Senate Budget and Fiscal Review Subcommittee No. 2 on Resources, Environmental Protection and Energy
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Speaker 5
Vallejo? Helen Kerstien with the Legislative Analyst Office. So, don't have any specific concerns with the proposal. It does appear broadly consistent with Prop four and the implementing legislation. However, we note this is a great example of some of the comments that we provided, I think, the committee last week on proposition four, kind of new programs.
Right? This is a very significant sized new program. I think this is the largest single appropriation for a new program in this year's Prop four budget. So, it's pretty large, and this is really the full amount, basically, of the transmission funding. So there is still my understanding is there's still quite a bit of detail that's yet to be worked out on exactly how the program will be implemented.
To the extent the legislature has specific ideas of how you want the program to operate, this like with other new programs, this is the time that you could weigh in. So if you're comfortable with the approach that the administration is taking, no further direction would be needed. But if you do have some additional ideas, providing that direction in the statute would probably be helpful. So, to take questions, if it's appropriate. Thank you.
Speaker 3
you. I'm wondering how GOBIS and the Department of Finance are how does this relate to driving down energy costs for ratepayers?
Speaker 7
to take a stab at this. I think the theory, the thinking around the transmission infrastructure accelerator is that with state financing and support, the project sponsor would not include those portions into their rate base or their rate of their request for a return on equity, therefore lowering ratepayer costs.
Speaker 3
So, I mean, so I hear you in the biggest picture conceptually, but is it does it go to any further depth? Because, I mean, it could result in it costing less, but that doesn't necessarily mean it comes back to the ratepayers.
Speaker 8
Morning. Andrew Barnes with the Department of Finance. So as my colleague from CoBiz noted, when a transmission company is seeking a rate of equity a return on equity, they have to go to the Federal Energy Regulatory Commission, FERC, and have an authorized rate of return. And so they were the language in SB two fifty four prohibits the entity from seeking a rate of return, they couldn't recoup that in their rates that they that CPUC works with them
Speaker 1
to set. Okay. Doctor. Choi? So SB two fifty four requires GOBIS to develop a financing development strategy for eligible transmission projects received from the California Transmission Accelerator financing, right?
What has GOBIS and I Bank done so far since the enactment of SB two fifty four in engaging with transmission project developers and coordinating with other state agencies? And when does the department expect to submit the strategy to the legislature?
Speaker 7
We've had some ad hoc meetings with some interested developers and investment firms who have inquired about SB two fifty four and the transmission infrastructure accelerator and the Prop four funds. In terms of this strategy that is due to the legislature, we would need funding to bring on consultants, and
Speaker 7
the budget request to help us develop this report in terms of the types of publicprivate partnerships at strategy or plan that the state can pursue in terms of transmission financing.
Speaker 1
As was noted by the LAO, the funding that is being requested is all the funding as opposed to only taking a portion of it. How much would be needed to just put together the plan?
Speaker 7
So, think there's two there's the Prop four funding, which doesn't allow for administrative services for this program. And so I'm estimating, you know, having done other types of, reports and bringing on consultants to do something similar for other areas, estimating about $3,000,000 to for the consultants just because this issue area is highly regulated and a very niche market. So the expertise that would be needed and the types of consultants, we're estimating that it would cost around that much.
Speaker 1
Because we do we recognize that we do have a structural deficit structural problem here. It isn't just whether we're going to be able to have a balanced budget, it's whether or not we're going to do something about the structural problems that we do have. And we're never going to do that if we keep implementing the bills that my colleagues and I have passed and asked you to implement. Those are hard decisions that we'll have to be making very soon. My other question for Ibank, and it goes back to ratepayer savings, is how is I Bank proposing to optimize the use of state funds in the revolving fund and maximize ratepayer savings?
Speaker 10
That's really yet to be seen, Senator. As my colleague said, we do need to bring on consultants and evaluate what would be optimal financing alternatives. The legislation is very broad and gives us the ability to make direct loans, provide financial guarantees, or even purchase insurance or surety. And so there are a variety of different financial tools which could be utilized, but we really don't have the staff or the consultant expertise to evaluate that at this point.
Speaker 1
And the fund that is being put together is hundreds of millions of dollars. And even if you gave all of it to one transmission, how explain to me how that's going to work.
Speaker 10
So a combination of different things. One is, ideally, we hope to be able to leverage the funds and be able to access the bonds markets to be able to borrow more, essentially, so that this is essentially seed money to be able to catalyze a larger borrowing. In addition to that, it's really just about figuring out what's the right how we're going to be able to utilize that.
Speaker 1
Very good. And how will you ensure that the state funds are protected? Because this is a revolving loan.
Speaker 10
Part of the analysis we would do is an evaluation of the borrower counterparty. So there's two parts to this. One is the developer needs to come through the transmission planning process from Kaiso. And then separate from that, we will undergo a financial analysis of the borrower and their financing plan, of which we would expect to just be a portion of the plan. As you pointed out, these are billions of dollar projects, and we're not going to have the funds to fund them in their entirety of their need.
So we're going to be part of a syndicate likely, lending into this or providing some sort of financial support. And we'll evaluate that and we'll evaluate them as a counterparty, which is why we do need consultants in place to really evaluate the soundness of their financing plan.
Speaker 1
Without a doubt, we need transmission. This is the infrastructure we need, and there's been lots of talk about this need and the fact that we're behind on it. And I appreciate my colleague having introduced this and having it signed by the governor. But we also want to be realistic in how we move forward with it. And how are there any accountability measures I Bank has looked at to ensure that you're able to recoup the funds if a project is delayed or canceled or mismanaged?
Speaker 10
One is we would expect that if we're going to be dispersing funds, likely if it goes through if we utilize a bond, they'll be dispersed to a third party trustee. So funds will be drawn down as they're spent. It won't be like we're just transferring the money to a developer up front. It would be working through there are mechanisms in place similar to any project that utilizes a bond issue, that you don't transfer all the funds to a third party and they spend it as they want.
Speaker 1
Very good. Thank you. No other questions then? We're going to move on to issue number two. Thank you.
Energy demand response trader bill language. All right. First, we're going to hear from Ms. Deanna Carrillo from the CEC and Executive Director Luwam Tassfei from the CPUC, who will present the Governor's proposal.
Speaker 11
Chair, if I may, I'm David Evans from the Department of Finance. Finance would like to provide an overview over the two proposals, and then we'll pass it on to the respective members from the PUC and the CDC. Okay. Good morning, Chairman and members. My name is David Evans from the Department of Finance.
I will be presenting the two trailer bill language proposals in Issue two. The 2026 Governor's budget proposes two pieces of trailer bill language to consolidate the remaining funding for demand side resources to respond to grid emergencies in 2026 while also transitioning state efforts and resources towards more long term emergency demand response efforts that have more reliable funding streams to provide the greatest repair value. So the first language proposal in issue two authorizes the general fund appropriated originally in 2021 for the Distributed Energy Backup Assets Program, the DEBA program, to be used for the Demand Side Grid Support Program, the DSGS program, to support any emergency triggered demand reductions during of the 2026. This redirection of $22,000,000 general fund from the DEBA program to the DSGS program will supplement the remaining existing funding that's in the DSGS program, which is about $30,000,000 for a combined total of about $52,000,000 to respond to any grid emergencies this summer. So that's the first proposal.
The second language proposal authorizes the accumulated interest in the California School Healthy's Air Plumbing and Efficiencies Program, the Cal Shape Fund, which has approximately $70,000,000 to be returned to the electrical corporations for use during the 2027 and 2028 to reduce ratepayer costs that support the Emergency Load Reduction Program, which is also ELRP, or a cost efficient equivalent program, which is under development by the PUC. The language also directs the CEC and the CPUC to work together to transition existing electrical corporation customers who are participating in the DSGS program to the ELRP or an equivalent program underneath the CPUC. This concludes my presentation. I'm here joined by my colleagues from the CEC and the CPUC, and we're happy to address any questions that you may have.
Speaker 1
Thank you. All these acronyms. All right. Next, Ms. Deana Carrillo.
Good morning, Chair, members. I'm Deana Carrillo with
Speaker 2
the California Energy Commission. I have nothing to add to the proposal, but I'm happy to answer any questions.
Speaker 9
Ms. Tisphai. Good morning, Chair Reyes and members of the committee. Likewise, Luam Tesfaye, Executive Director for the California Public Utilities Commission, ready and prepared to answer any questions on the proposal.
Speaker 5
Helen, Christine, again. The one comment I wanted to make is just to point out that part of this proposal includes transferring $22,000,000 of money that was previously, provided from the general fund, as you heard, from the DEBA program to DSGS. Absent this transfer, that funding would naturally revert back to the general fund because the, in pretty short order because it's it's due to expire shortly, the appropriation. So we just wanted to flag for that for you, because you could capture that savings as general fund savings, should you not choose to do this. So, again, it sort of fits into that larger framework that we talked about with the committee last week, about sort of thinking about what are your highest priorities for general fund, and we think this is another area where you'll want to weigh, is DSGS, demand side grid support, among your highest priorities for general fund resources this year?
Because absent this proposal, the money would revert back to the general fund.
Speaker 3
think there's also a proposal from SDG and E for it to go back to the ratepayers, Right? So from Cal shape the Cal shape funding, that's what you're specifically referring to. Right?
Speaker 5
So there are actually two pieces, I believe, to the proposal. So there's one is the general fund dollars, and that's the piece I was referring to. Absent that, that would revert to the general fund. There's a second piece, which is the emergency load reduction piece and the the cal shaped piece, and I believe that's the piece perhaps My colleagues may have more information, but I believe that's the piece you may be referring to.
Speaker 11
And David Evans from the Department of Finance. My colleague from the LAOs, correct? I think the question that you were responding to was regarding the Cal Shape program and the administration's proposal to use the interest the remaining interest that's in the program to revert and to go back to the IOUs for to assist ratepayers.
Speaker 3
Okay. So I guess my question is, why is the Cal Shape funding not being used for schools and classrooms? Because that's the point of that program. So I guess I mean, my question is why has the administration not used it for that?
Speaker 11
So the administer David Evans, Department of Finance, although there's no governor's budget to extend the Cal State program, the intentions of the Cal State program wasn't for it to be like an indefinite program. There was always, within statute, a sunset date for it for the program. And so the intentions of the administration is to provide, like, the greatest benefit to ratepayers. And so those are ratepayer funds that the schools have utilized. And so the remaining funds that are about to sunset that we would the proposal is so those can go back to the IRUs, or they can go back to the ratepayers, and then the interest that was accumulated within the fund to also go back to ratepayers.
So although the governor's budget doesn't extend the Cal State program, we do want to point out that proposition two, which is a statewide school facilities bond that passed in November 2024, approved $8,500,000,000 in state general fund obligation bonds for TK through 12 grade public schools for projects that are similar to the Cal Shape programs for the school ventilation programs, the plumbing program within Cal Shape that potentially could be used for using those resources as well.
Speaker 3
Okay. So it sounds like what you're saying is that you think there's the position is that it's potentially redundant of other programs or bonds that are funding the same types of improvements in schools.
Speaker 11
I wouldn't necessarily characterize that as redundant, but there's other avenues, other revenue streams that could be utilized. And so we're trying to we recognize that utility rates are rising and trying to use the available funding streams that we have to be able to address and mitigate those rising utility rates for ratepayers.
Speaker 3
Then thank you. And then my second question is, it's there seems to be a clear stakeholder preference for DSGS. So why is the proposal to shift the funds to ELRP?
Speaker 11
So DSGS is more of a statewide program, but ELRP is a program that was designed for, like, the utility ratepayers. And so the Cal State program is a program that utilized the ratepayer funds from the IOUs. And so we want to basically have the funds go back to the original fund source, which would be the IOU ratepayers.
Speaker 1
All right. So the And the funding was frozen at the end of last year, right, for the KL shape? Yes, ma'am. Okay. So potentially and I think one of the arguments is to use that money for HVAC in the schools, to continue to use it in the schools.
That's one of the arguments.
Speaker 11
That is one of the arguments that we potentially could use it for schools, or we can return it and let the money revert back as it is currently in statute and that it will revert back without any additional action. So that would require an additional action by the legislature to extend the program. The administration's proposal is to let the program sunset as it is currently in statute, and then the interest will revert also back to the ratepayers.
Speaker 1
Very good. Now going back to issue number two, the DSGS and the ELRP are both intended as tools to provide energy reliability and avoid disastrous public safety power shutoffs. Right? Yes. So in 2025 or prior years, how are these programs used to avoid PSPSs?
Speaker 11
For that, I might I'm going to turn it to our respective colleagues. And so I will turn it over to my CC colleague that can speak to specifically DSGS program and then my colleague from the PUC that can speak to ELRP specifically. So I'm going to pass it to Cece first.
Speaker 2
Good morning, again. Dina Carrillo with the California Energy Commission. DSGS and ELRP are similar but very different programs in addressing grid reliability. Since 2022, which was the last extreme heat event that the state had, our recent summers have been mild. This last year in 2025, DSGS is operated based on trying to avoid extreme emergency alerts.
We recently developed a storage virtual power plant, so to speak, which grew to approximately tested this last year. It was able to produce about 500 incremental megawatts during test events, but it wasn't triggered for an emergency alert.
Speaker 9
You. Lu Om, testified, California Public Utilities Commission. I wanted to address the part of your question about how DSGS or ELRP, Demand Side Grid Support Program, or Emergency Load Reduction Program, were used to avoid public safety power shutoffs. PSPS, those programs do not address any aspect of public safety power shutoffs. As Director Carrillo was explaining, demand side grid support program and emergency load reduction program are to support the grid in a time of electricity and security.
Public safety power shutoffs, rather, are triggered by many factors that are focused on conditions like wind speeds, low humidity, conditions specifically that will potentially trigger a wildfire. And so, the triggers for those events public safety power shutoffs versus a reliability event, are triggered by two different things. And so the Emergency Load Reduction Program or Demand Side Grid Support Program will not function as part of the public safety power shutoff.
Speaker 1
Thank you for that. D E D E B A, all these acronyms. Yep, alphabet soup. Why does that program have $22,000,000 left over? And what projects were they originally awarded to?
And why were the funds reverted back to the program?
Speaker 2
Yeah, I'll take that question. Thank you. The Distributed Electricity Backup Assets Program, authorized in statute, was designed to support two types projects. The first was enhancements to the bulk grid to bring on clean resources. And then the second were projects on the distribution system.
When we launched DEBA, we focused on the bulk grid projects first. I'm going to just refer to my notes to make sure I get my numbers right in the alphabet soup. So they were bulk grid projects that we brought on clean or increased their capacity. And of those, we authorized about 123,000,000 for two ninety seven megawatts on that bulk grid system. Two of those projects are not moving forward due to CEQA issues and federal financing concerns.
So they were awarded but aren't moving forward. We've got some additional funds available that could be used for DSGS this summer.
Speaker 1
Last year. That's quite a jump from the year before. Yeah, it is. Female Which was $14,000,000 So, under the Governor's proposal to shift the DBA funding to DSGS, it brings the total remaining funds to 52,000,000, which is what was discussed earlier. Do you anticipate this being sufficient to last through 2026, through this 2026 season?
We do believe it'll be sufficient for
Speaker 2
this 2026 season. Given the finite amount of funds, we're redesigning the program. So we will bring in the megawatts based on the funding available. Whereas last year in 2025, when you see that big growth, it was probably a three times growth of the storage virtual power plant.
Speaker 1
Okay. Give me just a moment to check on something. DSGS has largely been a successful program and one that has grown to enroll over 1,000 megawatts. Why is the administration proposing to start over in ELRP or a brand new program at CPUC?
Speaker 11
David I'm David Emmons, Department of Finance. To your remarks, DSGS has been a successful program, but the original vision and intent of the program was not for it to be an indefinite ongoing program in perpetuity. But it was like we during the budget season, we had sufficient funding for it to support the program, but it was always an attempt for the program to sunset while new grid emergency systems could be could come online. And so this is just part of that continuing of the narrative the transition that the program will discontinue as more resources come online, and then that we can rely on more reliable long term funding sources.
Speaker 1
But I think something that we should look at is, if something is successful, and it appears that this is a successful program, why don't we continue with something that's successful? Even if we intended it to be something that was temporary, if we find that something is temporary, but it is successful, why aren't we not continuing with it?
Speaker 11
Given our current budget climate, this is the administration's proposal in order to use the available funding that we have from the resources that we've provided to continue the DSCS program in the original intent of the program. However, we're happy to engage on the legislature in discussions if there's an alternative proposal.
Speaker 1
Well, one of the proposals that I've heard of is if we continue funding DSGS and combine that with a $50,000,000 clean energy justice pot in Prop four, then we may be able to close some of the peaker plants like the one in Oxnard instead of recontracting the $1,200,000,000 with DWR for that peaker plant.
Speaker 11
So we're happy to engage the legislature with that if there's a pivot from the 2025 Budget Act with which allocated the you know, the $50,000,000 in which you're referring in prop funds to the DEBA program, but there was, like, specific language that we agreed with the legislature to delegate those funds for the DEBA program with provisional language with specified, like, further intent for it to be to flow through DEBA. It would we would need to there would have to be some action by the legislature to kind of like rewire that to do that. Oh, and
Speaker 11
But that was the original intent, the proposition for statute. It is broad, so those dollars could go to DEBO or DSGS or more alphabet, super long duration energy storage program. But that was just our understanding at the time.
Speaker 1
Especially if we know that the Prop four money, 40% of that is intended for disadvantaged communities. So we have to find ways to make sure that as we distribute the Prop four money, that we are taking care of the disadvantaged communities that the voters intended when they passed Prop four.
Speaker 2
If I may just raise one technical issue regarding the Prop four funding specific for DSGS. DSGS is designed to fund private entities that are working on aggregation. Prop four's, by statute, is limited to public agencies, local governments, nonprofits. And so there is a little bit of a again, the legislature can look at the language. But the existing language is a little challenging on that element.
I wish I didn't have
Speaker 1
And our agencies then make contracts with some of the private industry to take care of business. But let's look at those technicalities and see what we can do, so that the purpose of Prop four and the purpose of what we're trying to do to make sure we provide breaks for the ratepayers, for instance, that we're able to take care of that. I do want to ask, can you walk me Sorry,
Speaker 9
Yes, Chair Luong testified, Public Utilities Commission. I also just want to provide a point of clarification. The ones through cooling facilities, example, the one in Oxnard, that were under contract, that expires at the 2026. There's no expectation for extension of those facilities. There'll be an upcoming, meeting through the Water Board on that.
I serve on that advisory committee, along with the Energy Commission and the CAISO, and so those contracts won't be extending past 2026. And, you know, we do an annual assessment about the potential closure for those facilities, and there has been no request to extend those facilities those ones through cooling facilities that were in the strategic reserves. More good news to be coming in the next few months.
Speaker 3
So I just wanted to support what the chair is asking about and focusing on here, which is that it does seem like there are members of the legislature and stakeholders who really have a lot of confidence in DSGS and want it to continue, and that there's a concern that ELRP is just not as effective. It's not as cost effective. It doesn't it hasn't enrolled very many. And I wonder, you know, if you could speak to that a little bit more directly, that it's you know, it's just not as successful.
Speaker 11
David Evans, Department of Finance. We're happy to follow-up in writing with, like, specific facts and figures on, you know, ELRP or on DSGS if there's, like, specific questions at this time.
Speaker 3
Okay. Well, I guess my bottom line comment is just to support what the Chair is saying and the concern that this maybe is a little bit misguided here and we should focus back on the thing that's already working and that might have a better chance of being successful. So, you know, relooking at the DSGS versus ELRP decision point.
Speaker 1
Thank you. And along the same lines, I do want you to walk us through how the agency's plan on transferring all of these customers from DSGS and ELRP or a new program. How long do you envision that the transfer will take? And what percentage or capacity of customers do you think will be lost in that process? I know you can get back to us later, but you're the expert.
You've got to tell us something about this.
Speaker 11
There's an so David Evans, Department of Finance. There's an active proceeding that's underway with the PUC as far as evaluating this transition from the Demand Side Grid Support Program, participants of that program, to ELRP or an equivalent program. So we I don't want to get ahead of that process, but there is a proceeding that is currently underway.
Speaker 9
Yes. Just a few other procedural components. The rulemaking, demand response rulemaking, the commission, issued the scoping memo for that proceeding in February. And so that scoping memo, it outlines, the issues to be considered in the proceeding as well as the schedule for the proceeding. And so this issue of transitioning customers successfully from demand side grid support program into the emergency load reduction program or a new program of a new design, was listed as an issue in the proceeding, to be addressed, and then that schedule indicated that we would provide a decision on that this year.
So really important to get that done timely.
Speaker 1
Unfortunately, it would be it would the report would be done would be completed after we have completed this budget, and that becomes a problem for us as we make our decisions. And my next question, I think, has already been asked by Senator Bleigsphere. All right.
Speaker 6
Before you move on, I want to just clarify my understanding fundamentally all these programs and the Prop four is to generate, to my memory, $100,000,000,000 in total? 10,000,000,000.
Speaker 6
That's a lot of money. That's all, in essence, people will have to pay for. Through those money that you are doing all different kinds of programs, CalShare, DSGS, DEBA, all these efforts are essentially it should be addressing the energy reliability and eventually lower rate for consumers. Through all these activities, have you achieved it? To my knowledge, California's energy cost is highest in the country, isn't it?
Are we keep on adding higher cost eventually higher and higher for the consumers instead of lowering it? And then also unused funds that you refund like $22,000,000 to the ratepayers, how much does it end up with like $1.01 $5 or $2 per month, which will be very negligible, all kinds of work that you are doing. But in essence, the bottom line is that the consumers, ratepayers are not benefiting from any of the activities so far what I hear. Can you educate me what you are trying to do in essence? Is it just to spend the money to do the work for the clean energy.
So your act activity so far that the climate agenda based energy production and production distribution and storage, all of those activities should be geared for essential lower rate and reliability. That's the bottom line, isn't it? What have you achieved so far from this creation?
Speaker 11
David Evans, Department of Finance. So I want to help clarify some of the points that you made. So regarding the Prop $4 proposition four, the $10,000,000,000 that you mentioned. So that proposition has, like, specific specified language of the dollar allocation of where they can go to. So the $325,000,000 which was addressed in issue one, is paramount.
It was being used as seed money to that for it's being used by seed money for iBank and then plus the 5% of the annual cap investments through the continuation of the cap and invest program. So that's being used as seed money to help for long term reliability infrastructure planning that will eventually so those costs will not be attributed to ratepayers.
Speaker 6
That sounds good. The long term reliability that sounds fancy, but have you resulted from the all those program efforts? What have you achieved? Have you achieved a lower rate and more reliable and we don't have to worry about blackouts or rolling energy supplies in coming summers?
Speaker 12
Senator Erin Carson with Department of Finance would just clarify that the Prop four bond funds, those were just appropriated in the fall. So, the departments that were appropriated those funds are in the process of developing regulations and setting program guidelines to distribute those funds. In terms of the energy programs, as my colleague mentioned, we are proposing to utilize those funds in the budget year to address the issues that you are raising on ratepayer affordability and long term grid stability. But we're happy to follow-up with your office with more details if you like.
Speaker 6
Can somebody predict that in five years or ten years, what this $10,000,000,000 that we'll be spending on the energy production and clean energy and reliability that where our state's energy reliability will be at and what per kilowatt rate for the energy for the consumers will be can somebody predict in five years or ten years will be lowest clean energy production and reliable energy production in California? Or are we going to still maintain the highest ratepayer in the state in The United States?
Speaker 11
Yeah. David Ermes, Department of Finance. It will be difficult for us to make that prediction, but there is interagency collaboration with the PUC through like and with CAISO and with CEC as far as understanding what the portfolio of resources that need to come online. There's long term evaluations through the IPER, through the transmission planning process. So all of those efforts and the collaboration, the MOU agreement between these departments is being used with the interest of understanding of what are the long term needs, what's the portfolio resources that we need to have online to reach our clean energy goals, but then also doing it in the most economic and affordable way to for ratepayers.
Speaker 6
When was four passed? Was it five years ago or last year? 2024? 2024. 2024.
So that means we haven't had much time to test whether that kind of effort and cost that we are trying to create and for our so called reliable transmission lines and clean energy transmission when wind and solar energy will produce that will require new grid, right, for transmission. So that's the cost that we are talking about this kind of billions of millions of several 100 millions of dollars annually.
Speaker 5
Can I add something perhaps to clarify? So my understanding is so I think one thing to clarify is that not the entirety of Prop four doesn't go to clean energy. I think it's about $850,000,000 that is dedicated to clean energy purposes. And I think your point is really a good one. I think even though this we don't know yet what this money will do in terms of reducing energy costs or reliability, partly because it's so new, but that's something that's reasonable for the legislature to care about.
You're gonna wanna make sure that you're getting you're you're getting your your goals are achieved with this money. And one of the things that I think our office has commented on in the past about these bond programs is that it can be helpful, when you're initiating them, to think and when you're initially funding these programs, to think about how are we going to evaluate these? How are we going to know we achieved what we wanted to achieve? And I think Senator Blakespeare also mentioned this when you're talking about, or sort of got at some of this, when you were talking about the transmission funding. It's going be really important to know, did we actually save ratepayers the money that we we wanted to save?
You know, what are our lessons learned from that program? It's a new program. It's you know, it has tremendous amount of potential, but, you know, we'll wanna make sure, did we actually achieve that potential? And so I think one of the things broadly that the legislature could think about is are there you know, is there reporting, or are there sort of ways you want to sort of structure the program or think about the program or have some sort of some mechanism in there so that when this is all done, you can look back and say, how much did we reduce rates because of this? Because, I guess, the the last point is there are a lot of factors that are driving rates up, utility rates up in the state, and, you know, wildfires, other types of things.
And so we could see rates continue to go up that may or may not tell us for sure whether this money was effective. We could have this money be very effective, and we might honestly, still see rates go up just because there are other factors at play. And so it'll be really important, I think, to be intentional about trying to build in whatever you feel is important on key programs, probably not every program, but key programs if you really do want to be able to assess later on what did you get for this money.
Speaker 6
Yes. And bottom line is that from the ground year of 2024, after spending $10,000,000,000 what can we say about accounting for that kind of money? How much have we increased the reliability? How much have we increased clean energy production? How much we have how many new greeds for electricity transmission we have created for to increase reliability.
And once we transmit the energy from clean energy production, then what I know is that California generates excessive solar energy during the daytime, during the summertime. And we curtail and do nothing and waste them. And that's where the storage comes in. We need to create reliable storage capabilities, storage facilities to capture them and use nighttime and even a month later. And nine hole storage site is being developed in certain areas right now and how much we have developed such reliable storage capacities in the state?
And lastly, how much by increasing that reliabilities and the efficiency in transmission and the storage capabilities, how much eventually the consumers have benefited in their monthly rate. Has it gone down substantially measurably that the people will appreciate? I think that should be really clear goal and objectives all the agencies are working together.
Speaker 1
Thank you. Thank you, Senator Choi. As was noted in 2024, the voters of California approved this $10,000,000,000 bond prop four. And last year, in last year's budget, we had $3,500,000,000 that was included in the budget. And this year, proposed by the governor's $2,100,000,000 to be spent of that that $10,000,000,000.
You're absolutely correct. And everything that we do that we have to look to the rate payers, they are the people that we most want to protect. And I appreciate the comments that have been provided by LAO about the fact that the legislature can and should include language for guidelines and reporting and evaluation, accountability, as you've mentioned, so that we know that as we make these investments that we we there is something that is good for the ratepayers. And it isn't only in the the what the ratepayers pay for you their utilities. It's what brought what is brought into the communities because it include it includes parks and a number of other things that are right.
It's descriptive and it's prescriptive in Prop four as to how the money will be spent.
Speaker 6
Yes. Can I add one more point? Of course. When I say ratepayers, I should distinguish one more important group that is industrial usage such as data centers. I visited ISO the other day and then was Lawrence Research Center where many things are under study and supercomputer that requires a lot of energy to run and California being the high-tech state, I'm sure a lot of computer usage and data centers are being developed and they require more reliable energy sources.
But California's industrial energy cost is double of the average of The U. S. I mean, you have to think about when we try to generate more revenue, where do they come from? In large corporations and businesses, we need to retain here rather than they go to Texas where cost is half of California. So we need to think about not doing the work for the work itself.
We have to have a clear purpose of what are we why are we doing this, all of this? Why are we spending this billions of dollars? So that's I want to just explain when you decide auto then general repairs.
Speaker 1
You just touched on the subject though. Data centers, if they're going to use more energy, they need to pay for that energy also as opposed to putting it off to the rate payers. And I'm sure you would agree with that.
Speaker 6
Yes. What I'm saying is that their rate should be also lower in comparison competitive in comparison to other states so we can retain technology companies and big large companies.
Speaker 11
David Evans, Department of Finance. To your point, Senator, I just wanted to just highlight that this is something that is on the agenda, and it is a priority for the administration of evaluating the growth of data centers and their potential impact on ratepayers. So the administration does have a proposal for that very same purpose.
Speaker 1
Very good. Thank you so much. Did you want to add something further? Okay. Let's go on to issue number three, SBX one dash two and ABX x two one and the implementation thereof.
Thank you all. We're going to hear from Barsha Chavezhwar and Ms. Alicia Gutierrez from the CC, who will present the governor's proposal. Or is it Department of Finance again? To
Speaker 13
start? I'm Alicia Gutierrez, and good morning, cherries and committee members. So I'm going to start off I'm with the CEC, and then I'll hand off to Varsha. SBX one-two and ABX two-one were put in place to give the state more tools and increased transparency for petroleum industry to mitigate gasoline price spikes and also to stabilize supplies in California. Implementation activities are ongoing, and CEC, with partner agencies, have taken several actions to publish data, refiner margin data, and work towards stabilizing the gasoline prices in California.
We're working with CARB on several products. One of them is the transportation fuels transition plan, which is mentioned in the agenda, and I can speak to questions about the status of that. We have also taken action the CEC has taken action in August to defer any action on the gross gasoline refining margin and penalty, and that was essentially done to see what our other price stabilization and supply stabilization activities would result in. We are requesting support today for our BCP of ABX two-one, which significantly expanded our statutory responsibilities related to petroleum market oversight, including development and enforcement of minimum inventory requirements, enhanced refinery resupply planning analysis, and expanded transportation fuel assessments. These requirements create a permanent increase in workload and cannot be absorbed with existing staff and require specialized expertise in petroleum markets, refinery operations, and economic analysis.
And so we are requesting, 1,697,000.000, for ongoing, support for permanent positions and technical support for the Energy Assessments Division to implement petroleum market oversight, inventory monitoring, and analytical requirements established under ABX two-one. And I will hand off to Varsha, who will cover the other request.
Speaker 14
Thank you, Director Gutierrez. Good morning, Chair 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 for about $173,000 and it would convert one limited term position into a permanent position, a data science position, in support of DPMO's increased responsibilities following ABX-two-one. As a bit of background, DPMO is an independent division of the Energy Commission established in 2023 by Senate Bill X1 two.
SBX 1.2 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. And we have a small team, but we've got extensive experience in economics, antitrust, law enforcement, and policy. And I'll include I'll acknowledge our director, Ty Melder, who was able to stop by today. In 2025, after assembly bill x two one was enacted, DPMO needed additional in house capacity to process the large volumes of data that we analyze for our market oversight functions.
To meet this critical need, we hired a skilled senior data scientist in a limited term position, but this position provides critical support for our economics and investigative teams. And as I mentioned, this BCP would just convert that position into a permanent position. These additional resources, while modest, are essential for us to fulfill our independent responsibilities under statute, protect the integrity of the market, and provide you, as policymakers, with the best possible information as we navigate the transportation fuels transition. Thank you, and I look forward to answering any questions. Department
Speaker 11
Department of David Evans, Department of Finance, have no additional comment.
Speaker 6
I understand that the now there was investigation. I don't know whether that price gouging price gouging of the petroleum companies or refineries or distributors was conducted? Was it the PMO that you are trying to expand? Those are the department people. And I understand that no price gouging illegal activities were found.
Mai?
Speaker 14
Thank you, Senator. So our market oversight and investigations work is ongoing, but the details of that are generally confidential as a law enforcement matter. And so I'm not able to provide details on any ongoing DPMO matters that are falling within the investigations lane. You did mention price gouging. And when we talk about price gouging, there's a generalized understanding, is an opportunistic raising of prices above costs.
And then there's also a criminal price gouging under the California Penal Code that specifically applies when an emergency declaration has been announced by the governor. In terms of the more generalized form of price gouging, DPMO has stated previously that the price spikes from 2022, the data from those price spikes is consistent with that generalized form of price gouging, which is what the legislature also stated in its findings and declarations in SPX one two.
Speaker 14
So those are our public statements. I'm not able to share any more information about an ongoing any ongoing oversight investigations, I madam, don't know since why that's it's
Speaker 6
so confidential. Any any you know, investigations are being done, ends up being done. You know, public should know. And then also whatever findings are so far, they should release it. I'm not 100% understandable what I'm hearing.
My analysis of the gas price that what makes up the gas price that we pay at the gas pump on a daily basis, I may be wrong, but one of the charts of the itemized charts for making up the total gas price comprised in total 30% is all tax, but 17% were on all necessary material cost or processing cost or distribution cost or storage cost, things like that, a general matter. And in price gouging investigation, what that people who are investigating is investigating whether such as my concern would be gasoline tax under all different kinds of about five or six different kinds of labor. So we pay state mandated tax, whether those tax collected are properly used after the collection and such as SB one that was passed about five, six, seven years ago whether that was proposed for highway maintenance, whether those raised funds are properly used, that should be also investigated instead of a company where they are unfairly overcharging their profit margin.
Speaker 14
Appreciate the questions and the concerns, Senator. Our practice of not sharing information about any ongoing oversight or investigations matters is generally consistent with similar practices at the California or U. S. Departments of Justice. In terms of some of the tax and fee concerns, as well as the price gouging, we do take taxes and fees into account when we look at changes in costs or changes in price.
And so what we're looking at is whether, for example, in the 2022 price spike, prices or margins raised above taxes and fees that are imposed by various regulatory programs. And I would defer to the other agencies that levy some of that are involved in some of those programs for in more information on how those programs are used and how those funds are distributed.
Speaker 13
You did have a point about looking at refinery maintenance and how that feeds into the gasoline margin. So one of the things that we are looking at in deferring the action on establishing the max margin and the penalty is, the refiners' plans to invest in refinery maintenance. So that is ongoing work. We are looking for, that ongoing, commitment to refinery maintenance to help with supply stabilization in the state, and then we'll be considering that as part of the staff's decision that will be put forth to the commission on whether to extend or move forward on the max margin and penalty.
Speaker 6
Again, representing the people who are on a daily basis consuming our products and gasoline is essential thing that we have to buy on a daily basis. And again, we need to think about I I know again this is that the policy issue that California has put in for environmental clean environment policies have continuously restricted oil refinery oil production and refinery activities through so many regulations. And to comply all that regulations of the state, it'll cost them money. So that's why they may pay more dollars. It is more expensive to produce a gallon of refined fuel.
So in one time when in 1950s, 1940s, there were over 40 different refineries in California. However, now how many are left? What I understand is 6,100 and is left and they are about to close their operations and leave California When there's no refinery activities, our air may be clean, but at the same time, still we need that until, what's it, 2035, but all costs still will remain even though no petroleum gasoline vehicles will be allowed to be sold after, what, 2035? Is that our state policy right now in place? But the older cars will still have to buy the gasoline.
And what is if any of you understand where the oil or the fuel will be imported from? By importing it, the cost will go down. Will it be higher than what we are paying? And as of now, still just like electricity cost, our gasoline prices in the top tier, if not the most expensive state per gallon. So I don't know what our you know, goals are by placing these regulations and investigating and continuously instead of encouraging them and they can make more money and put their their money into research, to clean to to refine their products to minimize carbon neutral level.
I think it can be done. But rather than just chasing them out of our state and get them out of business. So I don't know whether you have any concerns in our policies in California.
Speaker 13
So, the transportation fuels assessment, I think, did a job of presenting some of the supply side and also demand side strategies that we're looking at in California, but a few of them are started by ABX two-one, and that's, setting the resupply requirements and minimum inventory requirements. Other things that we are exploring is looking at maximizing in state storage capacity, also looking at managing our inventories in state and then, as you mentioned, importing finished product or gasoline components from outside of California. I think we are looking very holistically at, California's infrastructure, how we are portioned off from being able to utilize supplies from the Midwest and trying to manage in state supplies accordingly and to keep gasoline prices down and stable. So I think there are just a number of strategies that we're exploring and analyzing, which will also also be covered to some degree in the transportation fuels transition plan. That's also looking at non energy impacts, like workforce transition.
Speaker 13
all that to say, there are a lot of moving parts, a lot of different strategies that we're exploring on both supply side and demand side. But as current situation shows, there are things that are largely out of our control. And we are, you know, trying to plan for and brace for those kind of impacts as well.
Speaker 6
Thank you. I'm just saying because I'm really concerned and you are all data analysts and you can analyze what the result of certain policies that we implement through governance office or through certain bureaus. And eventually the economic impact for the state when our policies impact industries through over regulations. And to me unrealistic goals for one single goal that is by a certain artificial date set up from this date on such as 1935. 2035.
Speaker 6
Twenty twenty thirty five. Twenty twenty twenty I am still living in that age. My era was nineteen hundreds. Alright. Twenty thirty thirty five.
That by by setting that kind of goals, what the we'll achieve if we achieve the, let's say, zero emission state and the cleanest environment, the cleanest area in the world and all people have died and moved out because we could not bear the cost of living because of the unrealistic policies placed upon us and companies could not sustain their operation and have to move out of this state regulation field, the state California, and go out of it, out of the place? And what will be the impact? You need to make some kind of projections and the macro recommendation for the administration.
Speaker 1
If may say, Senator, I think that's probably what that's that balance that we're trying to find so that we have less reliance on petroleum. We also want to keep the refineries here in California. Those are jobs. We we keep hearing about that. Yes.
We have fewer refineries, and the regulations are important. Clean air is important. You said people are gonna die and move out. They're not gonna die. Some may move out, but they're not going to die because they're going to have a clean air to breathe.
You talked about SB one that we voted on in 2017, and I think that there is a certain amount that goes to each of the counties, each of the cities. And what I do with my cities and my counties, and I ask how much did you receive and how much did you did you use to fix the roads? And I think that's something good that that that we can do. But but this less reliance on petroleum is important. We found that that is something we need to do.
You talked about if we have less regulation and we give allow the the the refineries to make a greater profit, they then they can do their research to figure out how to to to have less impact on on the the air. I mean, that's something that's been available to them for many years, And I know some of them have done some of that work, and I appreciate that. But I thank you for your questions. I do have a few questions, if I may. Legislature approved prior budget proposals for the implementation of SBX one -two and, in particular, approved positions to implement the maximum gross gasoline refiner margin and penalty.
How is CEC repurposing or redirecting previously provided resources and positions for SBX1-two for this purpose?
Speaker 13
So the positions that were focused on the max margin and penalty analysis are still looking at max margin and penalty analysis. So, just because that decision was deferred, they're, looking at the new data, looking at the net margin data that, we are now able to analyze, and also weighing in on, some of the resupply requirements and minimum inventory requirement development. So, there those positions are still working and doing a lot of the analysis. The compliance portion, I would say, we have been using those resources that were hired on to implement the max margin and penalty are looking at the I'm sorry. They're looking at the minimum inventory resupply, and they're also helping us to I apologize develop our Right?
Speaker 13
the time. Yeah. Develop our rule making packages around those new requirements. My
Speaker 1
next question is, SBX-one-two required CC and CARB to submit this report that you referred to, in response to the senator's question, the transportation fuels transition plan Mhmm. To provide a more holistic road road map to, quote, show us how to ensure that the supply of petroleum and alternative transportation fuels is affordable, reliable, equitable, and adequate to meet the demand for those transportation fuels. That report was due December 31. When can we expect it?
Speaker 13
So, we are getting very close to releasing the draft and expect that to come out very soon, this spring. Additional time was needed to engage with stakeholders and the community to get a better understanding of the issues that we're facing, along with the changing landscape and unanticipated refinery closures and a changing federal transportation policy landscape. So CARB is in the process of collecting feedback on the overall mid- and long term transition strategies from partner agencies that build off of input we received from the stakeholders in the community and work group meetings. And the full report, which includes strategies and other framing around the future of fuel supply and demand, as well as community labor and economic considerations, is currently under internal CARB review.
Speaker 1
Do you have any preliminary findings that you can share with us at this hearing?
Speaker 13
I will Because it's not an investigation. Will hold off until the draft is released. I would like for that to, to come out with the the draft plan, which is, which is imminent. Alright.
Speaker 1
But we do look forward to receiving that. I think that answers some of senator Choi's questions. When we have a plan, then we're able to look at it and and evaluate it through the legislature's lens. In the CEC's Transportation Fuels Assessment study, there's a recommendation to further consider whether California should still be wedded so firmly to our boutique gasoline blend, car car bob. As we phase out fossil fuel altogether, the report notes that we might want to consider a regional fuel brand, a blend, or something similar, which would help cushion against price spikes.
Has the CC or CARB studied the idea of allowing departures from CARBob or pursuing a regional fuel blend or any further anything further in the year and a half since the Transportation Fuel Assessment came out?
Speaker 13
So that work is kicking off. We will be working with CARB on looking at the potential and then actual specifications for a potential of a regional blend. But it's just starting, and I don't have anything to share on it.
Speaker 1
And there are a number of colleagues and others who have talked about this branded versus unbranded fuel and trying to find again, we go back to that balance is what is the balance that we need so that we move towards less reliance on petroleum, but we also recognize the the the demands of California and industry as as senators talked about. We're making sure we are moving towards clean energy because that is what Californians are requesting. We we are still the fourth largest economy. We do have those who are moving out. And when we talk about the price of of gasoline, there are lots of factors, and I think that that was something that was alluded to, including, what's happening in Iran that's caused a spike in gasoline prices.
So it isn't just the regulations that that, the legislature puts forward. There are lots of other factors that affect it, and one of those was price gouging that was discussed earlier, and what is the amount that is appropriate, especially during the greatest time of need for Californians. So this the branding versus unbranded or regional fuel blend versus the carve out, is that going to is that information going to be included in this transportation fuels transition plan that we're waiting for?
Speaker 13
So the those are definitely going to be part of the next transportation fuels assessment, which is due in December. So we are working towards updating our analysis for purposes of including in the transportation fuels assessment. But that is where we really explore some of the strategies and near term strategies. But as you mentioned, there's a significant differential between unbranded and branded gasoline. And as far as the specification goes, it's all CARBOL.
Speaker 1
And I do hope that as you finalize this, you'll give us a draft by spring, which is already a little behind. But hopefully, even in that draft, you're going to include something about this branded and unbranded so that we're looking because we're looking at a plan, and that has to be part of the plan. It it it's something that is it's something that's being discussed, and I think that without a doubt, it should be included.
Speaker 14
Ms. Senator, if I may. Yes. Ms. TPMO has an economics and policy analysis shop, and so we're asked by SBX12 to publish our own annual report, a lot of reports in petroleum.
Our first annual report was published in October, and so a very large focus for us was the rising premium for branded gasoline, which is unique to California. Branded gasoline is about 30¢ per gallon more expensive than unbranded gasoline in California. And the rest of the country. That difference is about 7 or 8¢ a gallon. And so this is an issue that we're continuing to work on.
And on the fuels assessment as well as the transition plan, we're in sort of an input role for the Energy Commission and the Air Resources Board. So as we're able to make additional findings, we do share them and collaborate with our agency partners as they're developing these plans and reports.
Speaker 1
Wonderful. Would you share with the members, our consultant the most recent report Yeah, no problem. Included some information regarding the branded versus unbranded.
Speaker 1
Thank you. And I know that in the transition plan, I know we'll hear even more about it. All right, wonderful. All right, thank you all for your presentations. This was very informative.
We're going to move on to Issues four through six, which are all CPUC budget change proposals. Welcome back. First, we're going to hear from Director Tess Vye from CPUC, who will present the Governor's proposal.
Speaker 1
me one minute to pull Can I see the pen also? So take notes at anything. I tried. Now I tell them, give me
Speaker 9
paper. We'll see after this, all right. Good morning, Chair Reyes and honorable members of the committee. My name is Luam Tesspey, and I serve as the Executive Director for the California Public Utilities Commission. Though I am no stranger to this committee, this is my first budget hearing.
As the executive director, I assumed this role on February 2. So, it's an honor to appear before you today. Congratulations. Thank you. I'll be presenting the three items as outlined on the agenda.
So, starting first by Senate with Senate Bill twelve oh seven and SB eight forty. So, through Assembly Bill twelve oh seven and Senate Bill eight forty, the state reauthorized the California Cap and Invest program through 2045 and enacted changes on the return of program revenue to utility customers. AB twelve oh seven prioritized energy affordability, bill stability, and transparency, including new statutory requirements related to the timing, targeting, and communication of credits to customers. And so, the resources requested in this budget change proposal are essential for the CPUC's implementation of this legislation. In particular, AB twelve oh seven significantly reformed how program proceeds are returned to electric and gas ratepayers through the California Climate Credit.
The legislation prioritizes energy affordability, bill stability and transparency, equity, and equity by establishing new requirements for the timing, targeting, and communication of bill credits. Rather than primarily preserving a greenhouse gas price signal, the reformed approach emphasizes lowering electric costs to support affordability for customers as we electrify and achieve greenhouse gas emission reductions. To implement AB twelve oh seven, the CPUC must redesign and update the climate credit program for all investor owned utilities, including revising bill credit distribution methods to better advance affordability, greenhouse gas reductions, and broader state policy goals. Since 2014, the program has returned over $17,800,000,000 to ratepayers, including $1,600,000,000 in 2025 alone. The CPUC has initiated this reform through a rulemaking, so we've already kicked that off, but we do need these essential resources for implementation.
Redesigning and readministering the new affordability focused framework will require significant analytical and administrative effort, as the Commission must now identify high build months, which will change over time as our grid changes, and assess affordability impacts across customer groups, and continuously adjust the program through 2045 through rates, technologies, and the use and as rates, technologies, and usage patterns evolve. So with that, that concludes my presentation of this first item. If you would like, I can continue through the items. Okay. That sounds great.
So then
Speaker 11
David Evans, Department of Finance. No, nothing significant. I'd just emphasize that the work of AB twelve oh seven does require more extensive analytical, evaluative outreach and procedural work for the PUC, hence the governor's proposal for additional resources. Thank you. Elio?
Speaker 5
Okay, technical difficulties. Two mics. Yeah, then you can really hear me. So we do have some comments on this proposal. We think that the proposal goes beyond the statutory requirements of the bill.
So, the bill basically requires that CPUC change its approach to distributing the California climate in a specific way. So, right now, it distributes the climate or utilities distribute the climate credit in two months of the year, April and October, and the bill requires that instead, the CPUC distribute it in, at most, the four highest billed months. So that's a pretty, you know, it's a pretty kind of nuanced change. Now the CPUC is interpreting the language because there's also a little thing about, you know, affordability as well, and that's certainly a big emphasis of the bill. But they're interpreting this to require them to do a a full analysis of what are the you know, whether this climate credit should be changed, should be to vary by climate, vary by income, very potentially be distributed volumetrically, and then to make those changes.
So, potentially, to change the structure. So it wouldn't just be a fixed amount provided twice a year. It might be something that's provided to you know, more to certain areas of the state or potentially certain income groups. So we think this is a big policy choice for the legislature. This is potentially tens of billions of dollars over the life of the program that will be distributed to Californians to help offset the significant cost, and I know that's a huge issue for the legislature.
And so we think it's a really big policy choice. Do you want these rebates to go out volumetrically? Do you want low income folks, for example, those who participate in the CARE program, to get more money? How much more? Those types of choices, we think are really important.
As is currently envisioned, those choices would be left up to CPUC, and they would go through their process and determine and then implement those. But we think those are choices that have a lot of gravity. And we also think that the choices of how you proceed in implementing this have a lot of trade offs in terms of the funding. So if you're just gonna change which months and say, okay. We're gonna do it in June through August, that probably wouldn't require a lot of additional resources.
If you do do the more complex approach that CPUC envisions, we do think that would take more resources, particularly on the front end when you're setting that structure up. We think long term, probably the resources would be less because we don't think you're going to want to fundamentally change the structure of these rebates, very frequently because it would be confusing to customers if, you know, one year you're getting only its care participants, and another year it's changed. So we have a couple of recommendations that kind of flow from that. We think it's important for the legislature to think about the scope of the activities you want CPUC to engage in and whether you want to make additional you know, provide additional guidance about how this climate credit should go out. And then we think it's worth adjusting the level of resources accordingly.
If you want the more complex approach, again, more resources. If you want the simpler approach, probably fewer. And then also just providing those resources on a limited term basis, again, because we think there's uncertainty about the long term workload, but we think it's probably significantly lower in either case just because there's going to be more work associated with sort of establishing whatever this new structure is and then less going forward as it's modified over time.
Speaker 1
Because that was lots of my questions, I do I would like to have CPUC respond to those recommendations, which make lots of sense.
Speaker 9
Yes. Thank you, Senator Reyes. And so, just to start, so LAO has raised an interesting issue about, potential opportunities for slicing and dicing things differently, volumetrically, low income, non low income. Let's put that to the side for just a moment. Just looking between today, for example, some of us might assume, oh, the summer months are the highest build months.
Actually, for three of our investor owned utilities, Bear Valley, Liberty, and Pacificor, they're winter peaking. These customers are impacted more in the winter. So just like to start, I think there are some assumptions that people make about how simple this is going to be that, you know, I wouldn't really agree with. I think in addition to that, you know, this is a program extension between now and 2045, and we know, for example, the state has, you know, very significant electrification goals, right? So, as we see right now, a lot of people are using maybe gas for their heating.
As we get more heat pump water heaters out there in the system electrifying heating and cooling, you're going to start seeing higher bills in winter months between now and 2045. So even without looking at Central California versus coastal, volumetric versus non volumetric, care versus non care customers, there is going to be a significant change between today and 2045 as we see technologies change in consumer households, and we want to be able to address customer affordability as things change. And so, that's why we think this work is not just one time work where we're changing the months. It's going to be ongoing to make sure that all of these state policy goals for electrification, reducing greenhouse gas emissions, are able to leverage the climate credit as a way to put downward pressure on customer bills. And so I think some of the things that Elio has mentioned, like the more detailed volumetric versus non volumetric, inland versus coastal, I think those are still things that we should absolutely look at, things that are very important.
But just even fundamentally, looking at just the distribution and the change in the months, it's not the same for all utility customers today. And we're certainly going to be seeing a change as customers take on these new technologies in their homes that's going to affect their electricity bill. And we want to be right there and available to be able to make those changes to the climate credit to support those changes for customers and make sure their bills stay affordable. The
Speaker 1
difference is going to be minimal, right, after you do all of the studying. And I'm just concerned that if we were talking about 100 on a bill or even $20 on a bill, you can justify it. But when we're talking about $1 or $2 maybe $5 and to spend 2,200,000.0 ongoing from GGRF money. I do have concern as I read through this in preparation for today. When we're looking at a more complex approach to this credit, this California climate credit, we're spending a lot of money.
We're asking for an additional seven positions from now until forever, until we ask for more. And the €2,200,000 and then also an annual external contract to do outreach because that's another issue that was brought up in the evaluation, is that now you have to explain to the customers, well, we did an evaluation four months instead of just two months, and the amount of money that would be spent on changing it from two months to something other than two months. And I recognize, you know, we're trying to implement a bill, again, by one of my beloved colleagues, but sometimes we're well intentioned, and it isn't until the agency tells us how much it's going to cost, we don't realize the cost of implementing something that we've introduced and had signed into law. But that is a serious concern in evaluating this particular request. Any other questions?
Well, it's just me, so the questions are only going to be from me now. All
Speaker 9
right. And if I may, I did want to also add so there are also, there's a CARB rule making that is ongoing right now, and so an additional complicating factor that we will be addressing is the shift of the gas climate credit to electric utilities. And this is actually going to be more complex than it sounds. We don't have a clear it's not just like a PG and E customer gas credit is going to go to their electric side of the bill. As you know, we have PG and E gas customers that are SMUD customers.
We have Southern California gas company customers that are customers of LADWP. And so, we will be working collaboratively with CARB and the utilities to ensure this other significant transition occurs pursuant to the legislation, and this is going to be a very complex exercise as we track the work going on at CARB, and then also work an hour proceeding in order to effectuate that on an ongoing basis. I just want to see if Department of Finance has anything to add.
Speaker 11
David Effens, Department of Finance. I just echo my colleagues' comments underscoring that it's not just a continuation of the program, but it also modifies it regarding, like, the frequency distribution, the components regarding the phasing out of the utility allocations by 01/01/2031. And then also, as part of this requirement status, that evaluation component that we were talking about earlier in Issue one regarding the proceeds of the California Climate Mitigation Funds for those rebased at 5%, that's going to be used for as far as seed money for those potential transmission projects. So there's a lot of components that goes on within this bill. It's not just a continuation of the program that PUC can use existing resources, But the administration recognizes all of the various nuances that are outlined in the bill and we proposed this level of resources in order to meet and to implement those policies.
Speaker 1
There is a simpler way to implement AB twelve oh seven as opposed to going to a more complicated you talked about the nuances of it, but if we look at the letter of the AB twelve oh seven, there is a simpler way to implement it. And especially at times like now, we talked about this earlier where we do have a structural deficit, and we have to deal with that. And the the the governor is intent on making sure that we do deal with that in future years, and so is the legislature. We want to make sure that even though we're able to balance a budget because we have revenue that is coming in at a higher rate than was expected. So it'll help us with this year, but it's not going to help us with the years ahead.
And we all intend to be here. Senator Blake Spear will be here longer than I will. And even though we balance the budget this year, next year, we'll be dealing with it together. But in four years, she'll be dealing with this on her own with all her colleagues. And they're going to ask why she didn't take care of reducing the expenditures on some of these proposals.
And even though they're all great proposals, they're coming from a governor we love, we still have to figure out a way to figure out how we take care of that structural deficit that we have that we haven't dealt with in so many years. So, this will be one of those items that we will hold. All right. Thank you so much. And next is Issue five.
We said we were going to have you present all of them, all three of them, but I think it's better that we ask some questions in between.
Speaker 9
Sounds great. So, going to issue number five, which is for Senate Bill 57. Senate Bill 57 authorizes the California Public Utilities Commission to assess the extent to which large loads, including data centers, as was mentioned earlier today, may shift cost to other rate payers, and also look at rate design strategies to mitigate these potential cost shifts. And the California Public Utilities Commission must submit their findings to submit our findings in a report to the legislature 01/01/2027. And so this budget change proposal outlines critical resources that we need to be able to provide this study.
So, Senate Bill 57 really enhances the California Public Utility Commission's authority to assess the cost of these new electrical loads driven by data centers, in particular, and evaluate the potential cost shifts to other rate payers, and identify the rate design strategies to mitigate those impacts. We'll be conducting an ongoing analysis of procurement, electricity procurement, transmission and distribution investments related to data center growth, and submit that report to the legislature. So this new workload really also includes issuing and managing utility data requests, which are significant on these new matters and evolving, as well as analyzing cost and rate impacts and developing very complex alternative rate design scenarios to protect rate payers. We'll also be administering additional advice letters, as well as information requests and facilitating technical public workshops to work with all stakeholders impacted here on these issues of evaluating load growth forecasts and, importantly, customer bill impacts, as well as producing and maintaining comprehensive assessments of these potential cost shifts, and even more important, mitigation strategies, so that as these data center loads join the California grid, we're able to make sure that we can leverage them to contribute to fixed costs and support downward pressure on rates.
Happy to take any questions. Thank you. Department of Finance?
Speaker 3
think the question is that this is a one time report, right? So why do we need to have ongoing staffing and funding?
Speaker 9
Thank you. So, this report is going to have ongoing changing effects as we have more and more hyperscalers added to the system. So, I guess, to start, California already has hundreds of data centers on our system. We are a global leader in technology. But what we're seeing is a new type of data center, what we call hyperscalers.
These are often four megawatts or larger being added to the grid. And because each of these each customer is so complex, it will have ongoing changes to the impact of the transmission system, the distribution system, as well as additional resource procurement that needs to be done. And so, we'll be doing this study, but then also making sure that as the grid changes, because it's so impacted by each each data center has such a large impact, we'll be making sure to constantly assess and make sure that these new large loads are able to contribute effectively, as they also take from the system as well.
Speaker 1
That's a really important question because I think that if AB fifty seven requested one report, I recognize that CPUC would like to do ongoing reporting, but that isn't what AB fifty seven requested. And in fact, CPUC has already been engaging on the issue with large electrical loads of large electrical loads from data centers with PG and E. Has have you begun engaging on this issue with other IOUs of the territory, and what have you discovered with PG and E?
Speaker 9
Yeah, so I can start. So we are engaging with all of the investor owned utilities, but what we have observed is PG and E has the largest amount of growth. And we're also working very collaboratively with the Energy Commission, Director Gutierrez's team in particular, on being able to get more accurate pieces of data from all of the utilities, so the investor owned utilities. They're also getting data from the publicly owned utilities, in particular in Silicon Valley, that are also being heavily impacted. But the vast majority of the growth is in PG and E's territory.
Southern California Edison, for example, is being impacted by large loads, but more so on the medium duty and heavy duty freight charging side. You know, we have a lot of the warehouses and things like that in the Inland Empire. And so they're being impacted by a different type of large load growth, but the large majority of this, what we've seen, is in PG and E. That being said, we want to make sure California, as a state, as a whole, is well equipped to be able to leverage data centers as a way to support downward pressure on rates, and have economic growth statewide in this area should, you know, the opportunity appear. And so we'll be ready to do that.
But right now, we're seeing the most growth in PG and E's territory.
Speaker 1
Thank you. Anything further? All right. Then let's go to issue number six.
Speaker 9
So I'll start with, the next item, which is Senate Bill eight twenty five. And so, the California Public Utilities Commission is requesting funding for positions to support implementation of Assembly Bill five twenty five, which allows the California independent system operator and participating transmission owners to join a voluntary regional energy market governed by an independent regional organization starting 01/01/2028. But before the utilities can participate, the California Public Utilities Commission must determine, in a formal decision, that the statutory conditions of this legislation are met. The bill also requires the Public Utilities Commission to coordinate with the California Energy Commission to update all of our rules and regulations and guidance to ensure that this transition doesn't impact our existing state policies, like our renewable portfolio standard, as well as existing programs for reliability, like our resource adequacy program. And so, we'll be needing to do ongoing monitoring of the regional market activities, and ensuring compliance with California's laws and policies.
So, again, these are policies related to clean energy, reliability, greenhouse gas emissions. And we'll also be coordinating with the Energy Commission, in addition to that, to make sure that we have effective guidance to implement things like our renewable portfolio standard. We'll also be tracking any market design impacts that are going on and advocating for California ratepayers as regionalization would be implemented, and making sure that those stakeholder processes protect ratepayers, in particular, cost savings.
Speaker 1
All right. What work has the CPUC done to prepare for the proceedings required by AB eight twenty five? I know you started. And do you have confidence that you will have a determination made prior to January '8?
Speaker 9
So we have been trying to leverage existing resources that we have, which are very limited, to be monitoring the activities before the California Independent System Operator. We have not been able to open the new proceeding or open this issue at the Public Utilities Commission yet. These resources that are outlined are essential for us to be able to do that in the formal proceeding. But there have been activities going on at the California Independent System Operator, where they are bringing together stakeholders to look at the implementation of AB eight twenty five. And so, we've been leveraging existing staff, in particular staff from our renewable I mean, our resource adequacy program and market design program to be monitoring what's going on at the CAISO.
And that has been really key to help us make what we think here is a very strategic proposal, and being able to assess what that workload is going to look like, and how can we bring the necessary stakeholder process into the Public Utilities Commission with all of the stakeholders that come before the CPUC to be able to assess that all of the components of this legislation are met before our utilities join the regional organization.
Speaker 1
Doctor. Regionalization is something that, prior to Assembly Member Petrie Norris, Assembly Member Holden, he championed that for many years. So we've been talking about this for quite some time. The budget request, the bill itself calls for a report and then there's another entity that will be leading the work of the regionalization. Is that correct?
So your the request for funding, though, is ongoing beyond the requirements outlined in AB eight twenty five. What is the role going to be for CPUC in engaging with regional organization?
Speaker 9
Yeah. So there are a couple of different components. So first, of course, is the formal proceeding that you mentioned. In addition to that, we are going to have many if the utilities are given permission to join the organization, there's going to be several components of our existing programs, like the resource adequacy program, which is in state statute, the renewable portfolio standard program that's in state statute, and the integrated resources planning proceeding that will be impacted by the change in the situation for our utilities as being part of the regional organization. And so, will be having to look at program modifications for those programs to make sure that as our load serving entities participate in the regional organization, that we are maintaining the state requirements for reliability, maintaining the state requirements for greenhouse gas emission reductions, as well as all of the different components for clean energy and the renewable portfolio standards.
So, as you may recall, there are several categorical buckets in the renewable portfolio standard program that have to be met with different types of resources that might be in California, outside of California, as well as import transactions in the market, that we will be having to adjust all of our program rules on an ongoing basis to make sure that, as we participate in a western market, that we are making sure that all of the California requirements continue to be met with the changing market landscape.
Speaker 1
But I would imagine that all the load serving agencies, when we talk about resource adequacy and all of the other that you mentioned, there will be a time, once the report is done by '28 Mhmm. By January '28, and we move towards regionalization, I would imagine that each of those agencies is going to come before us or come before Senator Blakespeare and say we need more funding now because we're part of this regionalization. So I think that just something to consider because we're all having to make very difficult decisions during this time and that is to have the funding that is clearly called for in ABA25 should we choose to implement it now. And but it's one report. And thereafter, then there would be the requests thereafter for additional sums, but just something that may be considered.
How will the Commission ensure the California ratepayers' interest is protected in such a regional market?
Speaker 9
Ms. Yes. So, addition to those components I mentioned, the formal proceeding for this decision, the resource adequacy program, integrated resources planning proceeding, and renewable portfolio standard, we will also have some of these staff that are dedicated to monitoring and participating in the stakeholder processes before the California independent system operator. So, as you know, the CAISO is governed by the Federal Energy Regulatory Commission, and so they have their that tariff. And so, that tariff does require them to have stakeholder processes, and their board votes on the results of those stakeholder processes.
And so, the California Public Utilities Commission staff are going to have to act as stakeholders in that forum, advocating on behalf of California ratepayers among all of the different stakeholders that will be in that process at the California Independent System Operator. And again, our advocacy will be focused on making sure that California ratepayers are protected, affordability, but then also making sure all of the efforts that California ratepayers have invested in for reliability, greenhouse gas emission reductions, clean energy are maintained as well.
Speaker 1
Wonderful. Thank you. So is there any further questions? Well, wonderful. Thank you so much to all of you.
This has been very informative, and we appreciate your comments and your responses. Thank you. Thank you. And your direction. Thank you.
Now, whether we're going to follow it, but I appreciate you all so much. Thank you. All right, and now we're going to move to public comment. If anybody is here to provide public comment, please line up here to your left.
Speaker 15
Good morning, senators. I'm Bill McGavern with the Coalition for Clean Air, also speaking this morning on behalf of consumer watchdog. We're both in support of the small budget request from the division of petroleum market oversight. This, small independent division that you created recently provides a major bang for the buck in the data and analysis and transparency that they're bringing to the petroleum market. As you heard earlier, they've confirmed the existence that had previously been identified by an academic economist of the mystery gasoline surcharge that the oil companies are profiting from, which is price gouging.
And we think that actually the existence of DPMO may be already limiting the price gouging that the companies are engaging in. We support continuing to build the capacity of DPMO. Thank you.
Speaker 16
Mr. Madam Chair and members, Ian Padilla representing the Coalition for Adequate School Housing and the School Energy Coalition. I am going to direct my comments, of course, unsurprisingly, to issue two, the budget trailer bill piece. Cal shape was created, of course, to address issues relating to HVAC, air quality, and also water quality. The closing it down has created quite a bit of consternation with some of our school districts.
Some of the school districts have had projects and gotten caught kind of in a lurch in terms of they don't so they don't know what is exactly happening. So I won't go too far. I hope that you will statutorily extend the Cal Shape program so we can finish these projects, and also use the existing funds that are there already for future projects. I did want to say one thing, that proposition two was mentioned today. It's a very good program.
Has cash. We were very much involved in that and so on. But as a lot of folks know, that is, those programs are very specific to different needs in there. And so while it's a great program and districts already do as much as they can with upgrading through the school facility program, Calshafe is a little bit different because it's the only state program dedicated specifically to upgrading both plumbing and primarily so far HVAC. So we hope you consider this and schools as you make your decisions.
Thank you.
Speaker 17
Good morning, Madam Chair. Michelle Ogle, on behalf of California Association of School Business Officials, also speaking in support of issue number two, cal shape. Extreme heat and wildfire smoke are already disrupting learning and threatening our students' health. Many schools still lack modern HVAC systems. Upgrades are needed to improve air quality, lower long term energy costs, reduce reduce emission and benefit disadvantaged communities.
The California Energy Commission froze all Cal shape applications on 07/01/2024, and we urge legislature to extend the cal shape so districts can complete projects already underway. The legislature should also direct the California Energy Commission to reopen applications for the remaining $192,000,000 and allow flexibility between HVAC and plumbing funds, so schools can use dollars where they are most needed. Only 172 school sites have received awards, and many districts risk losing funding due to delays outside their control. Without an extension, projects will be scaled back or abandoned entirely. We request you to take urgent action on this matter because if it's not taken, unspent funds will revert to utilities in December 2026, not the general fund, with minimal benefits to rate payers and no clear accountability.
As mentioned in staff comments, CalShape is widely supported and we critically need it. Thank you so much.
Speaker 18
Good afternoon, Jerry's and members of the committee. My name is Caleb Weiss and I'm Environment California's Clean Energy Associate. I'm also commenting on behalf of the Climate Center whose representative couldn't make it today. I'm here to also comment on item number two and express our support for restored funding for the DSGS program through 2028 to enable the program to continue to provide vital grid resilience and cost savings benefits and to ensure that the state is able to transition away from dirty natural gas power plants as soon as possible by fully integrating distributed energy resources into the state's energy market. We are supporting other legislation to enable this integration.
We're supportive of the first trailer bill, which authorizes DEBA funding to the DSGS program and appreciate the recognition that the current DSGS funding level is not sufficient to fund the program in 2026. However, we also urge the legislature to appropriate sufficient funding to not only maintain the size of the program, but also allow it to continue to grow, and therefore advocate for funding with an amount closer to the 75,000,000 allocated back in 2025. We know that there remains significant additional potential for distributed energy resources to contribute energy capacity to California's grid during times of high demand, especially as Californians continue to make the environmental and energy affordability decision of adopting residential solar and storage. We also urge the legislature to consider dedicating cal shape interest funds to the DSGS program rather than the establishment of an updated ELRP. We appreciate the governor's recognition that the state needs to continue to tap into distributed energy resources for environmental reliability and affordability benefits, and we understand the recommendation to combine the programs into one.
However, we urge the legislature to consider the differing track records of the programs when deciding where to allocate funds for the next few years. Furthermore, we urge the legislature to consider that the DSGS program is a vital bridge to pave the way for distributed energy resources to fully participate in the energy market as soon as possible, which Environment California is working towards via other legislation and the climate center and is not meant to establish a permanent taxpayer or ratepayer funded program. Lastly, urge the legislature to extend the Cal Shave program so that the remaining funds can be used for HVAC upgrades in schools. We agree that the reason that the funding remains is due to the premature freeze on applications, not a lack of needed upgrades. We believe that the program efficiency and clean air benefits of the program outweigh the relatively insignificant ratepayer savings from returning the funds to IOUs.
We urge the legislature to explore alternative ways to reduce energy rates, such as the expansion of the DSGS program. Thank you.
Speaker 1
And before I call the next witness, I fail to say that we were we ask that you limit your comments to a total of two minutes per witness. Thank you. I'm not saying anybody didn't do that. I'm just saying, for the rest of you.
Speaker 19
Thank you. Good morning, Chair and Committee members. I'm Molly Corcoran on behalf of Ellis Power, speaking in regard to issue number one today. Ellis Power is a leading transmission investor, developer, operator and owner that has been awarded more competitively awarded transmission projects than any other entity based on innovative design and enforceable cost containment commitments that benefit ratepayers. We are here today to express our concern about the transmission accelerator program.
We think that there are still a number of implementation details that will need to be decided to determine whether the accelerator complements or unintentionally disrupt California's successful competitive transmission framework. We're reviewing the administration's trailer proposal that was posted yesterday, and look forward to continuing conversations with the legislature and the administration on this topic. Thank you. Ms. Thank you.
Speaker 20
Ms. Hi. Good afternoon, Chair. Gresheena Mahabir with California Environmental Voters. I want to briefly voice support for two of the items that were discussed today.
First, regarding the DSGS program, enviro voters would like to see this program properly funded to bolster clean energy reliability within the state and help deliver ratepayer savings in the long run. Additionally, I would also like to express our support for funding roles at DPMO, the Department of Petroleum Market Oversight, which is uniquely positioned as an oversight body to provide information about the oil market that benefits consumers and decision makers. Thank you.
Speaker 21
Welcome. Afternoon, Madam Chair. Brandon Garcia, California Director for Advanced Energy United, here to speak on Issue two. We believe the staff report very clearly outlines a clear showcase for why the program the DSGS should stay at the CEC and should not be merged with the CPUC's ELRP program. DSGS has been able to scale to 1.14 mega megawatts of capacity.
That's about half of Hoover Dam. It could dispatch power quickly, affordably, in an efficient manner. The the comparison between the megawatts is is is stark, really. One ninety versus 1,000 is is a massive difference, and we feel we echo the chair's comments. If a program is successful, we should continue funding successful programs.
We wanna make sure the state has reliability in its times when it's really needed. DSGS has cost control mechanisms that are able to respond before energy prices skyrocket so that ratepayers aren't suffering high energy costs. We agree with the administration that the DEVO money should be transferred to DSGS, and we are supportive of that trailer bill. We think that makes a lot of sense. We don't think it makes a lot of sense to restructure a successful existing program at the CPUC.
And frankly, I don't know if there was a good enough justification given today as to why it should do that. We are helpful and want to be working with the committee on finding innovative funding solutions, but want to echo my comments for the other stakeholders of fully funding DSGS this year. Also want to make note, DSGS was not funded last year, and we are in a dire strait to be able to respond reliably to those energy needs. And because of that, we would urge, funding that program to its fullest fund. Thank you.
Speaker 22
Madam Chair, good afternoon. My name is Dan Jacobson with Environment California. Really, just a quick item on something that came up, which was the ones through cooling plants discussion. And, what it sounded like they were saying is they don't want to renew those contracts. That is an incredible clean air opportunity.
I'd like to say, we'd like to follow-up with your office specifically on that because the opportunities to ensure clean air in communities that have been overburdened with dirty air is really a once in a generation opportunity to do that. And I think we have to take what they said very seriously and really follow-up with that. So, hope we can do that with you. Thank you.
Speaker 23
Good afternoon, Madam Chair. Will Brigger from Climate Action California. First off, I wanna associate with mister Garcia's remarks about the DSGS. It's, you know, everything he said. But I I stood up on issue 12, and that was bill last year, a b three sixty eight, that asked CEC to study something called the passive house standard.
Quick side note, it's H. A. U. S. This is a standard that developed originally in Germany, apparently, and is accepted in other parts of the world because it's very energy efficient.
So, as a climate group, of course, we love that. It means it helps us achieve our climate goals, it helps with grid stability, and it helps with affordability. The other thing about the passive house standard is it's good for the health of the occupants in those buildings. The air quality, it's recirculated air. So even in wildfire, you want to be in one of those houses.
And finally, it's home hardening, which is something California needs to be
Speaker 23
about. In the Eaton fire, there were some neighborhoods that burned down entirely, one house standing, built to the passive house standard. So, yes, we'd like to see CEC do the study to confirm what I'm telling you. And then, once they've confirmed it, wise California builders can build to that standard on a voluntary basis, even, be good for the climate, good for California. Thank you.
Speaker 24
Hello. Good afternoon now, Madam Chair. My name is Adam Haddafi. I'm here on behalf of Generac Power Systems and Ecobee Smart Thermostats. First, I want to echo comments from Brandon Garcia regarding the content of the staff report.
Very clearly differentiated what is in DSGS and what is in ELRP, and their ability to help the grid remain reliable. I wanted to address a couple of things that came up during the discussion on item two. There was a comment made that DSGS was always supposed to be a temporary bridge to a to a future where we have these resources up and running. That is true, except DSGS was initially funded at a much higher level, and those funds have been reverted year after year after year. So DSGS hasn't run for as long as it was intended to run.
And second, the idea of shifting funds from cal shaped interest funds to ELRP instead of DSGS, and hoping for a future functional program that runs based on ratepayer money right now is somewhat perplexing when we have a program that already works, where we can put those funds and let it run for as long as it was meant to. I think it's also worth pointing out that the CPUC's primary reliability program, which is the resource adequacy program, is very likely not going to meet its statutory reliability requirements for '26 and '27. The OTC plants are running out at the end of this year. And to wait for a program design that doesn't really exist and fund a program design that doesn't really exist at a time when we're facing potentially a reliability cliff in 2027 is a risk that I don't think our state should take. Thank you for your time.
Speaker 25
Hello, Madam Chair. My name is Colin Smith. I'm with Leap, Leapfrog Power, is a demand response aggregator based in California that participates in both DSGS and ELRP. I'm here to comment on item two. I support comments made by the committee and by witnesses about not ending a program that has proven to be successful.
There is comments in the staff report about ELRPs enrollment procedures being more complicated and cumbersome than DSGS. I want to underscore that. Based on our experience, we expect to see around five percent of DSGS participants actually successfully move into ELRP if we try to transition these customers over using the existing enrollment processes, 5%. Losing 95% of capacity from this program would not help, any customers, including the investor owned utility customers that this ratepayer funding is intended to support. Now I'm happy that the CPUC is considering a new program.
We don't know what that program will look like. We've seen other programs run by the IOUs that had more efficient enrollment procedures, have those procedures radically changed at the last minute. And so depending on a new program designed by the, CPC and invented by the utilities will create a lot of uncertainty, for an industry that's already seen significant uncertainty when $75,000,000 was removed from the DSGS budget last year, throwing us into this very, confusing and difficult budget quandary. So, there's been discussion about funding uncertainty for DSGS. The legislature has the ability to create funding certainty for DSGS right now or this year by allocating the $70,000,000 from Cal Shape not to ELRP, but to DSGS instead, or, you know, from a different funding source.
We're we're happy to hear that there is some interest in being being creative there, and we're excited to work with you on how to potentially do that. We're also excited to we're happy to work with our colleagues at the CPUC through the proceeding to create a new program. But I encourage you not to end a successful program before we know what, if anything, will replace it, particularly going into 2027 when the, one to two cooling plants will be offline and reliability is critical. That's not a chance that the state should take.
Speaker 1
Thank you. You did go over the two minutes. You heard her you saw her. She kept saying pointing to it. So when she starts pointing thank you.
Yes. Proceed.
Speaker 26
Madam Chair, members of committee, Marissa Hagerman with Tratton Price Consulting. I have a few comments today, but I will keep it under two minutes. On behalf of the Climate Center, we want to express our support for the DPMO and encourage full funding to help them implement SBX one-two, including petroleum market analysis and holistic transition strategy. On behalf of EDF, we'd also like to echo the comments of others today about their support for the DSGS program and opposition to moving that program over to the CPUC. As others have stated, the DSGS program is a good bang for our buck.
It's scaled to over one gigawatt capacity in under three years, only $13,000,000 in administrative costs, delivering over $66,000,000 in value directly to customers. Juxtaposing that against the ELRP, in 2025 alone, PG and E and SE spent over $16,000,000 in administrative costs and only delivered 525,000 benefits to customers, only delivering 47 megawatts. Appreciate your support and look forward to working with the committee this year. Thank you. Thank
Speaker 25
you, Madam Chair. Max Perry speaking on behalf of Q Cells Solar Energy. Just echoing the comments of our colleagues in the clean energy sector for support of the DSGS program and full funding as outlined in item two. Think they hit the nail on the head and have nothing to add to their comments. Appreciate it.
Thank you.
Speaker 27
Hi. Good afternoon. I'm Meg Snyder with Acxiom Advisors on behalf of Renew Home and Rewiring America. I want to echo the comments of Advanced Energy United and hope to see $75,000,000 for the DSGS program. Grateful for the conversation today and look forward to future conversation to fund the program.
Thank you.
Speaker 28
Ms. You, Madam Chair and Staff. Mitch Steiger with CFT, Union of Educators and Classified Professionals, here to speak to Issue two and the related trailer bill on the emergency load reduction program. We agree with all the comments that the DSGS program is probably a much more worthy place to put the interest from the cal shaped funds than ELRP. That is one issue with this trailer bill.
For us, the far bigger issue is what it doesn't do, which is anything about what's going on with the cal shaped program, which is a huge crisis that absolutely needs to be dealt with, and it has to happen this year. Our members and our students are very literally dying for this money. This money can go towards dealing with, respiratory toxins, carcinogens, all sorts of harmful materials that are floating around in the air in schools, And this can install MERV 13 filters that clean the air. There's an epidemic of indoor heat related cognitive dysfunction and learning loss. We hear from members who have to teach in 85, ninety, ninety five degree classrooms.
Kids cannot learn in that environment, and our teachers can't teach in that environment. Cal shape is really the only game in town. Prop two was mentioned. That money's gone. It's already been committed to other things.
We have a very large pot of money right there, both encumbered and unencumbered funds that can go towards solving this problem. It has to happen this year. The money did not go out through any sort of inaction or malfeasance or problems on our end. It it's a combination of different things. These projects are complicated.
There were delays at the state architect. And as was mentioned, deadlines were moved back by months. So there's artificially a lot of money sitting in this program that needs to go out. But if we don't do it by the end of the year, it's gone forever. And those problems of our kids and our students developing asthma, developing cancer, developing heat related learning loss will continue with no real funding on the horizon.
So we would strongly urge this trailer bill to be tweaked to not only take that ELRP money and put it towards GSGS, but also make sure that we move the deadlines out so that the cal shape money can oh, there's pointing. That the that the cal shape money can go towards where it was mandated by the legislature to go. And so we would urge that to be the action you take instead. Thank you.
Speaker 29
Ms. Good afternoon, Madam Chair and staff. I'm speaking on behalf of NextGen. My name is Megan Murray with The Vitamin Group, on behalf of NextGen California, in support we fully in support of fully restoring the demand side grid support program two, the expedient allocation of climate bond funds to advance climate resilience and clean energy across the state and three, distribution of the climate credit under the Cap and Invest program to reduce high summer electricity bills for our low income households. Specifically, we request that the budget allocate at least $75,000,000 this year to DSGS program before the peak summer months to keep the program viable, sustain private investment, and protect Californians from higher bills and unnecessary emissions.
We also respectfully request that the legislature keep the DSGS program at the California Energy Commission. Next, we urge the legislature to allocate critical funds for the climate bond this year to advance extreme heat and water resilience programs as well as clean air programs and to not use these funds to backfill any general fund obligations. Finally, we encourage funding for an ambitious transition of the natural gas to electric climate credit by 2031 and prioritize savings for low income communities during those hot summer months. Thank you so much.
Speaker 30
Afternoon, Madam Chair. My name is Evan Polisar here for General Atomics. I'm here to speak on an issue that was not on the docket today, the Fusion Research and Development Innovation Initiative. This program was created last year under legislation SB 80, and it was funded at $5,000,000 in the budget trailer at the end of the year. So fusion, as you know, is the process that powers the stars.
And when we successfully commercialize it, this will be a type of energy that can bring firm, reliable baseload power to California and the world. Fusion's been talked about for a really long time, but one of the things that doesn't get a lot of attention is that California actually has the largest ecosystem when it comes to this type of technology in The United States. We have the largest labs, we have the biggest, most robust academic programs. We actually have the largest share of startups in the country as well. When we put all of this together, Fusion drives about $1,400,000,000 in economic impact every year.
And looking ahead, this is an industry that could very well create about 45,000 permanent jobs and have about $10,000,000,000 in impact annually in the very near future. When we started this program last year, the point was that the Department of Energy was starting to make some of the investments for new facilities in the next coming near future, facilities that are going to be operating for the next ten to fifteen years. And we've started to see those announcements be made. And so General Atomics with several other organizations in the fusion community in California would like to recommend additional funding through that program and the budget trailer bill. Thank
Speaker 31
afternoon, Chair Reyes. Tiffany Fan on behalf of the California Efficiency and Demand Management Council, or SEDMEC. There was a lot said previously about issue two regarding DSGS. We are also in support of meaningfully funding that program. It's early in the budget process, so we look forward to working with this committee on how to meaningfully fund that program, having it continue that success.
Thank you.
Speaker 1
Thank you. Well, thank you to all the individuals who participated in public testimony today. If you were not able to testify today, please submit your comments and suggestions in writing to the Budget and Fiscal Review Committee or visit our website. Your comments and suggestions are important to us, and we want to include your testimony in the official hearing records. Thank you, and appreciate your participation.
Thank you to everyone, and thank you for your patience and consideration and cooperation. We have concluded the agenda for today's hearing. Senate Budget Subcommittee number two is adjourned.
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