wanna thank you, for your work as well. Let's focus on the bill in front of us. And then if people feel next year, they wanna do more work, awesome. We'll come back and do it.

Thank you.

Thank you, Senator. Appreciate your partnership and look forward to continuing to, dig into this work together.

Great.

Alright. And my my absolutely sincere apologies. The speaker's team is telling me that we have to officially adjourn the hearing and go back to our floor session. Yes. Okay.

So we think public comment can be provided officially on the the committee website. I will also I I have to officially adjourn so the TV goes off. I will stay here and listen and have conversations, but we do have to officially adjourn the hearing so we can go to session. And with that, our hearing is adjourned. Is is it is it I'm sorry.

Alright. We are now we're we're happy to hear public comment though. It's