Assembly Budget Subcommittee No. 4 on Climate Crisis, Resources, Energy, and Transportation, Wednesday, April 29, 2026
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Speaker 2
Thank you very much. We have, issue one, in front of us today. And so if the members will of the panel will introduce themselves before they begin to speak, we will appreciate that. And this item is to authorize distributed energy electricity backup assets program, funding for the demand side grid support program, and emergency load flexibility funding trailer bills. So this is our one of our bigger items for today, and, we look forward to having all of our panelists here with us.
Speaker 3
Good morning, chair members. My name is David Evans with the Department of Finance. I will be presenting the two trailer bill language proposals in issue one. The 2026 governor's budget proposes two bills two trailer bill language to consolidate the remaining, funding for the demand side resources to respond to grid emergencies this summer for 2026 while also transitioning the state's efforts and resources towards emergency demand response efforts to have more reliable funding streams and to provide the greatest, benefits to ratepayers. The administration's intent was for the program not to rely on ongoing funding from the state.
Given the general fund structural deficit and the constraints of the greenhouse gas reduction fund, it is no longer sustainable to continue to appropriate funding to support the the Mass Eye Grip Support Program, the DSGS program. Therefore, the administration proposes to transition the state's emergency demand response services to a rate payer funded program that directly benefits rate payers. So for the 2026, the first language proposal listed under issue one authorizes the general fund that was originally appropriated for the deeper program, the distributed energy backup assets program to be used for the demand side grid support program to support any emergencies triggered demand reductions during the twenty twenty summer session. So this is a redirection of approximately, like, $26,900,000 general fund. Originally, at the governor's budget, we we estimated that it would be $22,000,000.
This is an update to that amount. So it's now $26,900,000 at governor's budget. That's and DEVA funding that will be to supplement the remaining DSGS money, for a combined total about 56,900,000 to respond to grid emergencies during this summer. The second language proposal authorizes the accumulated interest that's
Speaker 2
in the Cal State program, the California Healthy Schools air plumbing and efficiency program, which is about approximately $70,000,000 to be returned to electrical ratepayers for the use of, demand respond services for summers twenty twenty seven, summers twenty twenty eight,
Speaker 3
or a cost equivalent program underneath the PUC. This language also directs the c EC and the PUC to work together towards transitioning, existing electrical corporation customers that participate in the DSGS program to the ELRP, the emergency load reduction program, or an equivalent program underneath the PUC. With me, my colleagues from the PUC and from the CEC that can answer specific programmatic questions regarding their respective programs, the emergency low reduction program with the PUC, the Cal State program, and then also DSGS, DEBO, with CEC. So this concludes my presentation, and we're happy to answer any questions that you may have.
Speaker 2
Great. Thank you. Do any of your colleagues have prepared comments also or just here for questions?
Speaker 9
Colin Christine with the legislative analyst office. We don't have any specific concerns on the proposal. One thing I'd wanna note though is that one part of the proposal, as you heard, reallocate some general fund from DIBA to DSGS. We wanted to highlight that absent this action, that funding would naturally revert back to the general fund. So, really, the trade off for you is would you want that as general fund savings, or is DSGS kind of among your highest priorities for general funds?
Speaker 2
Thank you very much. We will jump into this program, and I'm happy to begin asking questions. But if Assembly Member Rogers, if you have a preference. Yeah.
Speaker 2
Great. Okay. So, I want I want to make sure we cover the questions that we presented, so that you guys are aware of these. So let's just go ahead and and and make sure we move through those. How much funding remains, for the administrative overhead portion?
Is that the 26,000,000 that you're referring to in the cal shape program?
Speaker 5
I can take that one. Yeah. Good morning, committee members. My name is Dina Carrillo, and I'm a director of the Reliability, Renewable Energy, and Decarbonization Incentives Division. I oversee Cal shape and DSGS.
Right. As of the end of last fiscal year, fiscal year twenty four twenty five, the CC had spent 9,600,000 in Cal shape administrative funding of the 30,000,000 that was, totally available.
Speaker 5
And CEC will be returning unspent administrative funds, similar to the, incentive dollars under Cal shape.
Speaker 2
Next question. How many, already awarded school projects how how many already awarded school projects and what dollar amount of funding do you estimate may be unable to meet the encumbrance's deadline and therefore return to the investor owned utilities?
Speaker 5
Good question, chairman. And I'm a little hard of hearing. So even at this this this
Speaker 2
Great. And I have lectured everybody about being close to the mic and then I failed to do that myself. Right? So how many already awarded school projects and the dollar amounts do you anticipate won't be able to meet the encumbrance deadline and therefore return to the investor owned utilities?
Speaker 5
Yeah. That's a hard question for staff to have insight into for the LEAs. So I would I would ask for the schools to be able to speak to that, but I can provide you some background.
Speaker 5
So we've provided $789,000,000 in grants. There's over 1,100 grants to over 6,000 schools. Grants are provided were provided in tranches with a two year term. The program the last extension ends 10/31/2026 and there's a 109 grants totaling a $113,000,000, that come to, to the term on October 31. Roughly, we're seeing about a 15% rate of unused from the schools.
So schools that were provided grants and won't be moving forward. But I can't speak to the
Speaker 5
I would say that the CEC has been doing a lot of efforts to streamline communication. We have office hours to strengthen Okay. The school's ability to finish their projects on time.
Speaker 2
Great. Okay. So on the DSGS and the ELRP demand program, we have you know, staff has identified,
you
know, some some concerns about, these programs, etcetera. So what was the the total program budget and enrollment for ELRP in 2025? And what was it for DSGS?
Speaker 6
I can take that question. Sure. Good morning, everyone. Luam Tessify, executive director for the California Public Utilities Commission. So for ELRP, in 2025, the budget was $219,000,000 across all three IOUs.
So Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric.
Speaker 6
Yes. 219,000,000. That was the authorized budget. But, you know, I do wanna be clear. The vast majority of that budget was completely unspent because we had no, grid emergency events in 2025.
And so that represented about 237 megawatts of enrolled, capacity as well as 3,700,000 customers.
Speaker 2
Okay. Thank you. Before I ask my other questions, want to point out we have we have staff giving us the alternative to opine about option one, which is keep the funding with DSGS and the program at CEC or move the funding, you know, per the recommendation of the administration. This is your opportunity to defend the administration side of that. And so I just wanna make sure you know that at least significant percentage of assembly members are leaning towards option one, which is keep the program with DSGS and keep it keep, you know, keep the DSGS and have
Speaker 2
funding stay with CEC. I say that in the spirit of cooperation and professional dialogue that we can have, But I didn't want this to sort of come at the end and have you go, I wish we would have known that. Would have said x, y, and z. This is your opportunity to say x, y, and z because I would be remiss if I didn't let you know their significant legislative interest in keeping it at the CEC and doing that. So as I go on, feel free to work those that rationale into your program.
Do you envision increasing the ratepayer funded portion of the ELRP program increase enrollment, or will these one time funds be the only program increase?
Speaker 6
Great. So, right now, we have an open proceeding on demand response, and so we have, this opportunity to be able to get stakeholder engagement from, everyone who's interested in these programs. Right now, ELRP is entirely funded by ratepayers through the 2027, but the commission issued a ruling on April 8, requesting feedback from stakeholders on the potential updates to the ELRP program as well as specific questions related to the demand side grid support program so that we'll be able to have a robust record and make sure that we have these types of programs available to customers moving forward.
Speaker 2
Okay. Thank you. Question three, ELRP ended residential enrollment at the 2025. Do you envision the successor program will continue to exclude residential customers?
Speaker 6
So again, we're asking questions in the ruling, but I do want to reflect back on the learnings that we have had up to this point. And so the commission decided not to continue the residential ELRP program because the data really showed that the program was highly cost ineffective. And so the commission right now is really focused on, as you know, affordability for customers and really trying to put forth funds for programs that are are the most cost effective. But, again, we have this ruling that opened in on April 8 and taking comments for about the next month or so and, getting feedback from stakeholders on that issue.
Speaker 6
Yeah. So I think to start is, you know, if you have a program that isn't getting called because there isn't because a lot of things have changed when it comes to the the status of the grid, then rate payers are potentially paying for something that isn't needed at the time. You know, I I wanna share data points that we've been able to bring on a host of new resources to the electricity grid just from 2020 to today, over 31,000 megawatts of new clean resources. We have over 22,000, megawatts of contracts that are, resources that are contracted and in development. So a lot of circumstances have changed since then.
I wanted to see if Department of Finance had anything that they wanted to contribute as well.
Speaker 2
So I'm gonna digress here for a moment. It it is the situation has changed. We're less likely to be facing these emergency blackouts and brownouts that we were talking about in the summertime. But there is still a tremendous value in demand grid response and having a flexible system out there. So I think that's part of what's going on is that legislators think that's that's a good thing for us to have, that demand response.
And it seems to be fairly efficiently administered by the CEC and fairly well subscribed and could be better subscribed if we had more funding and and and went that direction. Why would we not want to let's say we let's say we're pretty confident we're not gonna have the blackouts, etcetera. It's your opportunity to say, why would we not want to keep, that program that has been fairly successful, and seems to, have capacity to expand?
Speaker 6
Yeah. So a couple of things. So when we're talking about cost effective programs, you know, we wanna talk about load flexibility in general. And so I think a really important thing that the commission has been pushing forward has been time variant rates to be able to support load flexibility. We had a rule making on that.
We actually opened a new rule making last month. I think you had asked me a question about this, Assembly Member Rogers, during the data center, oversight hearing. So we have now opened that rule making last month to be able to enhance load flexibility through rate design as a more cost effective way to be able to make the grid more flexible. In addition to that, we do have an open rulemaking on demand response, as I mentioned. ELRP is a is a small portion of that, but we have demand response programs that run across all customer sectors, across all of the utilities.
And these are programs that we have worked for over twenty years to make sure that they are cost effective and able to, perform and provide that reliability to the grid. And we've seen these programs perform in times of grid crisis. And so right now, as we think about resources that are cost effective and, that are able to provide those benefits, we haven't had a grid reliability event. So I think there's a lot of resources that we're talking about right now in this conversation that have not performed during a grid reliability event because we haven't had them. So I think as we think about being most cost effective with ratepayer resources, we want to work with stakeholders, build that record, and really find programs that are able to be proven to be cost effective and reliable both.
I wanted to just make sure that others had space to to share their
Speaker 3
And David Evans, Department of Finance. The term success, it's variable of how we could like, define that. But
Speaker 3
About success. There's different, I guess, like, definitions or, I guess, terms in which we could, like, qualify the demands, you know, the demand side grid support program. But the overall understanding in our intent, is that the current budget climate cannot sustain just additional appropriations, either, general fund or greenhouse gas reduction fund investments into the demand side grid support program. So the the trailer book proposal is to utilize the resources, the existing resources that we have, and then transition towards a more sustainable fund source.
Speaker 2
Thank you. Is there if if we're not having events right now, then why would we want to fund the ELRP program?
Speaker 6
So as I said, there's a ruling that's out right now that is getting stakeholder engagement, and so we'll see what the outcome is of all of those comments that we get from, you know, ratepayer advocates, from, you know, companies that are trying to provide these resources, just the whole gamut of stakeholders.
Speaker 2
And so this is a question for both you and for Department of Finance, and that is, is there is there something you don't like about the current d DSGAS program and the CEC's administration of it? Is it is it a negative or is it just the issue of, you know, you're trying to transition the program so that there's not general fund dollars? Because one option out there, get this all out on the table, one option out there is fund this for another couple of years and the program hopefully would be at the point where it could actually be able to support itself. Right? As as they get better at it, they get the economies of scale of it at of it, etcetera.
Right? From
Speaker 27
from the administration's perspective, it's not a matter of, like, which program is better or if if we dislike or have components about the demand side grid support program that that we dislike. The PUC's open rulemaking is to encourage that type of feedback to understand, like, the lessons learned, what are the benefits from the demand side risk support program that can be incorporated into the ELRP or an additional another alternative program. The legislature I mean, the administration's intent was that, we provided resources. It was originally envisioned to be, like, for five years, and it was supposed to be a onetime limited term program. And then right now in our current climate, we have fiscal constraints in which providing additional resources towards this program is is not, like, economically feasible at this moment.
Speaker 3
And then, also, we want to provide ratepayers with the the best benefit. They're supporting the program, and so we want to have a ratepayer funded program that benefits the the ratepayers.
Speaker 2
So if if I can be clear, if if we're just transferring the funds from one program to another program, it's it's not really a drain on the general fund at this point in time. Am I correct?
Speaker 3
No. Well, the demand side grid support program was funded through general fund, and it was also supplemented funded through greenhouse gas reduction fund. And so right now, we're just moving the appropriation fund DIBA to DSGS. And so we're not like, the the government's budget doesn't propose a new investment. So draining resources or redirecting or reallocating resources, appropriating resources from the general fund because we have a structural deficit be and then we're not making a new appropriation from the greenhouse gas reduction fund.
So that's the demonstration proposal.
Speaker 2
I believe we're we're trying to say transfers here instead of transferring it and having the program moving into CPUC, keeping it at CEC and would not necessarily do that. But Assembly Member Cottie Petronoris has
Speaker 12
Thank you. So, it does feel like we're kind of there there's I think there's three questions at hand, and it seems like some of the responses are conflating those. So I think, you know, the first question is, do we think that, know, demand response makes sense for California and for California rate payers as we are, building out our grid and as we are poised to bring on, just record levels of new demand. I I think that the answer to that is indubitably yes. Would be curious if you, you know, don't agree with that.
But I think, you know, as a foundational point, I think the answer to that is yes. The second question is, which program should we, you know, build on? Is it ELRP or is it DSGS? And then the third question is, so how do we fund that? I guess you can start with that first question.
Do you think there's any dispute that that some kind of a demand response program is an important part of our strategy as we move forward?
Speaker 6
I can start. I'm sure everyone has an opinion. I would say, yes, cost effective demand response programs. We have dozens of demand response programs that are currently in place. So, I just wanna make sure that people don't think that these are the only demand response programs.
We have other demand response programs, base interruptible program, air conditioning cycling program, ag programs that are very sophisticated and have been in place for over twenty years. So I definitely and they are cost effective as well. So, cost effective demand response, I'd certainly think is part of the picture. Anyone else? Okay.
I guess they
Speaker 12
all agree. So then kind of moving, I guess, to the second question around, DSGS and ELRP. And I'll say I think many of us were very surprised by this budget proposal, and by the proposal to, I guess, sun effectively sunset DSGS. So as the staff report notes, the DSGS program has enrolled capacity of, more than 1,100 megawatts with a program budget of roughly $109,000,000 allocated. ELRP currently has about a 190 megawatt enrollment, which has actually gone down over time.
So given the stark difference in capacity, why does this proposal sunset DSGS rather than sunset ELRP? And I don't don't answer about, like, how it's funded because that's the third question.
Speaker 3
Currently, the existing law, like, the program does does Sunset unless there's a new appropriation that's being made. Those customers right now, the CEC and PUC are working together so they can transition those customers in that capacity that is within the DSGS program and helping that transition to the ELRP. That way, you said not to mention the the funding mechanism, but that's a huge
Speaker 12
Whether this program is housed under the CPUC or housed under the CEC, we'll have to have a conversation about how it's funded. So my question
Speaker 3
is it's under if it's under the PUC, it will be a rate payer funded program. So it wouldn't be it will be through the investor owned utilities and then
Speaker 12
in the right. In the short term, you're using the interest from Cal shape. No. You're not? I thought What
Speaker 3
we the proposal the second proposal is to use the to transition the interest from the Cal shape programs for the 2027 or 2028 to provide rate payer relief. That's in order to mitigate the impacts of, like, new enrollment for the ALRP program. But for the 2026, what we're doing, we're planning to transition or transfer the dollars from the DIBA program to the DSGS program. So keeping an existing statute, plus ing up the DSGS program through the 2026, and then working together collaboratively to transition those enrolled in the DSGS program to the ELRP program for the subsequent summers moving forward.
Speaker 12
Okay. But, again, I think when we I I think as much we get ourselves a little bit confused when we think of California taxpayers and California rate payers as different people. And I think one of the things that I've been very concerned about is that in times of general fund constraint, we find it really easy to just add stuff onto utility bills. Like, these are all the same people paying for this. So I think that's why the conversation about how we pay for it needs to be the third part of the conversation.
Because I think that the the broad assessment well, I won't touch I won't speak for my colleagues. My assessment is that DSGS has been successful and has been cost effective. I mean, is there somebody from CEC here? Right here. Sorry.
Okay. Is that the thank you.
Speaker 12
okay. So is it the assessment of the CEC that the DSGS program has been a success and has been cost effective?
Speaker 5
What, what I can share is our twenty twenty five numbers, some of which are in the staff report. So you you referred to about 1,100 megawatts enrolled in 2025. Of that, our budget was 50,000,000 of funding spent, 45 of that went to performance based incentives, and 5,000,000 was administrative costs for both CEC and the administration. Of that, 1,100 megawatts enrolled in the program, it's not always gonna show up every day. It is voluntary.
Speaker 5
We did an evaluation of our performance and found incremental capacity of about 525 megawatts during market and test events last year. There were no emergency alerts last year. And in time of emergency, the price of energy goes up. So because the programs were designed to somewhat complement each other and test different things, it's hard to do a one for one comparison.
Speaker 12
Okay. And, yes, acknowledging that. Though I will note, and maybe this is unfair, but I'm just looking. So you just mentioned you've got 500 I'm sorry, $5,000,000 in administrative costs in 2025.
Speaker 12
And then for the ELRP program, you had I think in 2025 alone, SoCal Edison and PG and E recorded over $16,000,000 in administrative costs. So let me make sure I'm at least on the administrative costs comparing apples to apples. So how much does it cost to administer DSGS versus ELRP? CEC's
Speaker 5
1,100 megawatts enrolled capacity. Okay. And 535 525 megawatts of incremental performance.
Speaker 12
Okay. And then the CPUC, your administrative costs were, I guess, $16,000,000 at least. For how much of enrolled capacity?
Speaker 6
So I would like to make a correction earlier, the megawatt number. I think you had one something. So the number was 237 megawatts. Okay. To director Carrillo's point, the measurement of those megawatts is not the same between the two programs.
So as I said earlier, we have 3,500,000 customers that are enrolled. The CPUC actually derates the number of megawatts in the program to a lower number in order to provide the California independent system operator with a more realistic data point for the number of megawatts that are gonna show up in an event. So as we mentioned, there were no events last year where any program actually performed in the during a ten day heat wave like we saw in 2022. We didn't have that. And so we think it's really important, at least for our program, to derate the number of megawatts there.
So that 237 number, in years past, it was a higher number because it was if you're just going based on the highest number that could possibly perform. But we don't think that is a number that is appropriate to give to the California independent system operators so they know exactly what's going to happen. And as director Carrillo said, it's a voluntary program. People are unlike the other demand response programs that I mentioned earlier today, if someone doesn't actually follow through, they're not getting penalized in any way. But they're still getting, for example, in DSGS, a payment just for being in the program.
ELRP customers don't get a payment just for being in the program. That was something that we did with how we constructed the program in order for it to be a bit more cost effective. I think it's just there's as as director Creo said, there's not an apples to apples comparison between the two programs. That being said, the April 8 ruling that we issued does talk about both programs, and so we want to be able to hear from stakeholders to try and possibly do a comparison of the programs, take the best of both of the programs, create a new program. This is a big opportunity that we have, but I just want to be clear that in the line of questioning, the two programs cannot be compared apples to apples.
Speaker 5
I do want to correct the record, Director Tess Fife. The number that I gave you, the five twenty five was incremental demonstrated capacity based on test events. With program experience, you can provide the D rate. Now that DSGS has experience, are providing that to the CAISO.
Speaker 12
So you think that five twenty five compares to the two thirty seven that you just mentioned?
Speaker 6
The two thirty seven number is based on analysis from actual heat waves that have occurred and what performance occurred. So not from last year. The program's been in place since about 2021 for ELRP.
Speaker 12
Yeah. I guess it does feel like to me, and perhaps some of the information we have doesn't enable an apples to apples comparison, it feels like we should be able to get pretty close to an apples to apples comparison and that we should do that before we make a decision about sunsetting a program that like I said, barring any new information, like, I think DSGS has been successful. So if there's information you wanna share with us right now about why you think it hasn't been successful, I think that will be really helpful in order for us to make a decision. As the chair said, as outlined in the staff report, there's kind of the there's two options. Number one, keep the funding for DSGS at CEC, or number two, move the funding, you know, to ELRP or create a successor program at at Yeah.
Speaker 6
So that April 8 ruling that went out is that that's the purpose of the ruling is to get those data points to try and do a comparison between the two programs, asking about both of the programs point blank. That ruling was issued in our demand response proceeding on April 8. So some comments have come in and we have reply comments that are coming in too. And so hopefully, we'll be able to get those two data sets and try and do this comparison.
Speaker 12
Okay. Last question or perhaps comment, and then I'll, you know, let my colleagues ask some questions. So I think the other thing that concerns me is while we've been, you know, relatively fortunate, fact that we haven't had a 2022 event, we haven't found ourselves in this this kind of an emergency situation, doesn't mean that's not gonna happen this summer or next summer. And as you acknowledge, you haven't completed the public process. The plan is like you're going to design the new load reduction program.
You're not you're not even going to start designing the new program until 2027. Is that correct?
Speaker 6
So we plan to have a proposed decision out in 2026. Okay. But again, like like mister Evans said, you know, this is really looking forward 2027. There is this current plan in place that has DSGS for the summer and all the details that he shared. But we plan to have a decision out in q three twenty twenty six so that the market, the customers, all the stakeholders have an idea of what's gonna happen in 2027.
Speaker 12
Okay. I guess so then how can we be assured that you're gonna have a plan developed and in place in time? I think particularly, like, in another proceeding, the CPUC's own staff, proposed actually ending the ELRP pilots after this year.
Speaker 6
Right. So that was in the past. This is the ruling that came out on April 8. The schedule that has been provided publicly was that we're putting out a decision in 2026. This has you know, that schedule was put together because of this proposal, because of the work of our colleagues at the CEC so that customers and stakeholders will have an idea of what's gonna be happening in 2027.
So we're building that record right now.
Speaker 12
Okay. And I guess just my, you know, closing comment, I think that if the assessment is that DSGS has been a success, I would like to see us build on that success rather than sunset that program and effectively find ourselves starting over. I think that the that if if nothing goes wrong, then we don't need these programs, but it doesn't seem like that's a, a good strategy for us to plan on.
Speaker 6
Just want to make sure everyone knows we have over a dozen demand response programs that are that exist and have funding for the next several years. So I just want to make sure people don't think these two programs are the bedrock of our demand flexibility for the state of California.
Speaker 2
I think that's really a good point and thank you. But does take me are all of those programs mandatory programs?
Speaker 6
Yes. All of those are the existing programs are are programs that have penalties for not showing up, are cost effective, and have a multi year program budget.
Speaker 2
And do those programs have incentives based on price? Whether you're talking about trying to adjust the price to create the incentives for people to be in the program, etcetera.
Speaker 2
Okay. So a question that I have is why not wait for us to make this funding decision until after you've completed your study?
Speaker 3
now, the funding for the, like, the remaining DEBA funding, the encumbrance period, it ends, June 30 year. And so very in statute, we have to make a decision. And currently, right now, the proposal is to extend that incumbent spirit by a year until 06/30/2027. Transfer the money, keep it in DSGS.
Speaker 2
Okay. So DSGS doesn't just pay for performance. Right? So, I mean, they they do they they don't have it. So that should be a more expensive system because they're paying even when it's not the case.
But it is actually, it has five times the enrollment, you know, in the program, by comparison to to this. So it seems like it's more cost effective. From from my from my perception, it is more cost effective program. And if if it is a a more cost effective program at five times the enrollment, it feels like the burden of proof this time usually, by the way, we have these hearings so we can go through all the budget proposals from the governor, and we sort of have the burden of proof to go, hey. We don't think this seems like this one, the dollars and cents mean the burden of proof that we should end this program falls on the administration this time.
In in in just from our perception now, of course, administration doesn't have to have to accept that in in in any way. But that's what we're trying to give you this opportunity, to as as forcefully and as clearly as you can explain why this program, that from from my perception is in, you know, one fifth the cost, in in terms of of of what we're doing. So is that one fifth the cost would imply that DSGS is many times more cost effective. And we're talking about a a short term transition of these funds, the interest money, you know, moving the money over from the DEBA. So we're not talking about the philosophical question of long term, what are we going to do?
We're talking about a couple year transition, '26 and '27, essentially. And so that's the that's the issue. So I have one question for, I think, CEC, but what year did DSGS start enrolling customers? 2022. Okay.
Alright.
Speaker 5
And we had one option in 2022. The budget was approved and the program was launched in approximately five weeks.
Speaker 5
and then we went into the extreme heat event that the Western States experienced.
Speaker 31
Since then, we've expanded the program to four different options. The one that is, most highlighted in the staff report is our market integrated behind the meter battery storage BPP Mhmm. Which does receive a performance based capacity payment on a monthly basis, which is as we talk about how the the programs are different regardless of how many EEAs or extreme heat days there would be, there's the aggregators get provided one payment a month. Whether there is an event or based on the market prices, they're required to go in to to perform, ideally offsetting a heat event if it were to happen.
Speaker 2
So you've been in existence, if I do the math right, you've been in existence for three and a half years. Correct. And you launched the program in five weeks. Correct. Right.
And are now at this and you have four different versions of the program.
Speaker 5
All of the participation pathways are performance based. Option three is the storage VPP, which is a a capacity payment based on and you get paid based on your test event. Mhmm. So they get paid monthly based on their test events or participating in the market if the market price was to get over a certain amount. Price is calibrated to extreme heat days.
Speaker 2
Great. So I wasn't finished with my questions, but I'm I'm gonna save sort of some of my concluding. So do we need DSGS even when we don't have these emergency crisis situations is a fundamental sort of philosophical question, you know, that's out there. It was asked by the assembly member and and the perception I I think I'm accurate in saying a significant percentage of the legislators do think we need that. And, and then this the and the second half of the question is a program that was able to be launched in five weeks that's got this kind of enrollment after three and a half years.
And we're talking about trying to keep it going for another two years in hopes that it gets to the point where it actually can sustain itself. Why would we be ending that program and and contrasting it with a much a much more complex implementation process that takes more time, more studies, and has, so far, you know, lower results in in terms of this. And partially, there's an apples to oranges issue here because you're setting it up for when we have the crisis. But still, why end this one, that strikes us as very efficient for a process that has not matched the same sort of sense of efficiency that's out there. That's the question that that still remains.
And, so I'll let you
Speaker 6
And as a question in our April 8 ruling, we have heard this feedback that people say it's easier to enroll in DSGS than ELRP, and we're not really sure why. And the reason that we're not sure why is because ELRP, you know, has a company that does the enrollments, and DSGS uses the same company. And so we're not sure why that is, but that is a big question that we have, and we wanna hear back from, in particular, the companies that are working with these customers to find out why that is. So I I think that's a really important question.
Speaker 2
So if the response is, well, we're we're trying to find out why we should kill this program, that's that's a little bit different than sort of saying, we currently have the answers to why we would go after an efficient program. But really appreciate this. There's no hostility in this. This is just how professionals sort of try to sort out where we go here. Yeah.
Go ahead.
Speaker 3
David Evans. The largely, the consideration for this, you know, transition, this proposal is is based on the fiscal climate that that we currently have. And so we we don't have the additional, like, general fund resources or the GGRF resources to continue making appropriations for the demand side risk support program.
Speaker 2
And and I've I've I've heard you say that, and that's more of a long term question because if we're talking right now about short term dollars and ending this program and, you know, move and moving the short term dollars away from them. I completely hear your answer, and and that's, you know, the assembly member talked about, should we treat ratepayers differently than taxpayers, etcetera? Phil if philosophically, if that's why we're doing this for fill that philosophical reason, that's different than saying this program hasn't been the effective way for us to go about demand response, you know, flexible demand response. So I'm not hearing anything that says this is not the program for flexible demand response. I'm hearing we don't want to fund it any longer with rate pay I mean, with general funds.
Right? And if we're gonna fund it with rate payers, we need to move it away from that. That's that's a longer term decision because right now, we're talking about transfers of funds that we already have, the interest, etcetera. Am I accurate in that? Am I is there anything I said in there that you think is not accurate?
None. Looks like somebody's ready to jump. Alright. Go ahead.
Speaker 3
I would say that your your point is, is well taken and just yeah. Yeah. I don't Great.
Speaker 2
Thank you. Thank you. Again, I I appreciate just to to be able to clarify. So I have just two I have three other quick questions, and, so that we can move on and then still if do do you guys have things you wanna jump in on this? Okay.
So I'm make sure we knock these three questions out so that staff has everything that they need. Can you estimate what percentage of peak load during the declared EEA events is from residential customers? Anybody have an answer to that?
Speaker 5
Yeah. Partially. Okay. On an annual basis, residential consumption, or residential comprises about 35% of CEC's statewide consumption forecast. We would anticipate that percent to increase at that time of day.
However, we don't have that specific data during an EEA.
Speaker 6
Just because, you know, we received the question and it was focused on the EEA event. There was no EEA event last year.
Speaker 2
Yeah. Okay. Thank you. And when does the CPUC anticipate finalizing program rules for the successor program? I know you sort of answered that Q three twenty six.
Yeah. And what is the status of reaching the demand response goal required under the public public resources code, of the statewide load shift of seven gigawatts by 2030?
Speaker 5
The, CEC's analysis, which is in its draft 2024 IPER, which is the Integrated Energy Resource Plan, reports that, in 2024, we were at 3.4 gigawatts of load flexibility, and this is a 10% increase from 2022 largely due to customer battery storage adoption. CEC projects that under a business as usual scenario, the state will have four gigawatts of low flood flexibility by 2030.
Speaker 6
So just wanna be able to share. So I think you're you're familiar. In 2022, the CPUC changed the net energy meeting metering program to a net billing tariff program. And so, because of that, customers receive that higher incentive when they pair their solar with a battery. And so that has caused the large uptake of batteries across the state from customers to help contribute to the load flexibility goal.
Speaker 2
And I think that was really a wise thing on the part of the CPUC. So appreciate that everybody working hand in hand is the best way for us to to address this. But we won't hit the seven gigawatt goal by 2030 or do will we hit the seven gigawatt goal?
Speaker 6
Say we we continue to work across all of the energy agencies to meet that that goal. CEC, CPUC, and they're not here today, but the CAISO as well has been a big partner in looking at the different options to be able to get there. And so, for example, we opened the new demand flexibility. I keep pointing to you, but just because you were the one that asked the question last time, but the demand flexibility, rule making that opened last month is gonna be a big part about helping us get to that goal as well.
Speaker 14
Yeah. Mostly, I just wanted to chime in, because there seems to be a philosophical disconnect, that my colleague kind of pointed out, which is the legislature has been moving in the direction of trying to remove things from what ratepayers are paying for and making sure that we fund them through other more appropriate avenues like the general fund. This is the complete opposite. I think that that's why you're getting so many questions from legislators is whether we discuss that this program is is effective. Really, that's the philosophical problem that many of us are having with this.
Second, and I know you can't compare directly between the two programs, the data seems to suggest to legislators that one program has been more effective at enrolling folks for a cheaper administrative burden. And and so my question really because I was on board of directors for CCA in 2022 when we went through that event. How do you quantify or philosophically, how do you account for avoided costs? Because I remember that when you had energy procure procures in that moment who had excess energy or had other contracts that they could call upon, it it was not as substantial to procure that energy as it was for others, and and it was pretty exorbitant, which then to the point that my colleague made about the difference between ratepayers and taxpayers, really kind of insignificant at that point when you have pushed that additional unintended cost onto the ratepayers, and they have to pay for it anyway.
Speaker 14
how are you accounting for the avoided costs that not being prepared or not having a system that is capable of addressing these events inevitably creates for ratepayers?
Speaker 6
Okay. I can start. And then I want to give others an opportunity as well. I think something that you really point out, you know, the state of play in 2022 because largely driven by the pandemic, but other factors as well, we were really behind on resource procurement. There were a lot of slowdowns for construction, also, large challenges with supply chain.
Still some challenges challenges with supply chain, but it has been significantly improved. And so just looking at 2020 to today, we have been able to deliver on the amount of new resources that we need on the grid. Right? We've brought on 31,000 megawatts of new clean resources. And then we also have over 20 over 22,000 that are under contract in in development.
And so the state of play about being behind on resource development has really changed significantly. In order to meet our long term goals, know we need to be able to build between 6,007 megawatts of new resources a year. And we've been able to meet that target for the last two years, maybe even the last three years. I don't have it at the top of my head. And so we really have seen a lot of big changes to our system to improve reliability and a lot of actions taken by all three agencies to to make it happen.
Speaker 14
Yeah. So that in that answer is interesting to me because it fundamentally, what I just heard is you think that there won't be an increase in cost to ratepayers to not have the d a the the DSGS program because our resource, is more available than it was. But then what I was hearing was that the main impetus for this program is that its cost to the general fund was the issue. So I'm trying to figure out how to kind of square those answers between one that basically says the program's not necessary because we've made these changes and one that says program's good, but we can't afford to do it. Perhaps.
Speaker 5
I think to your question on how we evaluate the cost of not having something, it is a good one. And California has has faced those constraints. I agree with director Tessbai that we're in a better situation than we were in '22. I would note that the risk is really those coincident events when there's a western heat wave, a fire
Speaker 5
And other elements. And that's and I defer to Department of Finance on their evaluation of cost. Yeah.
Speaker 14
Yeah. And I I think just in general, given that we have seen one in 2022, if we were to experience one without having a program that was in place like this, I think we'd be getting questions from our constituents about why did you sunset a program that was designed after 2022 to fix that problem or designed during 2022 to fix that very problem. So I think, you know, I'm supportive of of option one in the way that this has played out so far, and and happy to have future discussions.
Speaker 4
Yeah. I think, you know, from what I can hear, it sounds to me like ELRP is just not cost effective. Correct?
Speaker 6
Neither program is cost effective. I do want to be clear about that. Using existing cost effectiveness metrics.
Speaker 4
And and you guys have already identified many programs that are not cost effective. Right? And you and you sent that in a report to us. Is that correct?
Speaker 4
And so can you just discontinue programs that aren't cost effective at the PUC or do you need direction from us?
Speaker 6
We have opened a number of new proceedings. For example, a new energy efficiency rule making, a new demand flexibility rule making, where we are, including the that exact question, you know, driven by these reports that we've been able to prepare to stakeholders to be able to to get to that issue. And and it is the top priority for the commission to be focusing on making either making programs cost effective or discontinuing programs that are not cost effective.
Speaker 4
we need to get at that in earnest. Like, if we've known about programs that aren't cost effective for many years and we're not getting rid of them so that ratepayers can see real savings, you know, how long is this rule making process gonna take?
Speaker 6
Typically, around eighteen months, but I do wanna be clear. The commission has taken action on some very significant programs mentioned with chair Bennett, the net energy metering program, shifting that to a program that is more cost effective. Steps have been taken. Some progress has been made, but there's certainly more work to do.
Speaker 4
Yeah. Well, I take issue with that, actually. I disagree. Your NBT is just screwed over the the consumers who had who had solar, and they're getting less credits. And, I mean, it was kinda the only way for people to to win on rates is to get some credit against their bill.
And and that just, like, you know, totally gutted it is what it did. So, you know, we need to, like, get, you know, to the bottom of reducing costs and for rate payers. And so eighteen months, that's too long. I mean, is there a fast track process to, like, actually get to cutting out programs that we know aren't cost effective?
Speaker 6
So for this one specifically, this the decision will come out in 2026. Eighteen months is just in existing state code, the the timeline for getting a proceeding done.
Speaker 4
And then I'd say for I mean, this is just a comment. DSGS, if we wanna continue to fund it, we have a funding source. It's called g r GGRF. And we could fund it out of GGRF, and there's a great place to take the money from. It's called the high speed rail that we continue to spend a billion dollars on.
It hasn't laid a single mile of track. So if we wanna fund that, there's a pretty easy way to do it. I wanna talk to about another program that I I'm very concerned about, the SOMA program. You know, there's been some allegations that this program is not, you know, money is not getting where it needs to be, and there may even be fraudulent activity associated with this. $900,000,000, and this is, again, for this is for multifamily, low income tenants to have solar and energy storage.
Right? $900,000,000 was set aside. There's still 500,000,000 sitting in that account. The goal was 300,000,000 megawatts. We're not even anywhere close to that.
My staff has continually reached out to you at the PUC, And I'm gonna just go through this initial contract, March 5, asking for the contract of the with the vendor for this program. March 5, follow-up email on March 16, a follow-up email on April 2, a follow-up voice mail April 10, a follow-up voice mail April 20. We've gotten no response. And so that is completely unacceptable. Like, how can I evaluate programs if you guys aren't giving us information?
We just want a copy of the contract with the vendor. And so my my first question is why are you guys ignoring that request? Is I mean, is there something to hide here?
Speaker 4
It's not to you, Dave. It's not Department of Finance. It's from the PUC. We've asked the PUC
Speaker 6
I'm happy to times. I'm not aware of the request, but we'll follow-up right after this.
Speaker 4
Okay. Yeah. I mean, please. I mean, all we'd love a response. We haven't gotten even a response back.
And, I mean, what can you tell me about Selma? I mean, 900,000,000 set aside. I'm not saying that money's been stolen or, you know, there are allegations, and right now we have 500,000,000 just sitting in an account hasn't even been spent on on people who probably need help.
Speaker 2
I'm sorry, mister Gallagher, but we we we have agendized items that we've asked them to come prepared for. You're on a completely separate program that they haven't come prepared for. And I I think it's certainly fine. Talk to me. Let me know in advance that you have something so that we can let people know and we can have the right people here, the people who do this particular program.
We could have them here. We could have them answering your questions. But given that we have the limited amount of time and lots of items and we always run all the way up until the other committee kicks us out of here, I'm just gonna ask you to to please cooperate.
Speaker 4
Mister chairman, I've moved through this very quickly with my questions. Very quickly. And I'm almost done. I'm just asking for a question. We're here on a subject of solar programs.
This is a solar program. And she actually just talked about all these other programs, many others that deal with demand charge. So I'm asking about a program that is well within the subject matter and asking what is going on with this program and why isn't the money getting out. And please give us a copy of the contract with the vendor so we can evaluate what's going on with this program.
Speaker 6
I know that projects have been built. I've personally been to ribbon cuttings for projects built for the SOMA program, and we'll follow-up with the requested information after the hearing.
Speaker 2
Okay. Thank you, mister Gallagher. Department of Finance, you you looked like you wanted to say something. I want to give you the opportunity if you still do or somebody else. Go ahead.
Speaker 13
Erin Carson, Department of Finance. Just wanted to follow-up on kind of the conversation around which program is more cost effective or less cost effective. Just want to emphasize that originally, with the funding that was appropriated for the DSGS program, there were several 100 millions of dollars appropriated out of the general fund. Subsequent GGRF appropriations were made. There were several reversions that
Speaker 13
made. So this the original intent was that this program would be a temporary program for five years. So the administration is, continuing with that, expectation. And then just also wanted to note that, you know, while a lot of general fund has been put into the DSGS program, the program has not always been activated to respond. Therefore, not all of the rate payers have directly benefited, you know, in a the program hasn't always contributed to rate payer benefits.
Speaker 4
So it's it's a it's a little difficult to kind of compare like the apples to apples comparison. So just wanted to make that point that while we have put in a lot of money to the DSGS program, there's other funds for the ELRP program. Because they're not always activated, the ratepayers aren't always gonna see those benefits. So it's the same type of situation for ELRP. Last summer, we didn't have any extreme events to respond to.
Speaker 13
Therefore, you know, we're still putting money into the program, but can't always predict, when the rate payers will see that benefit because we can't predict the
Speaker 2
Appreciate that. Just so I can be clear. So when there's no, events either, then the ratepayers aren't benefiting from those programs also. Is that correct?
Speaker 12
I know mister chair, I know we're trying to move on. Can I ask one just quick follow-up question to that? Or just put a pin in
Speaker 2
something Sure. Because I have a follow-up question too. I'll I'll defer to your follow-up question. Right?
Speaker 12
So, just I think that and maybe this warrants a longer offline conversation. I I think that the it sounds like the way you're doing the math around this doesn't does not make sense to me. Because if I think you just said that unless there's kind of a emergency event that ratepayers don't benefit. The the the concept of these demand response resources is that so you usually, the the grid is almost never utilized at a 100%. You know, the utilization is is what?
It's like 60, you know, an average of like 60%. If we don't have these demand response resources, we're having to invest in enormous amounts of infrastructure for new generation, new transmission. Those costs are borne by ratepayers. So the the question is whether you are building out the grid to an enormous level or if you're utilizing these resources to get more out of the existing grid. So as we are making assessments about cost effectiveness, we need to include that calculation.
So anyway, maybe that's I'm gonna just put a pin in that and I would love to have a follow-up conversation with Department of Finance on how we're evaluating rate payer savings
Speaker 2
Because yeah. That that is the fundamental question. The question is do we need the g DSGS program, like I said, even when we don't have events and I think philosophically, think you are hearing us feeling like yes, it does mean there is the potential for avoided cost in the future, which is hard for us to put a dollars and cents right now cost benefit analysis with the program. A quick question. Well, quick point.
You you mentioned that it was designed to be a five year program, and they've had three and a half years of the program. So I guess that's what you're hearing us say. Let's get it to the five year mark, and let's use these transition funds to be able to help us get it to the five year mark is is is what what we're saying. So in in terms of response to that. But CEC, would you identify and agree that the program is not cost effective?
Speaker 5
I think the definition of cost effectiveness by the PUC terms formula is and a construct developed under that PUC paradigm. DSGS was designed to be able to respond in an emergency for a coincident event in which many things are not cost effective in those moments. That's the the best I can do on the fly, sir.
Speaker 6
Is it okay if I just contribute? I just want to make it clear what demands
Speaker 2
I want to emphasize It is definitely okay. Okay. Alright? Thank you, chair. And because I wanna say that because I want everybody to know we're much more interested in the back and forth than we are in the formality of answering a particular question.
So just like she said, hey, I wanna go say that we want you to do that and we want to encourage everybody. We want LAO to say, hey, I have something to add here. That's how we want we we want these hearings always to be like that. That's why I tolerate somebody even saying, I want to interrupt when they're taking the same question I have. Right?
But anyway, it's it's yeah. Absolutely. So feel comfortable and feel comfortable for the rest of this hearing.
Speaker 6
Thank you. So, with the demand response programs, there are different flavors of demand response programs. So what director Korea and I are talking about DSGS and ELRP, these are for emergency grid events. And this kind of goes to the point LAO was making as well. There are a large suite of demand response programs that engage with the market on a regular basis, not just in an emergency.
To your point, Assembly Member Petrie Norris, they are preventing us from getting to that emergency. So they are constantly engaged in the market. They're part of a resource adequacy program, for example. And so, to the point that DOF was making, there are demand response programs that provide ratepayer benefit throughout the year, not just in an emergency event. They prevent us from getting to the emergency event.
And so a program a a demand response program like that is going to be performing better on a cost effectiveness evaluation because it's being used in the market on a regular basis. It's not it prevents us from getting to the emergency. It's not used just in the emergency. And so I talked about a few of those like the the air conditioning cycling program. There's agricultural pumping programs.
There's a whole suite of them, but they they regularly provide repair benefit and prevent us from to try and prevent us from getting to an emergency.
Speaker 2
Great. Thank you. We don't ever want one of the panelists that are up here to walk away going, I wish I would have been able to say x, that it would have helped the the the discussion. So definitely, we appreciate what you just said and that is a good point, for you to make. I do have this question.
EPIC is a ratepayer funded program where you collect ratepayer money and then you give it to the CEC to implement program. Correct?
Speaker 6
So CEC is one of the main program administrators, but also San Diego Gas and Electric, PG and E, and Southern California Edison.
Speaker 2
Okay. But but ratepayer money does go to CEC, you know, through So so is there any reason why we couldn't use ratepayer funds to fund the CEC administering the DSGS program?
Speaker 6
I mean, CEC has a whole research and development staff and team working on ongoing EPIC projects, and I wouldn't want those people to lose their jobs or or they're they're already that money is accounted for. I mean, I know Dina's not the director of that program, but there's a whole team at the CEC working on EPIC on the EPIC program. And I wouldn't feel comfortable saying that the money should be taken from that team and given to another
Speaker 2
Oh, oh, no. I don't want it taken from EPIC. Oh. I'm just saying that you're the concept that well, if it's rate payer funded, then it needs to be not the CEC DSGS program. If it's rate payer, this is more a question for Department of Finance, I suppose.
But we already we already do use rate payer money and fund some other things the CEC does. Why couldn't we take rate payer money and fund this?
Speaker 3
I would say that the constraint would be more on the the base, the repair base. And so the EPIC program is funded by the IOUs. And then it benefits like IOUs like that. The benefits of the EPIC program have to be concentrated in territories. The Manifested Grades Support Program, the SGS program, because it's funded with resources that are collected statewide, the program benefits the entirety of the state.
And so EORP, it's a very similar construct of the, the EPIC program. Those those benefits have to be concentrated within the IOU territories. And so p u's, CPUs c c sorry. C c, there will be a conflict of taking ratepayer funded, resources from the IOUs and providing that benefit to the, publicly, owned utilities and though not ratepayer base. And so there's that dynamic.
Speaker 2
Okay. Appreciate appreciate that answer. I'm I'm as the assembly member said, I'm not sure that we need to slice and dice a lot between ratepayers and taxpayers or which ratepayers and exactly which area, but I very much appreciate the answer. And with that, anybody else have anything else? Assembly member Gallagher.
Speaker 4
Maybe just as a final quick comment. You know, one, talking about this without talking about how we kept the lights on, during that heat event. We brought we kept the lights on because we brought in modular natural gas plants and paid for them and made sure we had baseline power. That's how we kept the lights on. So, like, you know, and we're talking about getting rid of natural gas plants.
Speaker 22
We're talking about getting rid of our last nuclear plant. And, man, we're gonna have to have a whole lot of backup storage if if if we're gonna go without those things. So that's one thing to be thinking about as well as our baseload power. And then I think just as a as a final, you know, I do think we need to be looking at all of these programs, and we should be thinking about the rate payer and using more rate payer dollars for something else or pushing more, program cost onto rate payers is the opposite direction that we need to be moving. We need to be moving in the direction of removing those costs so that we can lower rates.
Speaker 4
It's the only way to do that. So I mean, that that's where my focus, you know, I think I think we need to be on this.
Speaker 2
Thank you very much. And with that, we really appreciate this. I'm gonna end with one thing, which is we expect I expect that good government public servants are proud of the work they do. So we expect them to come and defend the work they do. And when they both work for the same administration, but they're in separate departments, there will be some tension there.
That is perfectly healthy. That happens in the federal government. That happens between the army and the navy. I mean, that's just that is normal. So it's normal for people to be proud of the programs that they're in.
It's normal for the CPUC to be proud of what you're doing, and it's normal for the CEC to be proud of what they're doing. And the issue is for us to hear all of that and for us to try to to figure out how we partner with the administration to reach both the goals of the legislature and the goals of the administration. So we sincerely thank you for a, sometimes not as comfortable as other times kind of conversations that we've had here today. And we'll move on to item two. Thank you very much.
Speaker 2
And item two is energy and modernization affordability, s b two five four transmission accelerator program prop four trailer bill language and a recognition that assembly member, Petrie Norris was, the lead on this, last year as we were doing things, in terms of transmission accelerator. So after we do the original comments, we're gonna go right to you, assembly member. Okay? Alrighty. Great.
And whoever would like to go first, please identify yourself.
Speaker 2
Even more. Oh. Come on. You gotta be right on top of it for them to hear you in the back. There you go.
Much better.
Speaker 16
Good morning, chair Bennett and committee members. My name is Raheem Amali, deputy director at the energy unit at the governor's office of business and economic development, aka GOBIS. The BCP before you is related to legislation that was passed, last year, s b, two five four. Among other things, two five four charges the energy unit with standing up a first of its kind transmission infrastructure accelerator, comprised of the Public Utilities Commission, the Energy Commission, the CAISO and I Bank to administer and support a public financing program for qualified transmission projects. SB two fifty four also requires the accelerator to develop a public private financing strategy to be delivered to the legislature.
The IA Bank team works with GOBIS in tandem and will collaborate with the energy unit and other accelerated parties to implement the provisions of this measure. Specifically, Ibank will evaluate projects selected by the accelerator and improve them based on financial viability. Ibank will continue to monitor and service the loans for the life of the debt even after their authority to use the funds sunsets in 2031. The BCP requests staffing and resources about $26,000,000 in total for program administration over five years. This includes 10 limited term positions to support the accelerator, further implement the requirements of SB two fifty four, and manage incoming program funds from Proposition four and AB twelve oh seven over a five year period.
With me today is Andy Nakahata, CEO of the iBank. Thank you for the opportunity to present this proposal and we'll take any questions you have.
Speaker 9
Just a couple quick quick quick comments. So we haven't raised any specific concerns with the proposal. We would note, however, this is a good example of when we talked to the committee about that prop four framework and how to think about it. This is a new program. We know the legislature has provided some guidance.
This is kind of modifying that somewhat. So making sure, one, that the modifications are consistent with your intent and your goals for the program. And then also because this is, the first time you the legislature is appropriating this program for this money, for this brand new program, we think this is a really important opportunity for the legislature to make sure that whatever whatever guidance you want is really memorialized here because this is this is the full allocation of the funding, and it's a big allocation. And so it'll be important to get it right, whether that means this whether you're okay with what's proposed or whether you wanna tweak that somewhat. So just wanted to to point that out.
Speaker 12
Well, good morning, and thank you for being here, and thank you both for your work on this. I think it's really exciting. Recognize it's kind of the first, the first and very important step in, in a long journey to save Californians money as we're making these historic investments in transmission infrastructure. And I'll I'll just say that, I think our assessment is that the trailer bill is moving in the right direction. I know that we've had some conversation about a couple of of potential concerns.
I think the primary one being, ensuring that, the FERC revenue requirement must reflect an actual capital structure. I think that's on your radar.
Speaker 12
So, there was a requirement that, there was, there was, some language in or an understanding in our conversations that, the FERC revenue requirement must reflect on the actual capital structure. And I think that that was struck through in the trailer bill. What we've been told is that your understanding is that that requirement is reflected somewhere else in the bill. So we're just gonna continue to have that conversation to make sure that we lock that point down. But just your intent is consistent with that?
Speaker 2
Could you and and then I'll catch you, mister Rogers, in just a second. And that is, could you summarize for us, where the state's liability will stand? Who will own the transmission line financed this way? What you know, we're we're trying to do this to avoid the cost of ratepayers paying 10% forever on a capital improvement. Want to try to make sure for the public we have that sort of out in the open.
What's the state liability? Who would actually control this line? How does this work in with the c CPUC sort of rate calculations, etcetera?
Speaker 19
So the way that is structured, eligible projects are limited to those projects identified in the competitive solicitation process identified at CAISO. So every year they do a TPP, excuse me, transmission planning process. And they will identify the bigger projects that are going to be competitively bid. And so those projects, there are private developers who bid on those projects. And the accelerator would and could, amongst those projects identified in the competitive solicitation, finance or provide state financing to that project.
Speaker 16
A part of that financing. Part of that financing. These projects are in the billions of dollars. And prop four, I think the total allocation is 325, so it would be a small portion of that.
Speaker 16
I think it's really hard to identify the rate savings, but the idea and structure of this is that with some state financing, it would lower the overall cost of the project and that in turn, when they go to request for the rate of return at FERC and at CAISO, that they wouldn't be able to include the state portion and the tax credits that's been that they've been given for this project be included in that rate of return and therefore lowering costs.
Speaker 2
So so hypothetically, a $10,000,000,000 project that the state somehow was able to help leverage billion dollars of that. Then when they go to ask for their rate increases, they could only do that on the $9,000,000,000 that's left. Is that how you understand it also? Great. Alright.
Speaker 12
Some of the estimates that an analysis that was done is is we were moving this through the legislature. Again, there's there's several permutations of how you might structure these arrangements. So the savings range everywhere from 10% of a project lifetime cost up to 40% of the lifetime cost to ratepayers that could be a savings as a result of this.
Speaker 2
Can you make sure you structure it so we get all the 40% ones? Right? Okay. Great. Thank you.
So many member Rogers.
Speaker 14
Yeah. Absolutely. Thank you, mister chair. So last week in in the utilities and energy committee, we had a comically large, graphic visual of the transmission adequacy across the state showing that there's not a whole lot. But especially North Of The Delta, there's very little capacity.
And I always take every opportunity I can to talk about how in areas that have already been left behind, they continue to be left behind in the program design or in the construct for programs like this. So my question really is, how are you going to address or how are you going to take into account historic inequities in that level of investment in some of the projects that are pushed forward?
Speaker 16
I can try to answer that. So the way that the transmission accelerator would work work is that we're limited to just looking at the projects that have been identified for competitive solicitation in the TPP. And so how they do that study and identify projects in underserved areas and where it needs more transmission. The accelerator, we're not within that process. However, the other part to this is that if there are, for example, three projects identified in the competitive solicitation, you know, looking at the policy, you know, we would have to evaluate against policy objectives for to to receive financing.
And those objectives, some of it are laid out in in statute, but there is another there is flexibility for the accelerator entities to determine other state policy objectives that it meets. For example, you know, if it is an area that is congested or doesn't have enough transmission. Like, if that if that transmission line meets those objectives, then that can qualify or raise up to the top of the one that may be eligible to receive financing.
Speaker 6
Gotcha. Andrew March, Department of Finance. I just echo everything that my colleague from from GOVA has noted is that CAISO has its own process for determining what projects are identified in the TPP, and these are very large projects, as my colleague noted, are several billion dollars that span for tens to hundreds of miles across the state depending on the the various needs and and various forward looking projections for generation across the state.
Speaker 14
Yeah. I appreciate that. And I just want to bring it back to kind of the linkage between some of the other states' priorities. Like, for instance, the staff comments call out offshore wind. There's obviously a huge economic opportunity and environmental opportunity up on the North Coast, but it needs adequate transmission to be able to move those projects forward.
And so it's really key component. And I know that there is a push, from myself and a number of other folks to make sure that the additional 250,000,000 is allocated from prop four for the offshore wind port development, and that goes hand in hand with this discussion about transmission capacity.
Speaker 2
Any other questions? Thank you very much. We're gonna go on to oh, we do. Assemblymember Conley. Can I
Speaker 24
I'll do a follow-up on that because I was gonna ask a a similar question? What is the status of the $247,000,000 toward offshore wind or development through Proposition four?
Speaker 17
So I believe that funding is going to through CEC. But half of it. Yeah. So so sorry
Speaker 17
correct. But I just I just wanna point out that currently, GoBiz is at the table, so they they're not gonna be able to answer that question. But we can get back to you sort of on the status of the funding. Not all of the funding has been been spent, to date,
Speaker 17
we didn't propose additional funding in the budget. So we're still working through that funding that was appropriated last fall. Yeah.
Speaker 14
I think the the push and to take back is, there's an opportunity to do bigger grants and do bigger portions of the project if that additional 250,000,000, which is very limited in the Prop four language for this for these types of projects, if that is allocated in this year's budget, again, should be it's general fund neutral. It's allocated in Prop four, but would open up those opportunities. I think that's the push.
Speaker 2
Anything else, Assembly Member Connolly? Great. Alright. Thank you very much. We're gonna go on to issue three.
Alright. Those panelists would please come up. Go ahead and introduce yourself.
Speaker 19
Great. My name is Alicia Gutierrez. I'm the director of the energy assessments division at the California Energy Commission. And I'm joined with by Barsha Savishwar. That is She is the deputy director of policy in the division of petroleum market oversight.
I am here today requesting support for RBCP, and good morning. I did not greet all of the committee members. Good morning to you. Since the passage of the special legislation in in 2023, the state's petroleum sector has experienced several major challenges and changes, including closure of two of the state's refineries and more recently the Warren Brown that is disrupting global markets. These dynamics have resulted in a shift in the focus, scope, complexity of CEC's work.
In 2023, staff resources were focused heavily on data collection efforts and developing analytical frameworks to provide more transparency into refinery profits. When ABX two-one was passed, we were focused on measures to address price volatility. With closures of the refineries, CEC was asked by Governor Newsom to develop a holistic strategic approach to the transition, and the strategic approach necessitated increased coordination with industry to ensure supply stabilization measures will have the desired impact on in state supplies. The work being done by the CDC and in coordination with DPMO, CARB, and other agencies to monitor conditions and remain in constant coordination with refiners resulted in stable prices in 2024 and 2025. The elevated delta between the California and The U.
S. Has been smaller in the past two years than what we saw in earlier years 2022 and 2023. We are continuing our coordination with partner agencies to ensure prompt and coordinated action if California supply conditions get too tight. And this BCP is requesting $1,700,000 for seven positions that responsible for implementing the requirements of ABX two-one. Now, will turn to Varsha for her opening comments.
Speaker 11
Thank you, Director Gutierrez. Good morning, Chair Bennett and members. My name is Varsha Sarveshwar, and I am the deputy director for policy with the division of petroleum market oversight. The BCP before you today from DPMO is 473,000 from the energy resources program account to convert one limited term position that we have at DPMO into a permanent position, and that's a research data specialist position. As a bit of background, DPMO is an independent division of the Energy Commission established by senate bill x one two in 2023.
Speaker 20
SBX one two tasks DPMO with protecting California consumers through market oversight, investigations, economic analysis, and policy recommendations. Thanks to the governor and with the support of the legislature, DPMO was able to quickly staff up in 2023 and 2024. But by 2025, after the passage of Assembly Bill X two one, we needed additional in house capacity to process the very large volumes of data that we analyze for a number of our market oversight functions. And so to meet this critical need, we hired a skilled senior data scientist in a limited term role. And this single position provides some really critical support for both our economics and our investigative teams.
Making this position permanent is essential for DPMO to fulfill our independent responsibilities under the statute, protect the integrity of the market, and provide you as policymakers with the best possible information as we navigate the transportation fuel transition. Thank you, and I look forward to answering any questions.
Speaker 2
LAO, we have seven, new positions being asked for in the petroleum markets by research. Have you had an opportunity to analyze whether you think they are necessary relative to the fact that our fourth question we talk about, the CEC has paused the price gouging penalties for five years, didn't complete its regulations about price gouging. So couldn't those positions be used for the new positions that we have here?
Speaker 9
So as part of our review of the proposal, we did ask a variety of questions, and we did meet with the department. I think in the course of that, work, our view was that they provided adequate justification that there was sufficient workload associated with the bill and their and their larger efforts in this space, so we're not raising specific concerns. But, that is certainly, I think, a a great question. And I think when additional positions are are being added, particularly if other work is not is not occurring, that's, I think, a top of a question that's always top of mind. So, should the legislature feel differently, certainly, you know, we could take different action.
But we didn't identify some any specific concerns that merited, raising with the legislature.
Speaker 2
Well, in our in our hearing numb in our first hearing, we sort of had a love fest with the CEC, in terms of their efficiency and and productivity with that with that program. But it is a significant question for me and that is the fourth question here, which is you've you've end you've paused the price gouging penalties for five years. You didn't complete the regulations. You had people doing that. Can those people can those positions be applied to this?
And if they can't, I'd love to hear why.
Speaker 5
So we did have a couple of individuals that were hired on to do the analysis to support the max margin and penalty and make that recommendation to pause. Those individuals are continuing to work on the analysis we did in our business meeting where we considered and approved the pause on the max margin and penalty. We did commit to providing an analysis in January 2027 time frame that would include the same considerations, framework, and make another revised and updated analysis and recommendation based on the current conditions on the max margin and penalty and whether we should extend that pause for additional years. They are continuing to do the analysis of all the supply stabilization measures that are before us and are being considered, like minimum inventory and resupply. There is the same analytical framework and rigor that is required.
Speaker 19
We have to look at impacts to supply, impacts to the economy, other costs and benefits of each measure. So, we're trying to do this systematically, implement the same, framework throughout all of the supply stabilization measure measures, and that is what that is what our resources are doing now. These resources will help us to bolster all of those analyses and make sure that we are implementing those supply stabilization measures very well for the industry and good for California.
Speaker 2
Let me say two things. One, I think that given the volatility of gas prices, given the price gouging that we used to believe we saw and that the CEC sort of discovered. The legislature very much supports the idea of funding the CEC to do a good job of understanding inventories and all of all of these all of these issues. So we really we support that and we actually need it because the public is so sensitive on this issue of of of gas prices and trying to identify what of the what what of it is, you know, international changes to the price and why is it when the price of oil goes up by 10%, price of gasoline goes up by 40%. People have questions and CEC helps us answer it.
So very much want us to get this program right, but at the same time, we wanna be as efficient as possible as we do things. Are you saying that even though this program the the the price gouging penalties were paused for five years, and even though you didn't complete those regulations, those people are still working full time doing that stuff, and that there's been no pause in their work or they're they're they they why would it take so long? Is it because of changing conditions? I just need to hear that justification of why these people why can't they have to keep working on this if there has been that pause.
Speaker 19
I hear you. So they I would not say that the work is one for one, but they have shifted. So there is one individual that is, full time continuing work on the analysis. The other individual is somewhat splitting time, between the other supply the evaluation and assessment of the other supply stabilization measures. Right now, our focus is on, the resupply regs and getting, those in place this year.
So, that individual has been focused on, getting the the analysis to support that. And we will be doing a workshop, in the next month or two on, resupply regulations.
Speaker 3
David Evans, Department of Finance. I would just like to add onto my colleagues' responses that the CC was resourced for the work of SBX one dash two, which had several different components. One was that maximum gross gasoline refining margin, which has been paused, but, also, they still have to collect daily, monthly, weekly, and annual reports from from major crude oil producers, petroleum transporters, importers, exporters, and businesses. That work is still ongoing. And then, also, they're responsible for having the, developing the tri annual transportation fuels assessment, and the transportation fuels transition plan.
So that that work for SBX, one dash two is still ongoing. The CEC was resourced for that work, but they were not resourced for ABX two dash one, which established the minimum supply regulations. So those regulations are still ongoing, and that's why they're requesting additional positions in order to do that additional workload that was placed on the department.
Speaker 20
And, Sheriff, if I may briefly, so the division as an independent division of the CEC, we don't the regulation is with the energy commission. It's not with DPMO. So with the initial 10 positions that we received in 2023, those were not sort of bespoke for the gross gasoline refining margin and penalty. Those were for all of DPMO's responsibilities under SPX one two. So we don't have sort of specific max margin penalty resources that we would be reallocating here.
Speaker 2
Thank you. That's all very helpful. And I just want to point out that we have a note from somebody sitting in the back that says David was the best speaker into the microphone. He held that thing right there real close to his mouth. Just show us again that technique for you.
Will you see that? Look at that. That is what everybody could benefit from. Assemblymember Gallagher.
Speaker 4
Well, I I don't wanna put him in a bad position, but he did used to work for me. So that's yeah. It's it's good to see you.
Speaker 4
Yeah. So I have a simple question, which is why did we decide to fund this using the IRPA program, which is supported by rate payers, electrical rate payers? Why are electrical rate payers paying for, like, a gasoline oversight program?
Speaker 3
Absolutely. I can respond to that. The CCN's main operating fund is the energy resources programs account, IRPA, and it funds a variety of different, like, energy resources programs and activities that has overlapping benefits for the state population,
Speaker 3
necessarily directly benefits to ratepayers. The CCS, other special funds, but those funds don't have sufficient revenue in order to take on this work. And then or there's specific allowable uses that will preclude them from being able to utilize those those other fund sources.
Speaker 4
Okay. And so, I mean, essentially, we're trying to cover a whole. Right? Will there be impact to the ratepayers? I mean, is there going to be additional cost to ratepayers by doing this?
Speaker 3
necessarily that there would be additional cost to ratepayers. Currently, right now, there's, a standard charge. And right now, the CEC is just operating within their existing budget, their baseline budget in order to do this. And so we would be adding on to that, but it there wouldn't be, a increase in fees or charges to the ratepayers in order to cover it because it's it's currently capped right now.
Speaker 4
And then to, you know, the folks from CEC. So during this time that you guys have had this in place, did you guys find evidence of price gouging that's been done by?
Speaker 20
Thank you, Assembly Member Gallagher. So, we try to be pretty circumspect when we talk about price gouging because there's a there's a criminal price gouging statute in California under a penal code section three ninety six. You know, there's sort of implications there for increases in prices above 10% above cost during periods of emergency.
Speaker 4
Yeah. I just mean under this system that we created with this special legislation.
Speaker 20
Right. So when we're talking about sort of general opportunistic pricing, we're often talking about situations in which there are increases in price above increases in input costs. And in the period that the legislature identified in 2022, you know, DPMO has said previously on a number of occasions that the evidence from that period is consistent. So you do see an increase in prices and an increase in margins that's not matched by an increase in crude oil costs or other input costs that market participants face.
Speaker 4
Yeah. But, again, did you find any evidence that that was a result of some bad faith on the part of the refiners or the oil and gas companies?
Speaker 20
So in terms of details of particular investigations, I think speaking sort of more granular than just the data, I think I'm not able to sort of speak to that at this time. We try to be really, really careful in terms of disclosing details of particular oversight or investigative matters.
Speaker 4
Okay. That's that's great. So from everything I've seen from since we started this and from what's been made available to the public, I guess what's been not disclosed, which is a problem. But from everything that's been publicly disclosed, we found zero evidence that this program has helped us stop well, that we even found gouging in the first place or that it stopped, you know, price gouging. So that's one question, like, why do we continue to fund a program that doesn't really seem to be getting results?
Speaker 4
Well, here's another question for you. So on the supply side, I mean, so we have we stabilized supply at the Phillips sixty six refinery in in Southern California?
Speaker 4
Well, answer is no because they closed down. Right? So there's no stabilized supply there. Right?
Speaker 4
No. I'm saying that right now today, is there a stable storage of refined gas at Phillips sixty six refinery in Southern California?
Speaker 2
is no. It's not really hard. That that's fine. But you've you've asked the question now twice. So is it rhetorical And I'm told
Speaker 10
I think Phillips sixty six is still involved in some marine terminal activity.
Speaker 10
Sixty six is closed, but they're involved in some marine terminal activities. We'll have to get back to you on that with some details.
Speaker 4
How about have we is there a stable storage supply at Valero's refinery in the East Bay?
Speaker 10
Valero, Valero, Valero, Valero, it's they have given notice, and they have ramped down their operations. They have closed down as of April. So no, right? So
Speaker 19
this is part of the challenge, I think, and part of the changing dynamics that I mentioned in my opening comments. We are dealing with a lot of fluctuation in the supply, and, I think that warrants more investigation and careful thought about how we implement the supply stabilization measures that I mentioned. Resupply is the focus right now. And then, once we see how resupply requirements with the results of that, then we will turn to minimum inventory.
Speaker 4
Just to, like, simplify this, like, since you guys started, you know, your program over there, we've now two refineries in the state have shut down. So 18% of our refined gas is gone.
Speaker 4
to say that since you guys started, our our gas supply has actually decreased?
Speaker 32
are importing from the from North Korea sorry, from South Korea. We are importing from various parts of Bahamas. We are importing from Middle East. So they're importing some
Speaker 4
Oh, from The Middle East? Where are we where are we importing from The Middle East?
Speaker 10
It comes from Middle East, Saudi Arabia, from from I don't have the specifics here right now from multiple countries.
Speaker 20
Assembly member, apologies. I've looked at the data probably a bit recently. So, as a rule of thumb, about 50% of imports of gasoline into California come from domestic sources, so they primarily come from the Pacific Northwest or from The US Gulf Coast, sometimes via The Bahamas for Jones Act purposes. The rest 50% are typically foreign imports, largely coming from Asia, not exclusively Asia, and that would be India, Singapore, and South Korea primarily.
Speaker 20
Crude oil is a different story. So California has been a net importer of crude oil since the late nineteen eighties. About a a good chunk, I think, about 20 to 30% of crude oil in California, comes from California. Another 20 to 30% typically comes from Alaska, imported from Alaska, and the rest is imported from foreign sources. It's pretty diverse of a mix.
Typically, The Middle East, Latin America are their largest representations there.
Speaker 4
And now even more so, right, because we have less domestic production and refining capacity. Correct?
Speaker 20
Yes. But there are sort of two trends that cut against each other here. So as you have few Yes.
Speaker 2
I'm so I'm sorry, but that's not the tone we're gonna have here. This isn't an inquisition. This isn't defense lawyers and prosecutors saying that's sufficient. Right? We are going to have a healthy conversation.
And whether you want the answer or not, we're gonna make sure she gives she gives the the complete answer to the question in a in a appropriate amount of
Speaker 2
It should not be an interruption of, no, don't give me any more of your answer.
Speaker 4
Yes. Also have to get somewhere in this hearing, Mr. Chairman. I agree with you. I like allowing people to answer a question and give context.
What I don't like is equivocation. And equivocation should not
Speaker 2
be equivocation is in the eye of the beholder. But I'll tell you one thing.
Speaker 4
Pretty obvious. And I think it's obvious to the people in this audience and everybody watching this hearing.
Speaker 2
And I'll tell you what what won't be appropriate here is that these people are coming here voluntarily. They do not have to show up at these hearings. They show that that's correct. They have they do not have to show up
Speaker 2
Hey. Would you let me finish? I did not interrupt you while you were talking.
Speaker 2
If would you let me finish? These people are professionals coming here, need to be treated as professionals, not like the enemy. And so our questions can be strong in terms of what they're doing, but the tone should not be in any way an harassment of these people as they're doing it. And so when somebody is trying to give an answer and we cut them off by saying no would be sufficient or this is it doesn't meet your your definition in terms of an appropriate answer. That's not how this should happen here.
And so I want you to be able to finish your answer now, please.
Speaker 20
Appreciate that, chair Bennett. And and assembly member, always welcome from from all of you the hard questions on these issues. In terms of crude oil imports, the reason that I was I was giving a bit of a caveat answer is because crude oil imports into California will actually likely decrease this year, as refineries close and as supply changes from essentially replacing crude oil imports with refined product imports. And so, just on a numbers basis, it's actually not an increasing trend over time.
Speaker 4
Yeah. I mean, so the bottom line here is, like, we have increased our amount of imports. We have become more reliant on imports for our gas since you guys have been set up. We've lost refinery and supply. We've found no evidence of price gouging, which was the whole impetus behind creating this this program.
Why are we funding this again? Mean, this legislation was flawed from the beginning, and we're here to talk. And, you know, mister chairman, my point about this is they absolutely need to show up to our hearings because they are incumbent they their their program is completely reliant on us funding them in the budget. So maybe it's voluntary to come here, but, you know, we get to make the decisions about whether or not we fund your program and whether or not it's working. And I think it's very clear, it is not.
And now we're gonna fund your program with rate payer money. We're paying we're people who are paying their electric bills are gonna pay for this gas gasoline oversight program that's not working and has made us more dependent on foreign oil? It's ridiculous. I mean, I I can't even believe we're even considering it. It should be rejected outright.
Speaker 2
Thank you very much for your comments. I am, going to respond to a few things. Number one, I think her answer was very appropriate and the accusation that it was going to be equivocal is just not accurate. That was a great answer. And we have a real professional that understands a lot about this data here.
So I think it was inappropriate to cut her off, and I think that her answer really really demonstrated that. Number two, I know that this is an opportunity for us to state our political views about whether we should be doing things or not doing things. And we have to tolerate a certain amount of that, when we're doing this. But the vast majority of this ought to be trying to get the information, the factual information that's out there. There's been an accusation that this program has been completely ineffective, and that there there has been no evidence that's been found.
I think it's very appropriate that our staff, our professional staff, is very cautious about making claims of criminal behavior, which is what price gouging is. And they cannot come here without real strong evidence, and they probably shouldn't come here with that evidence. They should take it to the attorney general if they find it. But I think there is a very cause a very interesting relationship here, and that is the price fluctuations that we won't call price gouging. The weird price fluctuations where the price of crude or the price of the inputs went up by 10% and they and the retail price went up by 40%, that all suddenly came to an end when this department was founded and we started having the ability to be able to check this out.
We've had we've not had the inventory, crisis that we had before where we had prices jacked up as soon as the spot market saw inventories drop below a certain level. We haven't had that happening. Now we still have some changes, but there's been a significant improvement in inventory monitoring and in in a lack of spot price changes. And I would offer that's pretty good circumstantial evidence that there are some real benefit for gasoline prices and for the client for the, citizens of California to be able to have this program out there. And I think it's just I think we have to have our head in the sand if we didn't recognize the tremendous improvement that's been made with this.
But with that being said, I have two questions. How many staff work on the gasoline market analysis at the CEC both directly and through the DP, DPMO?
Speaker 20
For DPMO, we have one director appointed by the governor. In 2023, we received, through a BCP, an additional 10 permanent positions. This would convert an additional position into another permanent position. So that would sort of be 12 positions plus the director. And we also have another attorney position that we've received, through conversations with the CEC and hope to be hiring soon.
So depends sort of giving you the complete picture here, but in terms of just p y, 10 p y.
Speaker 2
And the third question that we've And by the way, we give you all these questions in advance because this is not a game of gotcha up here. Okay? Some people like it to be a game of gotcha, but it's not a game of gotcha. It's a game of trying to get the information. That's why we want you to be prepared, and we offer these questions in advance.
So the third question, why is the CDC requesting new positions for legislation that was passed two and a half years ago? Right?
Speaker 19
So the legislation, while it was passed, the CEC was never fully staffed for carrying out the requirements of ABX two-one. This is to provide us with the staff that we need for those requirements to fulfill them.
Speaker 2
Thank you very much. I have a few other questions and then we'll go back to to my colleagues here. And that is, is ERPA in a structural deficit?
Speaker 3
I can take that one. Yes. It's still in a structural deficit where the, authorized expenditures are is outpacing the, current revenue cap.
Speaker 2
Okay. Thank you. CEC data shows imports of foreign crude oil declined by 10%. Is that accurate? What
Speaker 2
CEC data shows imports of crude oil declined by 10%. Mean, oil, a foreign crude oil. Is that accurate?
Speaker 10
Cannot answer that question, but we will get back to you on that. Yes, I cannot answer that question.
Speaker 20
I think that's probably I can't confirm the 10% number having not looked at that exact data. But I think that's what I was mentioning earlier in terms of the shift in import picture from crude oil to products. And so as that picture changes, we would see a decrease in crude oil imports and an increase in product imports.
Speaker 4
I agree that's a point that's made, but that means it means we're replacing it with refined gas from somewhere else. Right? South Korea or somewhere else. Right? Where do you think they're getting their crude oil from?
It's still imported it's still imported crude oil that's coming to that refinery, not in California, and then coming back in here.
Speaker 2
Just like we encourage everybody go back and forth. I appreciate the clarification. Right?
Speaker 4
So it's not it's not a distinction without a difference is what I'm saying. You know?
Speaker 10
There is no in state production capacity to meet the demand. It has to come from somewhere.
Speaker 2
Thank you. The unit is going to continue to monitor and report on all of these changes. Correct? And and and as volatile as the market has become with the Iran or the with with with the the Iran war that we have out there now, I think it's more important than ever that we have this department out there monitoring and giving us information we never had before. Ten years ago, we were in the dark about all of this.
And this is absolutely vital information as important as gasoline is for the market here, in California. So I certainly think there's strong justification for the program going forward. With that, does anybody else have any other questions? Assemblyman
Speaker 12
Just one one point of clarification. So, the in terms of the, positions requested, so the position the seven positions for petroleum market and supply research, that is for the CEC, that's not DPMO. You're only DPMO is asking for one Correct. Person. Okay.
Alright. Thank you.
Speaker 4
I I just wanted to point out as one final thing. Like, I am so happy these guys are here too, because as of as of their work as of just Monday, the price of gas on the East Coast is $3.95, and the price in California is $5.78. So you're right. It seems like a real bang up job that we're doing keeping gas prices low and stable, you know, here in California.
Speaker 2
We're we're sure you will continue to to, point that out from your philosophical point of view. Thank you very much. And with that, we're ready to move on to, issue four.
Speaker 2
need that microphone nice and close. David could give you give you some tips if you'd like.
Speaker 6
Thank you. And before I start my formal remarks, I did want to just say that we have a we'll have a follow-up item from the last item for assembly member Petrie Norris. Just there was a $16,000,000 admin budget number that came out, and I didn't wanna speak up at that time. But since you said you don't want me to leave here without saying something, so that was the authorized up to amount. The actual number is less than a million dollars, so we'll follow-up in writing.
I I could tell it was an important point and I want to make sure you have it.
Speaker 6
So I'll jump in. So good morning. My name is Luam Tessfi and I serve as the CPUC's executive director. Though I'm no stranger to this committee, I am new in this role. I started as the executive director in February and it's my honor to be able to present to you today.
Speaker 6
So for item number five, I wanted to just before I go into my formal remarks, the Department of Finance wanna start? Okay. I'll start. So California's cap and invest program renamed in a b 12 o seven and s b eight forty in 2025, one of the most consequential climate programs in the state's history passed by this body. So since 2014, the California Climate Credit as part of that program has returned over $17,800,000,000 directly to ratepayers, including 1,600,000,000 this year alone.
Speaker 30
The California Public Utilities Commission is responsible for making sure that credit reaches the right households at the right time and in a way that holds up as California's energy landscape changes dramatically over the next twenty years. In particular, we are focusing on high build targeted months and we understand that this is not uniform across the state. We have some jurisdictions like PG and E, Edison and SDG and E where they see their highest build months in the summer versus other jurisdictions like Pacific or Liberty and Bear Valley seeing their highest build months in the winter, and that's something that we're working closely to understand over that twenty year trajectory. So, more specifically, focusing on our ask before this committee, it is seven positions at $2,200,000 as well to support a rulemaking that reflects the reality of a program that will run between now and 2045 and as we expect to see many changes in the energy landscape, in particular with customer bill affordability and we are up to the task of making sure that this program is able to do that. With that, I wanted to conclude my remarks and I'm available for any questions.
Speaker 9
We do have some comments. So I'm gonna provide a few different points on this and some recommendations. So the first thing we wanna point out is that in our view, the proposal goes beyond what we think is statutorily required by the bill. So the bill requires that CPUC move instead from the April and October current practice to at most providing the climate credit in at most the four typically high build months. So we think that, the the CPUC's approach, they're thinking about a sort of more expanded approach that would look at, for example, should that those climate credits be volumetric?
Should they be go more to low income customers? Should they be different across geography? So that could be reasonable, but it's beyond sort of what's we think is mandated by the proposal. Second, we would note that we think the choice about how this money goes out is really important. There's potentially tens of billions of dollars at stake over the life of the program, that are gonna go out to California customers, and the choices about how to provide those are gonna be really important ones.
Speaker 35
And so we think the legislature would wanna consider whether it wants to continue to delegate that authority to CPUC or whether it would want to provide some guidance there about how those should go out. And then we also think that the, really, the proposal prevents some trade offs because if they do this sort of they do that work of coming up with, a more complex approach, that's gonna take more resources, the seven positions, and the consulting resources that were discussed. Whereas if you took a very sort of simple approach, it just changed the months. We think that the amount of resources you'd need would be significantly less. Again, also, the the final comment we have is that we think kind of the ongoing workload is likely to be less because we think you're gonna wanna set up a basic structure and then keep that basic structure pretty consistent and maybe just tweak the amounts on an ongoing basis.
Speaker 9
So, really, our recommendations flow from my comments. We recommend that you decide on the desired scope of activities that you want CPUC to undertake and adjust the resources accordingly. We do think it's more appropriate to provide limited term resources given that we think much of the workload is likely to be limited term. And then we also think that, you know, if you have additional clarifications about how you want, again, potentially many billions of dollars to go out, that this is the time. If not, if you that's fine too, but, you know, this is kind of that opportunity if there are additional if there is additional direction to provide that, we think.
Speaker 2
Thank you very much. I think we have pretty pretty strong recommendations from LAO about whether we should do the simple approach or whether we should do the more complex approach from CPUC. I think their analysis makes a fair amount of sense to me. I'm interested in something in between these two approaches. And then there's there may be some need to do something to do some analysis of implementation.
But seven positions to do an ongoing analysis of how we're going to do these these these returns, seems certainly in terms of permanent positions. We've been expanding and expanding the CPUC's positions. And I I think you find it very unlikely that legislature is gonna be supportive of seven permanent positions in in this kind of setup. So, with that, I wanted to to to get that out there. I think looking at, you know, a temporary position or two to analyze the implementation of is one thing.
And I'd like to turn this over to my colleagues for any questions and stuff. Assembly Member Rogers.
Speaker 14
Yeah. Thanks so much, Mr. Chairman. I know there's a lot of different areas that we can dig in here, and I'm sure some of my colleagues will want to. But in particular, I wanted to ask a little bit about some of the position growth, specifically around the public advocate's office.
Speaker 6
So I do have a colleague here that will join, I think, for a later item from the public.
Speaker 14
We could save it for the later item. Did you want to ask your questions?
Speaker 12
Just really quickly on on the on issue four, I think just reiterating the you know, some of the chair's points, some of the LAO's points. I I think I was really shocked to see that it's going to take seven permanent positions and a $750,000 consulting contract to implement what we see as a pretty straightforward change to the program. So I think this is an opportunity for us to have, not this is in this moment, but before we lock in this budget proposal, I think having some back and forth to see how do we achieve the intent of a b 12 o seven in a much more cost effective way because that should not take seven permanent people and a $750,000 consultant for us to move the climate credit allocation from, you know, twice a year payment to the highest tariff months of the year. I think just more to come on that.
Speaker 6
Yeah. And I do have, I wanted to give LAO the opportunity to, share their view, but I do have information to respond, if I may.
Speaker 18
Because I agree with that. Mhmm. So a response would be great. But also, in terms of what we're calling the more complex methodology, if you could also address from your vantage point, how would that specifically maximize customer affordability?
Speaker 6
Yeah. So I can do that. So, to start, you know, we actually have a voting meeting tomorrow where we are making the taking the first step of making the changes to, shift the climate credit distribution electric climate credit distribution to, the highest build month. So I just wanted to make sure that I, share the progress that's coming along. But in particular, you know, as I mentioned, the high build months are not the same across the different service territories, so that is a complexity that we'll have to continue to track and respond to over the life of the program.
In addition to that, when we're talking about being able to create a meaningful opportunity for ratepayers, the legislation also required a shift from the gas gas climate credit funds to the electric. And as we've started some of that preliminary analysis, there is a very big complex mismatch of customers to electric customers to gas customers. So, yes, we have many customers that are electric and gas with PG and E. We have a number of customers that electric to gas SDG and E, but we have a number of overlays that are more complex than that. So for example, the SMUD customers that pay, SMUD customers that would receive a gas credit from PG and E, that funding has to be shifted for that customer to from PG and E to SMUD.
Right? And then there's other overlays in particular in Southern California that are also more complex with that, looking at the POUs. The POUs, so LAWP being a big one with SoCalGas overlay, but then a number throughout Southern California. So that is a large, complex matter. And right now, CARB is in their regulatory process, sorting out the the framework for what that will look like, but then we'll have to come to the CPUC to sort out those extensive details.
In addition to that, as you all are familiar, you know, the state has very significant electrification and decarbonization goals. And so, we have started to do some of this analysis but need the staffing to do so, of the shift over from California most of California being a summer peaking territory where we are gonna be seeing a lot of winter peaking throughout, throughout the state, in particular, in areas where, like SDG and E, Edison, and PG and E. And so as we see the uptick in, electric heat pumps, for example, there's gonna be a big shift. The thing is that the state doesn't control the shift to electric heat pumps. It happens through a number of initiatives and incentives and things that we're trying to do, but it's not something that we have a command control structure on.
So, this staffing is going to help us analyze how that happens over time and making sure that customers are are seeing this, bill credit when they need it the most. And so, that just wanted to share a little bit of that background as well as that response to Assembly Member Connolly about really making sure this is something that can support affordability into the future. Thank you.
Speaker 2
Thank you very much. I appreciate that response. I think that you've heard from a couple of us that we want to continue to work on this. I'm gonna offer you this one thing. It seems to me that the CEC is saying that they need to do a lot of this work because it's a challenge to maximize customer affordability.
That's what's come out of the statute, those those three words. But seven permanent positions based on those three words feels like a mismatch from from my perception. Say we need seven permanent positions because the statute said maximize, customer affordability. If if it if that justifies seven, it could justify 70. It could justify one.
It could just you know, it's that's it. That's just an interpretation. And and we appreciate CPUC's interpretation is that seven permanent positions. You're having trouble selling us on that being seven permanent positions. So wanted to get that out there.
We're gonna need to have continuing conversations about that and about this issue as we go forward. So many members, anything else? Right. Okay. We will, go on to issue five, CPU, a public advocate of staffing.
And I know sending member Rogers has a question.
Speaker 6
Should I should I start with? Okay. So I have some Thank you. Of course. So I have some, introductory remarks and then I want to turn it over to my colleague, Mr.
Skinner. So just as a point of introduction, you know, thank you for the opportunity to share some of these data points and details. So the California Public Utilities Commission, at this time, we have seventeen thirty eight staff positions overall proposed for this twenty twenty six, twenty twenty seven fiscal year. I wanna spend some of our time today, talking to you about, you know, where those staff are, what they're working on, and, answer any questions about our staffing levels that you may have. I know there were a number of questions also specifically on rate cases, specifically general rate cases, which is a part of the work that we do.
I like to say the bread and butter of the work that we do because I started out in that work at the commission, but we have many things that are the bread and butter of what we do today, being a 115 year old agency. So in particular on those rate cases, you know, we tend to have on the advisory side, so separate from the public advocate's office, about 30 staff assigned to each of those cases. So Southern California Edison, PG and E, SDG and E, and that runs the gamut of a number of roles. So, of course, we have our administrative law judges, but we also have attorneys working on those cases, engineers, financial analysts, as well, all working on those cases in parallel to scrutinize all of the cost in the utility proposal, as well as being able to scrutinize and analyze all of the information that we're getting from our key stakeholders, like the public advocate's office, but we have, many stakeholders that participate in those general rate cases. And as I said, rate cases are just a part of what we do at the Public Utilities Commission, and so I know a number of the data points that we provided in writing, you know, we're referencing this time period, January 2017 to today.
And I just wanted to share, you know, during that time period, we have processed over 30,000 advice letters across all of our regulated sectors. And so that's over 12,000 in energy, over 14,000 in communications, over 3,000 in water, and over that same time period processed over 2,000 resolutions. And so resolutions are ones that are actually voted on at the voting meeting as well across all of those different sectors. And so that's really a big snapshot of our day to day. But looking at 2025 alone, just because we keep seeing this growth and escalation, in 2025, the Public Utilities Commission processed over 3,400 advice letters across those different regulated sectors and over 216 resolutions on top of all of the the formal, proposed decisions that are voted on as well.
And so just wanna be able to share beyond the rate cases, the the depth and the breadth of the work that we have to do at the Public Utilities Commission, as an agency that has, you know, a PU code that's over a 100 years old. And so with that, those are my introductory remarks. Want to turn it back to you all and, also to my colleague here.
Speaker 21
Yes. Good morning, chair and members. Thank you for the invitation to speak with you today. My name is Nathaniel Skinner, and I'm the deputy director for energy and administration with the public advocate's office. Our office was established by statute to represent and advocate on behalf of ratepayers for affordable, safe, and reliable service across water, energy, and communications while advancing the state's climate goals.
Although we are a part of the CPUC, we operate independently. So we set our own priorities, we develop our own policy positions, and manage our own budget and resources, including our budget requests. We participate as a party in CPUC proceedings and must follow the same rules as any other party, including when and how we communicate with CPUC decision makers. We also participate in other forums such as before the Energy Commission as well as the independent system operator. Given our mission as established by the legislature and the governor, the nature of our work is largely focused on issues impacting rates and affordability, and this is where we direct most of our resources.
We currently have 183 positions. For energy and water utilities, most of our staff are focused on engaging in proceedings that directly impact customers' rates and bills. We currently dedicate approximately 114 staff to energy ratemaking and 29 staff for water ratemaking. For today's purposes, as I refer to ratemaking, I mean general rate case proceedings or GRCs as well as other proceedings that can impact rates outside of the general rate cases. The GRC is a budget setting process where utilities forecast and justify their anticipated costs and the PUC establishes how much revenue utility may collect, which ultimately determines the rates that customers pay.
Examples of other proceedings that impact rates include decisions connected with memorandum and balancing accounts, where sometimes billions of dollars are on the line. Telecommunications differs from this. Most of our staff who work on communications issues are focused on non ratemaking proceedings. Approximately four staff work on communications ratemaking. Presently, only the small local exchange carriers, also known as Lex, are rate regulated.
Other communication companies, including broadband providers, are not rate regulated at this time. In terms of growth, our office conducts annual reviews to assess our needs. In those reviews, we consider any increase in workload and where we may need more support. And in those instances, we work with you all on our budget change proposals. We primarily propose BCPs for positions when new legislation is enacted that increases the workload of our staff.
We also occasionally submit BCPs when the CPUC initiates activities that would require increased engagement from our office. In conclusion, we appreciate the legislature's support for our request for additional resources, and I'm happy to answer any questions you may have.
Speaker 3
David Evans, Department of Finance. Just wanted to add a point of clarification. So if you see the positions, the number of employees that are listed on page 19, I just want to caveat that those are the authorized amount of positions. So it's not like the exact number of positions that are filled. They don't incorporate any vacancies or positions that are not filled.
And for the 26, 27 governor's budget proposed positions, that's the total number of positions that they're authorized plus the positions that they're are requesting, to be, authorized to have in a DCP.
Speaker 2
We have a boatload of questions that we provided to you guys in advance. I'm gonna rip through them, but we'd like to have pretty brief quick answers because there are so many of them, if we can. And just one, I just want to clarify. Can the public, advocate's office, sue the CPUC, if they disagree with actions of the CPUC?
Speaker 21
I would have to get back to you on that question. Okay. We have had cases that have gone before the California Supreme Court where we disagreed with the commission and including cases where we also agreed with the commission all the way up to the US Supreme Court. But have you sued? Sued the commission itself?
Speaker 2
Yes. Not to my knowledge. Have you have you sued independent operators? Have you engaged in lawsuits?
Speaker 2
Great. Thank you. Alright. So, rip through these and whoever thinks they're most appropriate, start first and whoever wants to add. But, how much time does it take to do a rate case?
And describe the time by type, electric, natural gas, telecommunications. I know you partially answered that in your in your comment, but could you just very briefly give us a quick answer on those?
Speaker 6
So I can start. So, pursuant to the public utilities code, general rate cases and a number of other rate setting proceedings, should be done in eighteen months. That being said, you know, I I do wanna be transparent. A number of rate cases, have taken closer to twenty two months, twenty four months. In particular, as we have more stakeholders joining the general rate case proceedings, they wanna make sure that they have enough time to analyze, you know, the the proposals from the utilities, provide their own testimony, their alternate proposals.
And so, in those instances, when they request extra time to be able to provide that, testimony in order to fulfill due process, we grant it.
Speaker 2
Thank you. How frequent are rate cases submitted? General rate cases are supposed to be on three year intervals. Four year. Seems like rate increases are being approved every six months.
Speaker 6
So, rate cases are actually on a four year interval. Historically, they were on three years for many years, and then a few years ago, there was a change in the rate case plan, so that they are now done every four years. And but then in addition to that, you are correct. Utilities can file, additional requests that don't fit into that four year cycle. So I think an example that, that you all may be familiar with was Senate Bill four ten that passed recently related to energization.
You know, through that legislation, the utilities were allowed to, come in and request additional funding for energization. So, for example, PG and E put in requests for over 2,000,000,000 for energization that we had to look at, but that was outside of the rate case because the timing didn't line up.
Speaker 2
Do you have a you have just statistics on then how how often are rate cases coming? If you add in these outside of the four year and then these special requests that come in, Do you have statistics on how often rate cases are coming in?
Speaker 6
Again, rate cases are every four years, but then there are additional, proceedings that have an impact on rates that come in on an ad hoc basis. I don't I don't think
Speaker 2
statistics on those. Okay. That's that's fine. Just trying to find out what we have. How many staff are typically assigned to a rate case?
Speaker 2
That's right. You mentioned that earlier. Thank you. And what technical expertise, engineering, accounting, economics exist in house to independently evaluate utility cost claims? And to what extent does the commission and the PAO rely on utility submitted data versus independent staff analysis versus consultants?
So how much we use in consultants? How much we counting on, the independent operators? And how much do we have in house?
Speaker 6
I can start and I'm sure mister Skinner has a response as well. So we do not use outside consultants for the general rate cases. All of the staffing is done in house. In terms of the types of positions I had mentioned earlier, so engineers, financial analysts, attorneys, administrative law judges, all are working on the rate cases in house. Okay.
The utilities do provide the initial application. So that is the I would say, the the basis of the rate case. They have to put forth a case that they wanna support. But then in addition to that, the judges put out rulings that the staff help them to prepare to get more information for the proceeding. And then in addition to that, parties like the public advocate's office and others provide their own testimony, their own proposals that also, inform the decision.
Speaker 21
Okay. And for the public advocate's office, the vast majority is in house expertise. We do occasionally contract out for very niche technical experience. And as part of that, our staff reviews the utilities proposals, other parties' proposals. We apply our own expertise, and then we conduct our own studies and analysis.
So we do rely on utility data, but we question it. We make sure that it's accurate. We use our own expert judgment in evaluating that.
Speaker 2
Okay. Thank you. For for general rate cases, do you have any recent data on how frequently the approved decision is the commission's proposal? The the commissioner proposal, how much of it is the PAO proposal, staff proposal, regulated utility, or other stakeholder proposal that's adopted?
Speaker 6
Yeah. I would say the the general rate case is never fully the utility's proposal, fully public advocates office. They the, case is split up into dozens of different business units, and so different approvals are done for each of those. And so I think a good example would be in the Southern California Edison, their last rate case. That case was reduced by the commission by about 800,000,000 and that reduction was, you know, driven by analysis from our staff and those advisory recommendations they provided to the administrative law judge and the commissioners.
But again, it's taking, parts of all of the different stakeholder testimony. We never accept I've never seen us, in my fifteen years at the commission, accept a utility rate case in full, but we've also never accepted a specific stakeholder's proposal in full either. It's a it's a analysis of all of them.
Speaker 2
So these are all hybrid, so it's hard to tell whose proposal actually is getting approved?
Speaker 6
So every rate review does result in a decreased amount of an approval. So for example, for Edison, I said the commission decreased their request by 800 about $800,000,000. We would we've never just denied a whole rate case. I mean, this is the funding that's for every single nut and bolt for the utility.
Speaker 2
Yeah. How does the commission, the PAO handle institutional knowledge loss when experienced analyst leave, given that these cases take years?
Speaker 6
So, as I said, we have, you know, about 30 staff on each of these rate cases. So that's a mix of people who have many years of experience as well as newer staff. And so that helps to train the next generation. We put funding, of course, towards sending our staff to rate case trainings, in particular hosted by the National Association of Regulatory Utility Commissioners. Good.
Okay.
Speaker 21
Thank you. PAO? And we do the same as the commission with overlapping staff assignments between new and existing staff. We've also developed a number of robust mandatory in house trainings. We have a basic training that takes a full sixteen hours negotiation training, numerous other in house trainings.
We also have written procedures for more routine work to help ease that transition. And then also where possible or when we can, depending on vacancies, if we can overlap, especially certain key positions with the new staff coming on board, we do try to do that periodically.
Speaker 2
Great. Thank you. Does the commission have a strategic plan that prioritizes proceedings? If so, how are trade offs made when staff capacity is con constrained?
Speaker 6
Yeah. So in particular, I wanna be clear that, you know, the staff working on a general rate case, they're not the same staff working on integrated resources planning. And so there's not like we take staff from from IRP and put them on the rate case or pull staff from the rate case team to IRP. It's a different skill set, a different set of staff. And through the rate case plan, you know, as I mentioned, we shifted from three years to four years.
The goal there was to make sure that the as much as possible that, the rate cases aren't all stacked on top of each other. So we don't have to prioritize PG and E over Edison. The goal is that as one rate case is ending, another one is coming in. And so, that's that's how we make sure that we don't prioritize one utility over the other.
Speaker 2
Thank you. What's a typical level of commissioner? That's all commissioners, not just those assigned engagement and record building in the record building phase of the proceedings, the hearings, workshops versus just the decision phase?
Speaker 6
Yes. So, when it comes to commissioner assignments because of Bagley Keane, we always have our our our, you know, main commissioner and then they usually have a Bagley Keane partner, and they are the only ones that will be part of the record building of the proceeding. The other three commissioners will not be part of the record building of the proceeding. And so that, especially the assigned commissioner, but also in conjunction with their partner, they create the scoping memo for the proceeding. This is an early document in the proceeding that said, these are the scope of issues that we'll be working on, and that dictates what can go into the record and be developed in the record.
But I do wanna be clear, not all five commissioners contribute to the record building of any specific case. I would say only two.
Speaker 21
It varies on the proceeding. In larger proceedings like rate cases, we're already gearing up before it ever files. In other cases, might be, for example, it was talked about earlier today around demand response programs or transmission and the GoBiz proposal, we're engaging at the same time as that information comes over to us.
Speaker 2
Great. Can any update be shared about the role of the Internal Audit Services Division and how its work has added transparency or efficiency to the CPUC process?
Speaker 6
Yes. So our Utility Audits Risk and Compliance Division provides an additional independent check on utilities between all of the rate cases. So utility audits branch staff, and these are auditors, drive, bringing diverse professional certifications and auditing expertise. They're covering all types of topics, energy procurement compliance, balancing accounts, energy efficiency audits, financial statement reviews, and these audits really span all complex areas of utility management, leveraging not just, you know, financial attestations looking at the books. We all they also go out into the field and they check was this vegetation management done according to what was provided to us.
And so, that's certainly an additional function. Thank you for asking about it for the utility audits risk and compliance branch.
Speaker 2
Great. We're trying to get this all on the record. We're getting close. Right? How are the staff at CPUC and PAO encouraged or required to find cost savings for ratepayers?
What incentives or cultural changes could be made, so that people are really looking for incentives for savings?
Speaker 21
So for the public advocate's office, that's the core at the heart of our mission is looking at where our programs cost effective, where is there more benefit to the rate payer than the cost of the program. And that's really at the heart of our advocacy around safe and reliable service is once we've assured that it's safe and reliable, is it cost effective? And so it's really at the institutional heart of our organization.
Speaker 6
I would say the same thing on the CPUC side. So we are working in particular with the administrative law judge and commissioners to ask additional questions via ruling, making sure that the testimony is robust in order to be able to support, the documentation that or to make sure that, there's appropriate support for the proposals that the utility is putting forward, as well as scrutinizing the testimony that we get from all of the stakeholders through additional data requests as well.
Speaker 2
So this has been a a concern that is has been raised and that is commissioners come in late in the process with proposed decisions. They you know, you it's it sounds like you only you have one in the record building. You have you have two of them involved and three of them not involved. What what can you identify as why we have so many commissioners coming in with proposed decisions late in the process?
Speaker 6
That hasn't really been my experience in the last several years. Maybe ten years ago, maybe that was happening more or even before that, we just had a different leadership at that time. But that has not been my experience today. And so even if sometimes we have a proposed decision and an alternate proposed decision, it isn't even necessarily that the commissioner and the judge are disagreeing, but they're trying to put forward two different options for the commission to be able to consider. And so, I think that over a decade ago, you were maybe seeing more of that, but now, we have been fortunate to have commissioners that are very engaged in the work.
They're they're out there with the community at the public participation hearings, hearing the concerns, and working very closely with the judges and staff, on on finding the right outcomes.
Speaker 2
Thank you. Can you explain, why the GRCs for small telecommunications companies were put on hold?
Speaker 6
Perhaps Anna Maria Johnson, deputy executive director for broadband and telecommunications can join me.
Speaker 22
Afternoon Chair Bennett, Anna Maria Johnson with the Deputy Executive Director for Broadband and Communications in the CPUC.
Speaker 2
Yeah. Can you explain why the GRCs for small telecommunication companies were put on hold?
Speaker 22
Sure. Thank you for that opportunity. So the small rural telephone companies, there are 13 of them. 10 of them participate in what is called the California High Cost Fund eight program that provides a subsidy for them to continue to cover their operating expense that allows for customer rates to to remain just and reasonable, while the subsidy that is funded by ratepayers, it makes up the difference for them to operate. The CPUC communications division issue a resolution that put out there for public comment looking at explore putting on pause general rate cases, which the 10 of them are broken into three groups, group a, group b, group c.
Speaker 15
Group a was gonna be coming in in October. We put a resolution to put a notice to those companies that we are considering putting the general rate case on hold as we explore ways to increase efficiencies in that process. And by what I mean by efficiencies is to make sure that all parties understand, the type of data that needs to be submitted, looking at opportunities to be more formula based so that, there's more predictions of what the outcomes of the GRCs will be. And that requires for a rulemaking to be open to explore that. So instead of beginning the next cycles of general rate cases under one paradigm and structure of a GRC, we put it up for comment to put a pause as we explore multiple ways.
Speaker 22
Do want to share that that resolution has been withdrawn at the moment, so it's no longer under consideration at the CPUC. We have been working very closely with the small rural telephone companies to understand their concerns. They also have heard our goals and objectives and what we're trying to achieve, and we're trying to find ways to get us there.
Speaker 2
Great. Thank you. Two questions about the intervener compensation. Can you provide a yearly estimate of the funding provided for intervener compensation?
Speaker 6
I don't have that dollar amount on the top of my head, I will have to come back. I apologize and get that detail. Just one comment I'll make about the intervener compensation program, though, is that we have seen more and more stakeholders getting involved in our proceedings, and so we've been receiving more and more requests for intervener compensation. I'm not saying that's a bad thing. These are groups that are contributing, making sure there's different perspectives than just the utilities, and so we highly value their contributions, but we have seen a growth in that.
Speaker 2
Okay. We we did provide this question to you guys in advance. Right? Can you provide a yearly estimate of funding provided for intervener compensation? So we would hope that in the future, you'd be able to come with that information.
How much does the interviewer funding process effectively supplement staff capacity or substitute for it? Is this this the same for quasi alleged proceedings versus rule making proceedings, or does it differ?
Speaker 6
Yeah. So I would say that the intervener, contributions do not replace what staff are doing. They, as I said, it's valued feedback, but they all have their own perspective. Right? We have interveners that represent small businesses, and, so they come for with a very small business forward perspective and testimony that they provide.
The Public Advocates Office has their own perspective. We have a number of different ratepayer advocates as well as environmental organizations, labor organizations. So, you know Okay.
Speaker 2
Right. Okay. As we go forward. I'm that's it in terms of the questions, but there are five things that from the legislature point of view, I want to make sure we get on the record, and that is assembly member, Burr has, wants to increase the size of the CPUC. She has ACA nine.
She has AB twenty two eighty nine, to establish the office of broadband and digital equity, within the government, operations agency, transferring that responsibility that direction. And she also, has a b 17 o five, to retry to reform the existing audit functions of the CPUC, in the independent office of audits. And, so I want to get on the record, that she has those, three requests out there. There's been a suggestion that we create a specialized investigative team at the CPUC to initiate an independent review of utility spending outside of the general rate review cases. And, this approach would allow additional time and depth of investigation.
Just like we've been able to to, do better with the refineries, as a result of having that, That seems like a suggestion that it merits our careful consideration by the legislature and by other people. And then the other one is that establish a CPUC tip line that would encourage utility employees and contractors to report instances of wasteful and unreasonable spending by the utilities. Do you have any comments that you'd like to make about any of these five proposals, but particularly the independent review, you know, to have specialized teams within the CPUC and also the CPUC tip line?
Speaker 6
So on the topic of the independent review, you know, earlier I gave a description of the work that our utility audits utility audits division does, and so that is what they're doing between the rate cases. Are checking, of course, the financial statements, but even going into the field independently between the rate cases. So I I do think that internally we do have that function. On the with the, like, the tip line, we we call it whistleblower. We do actually have that, in place right now.
And so those, items do come in and are, looked at by the appropriate teams. We have a whole consumer protection and enforcement division that, looks at issues like that, looks for patterns. And then in addition to that, you know, we have a consumer affairs branch at the PUC who picks up the phone every day and helps customers who have an issue with their bill, they missbilled. And just looking at 2025, they returned over 3,700,000 in redress payments to utility customers through that, through that consumer affairs branch. So I think we have a variety of different, structures in place at the PUC to support customer affordability, but always open to a conversation about improvement.
Speaker 2
And I assume you don't have any comment about the three pieces of legislation?
Speaker 6
About the broadband office and things of that nature. I would say that we are working very hard in those areas and have made great progress in closing the digital divide that we're very proud of at the agency, and, we'll continue to do that good work.
Speaker 14
Thank you so much. And and I did wanna jump in and and ask some questions and express some comments on the public advocate's office staffing level. In the call out from the staff on this item, I'm just gonna read from here. Subtracting p a PAO staff from the CPUC total resulted in a CPUC growth rate of 44.4% since 2017, 2018, and 26.3% since 2021, 2022. I don't know that there's any other agency that I can think of that has seen that level of growth in that amount of time.
Speaker 25
And so setting aside that that in and of itself is concerning to me about how CPUC is utilizing resources, and I'm really glad to hear that the tip line is already in place because I would be worried we'd be asked to fund another seven positions for the tip line based on our last discussion. It is especially concerning to me that the public advocate's office is asked to keep up with the same proceedings that we see enormous growth from CPUC staff to keep up with without a similar level of investment. And I know that there's an argument to be made that the entire CPUC should be a public advocate. Think there's an overwhelming sense that it isn't always. So I'm hoping that the PAO can kind of respond back about, given the staffing level that is proposed for you, what are the things that you are not able to do, And where should the legislature be looking given that I can only imagine that the utilities also have a larger staff and more available resources for these GRCs?
Speaker 14
So how do we best aim the PAO to be able to actually be that public advocate that we need them to be?
Speaker 21
Right. I'll start with the legislature has been very supportive of our requests. Looking at the commission's growth, there are many functions that the commission has that are outside the scope of the public advocate's office. So the safety inspections, the consumer affairs branch, a large part of what the commission does, required to do by statute is well outside the scope of the public advocate's office. As was noted that we've grown significantly as well, over the years, and that is paired with primarily, since 2018, has been with changes, enacted by the legislature.
So as the threat of wildfire became far more apparent in the aftermath of the 17, North Bay fires and the Southern California wildfires in '17 and then as we saw in '18, the public advocate's office grew with the support of the legislature, added significant new staffing resources to meet those demands. And so from our perspective with the legislator support, we have the resources that we need, in order to meet our statutory duty.
Speaker 14
Okay. I see my colleague jumped up to the table as soon as I asked that question. Would you like to weigh in on this?
Speaker 1
I have some general comments on item five and six, but you could continue your questioning and then I will jump in when the GRC is fed.
Speaker 14
Yeah. And I really appreciate that that answer. I I think what I'm really trying to suss out here is how do we make the CPUC more nimble and more responsive to the public? And I think one of the criticisms that I hear frequently when I talk to constituents is that the CPUC has been much more focused on what they would consider to be policy and less on the actual administrative function of administering this GRC process or making sure that you have the safety division. And I just would like to know how you'd like to respond to that, especially given the exponential growth of staff.
Speaker 6
Yeah. So I can share. So as I said earlier, the staff that we have working on, for example, a rate I'll I'll start with energy because there's also rate cases with water and telecommunications. So on energy, this maybe the policy issues, maybe that's integrated. I'm not sure exactly what that is.
Maybe it's integrated resources planning or rooftop solar. I'm not sure. But those, areas of work, we don't pull staff to work on those policy areas that we're supposed to be working on the general rate cases. So we do keep like, the staff for the rate cases are focused on the rate cases, they do not get pulled into other work That's policy related. They might do some they might do other things like connect with our utility audits division, for example, to make sure that they have information about the rate cases as they conduct their audits or even go out into the field.
But we're not pulling staff away from general rate cases in order to be able to support policy work. I would say over that time period that I talked about, 2017 to the present, as part of the questions, actually saw more more growth in the general rate case team at the Public Utilities Commission, and there's some history behind that. The CPUC went through a period of time, I would say, in the nineties of doing, performance based rate making, if you've heard of that term, And, performance based rate making did not have the results that we had hoped for, and so we have now built back up our rate case team in order to be able to do the, the fundamental components of the rate case and be focused and staffed to be able to do that work. And, you know, that was through support from the legislature for being able to build back those teams. But I would say none of our staff are pulled from, rate case work to be pulled to do, policy matters.
Speaker 2
Assembly member, Kati Pichinoros has a question. But, Assembly member Boehner, I did not Boehner. Boehner, I'm sorry. I did not see you sitting there, which is why I brought why I sort of summarized. I thought, well, at least I'll make sure that they know that.
You were right. You were just perfectly blocked behind the the person sitting here. So anyway, that's why I went I covered your items trying to cover for you. But anyway, I'm glad you're here.
Speaker 2
my as soon as, assembly member Peter Norris is done. Yeah. Assembly member.
Speaker 12
Alright. Well, thank you, mister chair. Picking up somewhat on Assembly Member Rogers' line of questioning, I think we're we're all really trying to understand what all of these additional people are doing. And I didn't I was watching outside on the screen while I was taking a call. So I didn't really understand your answer to Assembly Rod Minh Rogers' question.
So you've seen the the staff grow by more than 40%. What are all of those people doing? Okay.
Speaker 6
So I'll repeat a little bit of what I said and then continue to grow on that response. So, the staff that are working on the rate cases, the skill sets, I think it's part of your question. So we have engineers, financial examiners, attorneys, of course, the administrative law judges all working in. It's about 30 staff approximately per rate case. So this would be for Edison's rate case, PG and E's rate case, San Diego Gas and Electric's rate case, for example.
Now thinking about the growth of the agency since about 2017
Speaker 12
just if I can just pause there. Okay. So you've got make sure I understand. So you've got 30 you've got approximately 30 staff working on a general rate case.
Speaker 12
Okay. So that would be about 90 people then that are working on rate cases? I would oh, sorry.
Speaker 6
I would say so that 30 staff, approximately all of those are working on all of the rate cases. What I mentioned earlier was we had a rate case plan that shifted from a three year to a four year rate case with the goal of not having them be stacked on top of one each other of one another. But we do like to have the same staff work on multiple, utility rate cases so they can kind of I mean, it's not apples to apples always PG and E versus SDG and E, but be able to see what the trends are, see what you know?
Speaker 12
So I would it's not 90 staff. It's 30. Yeah. Okay. So you've got 30 and you it's interesting.
So you actually began your comments by saying that that rate cases are the bread and butter That's what I've always at the PC. I totally agree with you. 100%. But I guess what I'm now trying to understand is that if we've got 30 people who are doing the bread and butter work of the commission, what are the other 70 1,700 people doing?
Speaker 6
Yeah. I'd like to speak to that. So, you know, starting around 2017, we were able to see a growth at the PUC, in particular, in our safety staff. We had some very tragic incidents like San Bruno and, of course, the gas explosion at San Bruno, as well as some devastating wildfires. And so we have really grown our work at the CPUC in particular and our safety work.
That is a couple of different areas. So there's staff that are specifically focused on safety policy initiatives, and, those staff are also contributing to the rate cases, but then also a number of staff that are out there in the field doing inspections, of infrastructure. So this would be electress electric overhead infrastructure, gas pipeline work, all all different types of safety, what we call safety enforcement work. And we saw a very large growth in that staff safety enforcement and safety policy because of these, you know And then can
Speaker 12
I pause? On page 19 of our handout, we've got the number of full time employees by division.
Speaker 12
Was this from the PUC or is this from is this our estimates? Oh. The the Safety and Enforcement Division, according to these numbers, is actually the one line item that has decreased, not increased. So according to these numbers, in twenty seventeen, eighteen budget year, Safety and Enforcement Division was two zero six people and the proposal for this budget cycle is 120.
Speaker 6
Yeah, I want to speak to that. So if you look a little bit further down, you'll see a new division that was created called our Safety Policy Division. You see that it's, the one right underwater? Yes. And you'll see that there was nothing in the first column and then there's later columns.
So we were able to get growth in staff and safety policy division. Some of those staff did come from safety and enforcement. They had, you know, real life experience in the field that they are going to be, providing to safety policy work versus doing inspections, and so there was a shift there. So we got new staff for safety policy. That was a newly created functions at the Public Utilities Commission.
And then, some some staff that had been in safety and enforcement that went
Speaker 12
so then if I add up everything in 2017, 2018 that has to do with safety, I'm gonna include safety and enforcement division, safety policy division. Let's go ahead and include the office of safety advocates. That would be that you had 214 staff focused on safety in 2017, 2018. In 2026, 2027, adding up those things, you have 161. Yeah, you have 161.
So
Speaker 2
Excuse me. Again, don't don't forget the rail safety division, which is, hundred and twenty five.
Speaker 12
Yeah. Added people to rail safety. Okay. So were some of the safety and enforcement people not in rail safety? Yes.
That's Alright. So then thank you. We just need to add up all of the okay. So you're the safety has grown from has grown from two fourteen to two eighty six. So what about all the other areas?
So we've got the energy division in particular has grown has nearly doubled. So the energy division has gone from 161 people to 299.
Speaker 6
I can speak to that one specifically, but there's others I'd like to talk to about as well. So in particular, in that time, you know, we had the passage of Senate Bill three fifty, which completely changed the way that we are doing our our work our work around energy resource planning, and created what we call integrated resources planning. And so that was a very large grow you know, landmark legislation that came with landmark positions to be able to shift our resource planning from being, you know, focused on on, you know, get just getting new resources onto the grid. We're focused it's now focused on reducing greenhouse gas emissions and affordability and reliability. So all of those different pieces.
I also want to to point out, you know, we did have some growth in our admin human resources and IT in order to support all of these new staff coming on board. There's also some shifts that you'll you'll be seeing you see from these from these numbers here of making sure that we have enough administrative law judges to be able to, take on this additional workload that we're getting across all of the different industry areas. As you know, we had a a big change around the time of it's actually before senate bill three fifty, of the CCAs that are now part of the resource planning process. So before, we were doing resource planning for three three electric utilities. Right?
And now we have over 40 entities buying electricity, and we need to make sure that all of those together are meeting the compliance requirements and moving towards those greenhouse gas reduction, goals from senate bill three fifty and senate bill 100, which, is a very large undertaking going from planning for three and the to planning for with 40 different almost 40 different entities. So that's some of the growth on the energy side as well as on the admin side. I also wanted to, you know, acknowledge that we had a growth in our communications division focused on the work that we're doing for broadband, as well as the growth that we saw in the creation of the utility audits risk and compliance division. As you can see, it's not there in that first column, But just given, the concerns that we had about, accountability from the utilities, we, were able to build this division and make sure that they're able to do this work on the balancing accounts and and checking all of the financial statements and work being done.
Speaker 12
And, so this is these 40 people are sort of a result of the proliferation of balancing accounts and memorandum accounts? Yeah. Okay. Which has also driven an increase in workload for the PAO. Correct?
Speaker 21
Absolutely. That's one of the key items for us as, Chairman and Assembly Member Rogers were asking is around our staffing levels comparatively. As executive director Testify said, with the move of the energy rate case cycle from three years to four years, that eased some of the pressure. But what's filling in that gap is this in this proliferation of memorandum and balancing accounts. And I know for us in our response, you'll see that we have about 20 staff on the energy side who work on rate cases any given time.
Speaker 7
A lot of our other staff are dealing with everything from IRP, but a lot of it is work on memorandum and balancing accounts. As we've mentioned before on the wildfire side, dollars 9,000,000,000 previously approved, 7,000,000,000 under consideration, at least another $2,000,000,000 in the pipelines. And those sheer amounts of expenditures are GRC levels of expenditure. So truly staggering amounts and that's if that continues on its unsustainable path, we'll put more pressure on us for additional resources down the road. Something has to give, the more we can get back in the rate case, it isn't necessarily one for one, but it will ease some of that pressure because it'll become more efficient and we get to see all those requests in one go.
Speaker 23
Well, and I guess I have sort of just two comments then related to, I guess, this nexus between what we're doing as policymakers and what that does for your agency in terms of staff requirements, and I think particularly on balancing the memorandum accounts, because I think you both know there is concern amongst many legislators about that proliferation in growth. And so it sounds like if we are to take policy steps to put more things into the GRC, that will actually have a beneficial impact in terms of your staffing requirements, if I understand what you just said. Okay. And then, I guess my second point, just kind of coming back to item four and the conversation that we had around the implementation of the the change to the climate credit in, cap and invest in AB 12 o seven. I think that was a little bit of a light bulb moment for me where we have policy intent that I think we envision as being a pretty straightforward change and I think that there is an implementation path that's very straightforward and then we hand it to the agency and you come back and tell us, but to make this simple change, it's gonna cost us seven permanent positions.
Speaker 12
And I think that there's probably quite a lot of this positional growth that perhaps has been, made has has happened as a result of policy changes that have been made by the legislature. But I'm not sure that we've always connected those dots in a coherent way. So I would love again, just as a follow-up from this hearing, I think digging into some of the the day to day functions and figuring out, okay, wait a minute, are are there policy changes that we can make that will result in the same outcome that enable you to do this work more efficiently? I I think there's actually a ton of opportunity for us to have that conversation because, you know, growth rate of 40% in less than ten years of staff and budget is simply not sustainable. And so I think we need to work together to take a really hard look at that.
So look forward to doing that. Thank you, mister chair.
Speaker 2
Thank you. We're still on this topic. So let me just make a couple of quick comments. I think it just makes sense before we jump jump to your items. And I appreciate the the the the comments that that you made.
This has really been a very helpful hearing because I think some people are sort of thinking, you know, you you should just be doing rate and, you know, all this other stuff, you know, what what's everybody else doing? Well, I'm more informed now than I was before. We had this sheet in front of us, but, I do think the CPUC should be focused on rates. But I also think the CPUC should be focused on safety. And, you know, there's not somebody else out there doing that.
Speaker 10
And the fact that you've gone from three utilities to now with all the CECs and you have to review their rates also, those are three big important functions. And when you when you think about safety and what's happened with wildfire and sort of your growth and safety, this this might be a justification for a one time, you know, pretty bigger, than than normal growth sort of in in your agency. At the same time, you go back to item one that we were talking about, I'm not sure that policy should be the focus of the CPUC. I think rates, safety should be the policy of the CPU I mean, think about what did the citizens want when they voted for the CPUC? They wanted somebody to look over the the utilities and make sure they weren't getting ripped off by big powerful monopolies.
Speaker 2
I don't think they were thinking about, oh, we want you to run a demand grid response program, etcetera. I think they viewed that as policy that the legislature would probably be doing. And so, if you look at that first one, that's where I think we need to do this. There's more of this justified than I thought when I look at when I add the safety things in here and stuff. I'm not seeing that many, but I do have some specific questions on these things.
So if I'm but I've just give me quick answers, right, in terms of this. Executive division went down, from a 135 to 54. How did that happen?
Speaker 2
You just Yeah. Flip those over. Okay. Good. I don't have to ask about about that next line.
And then the safety divisions, I don't have a question. Administrative services division jumped up because you just have so many more staff. Assume this is like HR. Is that right? Okay.
Then information technology division. Makes sense. More technologies out there. You're gonna need more people. But but as technology is getting better, you should potentially need fewer people.
So what is it that's happening with the technology division that you need more people when technology actually should have many ways decrease the number of people that you need?
Speaker 6
Yeah. I mean, a lot of these are IT staff that are providing day to day support to this increased number of staff. So if you had, you know, one IT person that's supporting
Speaker 2
Let's go on. The legal division, it's, balancing accounts, two things. Tell me real quickly what what what tell me more about balancing accounts. I know you're trying to check all these little pots of money that the utilities are setting aside. Why is that getting so much more attention or focus or whatever?
Can update
Speaker 21
on that. It's really just the growth proliferation, the number of the sheer amount of money that's now flowing through these balancing accounts is, you know, we look back ten, twenty years ago, the vast majority of utility money flowed through the GRC. It was the budget they lived by. They were instructed to operate safely and reliably within that forecast. And as we've through a mix of legislative action or other things required memorandum or balancing accounts, the utilities are smart.
They're taking advantage of that opportunity, putting more money in there because it gives the illusion of rate cases becoming smaller and less impactful and shrinking bills. Instead, we've seen bills increasing, rates increasing, memo and balancing account costs increasing. So it's just kind of spilling out across
Speaker 2
the board. And so the legal division, that that's the kind of stuff you need for?
Speaker 6
That was in the utility audits risk and compliance. I mean, we we do legal Okay. At the bottom. The legal division does work with all of the different staff. And then one thing that's less visible here, it's for both legal and energy division.
There was support from the legislature a number of years ago to enhance our work at the Federal Energy Regulatory Commission
Speaker 6
Where we, are kind of in a public advocates type role, where we are advocating for ratepayers at the Federal Energy Regulatory Commission. There's another set of rate cases that they do there related to the transmission level infrastructure.
Speaker 2
Okay. Let me jump to the energy division, you know, growing from one sixty one to two ninety nine. What is that growth?
Speaker 6
Well, I was talking earlier about senate bill three fifty and senate bill 100, shifting the way we did our resource planning. Also now now doing resource planning, just for the three IOUs, but 40 different load serving entities with the CCAs, etcetera.
Speaker 6
That's been a big driver there. But I I do wanna just comment that, you know, that might be seen as policy work, demand response, or maybe policy work. That costs ratepayers money, and that is what we have to have the oversight over. So just because something is called a rate case, as as director Skinner said, not everything is just in the rate case. Demand response proceeding is rate setting because we're authorizing budget to do work.
Many things that people might just think of as policy have a dollar amount attached to it. Integrated resources planning, for example, it seems like policy, but a very large amount of a customer bill is for generation. And so they have to pay for the power purchase agreements that we scrutinize that is the clean electricity that we're talking about coming to the grid. So I just wanna make sure that we don't think that the rate cases are the only places where rates are going up. All of these policy decisions also have a rate impact, and so the staff are analyzing that as well.
Speaker 2
Thank you. Appreciate that. And, I think, I I think that's that's it from that standpoint. But, going back to that, it makes me more reluctant to add more policy to CPUC when you've got your hands full with what you have there. And with that, turn to the assembly member.
Speaker 1
Thank you. And thank you for to chair Bennett for allowing me to join these hearings. A lot of important policy considerations and telecommunications happen in the budget. I attend these hearings as the Chair of Communications and Conveyance because telecommunications, I don't think, always gets the attention it deserves. And I appreciate your willingness to continue to put these items up for discussions so that we can have these important I can ask these important questions.
What I see, and I think I would echo the sentiments of my colleagues, is when it comes to the CPUC, it's an organization that's growing in size, but the issues our constituents complain about are not getting better. And I don't think it's anybody's fault. In fact, you'll see I have heard the chair's comments on some of my bills. I think it's around the governance of the CPUC. And I think we have to start thinking about, know, more structural changes that need to happen with the CPUC.
So I'll speak for telecommunications in particular. It's rapidly changing policy area and the state has invested heavily in five years. And the CPUC is doing important work in this area, But I wonder if the structure itself is a barrier to better outcomes and unlocking further investment in our future. I do think a more focused CPUC would better serve Californians and telecommunications policy. And my colleagues on the UNE committee agreed, since my ACA nine to reform the CPUC passed unanimously last week.
Speaker 20
And while that policy discussion will continue in the legislature where it belongs, I am committed to working with the current within the current structure, to ensure the best outcomes in the meantime. So I have items, questions on item six, the lifeline program, but also I'll start with items five, and I'll go back to my inspector general bill from last year. So the CPUC staff in the communications division has nearly doubled since 2021 from 79 to a 142 staff. How many of those staff are permanent versus temporary? And I ask that because we know that some of the broadband infrastructure work will be decreasing when the FFA winds down, the bead winds up.
Speaker 6
Yeah. So I'll start and I wanna introduce myself. I'm the new my name is Lilam Testify. I'm the new executive director. I took on this role in February and looking forward to engage with you on the broadband and telecommunications issues.
And then I am joined today by Ana Maria Johnson, our Deputy Executive Director for Broadband and Telecommunications. And so just focusing on the question at hand, you know, the data that we provided for the Communications Division, as you said, you know, 70 staff, 79, and then now we're at 142, really focusing on this once in a generation, I would say, opportunity to close the digital divide. So I wanted to give Director Johnson an opportunity to share some additional information in response to your question.
Speaker 22
Thank you. Thank you for your question, Assembly Member Burner. As Director Tess Fye has mentioned, the communications division has grown tremendously. That is given the responsibility of implementing, deploying, and overseeing broadband initiatives across the state. From Senate Bill 156 to federal programs such as the Broadband Equity Access and Deployment Program Bead.
Across those two programs, it is close to $4,000,000,000. 2,000,000,000 in the federal funding account and 1,980,000,000 in federal funds. I do want to talk a little bit about the question, well, once those programs are up and running, then why do we need ongoing? It's a journey. We are not done until the customer is connected to broadband.
So from the time the legislation through the Public Utilities Code or through the bills you put through pass, we work in implementing those programs. Once they're implementing, then we operationalize them. Meaning, we open the doors for applicants to come in, get awarded, and that's what we have been doing in FFA and Bead. Now that awards have been made for a part of them, we go into making sure that those awards are delivering on the performance. So there's a performance period.
WARs have two years to complete, and then there's a performance period of ensuring delivery of affordable services for five years or up to ten years. And all that oversight and managing to making sure that those projects gets completed, to ensuring the performance of those multiple years does require the staff. So it does not end once the award is done or the program has completed the application period. It continues until the life of that particular project when the performance period is complete.
Speaker 2
Thank you very much. Assemblymember, I just want to point out we have a super hard stop at 01:30 and a lot of public comment and we still have item six. I want the answers to be as sufficient as possible.
Speaker 1
Yes. I want to thank you. My question was actually how many of them are temporary and how many are permanent, which wasn't answered. But I would encourage you to look at just like, the, director was, executive director was saying, with the GRC, you have 30 people. They're staggered.
You use them efficiently. FFA and BEAT funding are very similar. The people that you would use to allocate the awards and then check that they're doing don't need to be ongoing. That makes no business sense to me, so I would encourage you to reevaluate that because the growth in such a short amount of time that's doubling doesn't match with what the task that the communications division has been given, in my opinion. I also I'm going to leave out the question about the high cost fund A.
It was touched upon earlier. I think the proposal and the resending of the proposal has created uncertainty in a core function of the communication division, which is the making for the high cost fund A program. It would behoove the CPUC to focus on its bread and butter in the telecommunications area. The high cost fund a part is your core bread and butter component. That doesn't really match up for me that you would say we don't have staffing, so we can't because we're doing these kind of nice to have things, but we're not gonna do our core things.
I I think, again, that comes back to our constituents. They wanna see the CPUC look at rates, look at how we have, efficient reaching of our goals, both our affordability goals and our clean energy goals, and our ending the digital divide goals. They want to have that. That is the first thing, and all the other stuff comes next acts after that. When they see as agency growing, growing, growing, growing, and they're not seeing the results, every the CPUC should be concerned because each one of us who go home to our districts as elected representatives are concerned.
I just want to say on the internal audits, I wanted to ask, are those published? Are they accessible to the public? I will ask this so you can answer together. If they are published, do you follow all the internal audit recommendations? Three, how do we know you have done that?
Ahead.
Speaker 3
I want to go back to that question, I'm sorry, to clarify. The positions on page 19, those are all authorized permanent positions. Those are the positions that the PUC is authorized to fill. Those are permanent.
Speaker 1
Oh, thank you. So the so the request from what it was at '79 I don't know. Let me see. What From '79 to January, the January are permanent positions.
Speaker 3
I'm sorry. To further put a nuance on that. So, the 79 is, like, the maximum number of positions that they could fill within that, in that division, from the comms division. The proposed positions for the one forty two consist of those that they're authorized to fill, plus any budget change proposals, that was put out at governor's budget.
Speaker 6
I can take a moment for the other part of your question. The utility audits and risk compliance division that I mentioned, they are doing external audits of the regulated entities, All of those external audits of our regulated entities are published online on our website.
Speaker 1
There are no internal audits that exist outside of what is published online?
Speaker 6
I can share. We have a different division that does internal audits. They are doing audits of the communications division, the energy division, legal division. And so those internal audits are also published. There's a report on our website.
Our internal auditor did a presentation at our voting meeting. She does it every year in February, sharing the audits that are in progress, the number of recommendations that have been completed, the number that are outstanding. We can provide that to your office, the report to your office.
Speaker 1
I have questions on six, but we want to go to six. On item six that I don't think we have heard yet, we have not heard six yet. My question is the hearing. The CPUC is proposing to increase the public purpose program fee from $1.25 per service line per month from 90¢. The fee was previously a dollar 11 in mid twenty twenty five.
Why is there so much fluctuation and how can the legislature be better informed about future adjustments?
Speaker 6
I can start on this response and I will go to deputy executive director Johnson for any further details. As you know, the California Lifeline, it is the state's primary program for ensuring that low income households have access to affordable phones, broadband services. As you know, the federal affordable connectivity program has, you know, sunset in 2024, and so we did see a growth in customers coming into the California program, and that growth is really what drives the program costs. And so, the legislature, of course, approves multiple budget increases to accommodate that growth of subscribers, and that's reflected in the surcharge. And so we have preliminary numbers that we share with the legislature early in the year, and then we continue to collect information about our subscribership levels, We use that to inform the resolutions that we issue to increase that surcharge.
I know there are many other details there, so I want to turn the mic over to Deputy Executive Director Johnson.
Speaker 22
Thank you for the question on the surcharge. Think of the surcharge as the cash flow that funds our six public purpose programs for which the budgets are approved by the legislature. The CPUC has a responsibility to ensure that whatever budget is approved, that we have enough cash flow coming in through those surcharges, which is an amount, a fee on access lines across the state. You are correct that we had decreased the surcharge from $1.11 to $0.90 a year ago, and now we're looking to increase. Throughout our management of our six universal service public purpose programs, the CPUC has overseen the need to update, increase or decrease surcharge year after year.
And that may happen a couple of times in a year. Sometimes it stays constant for a few years. It just depends on the budgetary amounts. At the time we decreased the surcharge last year, we were seeing
Speaker 22
funding coming in from ratepayers to fund those accounts and has sufficient reserve. And as a responsibility of stewards of ratepayer funds, it was necessary to decrease it. So ratepayer contributions have been down for a year. Now that our assessment has seen that the fund balances are being depleted, and if we don't increase it, we are at risk of being in the red, We are now proposing to increase it to 1 point dollars 2 to cover the approved budgets today. That process is an ongoing common process that is our ordinary work that we do in assessing all the six public purpose programs.
Because at the end of the day, we cannot be close to depleting the account or in the balance because keeping those balances healthy is necessary to ensure that ongoing services happen to the customer. There is lead time necessary to increase surcharges. It goes through a public comment period, it is very transparent. And then it is voted out by the Commission.
Speaker 1
So in the draft resolution to I mean, have so many questions, but in the interest of time, I will probably have a separate conversation. In the draft resolution to increase the surcharge, the CPUC is estimating program expenditures of $170,000,000 below the requested amount of the Lifeline BCP. So if this BCP is approved, can we assume the surcharge will increase beyond a dollar 25? Because for everybody that knows, these access lines, if you're two parents with two teenager, you're paying four access lines. You might have a VoIP account at your home that's in fifth access line.
So there are a lot of access lines that have fees. And to my knowledge, there's no there's no cap on any of these fees. So will we assume the surcharge will increase beyond $1.25?
Speaker 22
Yes. You should assume that it will increase because our budget will be increasing. And while we always do a very close look of assessing where we are with the number of access lines and the revenues, it is fair to expect that the surcharge will increase. But I must say it's increasing to cover a budget that is necessary to serve the people of California. The California lifeline program is still only operating at a 40% take rate, 1,800,000 out of an estimated 4,500,000 that are eligible to participate.
While we are seeing tremendous improvements in knowledge about the program, increase of the program, including our home broadband pilot, I do want to be very transparent and honest that we are not at 100% of serving everyone that's eligible in California. And in order to fund everyone that's ineligible, revenues are needed to fund the program.
Speaker 1
Yes. And when will we see the first enrollees? You're talking about the Lifeline Home Broadband Pilot Program. Do you already have enrollees? Or when are the first enrollees?
Speaker 22
Yes. We have 9,400 enrollees to date. And there are eight companies that are already offering it, including Comcast and Charter, and they continue to grow, weekly.
Speaker 1
So you said 9,400 of the estimated four point how many that are eligible? 4,500,000. Is that what you said?
Speaker 22
So 4,500,000 is everyone that's eligible. Right now, we have 1,800,000 subscribed, to the California lifeline. The home broadband pilot is just one stream of that.
Speaker 1
Okay. I will end my comments and I would hope to have further discussions. I really do believe policy should sit with the legislature and not other agencies.
Speaker 2
Thank you very much. We are not going to open up a anymore in terms of item six of those. The reason we had item six on there was so the assembly member could ask these questions. And, with that, we are now moving to public comment. I'm gonna ask the sergeant to help me estimate how many people are lining up because that will determine how much money we have.
So if you're outside you're planning on doing public comment, would you please step in the room so that we can estimate how many of you there are because we have a hard stop at 01:30. So if the sergeant could give me that estimate before we start up here, you're gonna have to step outside probably to see. I'll I'm I'm just looking at that line now. We're gonna go thirty seconds and give you a gold star if you go faster. Will you please the next person be ready to step right up to the microphone?
Will the line move a little bit this way so when you finish with the microphone, you go that way and the other person steps right up. Step right up to that microphone, sir. Good. Alright. Thirty seconds per person.
There you go. You're on.
Speaker 28
Ian Padilla representing the coalition for adequate school housing and the school energy coalition. We're part of a a a coalition that is, wanting to extend the, deadlines and get the money out to schools. Thank you very much.
Speaker 7
Good morning, mister chair. Michelle Gil on behalf of California Association School Business Officials, also speaking regarding issue one. We request immediate action to ensure remaining Cal shape funds reach the California schools that need them most to improve energy efficiency, health, climate resilience. Please, extend the deadline. Thank you.
Speaker 9
Good afternoon, chair. Molly Kroll with American Fleet and Power California. I wanted to speak briefly about the transmission accelerator program, which targets CAISO competitive projects often completed by independent transmission developers bringing unique resources to California and with a record of completing projects on time and at savings. So I wanted to point out that while the accelerator targets those projects, the vast majority of transmission in the state is developed by IOUs. This TPP, for example, one project is eligible for competitive solicitation.
Speaker 24
36 are going directly to the IOUs with a work total of $5,000,000,000. We're very interested in making sure that the competitive transmission developers are still able to participate in the state. Thank you.
Speaker 8
Hi. Good afternoon, chair. Molly Quirkburn with Axiom Advisors on behalf of LS Power. My comments are regarding item two from today's agenda, the transition accelerator program. Ellis Power is a leading
Speaker 2
interrupt you for a second. The person that just spoke, will you be sure to email my staff your comments and everybody else in thirty seconds. We're having trouble getting all your comments captured. So if you will email your comments after you make them, it'll be a big help for us. Okay?
Thank you. Sorry to interrupt.
Speaker 8
Oh, no. It's totally okay. Molly Corcoran, do you want me to start over?
Speaker 3
Molly Corcoran with Acxiom Advisors on behalf of Ellis Power. My comments are regarding item two, the transmission accelerator program. Ellis Power is a leading transmission investor, developer, operator and owner of transmission assets. In California, we've been an active participant in CAISO's competitive solicitation process, having been selected by CAISO to build and operate more transition projects than any other entity due to our innovative design and cost containment commitments that lower the cost for ratepayers. Our concerns are just that we wanna make sure this program works and the details really matter here.
Speaker 17
Thank you, chair. Will Abrams with the Utility Wildfire Survivor Coalition and also an intervener at the CPUC and Office of Energy Infrastructure Safety. I would just advise the committee to think about sort of pre and post a b ten fifty four in 2019. We moved a lot of the responsibilities out of the CPUC over to office of energy infrastructure safety, but what we've seen is still increasing costs. We've seen interveners move away from safety performance, and I would say that that's not a great, thing to have.
Speaker 25
us. Representation of wildfire survivors in these and there's no budget for it. Thank you. Why Victor Berger
Speaker 12
afternoon, chair. Martin Vendula, on behalf of the California State Association of Electrical Workers, the California State Pipe Trades Council, and the Western States Council of Sheet Metal Workers in support of, extending the deadline on the Cal Shape program so that those schools get that much needed funding. Thank you.
Speaker 23
Craig Scholler on behalf of AVA Community Energy in support of funding DSGS out of its existing program at CEC and possible extension of the program. Thank you.
Speaker 22
Good afternoon, Chair Grisela Chavez on behalf of Ceres. We urge support for the DSGS program, which has proven efficient and must receive adequate funding to maintain last year's scale. Since the CPUC cannot realistically build a replacement time, DSGS should be extended through at least 2028 while SB nine thirteen establishes a long term solution. Thank you.
Speaker 33
Leah Barrows, on behalf of GoodLeap, thousands of GoodLeap's customers are enrolled in DSGS, so we support issue one. It's a successful, well run program that allows them to earn cash rewards for supporting a cleaner, reliable grid. It's important that DSGS receives adequate funding this year and remains unavailable to to prevent blackouts and price spikes. For issue number two, we do oppose while GoodLeap supports and participates in ELRP, that program only covers customers in IOU service areas. And so we really wanna make sure that you guys understand that replicating a program the size of DSGS by next year is challenging, if not impossible.
Speaker 7
afternoon, Cassandra Marr. On behalf of the California Efficiency Demand Management Council regarding issue one, we align with the committee about success of DSGS program. DSGS should be extended at least through 2028 to ensure that we could take advantage of the program. As such, Cal shape interest dollars should go to DSGS, not ELRP. And separately, Sedmex supports ongoing funding for the Tech Clean California program.
Thank you.
Speaker 18
Good afternoon. I'm Robert Harlow with indoor environmental services. We're a mechanical services provider. We're a contractor. We've been involved in the cow shape program.
Speaker 28
We hire union sheet metal workers, union plumber pipe fitters. We're sole sourced to 42 different districts, and those are really good jobs. We encourage you to extend that program, and thank you very much.
Speaker 29
Adam Hodafi here on behalf of Generac Power Systems and Ecobee Smart Thermostats. I wanna echo what was said about DSGS. Our customers are in DSGS, and our experience has been that it is much harder to enroll in ELRP. I want to zoom out and mention that reliability wise, we are headed to a reliability cliff in 2027 where many of the programs that we created in 2022 to prevent another '22 from happening are expiring, including the OTC plans, which you're very familiar with, and also DSJS is running out of money. And the CPUC's resource adequacy program really isn't sufficient to meet their statutory reliability mandate.
Losing this program at this time would be catastrophic, as we're heading into this this rather constraints are.
Speaker 2
Thank you very much. If you'll please if you'll go if you'll go out that way and the line moves this way. Right? There we go. Turn to your left after you speak.
There we go.
Speaker 13
Good afternoon, chairman. I'm Caleb Boyce with Environment California, also commenting on behalf of the Center for Biological Diversity, California Public Interest Research Group, and Rewiring America. Just wanted to voice our support for the continuation of the demand side grid support program through program years 2027 and 2028, and broadly, just the support for environmental organizations. There are many more here, just for relying more on the millions of distributed resources that we have throughout the state. And we think that the DSGS program has provided an excellent model for how we should do that.
Speaker 26
Thank you, chair. Kim Stone of Stone Advocacy, another one on Team Save DSGS. CALSA agrees with the staff recommendation to shift unspent deep DEPA funds to DSGS for use for twenty twenty six summer. We are concerned, we like using cal shaped interest for DSGS as more effective than using cal shaped interest for ELRP and shifting those folks over. DSGS has been tremendously successful, and, we urge its continued funding.
Speaker 4
Good afternoon, Chair. Vince Segrew, on behalf of the Western States Council of Sheet Metal Workers in support of item nine, heat pump matching funds. We think this is a great program opportunity with zero overhead, full transparency, and shows a really good use of governance, results driven. Thank you so much.
Speaker 11
Good afternoon, chair. I'm Brandon Garcia with Advanced Energy United here to speak on issue number one. Wanna echo all the comments made about saving DSCS and extending it to 2028. I would wanna further comment and say, if the issue is about funding stability for a program like that, we work we're working on a bill right now to integrate DERs into the larger market and would invite the committee to have that conversation with us because we do think that is a good way to continue these resources without having to come back every year. Thank you.
Speaker 8
Good afternoon, chair McKinley Thompson Worley on behalf of Solar Energy Industries Association and aligning my comments with all of my colleagues regarding DSGS.
Speaker 32
Of course. McKinley Thompson Worley on behalf of Solar Energy Industries Association, aligning my comments with all of my colleagues just regarding DSGS and just want to emphasize that we have an existing program that's proven scalable, reliable, and cost effective. We agree with the staff recommendations and feel it's critical that it receives adequate funding this year and is extended to 2028. Thank you.
Speaker 5
Good afternoon. Allison Hilliard with the Climate Center also commenting on issue one in support of the comments about DSGS funding and making sure that we're shifting the diva funds to DSGS and also concerns about, the shifting of DSGS to ELRP. I think we should keep DSGS going, and that's also on behalf of Vote Solar. I'm working with Brandon at Advanced Energy United on that bill and make sure we'll follow-up with you. Also, quick comments on issue number three, the climate center.
We are support of the division of petroleum market oversight budgets requests. Smooth transition, managed transition away from fossil fuels is important. Thank
Speaker 14
Chair members, Marissa Hagerman with Trident Price Consulting commenting on issue one for environmental defense fund California environmental voters and with permission for Californians for local affordable solar and storage and Los Angeles Clean Tech Incubator. In summation, we support adequately funding DSGS and support keeping the program at the CEC. I'll follow-up with written comments.
Speaker 15
Hi, chair. Marie Lu. On behalf of the Asian Pacific Islander, Environmental Network and the Union of Concerned Scientists in strong support of DPMO on item number three, given the substantial profits that the oil and gas companies are making amid the Iran war and the ongoing mystery gas surcharge, we believe that DPMO's market investigators are critical to protecting consumers. On behalf of the California Environmental Justice Alliance, wanted to support, item number one and strong support of DSGS, mirroring other comments from others. And then finally, on behalf of the leadership council, on issue number nine, we're concerned that the proposal to move money out of the EBD program and are interested in working with the steelworkers and supporting alternative funding sources.
Speaker 1
Good afternoon, mister chair. Bigham Murray on behalf of NextGen California to urge the committee to strengthen CARB's latest amendments on its cap and invest rule making, specifically by removing the manufactured decarbonization incentive to ensure robust GGRF. NextGen also fully supports restored funding for the DSGS program, like many of the other folks here. And they also support the proposed $200,000,000 in the ZEV incentive program and expansion of funds to also support medium and heavy duty zero emission trucks.
Speaker 34
Good afternoon. Taisha Waltz with the California Housing Partnership and also representing over 40 climate environmental justice and housing orgs. Advocating gets funny cuts to the Equitable Building Decarbonization Program, the Low Income Weatherization Program, and Tech Clean Program, all which are running out of funding this year. The Low Income Weatherization Program is the state's flagship program for multifamily decarbonization. On average, participants in the program save over 30% on the energy bill, which helps maintain affordability for low income households.
Speaker 35
And lastly, we are happy to work with the sheet metal workers on establishing their program as well. Thank
Speaker 34
That was fast. Gabriella with Sierra Club California. I'm here to respectfully oppose the staff recommendation to redirect 10,000,000 from the Equitable Building Decarbonization Program administrative budget to fund the proposed sheet metal metal worker initiative. We're eager to explore pathways to support their goals without weakening EBD. We believe there is a collaborative solution here.
We're already facing real funding shortfalls for both the low income weatherization program, which is especially critical in the tech clean California. EBD has already faced multiple cuts and further reductions were setting a harmful precedent. Also want to echo the comments from previous partners and urge continued funding for demand side grid support program. Please send
Speaker 2
us an email on that. All right. And with that, this hearing is closed in, ten minutes before we had to be thrown out of here. Thank you.
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