(mid-tempo music)
Operator: Welcome to the California Public
Utilities Commission on this day,
Wednesday, February 24th, 2021.
This is the En Banc meeting
of the California Public Utilities Commission.
Mary Claire Brown, you may begin.
-: Thank you.
Good morning, everyone,
and welcome to the California Public Utilities Commission's
En Banc hearing on electric costs and rates.
Can we afford the future?
My name is Mary Claire Brown, or MC, and coincidentally,
I will be your emcee for today.
I'm an interim energy advisor to our new Commissioner,
Darcie Houck, and until very recently,
I was an advisor to Commissioner Shiroma.
We have a really great agenda planned today,
a very packed agenda.
So I'm just gonna briefly cover some housekeeping items,
and then I'll hand it over to President Batjer
to kick off opening remarks.
So all the materials for this En Banc,
including the agenda, slides, and the white paper,
are available on the CPUC En Banc web page.
So for those watching the webcast online,
you can find the link to that webpage right below
the video window.
And for the virtual dais members,
I'll put a link to that in the chat.
The structure of the day, we'll begin with opening remarks.
Then energy division staff will present on the white paper
that was released last week.
Then we'll have three panel discussions
with our panels of experts,
one in the morning and two in the afternoon,
followed by closing remarks from Commissioner Shiroma.
And then we will have half an hour for public comments.
So during the panel sessions,
only members of the virtual dais
will be able to ask questions of the panelists.
So we will not be taking questions from the public
during that time.
After the last panel and after closing remarks,
we will have half an hour for public comments,
that will likely start at 4:15 PM,
and you'll be able to call in
and we'll provide more directions about how to do that
closer to the end of the day.
We've also created a dedicated email inbox for this event,
and members of the public can submit
informal written comments to that inbox at any time.
The email address is costenbanc@cpuc.ca.gov.
And you can also find that address on the agenda
and our event webpage,
and the webcast webpage that you're watching now.
And the last thing I'll say is this event is being recorded
and will be available for viewing afterwards
on the CPUC webpage.
So with that, I'll hand it over to President Batjer
to begin our opening remarks.
-: Thanks very much Mary Claire,
and good morning everyone.
And thank you all for joining us today
for the energy rates and costs En Banc.
I would like to especially thank my colleagues
for joining me on the virtual dais
for this important discussion.
(mumbles), Mr. Chairman,
Assemblymember Holden, Mr. Chairman,
from the California Energy Commission,
Chairman Hochschild,
Commissioners Douglas, Gunda, McAllister, Monahan,
and the executive director Bohan,
from the Cal ISO, chair Galiteva, vice chair Bhagwat,
Board members, Borenstein, Leslie, Schori,
and CEO Mainzer.
From the California Natural Resources Agency,
deputy secretary of energy, Matthew Baker.
Thank you all very much.
Oh, I'm so sorry, wait a minute.
It's my fellow Commissioners, Commissioner Rechtschaffen,
Commissioner Guzman Aceves, (cuts out)
Commissioner Houck.
Thank you all.
We begin this work because we understand that
meeting our state decarbonization and electrification goals
will depend on maintaining electricity rates
that are affordable for customers.
We are working to move our state's climate goals forward.
We want to take a strong look at the potential rate
implications as we move forward with these policies.
The white paper prepared for today's En Banc
by the talented energy division team,
found that some of the concerns regarding
rate crash pressures from our ambitious
and critical policy goals may not be as acute
as some had feared,
though, there are still very real rate pressures.
As the white paper shows, energy spending in households
more sensitive to rate increases is forecasted to rise
faster than inflation over the next decade,
which is a very troubling finding
that we will explore further today.
The common mandate across our agencies is to ensure
Californians are served by reliable electric grid,
and that over time it is decarbonized
at the rate needed to reach our clean energy goals,
and at a cost that Californians can afford.
Policies to mitigate climate change,
while we are also in the midst of experiencing
and adapting to the effects of climate change.
Last week, the country experienced yet another
extreme weather related disaster.
Our thoughts continue to be with those who endured
the impacts and suffer the personal loss
due to the blackouts.
As the situation in Texas,
and the experience here in California last summer
have shown us, we must prepare the grid
for more frequent and extreme weather events.
A changing climate means that the level of reliability
that we require for the power system
will likely come at an increasingly higher cost,
which will be one more factor putting
pressures on our rates.
Here's the CPUC in our climate adaptation proceeding.
We are ensuring that the utilities plan for climate change
in a way that protects the more vulnerable populations.
Let me also be clear,
California is not combating climate change
to the detriment of affordability and reliability.
The real and much more important conversation
is happening here today.
That is, how do we as a state,
continue with our essential decarbonization work,
while ensuring that the communities who are more sensitive
to rate increase are not unduly burdened.
Many of these communities have historically shouldered
a disproportionate impact of pollution from power generation
and who are now feeling the effects of COVID-19
more severely than the other parts of our state.
Increasing bills by a few dollars a month
each year may be absorbable for some in the state,
but for others, continued rate increases
during challenging moments in their lives
could lead to undesired sacrifices within a home,
and a breakdown in confidence
in the shared efforts of our organization.
And as our work at the CPUC's affordability proceeding
has shown, many households are spending a larger and larger
proportion of their annual income on energy bills.
But may we must also recognize that there will not be
a particular cost metric that will trigger
so-called rate payer shock or revolt.
Rather, it will likely be caused by an environment and mood
we failed to see coming and fail to respond to.
Today's En Banc and the work leading up to it,
demonstrates that the CPUC's awareness
of these potential conditions and our readiness to respond.
To me, this is the main takeaway from the white paper.
The CPUC must continue promoting more equitable outcomes
in our decision-making.
I am very much looking forward to the conversation today
on potential options to address the trends
and the impact the energy division has so well articulated
in the white paper.
My hope is that the conversation today will be a catalyst,
additional efforts that will catalyze the additional efforts
that continue to contribute to our focus on equity
as a central tenant in the PUC
and all of us moves forward.
Thank you all very much.
I look forward to the participation of all of you today,
and I thank the public who has joined us.
Thank you.
Mary Claire?
-: Thank you, President Batjer.
Commissioner Shiroma, are you ready?
-: Yes, thank you.
Thank you, MC.
Thank you, President Batjer.
And a very warm welcome to all of our distinguished guests
and colleagues here on the dais.
As I look through the virtual dais,
seems we have the who's who of energy in California
with us today.
Thank you to the public who are taking time out of their day
to spend it with us.
I'll keep my remarks brief because we have a lot
of great content to plan for today.
As many of you read in the white paper,
which is out for public comment until March 19th,
Pacific Gas and Electric and San Diego Gas
electric rates have increased at more than twice
the rate of inflation since 2013,
and all three electric utilities rates
are expected to continue increasing faster than inflation
over the next 10 years.
We'll hear today about the impact of these
anticipated rising rates on some of our
most vulnerable customers,
for customers who are below the 200%
of federal poverty limit.
We do have in place CARE, which is the
California Alternative Rates for Energy program.
It is the nation's most generous bill discount program,
which offers a 35% discount on energy bills.
However, this only partially mitigates
the impact of rising rates, and for customers who make
just above the federal poverty limits, these rising
electric rates are going to hit them the hardest.
This underlines one of my key takeaways in the white paper,
and that is, we as a Commission,
cannot continue to approve larger and larger
revenue requirements while relying on programs like CARE
to shield customers from the worst.
We must make adjustments to slow the increase
in utility revenue requirements for all customers.
And many of these adjustments need to come from
Commission itself.
We need to do a better job of considering
the cumulative impact of the rate increases
we approve in individual proceedings,
and we need to be diligent in ensuring that
when we approve new spending,
it is only for programs where we have strong evidence
that the benefits will outweigh the cost.
We need utilities to be our partners in this,
and aggressively look for cost cutting measures.
And I'm very much looking forward to hearing their ideas
in a panel after lunch.
Lastly, we need support and collaboration
of the legislature, our sister agencies
to assist us in this endeavor,
as many of our programs are legislatively mandated
or related to the purview of other agencies.
I'm thrilled that we have all of these STH representatives
on the dais with us this morning.
And before I turn this microphone back to our emcee,
Mary Claire, I want to take a moment to thank
the many CPUC staff who've made this day possible,
Paul Phillips, Ankit Jain, Alireza Eshraghi,
Simon Hurd, Julia Ende, Bridget Sieren-Smith,
Josh Huneycutt, and a number of other position staff
who've been working tirelessly these past months
on the white paper.
And thank you to Franz Cheng, David Zizmor,
Joe Haga, and Robert Stanford for handling the planning
and logistics of this very complicated event today.
It's truly been a Herculean task,
and I thank them for the great work
in a very short period of time.
And I'll now turn the microphone back to Mary Claire.
Thank you.
-: Thank you, Commissioner Shiroma.
Assemblymember Chris Holden,
are you ready to give some opening remarks?
-: I am.
Good morning everyone.
And thank you, President Batjer, Commissioners
for inviting me to be a part of the meeting today.
Let me just thank you for discussing a topic
that is of great importance to me.
And that is how we ensure our energy future
is not only cleaner and safer, but still affordable.
Our committee held a hearing around this time last year
to discuss rates and affordability,
which remains critical, and critical importance to me.
I appreciate the Commission's raising the topic
and I recognize solutions to rate affordability
is a tight rope we must walk.
There's not a matter of whether or not
we can afford the future,
we can't afford to do nothing.
Climate change is the reality,
and we are bearing our response to the changing climate
and our energy rates, from greening the grid,
wildfire mitigation, to electric vehicle charging build-out.
Yet, so often the conversation
is presented as a duality.
You either have wildfire safety of the power grid,
or you keep costs low.
You either have aggressive GHD reduction goals,
or you keep costs low.
I'm not disputing that certain capital investments
are necessary, but I reject the false choice,
this either or.
We must figure out how to get our costs under control
while continuing to pursue our ambitious goals.
We need to get more out of what we have already paid for,
how to manage smarter, and be more nimble,
including how the development of more coordinated
western grid could add real benefit to rate payers.
We need to examine existing programs
and evaluate whether redundancy exists.
We must also explore financing options and rate schemes
to ensure these long-term investments in our grid
are not front loaded.
But these are not our only challenges
in facing future affordability.
We also recognize that affordability impacts communities
in our state differently.
As this pandemic has highlighted very starkly,
energy is a basic necessity and essential service.
Unfortunately, as the staff white paper shows,
some communities pay much higher percentage
of their discretionary income for vital utility services,
even when compared to low-income households
elsewhere in the state.
Our solutions must have this reality in mind.
That is why this conversation today is so vital and timely.
I appreciate the Commissioner's attention
to this critical issue.
And I look forward to the discussion today,
not only as it highlights the challenges
to ensure our future affordability,
but also with an eye toward solutions and remedies to help
moderate this growing trend toward ever increasing rates.
Again, thank you for inviting me today.
I look forward to the conversation.
-: Thank you, Assemblymember.
Next we have Senator Ben Bezo.
-: Hello, good morning, everybody.
I'd like to thank you for this opportunity
to share some comments.
I want to thank President Batjer,
Commissioner Shiroma, CPUC chair Fokesield,
CAISO CEO Mainzer, thank you for the invitation.
And it's a pleasure to join you.
I appreciate the CPUC organizing this discussion today
on electric costs, particularly
given the economic challenges
many of our residents are currently facing.
These challenges have become more pronounced,
but the economic toll and the impacts of COVID,
as many have discussed for quite awhile now.
Electricity is an essential service
to the people of our state, even more necessary,
if not more appreciated,
in the midst of this global pandemic.
It's always been the key to people's public health,
safety, and the prosperity of the businesses of our state.
Unfortunately, the changing climate is creating
more challenges to maintaining
reliability of electric service.
As we witnessed in August,
with the unexpected rotating outages,
but also the numerous distribution equipment failures
due to the 120 Fahrenheit degree temperatures,
that likely affected customers more on duration,
and of course, the tragic horrors
of the recent outages in Texas.
Catastrophic wildfires in California become
a nearly yearly occurrence,
and the electric grid has been a source of ignition
for some of these horrendous fires.
As a result, the need to mitigate the vegetation management
and improvements to electric infrastructure
have become yet more critical.
As a state, we're pushing toward cleaner generation
to achieve our climate goals,
while allowing local governments to make decisions about
what generation to procure.
We've pushed to expand access to solar rooftops,
to help develop an industry which many argue is no longer
in need of the current incentives.
Incentives and rates that raised equity concerns
about who benefits and who pays.
The COVID pandemic is further challenging us
to protect our most vulnerable residents.
I applied the Governor, the CPUC, and utilities
for continued policies to protect residents
from loss of service due to nonpayment during this time.
It really is the right thing to do.
Disconnection of service due to nonpayment
is an issue very important to me.
As I previously offered to build a direct of CPUC,
institute protections for customers who could not pay,
including those on life support medical equipment.
The CPUC robust policies have been demonstrated
during this pandemic.
Nonetheless, I'm mindful that these are all costs
that need to be shouldered.
Federal assistance will be helpful,
but we must continue to be vigilant to protect customers
at their time of most need.
Over 100 years ago, what began as the Railroad Commission
has been transformed into the California Public
Utilities Commission, with a mission to provide
rate regulation of monopolies that were needed
to provide essential services.
Beginning with the advent of electricity.
This regulatory compact must always remain
at the core of the work of what the CPUC does.
Even as technology has changed, and issues of concerns
ebb and flow, wildfires, gas, pipeline, safety,
access to broadband and services,
the fundamentals of just and reasonable rates
continues to be the linchpin
of the regulatory authority of the CPUC.
So ensuring residents have access to reliable central
services, including (cuts out).
Various issues that pose challenges to electric costs.
I ask everyone to be mindful of the need
for reliable service at just and reasonable rates.
California residents provision of essential electric service
at reasonable rates relies on a strong CPUC
that can manage the robust issues,
before it can maintain the regulatory compact
at the center of its work.
We will have expenses that must be shouldered
to meet our many challenges.
But we must ensure that they are both
to the benefit of California rate payers,
that they are prioritized, and judiciously reviewed.
While our challenges have grown, I ask what additional tools
does the CPUC to meet those challenges?
Is the CPUC able to satisfy the necessary review
of each dollar spent by regulated utilities
to ensure it as just and reasonable?
I look forward to today's discussion as well as
any follow up regarding ways we can ensure
the CPUC's efforts are bolstered and strengthened.
What tools does the CPUC need
to continue the agency website?
As the website states, protect consumers
and ensure the provision of safe, reliable utility service
and infrastructure at reasonable rates,
with a commitment to environmental enhancement
and a healthy California economy.
Thank you very much.
And I look forward to working with you this year.
-: Thank you Senator.
Next we have CEC chair, David Hochschild.
-: Good morning friends.
Thank you, Chairman Holden and Chairman Hueso,
President Batjer, Commissioner Shiroma,
and the rest of my esteemed colleagues.
I'll be brief.
I just wanted to point out for the last three years,
we've had the worst wildfires, climate driven wildfires,
in state history, and climate solutions need to be
a fundamental part of the strategy as we think about
rate and rate design, and really to understand that
at the electric rates today, our climate policy,
our functioning climate policy, and to be very mindful about
proceeding in ways that are going to incense
the good things we want to have happen,
and be very mindful of that.
And then an example, we have now over 800,000
electric vehicles that have been bought in California.
Those vehicles together have contributed
almost a billion dollars to rate base,
and that's a downward force on electric rates.
And to think about this as well as we look towards building
decarbonization electrification.
The other thing that's on my mind as well,
now that we have a new administration in Washington, DC,
our state goal of getting to 100% clean energy
is now the nation's goal.
The grid is cleaning up rapidly
without 60% carbon free today, it would get to 100%.
Thinking about the opportunity for federal stimulus money
to go to do the kind of grid upgrades that might otherwise
be paid for by rate payers, to relieve the burden of those
from rate payers, and really be strategic about that
as a way to keep rates down and make use of
the infrastructure dollars that the federal government
is going to be pushing.
I think I'll stop there, but thank you,
Commissioner Shiroma bring us all together today.
-: Thank you.
And our last opening remarks are from CAISO CEO,
Elliot Mainzer.
-: Good morning, everybody.
On behalf of the California ISO's governing Board and staff,
I very much appreciate the CPUC convening us today
to address this very important set of topics.
As we've seen over the past year,
investing in our critical infrastructure
is essential to the health, safety,
and economic wellbeing of the people we serve.
The CPUC has a tremendous task and important role
in balancing the state's various policy objectives,
including addressing critical climate, electrification,
and building decarbonization goals,
while maintaining affordable service
for utility customers in California.
At the California ISO, we recognize how challenging this is
and stand ready to provide the technical expertise
in grid operations and transmission planning
to help the state make informed decisions
in the realms of resource adequacy,
planning, and procurement.
This conversation comes at a critical inflection point,
as we're all working diligently to ensure
electric reliability for the summer of 2021 and beyond.
I would like all of the attendees of today's meeting
to see the California ISO as a collaborative
and solutions-oriented partner in the transition
to a clean energy future.
We will continue to look for ways to efficiently integrate
clean energy resources using our market-based
least cost dispatch.
We will also work closely with the CPUC, DEC,
and other stakeholders throughout the west,
to conduct dynamic and farsighted power and transmission
resource planning in order to meet the state's long-term
clean energy goals, in a reliable and affordable fashion.
Personally, I've very much appreciated the warm welcome
since returning to California
and joining the ISO last October.
I'm here to listen and learn today,
and very much look forward to the conversation.
Thank you all very much.
-: Thank you, Mr. Mainzer.
And thank you to all of the folks who gave us
those great opening remarks.
Now we're going to launch into the agenda for the day
and first up, we have a staff presentation
from energy division on the white paper
that they released last week,
that looks at cost and rate trends historically
and over the next 10 years.
So I'm going to turn it over to Ed Randolph,
the CPUC's deputy executive director of energy
and climate policy to introduce this presentation.
Ed, I think you need to unmute yourself.
-: Yeah, that's the first snafu of the day.
Thank you, Mary Claire.
Thank you, and good morning Commissioners,
legislators, and Board members.
I am Edward Randolph, the deputy executive director
for energy and climate policy
at the California Public Utilities Commission.
I want to start by echoing the thank yous to the CPUC staff,
both in energy division and Commissioner Shiroma's office
who have worked many, many hours to draft the white paper
and to put this event together.
I also want to thank David Roland-Holst from UC Berkeley
and Mark LeBel from the Regulatory Assistance Project
for the special assistance with the white paper.
And I want to specifically thank Robert Stanford
and Joseph Haga for their help on the technical side
of making this work today.
Before I hand things over to Paul Phillips
to discuss the white paper,
I want to take a few minutes to set the stage on
why we are having this En Banc
and what the next steps will be after today.
Over the past five years, energy division has worked
to refine our ability to forecast rate and bill trends
and to provide the CPUC with more tools to understand
how individual decisions will impact
overall rates and bills.
Additionally, under the leadership
of Commissioner Rechtschaffen,
and the CPUC has developed metrics to measure
the affordability of utility bills to California households.
These efforts have allowed us to better understand
the dramatic increases Californians could face,
and energy bills in the years to come.
And more importantly, to understand that
for some parts of the state,
and especially for some communities within the state,
energy could become increasingly unaffordable.
It was apparent that meeting the key goals
for providing safe, environmentally friendly,
reliable, and affordable electricity
will get increasingly challenging over the next few years.
As some witnesses will discuss today,
higher bills make meeting our policy goals much harder
in the investments we must make to ensure a safe,
reliable electric system will lead to cost increases.
These realizations led to internal discussions
within the PUC on ways to reduce upcoming bill increases.
But once we looked at the drivers of the increases
and ways we could reduce utility costs,
it was hard to pinpoint places where
we should cut back on spending.
As we will discuss in this panel,
the biggest drivers of bill increases
are wildfire mitigation spending and transmission build out.
While we can look at ways to be more efficient
in these investments, I don't believe we can recommend
not making these investments.
They are critical to reducing wildfires,
maintaining reliability, and avoiding outages,
such as ones that happened last summer in California,
and just happened in Texas.
We also know that investments in clean energy infrastructure
are absolutely necessary to meet our state policies,
and analysis shows that these investments
have minimal impact on bills
or can even save Californians money over time.
We quickly realized that while keeping energy bills
affordable to critical policy objectives,
there are no easy actions we can take
to minimize bill impacts.
In meeting affordability goals,
must be a joint effort with the CPUC, our sister agencies,
the legislature, the utilities,
and the many stakeholder groups we work with.
Hopefully this En Banc is the start of that joint effort.
It is my hope that the En Banc and the white paper help
elevate the importance of these issues,
and they help everyone joining us today
to better see the complexities
and pressures of increasing energy bills.
There will not be a single big solution to the challenges,
but instead we will need to think about rate
and bill pressures in all the decisions going forward,
and look for ways to find large and small efficiencies
in each new decision we make.
After today, energy division staff will incorporate
the discussion from today and written comments received
on the white paper into a revised white paper.
That can help shape further discussions and decision-making.
But we do not anticipate that a revised white paper
will be a roadmap for a path forward.
And we hope that it is not the end
of this important discussion.
Instead, we hope that everyone involved
in these discussions today will incorporate the findings
from today into their own policy, roadmaps and discussions.
We will need to look for cost savings in all our decisions,
and we'll need to look to find some paradigm shifts
on how we find our investments along the way.
Thank you.
And with that, Paul Phillip, the virtual floor is yours.
-: Everyone.
We are going to transition to some slides now
to begin discussing the white paper.
And I thank you all for being here.
I wanted to just echo a lot of the sentiments
that Ed Randolph just said for all of us,
and to say that this has been a mammoth effort
to look at some very mammoth level operations
for our major investor and utilities in California.
I want to thank a lot of people in the energy division,
but especially folks on my staff,
Ankit Jain and Bridget Sieren-Smith,
who've done a ton of heavy lifting on this effort.
And with that, we will transition into
a brief overview of what we're embarking on here today
in this discussion, in terms of the scope of the paper,
and what we hope to provoke in terms of discussion
about a range of solutions,
knowing that there is no one silver bullet
for addressing the issues that Ed Randolph
just teed up for all of us.
Next slide please.
So we have in this white paper,
a number of kind of key narratives and themes
that have emerged, understanding of course,
that we've looked at a number of areas
where we could potentially cut costs,
again with no one singular solution in mind.
But at the top, we should talk about firstly,
the household energy costs and rates are obviously rising
disproportionately and impacting affordability
for certain parts of our state.
It really has become a bit of a tale of two states, in fact.
What we have wealthier coastal homeowners who tend to invest
in DER's, distributed energy resources,
and who tend to have more of a sense of how to arbitrage
from a position in billing to take advantage of
other rate offerings to help themselves in terms of billing,
in terms of load shifts.
We're hoping that we can begin the process of
getting lower income individuals involved in this
distributed energy resources marketplace,
and to hopefully address the issue of rising rates
before we're sunk.
With that said, we clearly see that
bundled residential rates have begun outstripping
inflation, going really back to 2013.
And that our investment and utilities are kind of gradually
climbing the national rankings when it comes to
a comparison with other utilities around
average residential bills.
It used to be that we could say that
our bills effectively paced inflation
or rates paced inflation over the years.
But really again, since 2013, that has changed,
and we're seeing some rather rapid escalation.
And in particular, we look at transmission distribution
rate base, that has been an area of an acceleration
over the past five years, I would say.
And in particular transmission,
we'll take a closer look at that today.
Resulting rate impacts are clearly exacerbated by
the ongoing substantial wildfire mitigation planning costs,
and a higher than national average return on equity,
which is not major, but it is something worth looking into.
And again, we have the narrative of lower-income customers
are really kind of less likely to participate in
our behind the meter offerings,
and paying for more and more incremental costs
that are displaced by behind the meter customers.
This is a not a new or novel concept,
we've been talking about central cost shifts resulting
from net energy metering,
but we think that it could get worse in some ways,
depending on how we manage the BDR marketplace
going forward.
And furthermore, finally, it really becomes
it's not just about rate design and revenue requirements
rising and changing,
and there's no silver bullet within that matrix,
but you know we have to also consider that
the upfront investments by all customers
can be a barrier to entry to a more distributed economy
in the energy space for household energy bills.
Next slide, please.
So we'll start to delve in here into some of the more
quantitative number crunching that we undertook
in the process of drafting this paper.
Here we have just a sense of the range of outcomes,
of how we model a ten-year forecast, and where PG&E,
Southern California Edison, and San Diego Gas and Electric
might end up 10 years from now starting,
ranging anywhere from, 21.7 cents per kilowatt hour
at the bubble residential level for Edison to 30 cents
currently for San Diego Gas and Electric,
as you can see here.
Going all the way to potentially 44.3 cents
per kilowatt hour, based on this ten-year forecast.
So anywhere in the range from about 3.7 to 4.7,
5% give or take, annually on average increases in rates.
This compares to a current inflation rate of about 1.9%.
So clearly as we look forward,
a very clear trend of rates that are outpacing inflation
increasingly over the next 10 years,
and that's our expectation.
And so building on the previous slide,
there's a few critical areas that's identified here.
Not all of the areas, it's just some
that we've delved into areas of capital additions
and transmission distribution,
looking at the accelerating trend there,
and a need for maybe greater and more stringent reviews
at both the state and federal level,
particularly when it comes to
jurisdictional costs in transmission.
We are clearly very, very interested in looking at
trajectory of wildfire mitigation planning costs
and the significant rate impact that that will impose.
And we'll look at the specific impacts of that momentarily.
And then obviously, how do we look at both the costs
and the potential long-term benefits or system savings
that might arise when it comes to
distributed energy resources,
and how that marketplace continues to mature,
whether it's in PV solar storage technologies
and/or electric vehicles,
as we move to electrify the system increasingly,
in transportation and at the household level.
Next slide please.
I wanted to take just a moment to make sure that
we understood here that there were a couple of different
modeling tools that energy divisions use to help create
the service forecast.
First are these cost and rate tracking tools,
which we've covered before in previous presentations,
there's we worked very closely with the
investor of utilities to develop these tools,
which are updatable on a quarterly basis,
they look very deliberately at individual proceedings
and revenue requirements that are,
as they dynamically change over the course of time,
throughout a year, we have a sales forecast
that get updated annually,
that are uploaded into these tools.
And it really is an attempt to cover a three to four year
more precise forecast of where rates and bills are heading
on a bundled residential basis.
And we can do it at the system level,
as well, with these tools.
What we couldn't do with these tools just to then get to
2030 or even beyond, in terms of forecasting.
And as many of you know, forecasting is a difficult
and not precise area, particularly when it comes to rates
and given all of the number of factors that go into it.
So what we had to do here was we had to partner with the CEC
and work with them on understanding better how the IOU
service area rates were going to be leveraged
to derive preliminary bundled residential rates
that could be used as part of this forecast going into 2030.
In addition, we had to create a residential energy
cost calculator tool and work with the consultants on that
to develop the full 10 year forecast.
And so we leveraged some escalation factors
beyond 2024 to get us to 2030.
And these were based on different revenue assumptions
across many cost categories,
obviously within the operations of the IOUs,
but also with a look at the sales forecast that would be
dynamically changing over time,
based on the CEC's long-term looks at
how sales forecasts may change.
Next slide please.
And so what we ended up with here,
as you can see on this rather cluttered slide,
a few different themes here.
We have all three major investor owned utilities
and their bundled residential rates,
from PG&E to SDG&E, left to right.
We find that by 2030, these bundled residential rates
are forecasted to be somewhere in the neighborhood of
a 20 to 70% higher than they would have been
if they had simply tracked inflation
over the same period of time from 2013 on.
So that's rather significant, frankly,
in looking at that, SDG&E in particular, a bit of a concern,
but we'll get into why that's a concern
and what the reasons are for that a little bit later.
Again, rates track inflation historically,
but we can no longer rely on that narrative,
it's just not true anymore.
Finally, just in looking at this,
I want to just kind of point out that it's clear
that each utility is sort of escaping gravity
when it comes to the inflation rate
and the trajectory of the inflation rate over time.
So clearly PG&E starts its change somewhere around
2016, 2017, and Southern California Edison is really
transitioning upward rather rapidly around 2019,
but SDG&E clearly just started transitioning
away from, moving away from the trajectory
of the inflation rates around 2013.
So it goes all the way back to that period of time.
So let's go onto the next slide, please.
So we'll talk a little bit about some basic concepts
going back to basics here in terms of rate base
and return on rate base.
I think it's important to ground ourselves
in the fundamentals of what we're talking about here.
We have a number of concerns about the rise in capital
additions for distribution and transmission,
as we have noted clearly generation has changed
over the past several years with regard to
utility on a generation in particular,
that is no longer as much of a concern.
But in defining rate base for us,
let's just remember that it is the net of capital additions
with capital expenditures capex
net of accumulated depreciation over time.
And so we derive a return on rate base,
which ranges anywhere from five to 7%, going back to 2016,
in three major investor owned utilities.
And this rate of return on rate base really is
it just something that is recovered in rates,
that is measured by which we look at the,
as you can see from the table below from 2016 to 2020,
we are measuring the growth in the return on rate base
up to say 2.37 billion in the case of PG&E.
And you can see the Delta percentages,
the changes over time, year over year
for each utility in this table.
We don't need to go through all of them.
But just wanted to give you a flavor for
what those magnitudes are year over year.
Next slide please.
And likewise, I think it's valuable to go back to basics
and look at cost of capital
and as we look at rate of return,
and to understand, of course,
that within the capital structure that CPUC sets
for the major investor owned utilities that we have,
the cost of common stock or return on equity,
which is a huge component of the overall cost of capital,
the rate of return on rate base.
And as you can see from the table below, we have
everything's kind of within the same neighborhood
when it comes to the four major utilities
from SoCalGas to Southern California Edison
in the stack there, from about 10% to 10.3%
for return on equity.
That is down from years past,
we've had some decline in return on equity
for reasons that I'll get into momentarily.
But also you can see on the far right in the table
that the overall cost of capital, the rate of return
is comparable across the four areas that we reference here.
And I think it's important just to keep in mind that
as we look at the last bullet point there,
the PG&E's a 0.12% increase in the most recent adjustment,
really accounts for 46 million in 2020 dollars.
And that a 1% full increase in rate of return
would account for 383 million.
So not insignificant obviously in changes,
we don't see massive changes on an arbitrary basis,
we don't see it happening that quickly,
But it's just important to kind of keep these magnitudes
in mind as you keep a frame of reference here.
Next slide, please.
And a little bit more here on the return on equity.
So I was just wanted to cite that the authorized ROE
has been generally above, even though trending downward,
it has generally been above the national average
for a very long time now.
And there are reasons for that, they've been discussed,
I'm no expert in this, but certainly these arguments
have been processed in different CPUC
cost of capital proceedings,
but it really is a reflection of the perceived risk
of operating in California relative to other states.
The perceived expected return on alternative investments
of comparable risk when looking at
different capital market financial models.
So you can see from the table below there,
what the percentage difference between
what we currently have in California relative to the nation
accounts for in actual dollars.
I mean, you can see that for a half a percentage point
in ROEs, we really do get a potentially large impact
in terms of revenue requirement in the millions of dollars,
over a hundred million in the case of Edison and PG&E.
Next slide please.
And should we turn, I just wanted to kind of spotlight
as the paper does, the work that was done
around wildfire mitigation scenario analysis,
revenue and rate impacts.
And here we have a look at the,
if you look at the yellow portion of the stack,
the bar chart here, with a stack of rate components in it,
that is representative of what the actual
wildfire mitigation impacts are in the rate.
So not insignificant at all.
I mean, if you actually kinda measure it and look at it,
you can see that it isn't far off
from the total transmission components in this case.
So very interesting.
And you can see from the numbers here that
we estimate over the course of the next decade,
between 2021 and 2030,
we'll see anywhere from a 4.6 billion to 23.7 billion
in our three major IOUs spending on wildfire mitigation
planning that is subject to change, of course,
that is likely to change on some level.
But I also just wanted to be clear that we are evaluating
as we go.
It is gonna depend a lot on the needs.
In the case of San Diego Gas and Electric,
a lot of wildfire mitigation planning expenditures
have occurred over the past decade,
as a result of previous wildfires Guejito, Witch,
and Rice fires that occurred back in '08,
I think there's been a lot of attempts to harden the system
distribution transmission system to address those concerns,
but still more work to do.
So very significant part of revenue requirement
and rates going forward.
And we just received our IOU's most recent 2021 estimates
for wildfire mitigation planning spending.
It's not inconsistent with what we're seeing here
with what we had forecasted.
Next slide please.
And in turning to another big theme, broad theme,
that I mentioned earlier in this white paper,
it's critical I think to,
we don't want to spend a ton of time speaking about
net energy metering because it tends
to suck the oxygen out of the room in a sense
that we have a whole nother process dealing with it,
but it is important to mention that we,
as we transition into more advanced rate offerings
and more advanced DER offerings in a maturing marketplace,
that there is the risk of greater cost shifting
from participants to non-participants.
And that's a broad theme here
that we wanna address today discussion.
Net energy metering is well-documented
what the concerns are from the IOU perspective,
and certainly the arguments from the solar and storage
perspective and other other stakeholders in our process.
But it's just important to kind of tee this up to say,
look, we're aware that this is going to result in
potential revenue requirement shortfall as we go forward,
and build out this distributed system,
the grid of the future.
And that we are looking for not a single silver bullet
solution to this problem, but to look at many different
portfolios of solutions from different types of rate design,
that my team would be responsible for,
to other solutions with marketing and education and outreach
for customers to get them involved,
to ensure that they're taking advantage of
the offerings in the market.
And that's obviously we have to look at
low-income concerns as well.
So again, we know that this is potentially
a tale of two states, with folks who are wealthier
and tending to invest in these
distributed energy resources more broadly,
versus those who may have barriers to investments
around income.
And as we look at affordability in a more granular basis,
we can begin to assess and diagnose
how to address these problems.
Next slide please.
And finally, before I close,
I wanted to kind of start the conversation here
a little bit about household energy costs in general.
So what you have here in front of you are
a few charts that look at the three different
major investment utilities and their electric, gas,
and gasoline prices forecasted out to 2030 within a range.
And so you can see obviously the escalation pattern
that is occurring across all three fronts here.
And just wanted to demonstrate the acceleration
of the bundled residential electric rate forecast trends,
as well as gas and gasoline,
and how that begins to factor into a decision that customers
are going to be making about how to
address escalating costs in the future.
And we will get into that a little bit more.
I'm going to hand this off now to my colleague,
Nathan Barcic, who's gonna dive into this a little bit more
deliberately, but thank you.
Nathan: Thanks very much, Paul.
This is Nathan Barcic, program and project supervisor
for the generation and transmission planning section
and energy division, also home to our
integrated resource planning team
that I think a lot of you are familiar with.
If we can go to the next slide, please.
As was discussed earlier, pretty in detail by Paul,
there's a broad trend across the three major IOUs
accelerating rates increases.
Those earlier slides showed how rates are increasing
over time relative to inflation.
Now we're actually going to discuss a potentially more
impactful or important concept for customers,
which would be looking at their overall energy bills,
not just rates.
The trend for bills, not surprisingly, is similar.
They are projected to grow steadily over the decade,
outpacing that 2% approximate inflation projection
that you see represented in this chart as a dotted red line.
Note, household bills can include more than
just electricity and gas.
In this section, we're actually gonna cover some costs
of owning and operating a gasoline vehicle.
And those costs are usually depicted in our charts in gray.
When the chart here depicts a forecast for
San Diego Gas and Electric household energy use
or energy costs over the next 10 years.
While the annual growth rate for San Diego Gas and Electric
household cost is higher than that for PG&E
and for Southern California Edison,
the trend still holds for PG&E and Edison at the same time,
it's just not quite as significant.
Main drivers of the costs increase is depicted here.
Mainly we're talking about kilowatt hour sales decline.
It's driven by several factors
that Paul started to touch on,
the behind the meter resource adoption, rooftop solar,
energy efficiency, as well as load departure away from IOUs.
And then that can kind of lead to
a loss of economies of scale.
So basically smaller LLCs making decisions based on
smaller customer base, could mean a loss of
economies of scale that kind of feed this dynamic.
Next slide please.
So this slide shows the relative impact
of climate policy decisions on bill impacts.
So in CPUC's current integrated resource planning cycle,
CPUC's considering two different 2030 electric sector
greenhouse gas emissions targets,
46 million metric ton target,
which was adopted last March,
and a more strict 38 million metric ton target.
An IRP modeling and analysis,
moving from that 46 million metric ton target
to the lower, more strict 38 million metric ton target,
results in more renewables and storage being needed
to meet your goals, thus they're added to the portfolio
and may increase costs, not surprisingly.
Those costs could translate to a 2030 rate impact
between 0.6 and 0.80 cents per kilowatt hour.
Figure here shows the corresponding impact on
monthly energy costs for the representative households
under three different configurations,
showing their average energy usage.
So from left to right, you have starting on the left,
the customer in a mixed fuel building
with a gasoline powered vehicle under a 46 million
metric ton versus 38 million metric ton target.
Moving to the middle, to the customer
in mixed fuel building, but with an electric vehicle.
And on the right, the customer in an electrified building
with an electric vehicle.
Just a quick note, this analysis and that presented
in the next couple of slides does not actually take
into account upfront capital costs
associated with these investments,
but it does instead focus on ongoing fuel
and maintenance type costs.
So assuming a rate increase of 0.70 cents per kilowatt hour,
the more aggressive GHG target,
the green boxes in this chart show that
the mixed fuel customer with gasoline powered vehicle
would see an impact of approximately $4 a month
in their energy costs,
which can translate to about $48 a year.
Moving to the center of the mixed fuel customer
with an electric vehicle, would see an impact of
about $8 a month, about $96 per year.
And on the right, the electrified customer
with the EV, electric vehicle would see an impact
of about $9 per month, about $108 a year.
The main takeaways that I see here that other costs
to further reduce GHG emissions in the electric sector
from the 46 million metric ton target that's adopted,
to the 38 million metric one would increase bills
by approximately between four and $9 a month.
These costs are smaller than the potential savings
that are depicted in these charts.
So a well-managed effort to move customers
to electrified homes and electric vehicles
could potentially result in over $100 a month savings,
which could be more than $1,200 a year
in overall energy bills.
Next slide please.
So the electrification of vehicle building technologies
represents a pretty key pillar for
decarbonizing California's economy.
Together, those vehicles and buildings
represent more than half the state's emissions.
And that begs one key question,
whether rising electric rates may affect electrification
cost effectiveness by 2030, and what the relationship of
those are to gasoline price forecast?
So what we have here are four different scenarios
depicted in this chart, that kind of evaluate
the potential cost savings and even decision-making
that a customer might make
as it relates to electric vehicle adoption.
So the two panels on the left of the chart
show managed electric vehicle charging,
which basically means that the customer's
on a rate structure that incense
a particular type of charging behavior,
one that could potentially save them money.
The right side of the chart shows fund manage.
The top two panels show energy plus maintenance costs
for vehicle ownership,
while the bottom shows energy costs only.
And the main takeaway here that
under a mid gasoline price forecast,
much of people under see cost savings throughout the decade
in all four of the scenarios.
In 2030, electric vehicle owners manage charging
are forecasted to save between 130 and $140 per month,
which could be approximately between 1,500 and $1,700
per year in operating costs,
as compared to the gasoline vehicle owner in the top left,
depending on which IOUs territory they're in.
Next slide please.
Now turning from vehicle electrification
to building electrification.
This slide depicts the impacts of the residential building
electrification for representatives above average
energy usage household in a hot climate zone.
The top figure shows the average monthly home energy bills,
which is going to be electricity plus natural gas
for a 1990s era home, across the three electric
IOU territories, considering retrofit electrification
of space and of water heating.
Retrofit electrification provides this representative
customer with substantial energy cost savings
under all three of the scenarios that we've depicted here.
Primary source of these cost savings is actually equipment
efficiency, which might not be surprising to many of you.
Bill savings in these scenarios will vary based on
building types and climate zone.
And energy cost savings will be greater for homes
with larger demands, particularly for
space and water heating.
If you move to the bottom figure,
we're showing a new single family home,
comparison between mixed fuel home and all electric home,
across the three electric IOU territories
in a hot climate zone.
Energy costs for mixed fuel and all electric homes
are likely to be similar over the decade.
Main takeaways here are whether an all electric home sees
net bill savings or costs sensitive to the trajectory
of the natural gas rate that you assume.
And on top of that, new homes tend to be more
energy efficient than existing homes,
which could reduce space heating demand,
and that's opportunities for energy savings,
particularly from adopting something like
keep home heating ventilation and air conditioning system.
Next slide, please.
While we've discussed energy costs for customers
that are adopting technologies,
a separate question is what is the impact of electrification
for non-adopting customers?
And kind of looking at things
from a more system-wide perspective.
Some prior work has indicated that building electrification
may lead to increases in natural gas rates
for remaining gas customers, as gas sales decline.
The impact of electrification on electric rates
is a little more complicated though.
As electrification will increase both
increased electric system costs
and retail electricity sales,
which can have countervailing effects.
While the reference case that we described
in our white paper includes about 15 terawatt hours
of CAISO-wide vehicle and building electrification
load in 2030.
High electrification scenario that assumes more,
adds about 18 terawatt hours of electrification
loaded 2030 for a total of 33 terawatt hours.
This slide tends to articulate the cost differences
associated with that increase in electrification.
The main takeaways are that the additional electrification
load will increase electric system costs
in three categories, resource procurement
needed to serve load, electrification programs,
and transmission and distribution infrastructure.
The high electrification scenario adds between about 4.7
and 5.8% to the 2030 revenue requirements,
driven primarily by additional resource procurement costs.
The proportional increase in electricity sales
is larger than the increased cost.
And the high electrification scenario has 18 terawatt hours
of increased retail sales in 2030,
corresponding to an 8.5% increase in sales.
The result is that the system average rates would fall
by between 0.6 and 0.90 cents per kilowatt hour.
Taking the mid-cost estimates that you see,
residential rates for the three IOUs
would fall between 1.4 and 2.10 cents per kilowatt hour,
and the high electrification scenario
relative to the reference scenario,
which is based on the upper-mid demand forecast from CPUC.
That concludes my slides.
And I can hand things over to the next speaker.
Elaine: Thank you, Nathan.
We're transitioning to transmission now.
Next slide please.
Good morning, my name is Elaine Sison-Lebrilla,
and I'm the program and project supervisor
for the FERC electric costs section.
Transmission is under the jurisdiction of the
Federal Energy Regulatory Commission, also known as FERC.
The CPUC's role is to advocate at FERC on behalf of
California rate payers.
Transmission cost is a portion of the California
consumers electric bill.
For PG&E, it is 16.6% of the residential rate.
For Southern California Edison, it is 9.1%.
And for San Diego Gas and Electric, it's 15.1%.
Over the last five years,
the trend has been increasing transmission costs.
In the next four slides, we will see supporting data
that reflect increased transmission revenue requirements
and transmission rate base.
Transmission revenue requirements,
which has also been known as TRR,
is driven by capital investments or capitalization,
operations and maintenance,
and administrative and general expenses.
These are, for example, increased capacity on certain lines,
substation upgrades, renewable transmission,
insurance expenses, and IT costs.
We will also see that in the past decade,
transmission costs have increased,
while energy demand has decreased.
Next slide, please.
In this slide, we see increases in both transmission
revenue requirements and transmission rate base.
In the top table, you can see across,
the three biggest utilities,
the total transmission revenue requirement
increased by 38.1%,
from about 3.14 billion in 2016
to a projected 4.34 billion in 2021.
Similarly in the lower table,
the total transmission rate base increased by 38.3%,
from 13.9 billion in 2016
to a projected 19.2 billion in 2021.
Conservative assumptions indicate that every dollar
you put into transmission rate base, costs rate payers
in excess of $3.50 over the life of a transmission asset.
Next slide, please.
As mentioned earlier, transmission capital investments,
also known as capital additions,
contribute to the transmission revenue requirement
and are close to additional.
Transmission cap further additions have increased by 21%,
from 2.14 billion in 2016
to a projected 2.59 billion in 2021.
Looking at the top table, it lists capital additions,
transmission projects in excess of $500 million.
As you can see in some cases, individual project expenses
were more than originally set.
FERC incentives also add tens of millions of dollars
to rate annually.
For example, FERC award is 50 basis point added,
which is half a percent, to the return on equity
to incentivize transmission owners to join
an independent system operators.
California's three big utilities get this incentive,
even though they are mandated by California law
to be a member of the CAISO.
The CPUC is advocating against the incentive.
So capital investments come in two flavors.
Projects that expand the capacity of the transmission grid
and are under reviews are in review,
are reviewed under the CAISO's annual transmission
planning process, and projects that are not related to
grid capacity expansion,
and therefore receive no review by the CAISO
through the transition planning process.
On the lower table, you can see that spending
on self-approved projects, and these are the ones
that are not under CAISO transmission
planning process review,
account for about 41% of the nearly 20 billion
in capital additions from 2009 to 2019.
And further in 2020 and 2021, capital additions
have suggested to total 5.3 billion across
the three big utilities,
in which 60% are self-approved projects.
Next slide please.
So the next part, this part slide,
provides data on operations and maintenance,
and administrative and general expenses.
As you can see in the top, across the three big IOUs,
operation and maintenance expenses increased by almost 80%,
from 375.5 million in 2016 to 674.6 million for 2021.
Operational expenses are those expenses related to
the transmission system that are not a capital expense,
depreciation, or taxes.
In the lower table, administrative and general expenses
tend to be the most variable cost categories.
As you can see in this category,
there was an increase by 29% from 203.2 million in 2016
to 262.8 million projected in 2021.
So examples of A&G expenses are wages and salaries
of employees providing accounting, human resources,
and legal services, in addition to IT and insurance.
Next slide please.
So in review, the previous slide provided data
showing increasing costs from 2016 to projected 2021.
We look deeper at components and drivers of the transmission
revenue requirements, mainly capital additions,
O&M, and A&G expenses, and these components
increased to over the same (mumbles).
Now, recall that the transmission revenue requirement
is a total cost of providing transmission service,
including the return on associated capital investments.
The transmission access charge, also known as TAC,
is one of the mechanisms you use to recover the utilities
transmission revenue requirements.
In this slide, we see that the TAC increased
while electricity loads decreased over the past decade.
In 2009, the transmission access charge was $3.83,
increasing to $13.60 in 2020, this is a 255% change.
In the same time period, transmission load in 2009
was 216.7 million megawatt hours,
decreasing to 196.5 million megawatt hours,
a change of negative 9.3%.
So you see a clear trend of increasing amounts of revenue
being collected through the TAC,
and spread across fewer and fewer megawatt hours.
So in closing, we have seen that transmission costs
have been increasing over the last five years or so.
Remember that transmission is under FERC jurisdiction,
and the CPUC advocates for California's
base payers at FERC.
This is the last of my slides.
Thank you for your attention.
I guess I will return this to either Mary Claire or Paul.
-: This is Paul Phillips.
Just to jump in here and thank Nathan and Elaine
for adding to the conversation here
with some great slides.
And to sum up by saying that very clearly,
we have some trends that are heading upward
when it comes to transmission.
We also can look at more aggressive emissions reduction
scenarios, per Nathan's slide,
to understand how electrification will impact bills
in a more meaningful way over the next 10 years.
And clearly sales decline is a part of the equation
that needs further discussion.
And as a countervailing measure, will begin to come back up
as electrification continues into the future
and beyond 2030.
With that, I want to kind of make sure
that we're opening it up to Q and A,
and I'll let Mary Claire take over as emcee at this point
to help that out.
Thank you.
-: Great, thanks Paul.
So at this point, we're gonna open it up for Q and A
from the dais, and if you could use the raise hand function
in the WebEx to indicate whether you have a question.
And Paul is gonna be monitoring that, and we'll call on you.
-: This is, I apologize.
I didn't click on the raise hand.
Can I take liberty of asking the first question?
Mary Claire: Of course.
-: Okay, thank you.
Just very briefly, very sobering information folks.
Thank you so much.
This is for Paul or Nathan, and (mumbles).
Does the analysis of the total household energy bills
take into account the upfront investment, the upfront costs
of buying an electric vehicle and heat pump?
Or is that separate from the metrics that were provided?
All onto that is do we know what the payback period is
for folks who are electric vehicles
and heat pump technology, other building electrifications
for their residential households?
-: For sure, this is Nathan, great question.
We actually did not take into account the upfront capital
costs that would be associated with those
different electrification measures.
It'd be extremely important for us to do so in the future.
It does involve adding some complexity to the analysis.
And to answer the second part of your question,
it would change the payback period
associated with those decisions.
-: [Commissioner Shiroma] Thank you,
we'll look forward to that future analysis.
Paul: Okay I'm gonna call on Severin Borenstein,
who has his hand up.
Severin: Thanks, can you hear me?
Paul: Sure can.
-: Okay, great.
So I have a few questions I wanted to,
and there was a lot of content there.
So excuse me for sort of jumping around a little bit.
On the cost in 2030, which I'm not sure what slide,
I couldn't see slide numbers,
but in the white paper, it's up around page 77.
I'm trying to figure out what technology is being assumed.
We actually have a project right now working on
the relative economics of heat pumps versus natural gas
for water heating and space heating.
And we find that even at current rates,
heat pumps are way out of the money.
Though they would be if we brought rates down to
true social marginal costs.
And so I'm sort of surprised that the,
if I'm interpreting figure 38 correctly,
that it's actually a money saver to switch by 2030,
even though electricity rates are gonna be a lot higher
in real terms by then.
So that I found that confusing.
And I wanted to understand what's being assumed about
technologies in 2030, or why,
if this would also imply if heat pumps
are a massive winner right now?
Maybe I could get an answer to that before I,
my other questions are more about transmission.
-: That's a good question.
And I can try to direct that to our consultant
from Energy and Environmental Economics,
Ari Gold-Parker.
-: This is our Ari Gold-Parker from E3.
To answer your question, we are assuming heat pumps,
HVAC, and water heating devices
that are substantially more efficient
than minimum federal standards.
But these do reflect efficient technologies
that are available in today's market.
And the other component of this is that in this analysis,
natural gas rates are seen to escalate at a higher rate
than electric rates over the decades.
And so the energy costs savings,
when building electrification increased from 2020 to 2030,
as the growth in natural gas rates
outpaces the growth in electric rates.
-: Okay, I would just say those are certainly not
certain assumptions, and I would not even consider them
the best base case assumptions,
given what's happened in natural gas technology.
But did you do this calculation for today's rates?
-: Yes.
The residential energy cost calculator
can run these kinds of comparisons for any of the rates
that are provided in the white paper.
And the comparison for today's rates was shown
in the figure indicating energy cost savings for retrofits
over the decades for the three IOUs.
And so there are some energy cost savings for PG&E
and SDG&E in 2020,
and those cost savings grow over the decade.
-: Okay just to be clear though,
those are not at today's rates,
those are including a forecast
over the life of the equipment.
And so the increase in natural gas prices
are built in again, is that right?
-: Assuming efficient heat pump, HVAC,
and water heating devices available in today's market.
There would be energy cost savings
using today's rates in 2020.
-: But that's not at all consistent with our calculations,
but okay.
Let me move to the transmission.
I was wondering, so looking at these numbers,
which are indeed eye-popping and very worrisome,
one of the things, my understanding is that PG&E
handles the accounting of transmission very differently
than Southern California Edison
and San Diego Gas and Electric.
And that their transmission calculations go down
to a much lower voltage,
what they call a transmission line
at San Diego Gas and Electric
and Southern California Edison.
So first of all, just a larger share of their costs
are in transmission.
And second of all, the wildfire impact
would appear to be larger.
How was that handled in doing these calculations?
Just trying to understand the comparison
'cause the comparison between the utilities
is also pretty eye-popping.
-: So I'm gonna let Simon Hurd, who's my PG&E person
answer that question.
-: That's a great question.
And it's an important point that we strictly looked at
what falls under FERC's jurisdiction
and under the transmission on a rate cases there.
And you're exactly right, SCE, for example,
well, let's take PG&E.
PG&E, anything 69 KV and above, is generally considered
to be transmission, it's networked in a way
that makes it FERC jurisdictional under the ISO's control.
Often the case with SDE, for example,
anything that's 115 KV, which would certainly put it into
the FERC jurisdiction under PG&E,
is often configured in a radial fashion,
which doesn't meet all the net and criteria
to make it FERC jurisdictional, considered sub-transmission,
still falling under the CPUC's jurisdiction.
So that's just the point you're making.
So as a result, we just strictly looked at
what is allowed to go into FERC rates,
based on what qualifies us FERC jurisdictional.
Severin: So just to be clear,
the increase in the TAC is including some wildfire costs
and is including a larger share probably for PG&E.
Is that right?
-: Yes, those TAC numbers are actually the high voltage TAC.
Now the high voltage TAC overall of the $4.3 billion
of revenue requirements for FERC jurisdictional
transmission in 2021,
altogether for all three of the utilities,
about 40% of that is considered to be low voltage,
which is under 200 KV.
That means it's billed directly in the service area.
So PG&E's low voltage, anything under 200 KV
in transmission system, that stays in PG&E's territory.
Anything that's 200 KV or higher,
that actually gets spread throughout California,
California-wide through the high voltage TAC.
Those numbers that Elaine was sharing
are related to the high voltage TAC.
And it varies widely.
About 56% of PG&E's revenue requirement is low voltage.
It stays being billed to folks in PG&E's territory.
Southern California Edison, which has had some
massive projects in recent years in the last decade,
97% of their revenue requirement is actually billed through
the high voltage TAC.
It's spread throughout all of California.
So it's very much different.
Yes, the revenue requirements will reflect
those wildfire costs, whether it's mitigation costs,
or in some cases, the injuries and damages
that are allowed to be recovered through FERC jurisdiction.
And as we know from recent history,
sometimes FERC will allow recovery of certain costs
that the CPUC has disallowed in the past
related to wildfires.
So well, that's a kind of a long answer,
but I hope it provides some further information for you.
-: That's incredibly helpful.
And I'll just ask one quick, final question.
On figure 21, and this the TAC increasing
is definitely a concern, but at the same time,
I sort of expect it to increase as low decreases
because the TAC is that's the tax per megawatt hour.
And there are huge economies of scale here.
So that alone wouldn't, so we should be expecting
that if we actually lower transmission flow,
we're going to see a higher TAC, shouldn't we?
It obviously does not explain the whole thing at all,
but that aspect of it.
-: It certainly makes sense, it certainly makes sense,
but a 9.9% reduction in load compared to a 255% increase.
And that's of course, some of the really large scale
projects, Tehachapi, Sunrise, and so forth
that have occurred, especially in Southern California
in the last decade.
-: Thank you.
Simon: Thank you.
-: This is Paul Phillips, just jumping in here
to tell people if it wasn't clear,
that in your lower right hand corner,
you have a participants tab.
If you do wish to raise your hand,
there's a little tiny hand icon,
right above that once you click on participants
and please do that if you do have a question
'cause I'm not seeing very many hands up right now.
But I do believe that Commissioner Shiroma has a question,
so I'll turn it over to her.
-: Okay, thank you.
I'm going the old fashioned way, just raise my hand.
All right, just a poll.
Just real brief because I know we're running
a little bit behind.
Some of the drivers behind California's higher rate
on equity and what are the future opportunities
for us to look at those numbers again?
-: That's a good question.
While I am no expert in cost of capital,
I will just put that out there at the outset,
I do know that we on a fairly regular basis,
it varies, so it's anywhere from three to five years
have opt capital proceedings,
in which we entertain arguments about where
that line should be for return on equity, in particular.
And various arguments about the complexities and risks
of operating in California relative to other states,
and how the markets prices that risk effectively
in order to attract the right amount of capital
for projects ongoing.
So it's essentially, there's a lot of technical arguments
that would go into that.
I believe if I'm not mistaken and someone can correct me
if I'm wrong, we just adjusted these returns on equity
over the past a couple of years.
And they were downward adjusted by,
as you saw in the slides,
under a percentage point, under a full percentage point
for each of the three utilities, somewhere in the
55 to 65 basis point range, if I'm not mistaken.
So I don't know if that fully answers,
but I mean, things that come to mind
that become operating risks, obviously wildfires
are an operating risk in California,
the sense of competition within the state of California
in the utility industry is also
something that would be priced into the risk.
The comparatively speaking with other states,
you clearly have natural disaster concerns
and infrastructure concerns around the country
that would obviously create return on equity related
impacts in different states, southeast, for example.
If anyone from Elaine's team would like to step in
and add to that conversation, please let me know.
-: So the CPUC advocates at FERC for these rates,
and in particular, when these rates are proposed
for the IOUs in (mumbles) cases,
those are the types of things that we and the leaders
essentially negotiate or advocate for lower rates at FERC.
Unfortunately, it is under court jurisdiction,
and so it needs to be approved by FERC,
but we do play a strong advocacy role
in reducing the (mumbles) in those rates (mumbles)
that we're involved in.
-: Thank you.
Very sobering information.
As I said before, I'm gonna send the microphone back
to Mary Claire to tee up our next panel.
-: And Mary Claire, just this is Commissioner Douglas,
I'm on my phone, but I lost my WebEx participant status.
So I do have a question at some point.
I just wasn't able to raise my hand.
-: Great, well, I don't see any other raised hands,
so why don't you go ahead.
-: [Commissioner Douglas] Thank you.
So I'm trying to understand the transmission costs
pictured here, and I have some questions
that might just be a bit basic, but I'll just list three.
One is when I looked at the list of the transmission lines
that were over $500 million, I guess,
they had a wide range of online dates.
And I'd be interested in at what point
do they start showing up in rates?
Or at what point do we see those costs appear?
Is it at the online data, is it before?
Presumably not after.
Secondly, I'm puzzled by in some cases,
the really large difference between original estimated costs
and actual or projected costs
because it's so substantial in some cases.
Let me just start with those two questions.
-: So, the first question really is to answer that
essentially these rates generally go in when
the project is in service.
So that's the answer to that.
So in general, that's what happened.
And the next question.
-: [Commissioner Douglas] Just to understand that.
So like the project, for example,
the in service date is 2026.
It's not.
-: That's projected.
-: This is Simon Hurd.
Just to add a little bit to that.
That's when they can start recovering on it.
So then they recover over the life,
the estimated life of the asset.
However, it was mentioned about the tens of millions
of dollars of impact from FERC incentives,
now those are ROE boosts, ROE adders.
One of the other incentives that FERC does offer
is what's called a CWIP incentive,
the construction work in progress.
And what that allows is especially for large projects
to in theory, compensate for cashflow issues,
they allow them to put into rates,
they allow the utilities to put into rates
before it's used in useful, and that's the term at FERC,
before the actual project is used and useful, which is,
as Elaine said, typically when you can start
recovering those costs.
This CWIP incentive provided by FERC actually allows them
to start collecting on it before
sometimes before it's even close to finished.
-: This is Ed Randolph to build on that.
I think that's a very important question,
Commissioner Douglas.
And that same mechanism actually holds true
for generation resources, so not the transmission,
but it typically doesn't show into rates
until it's used and useful.
So that means if we approve,
looking at the (mumbles) or the whole sustain for FERC,
but if we approve construction or a contract
for a new solar facility or a new geothermal facility
or a new offshore wind facility,
those costs don't start going into rates immediately.
They start going into rates when the project has hit
its commercial online date out there,
with the exceptions that as Simon has mentioned,
for some rate making treatments for things like
construction or on projects.
And the reason why I focused on that here
is that could be a very important factor
as we look forward into trends and rates,
is that a project we approve today doesn't impact rates
for several years.
But you then have the potential,
and we've seen this in the past, for big spikes in rates
if we are not careful on when projects are layered in
and when they go into rates.
And you could see big rate increases in a single year,
and then no rate increases over several years after that.
-: [Commissioner Douglas] That makes a lot of sense to me.
I don't know, I was just wondering if,
some of this increase is just sort of a factor of
TAC approvals coming into rates kind of concurrently,
or if that was a factor, but that makes sense.
-: And that can definitely be a factor if you go back
to some of the slides, you'll see in certain years,
there's in certain rate categories big spikes.
So for example, looking at transmission,
when the Sunrise Powerlink transmission project
was completed, that year it had a bigger impact on rates
than before because that's when most of the project
then becomes part of rate base,
and similar with Tehachapi transmission project
and other big projects.
-: [Commissioner Douglas] Yeah, that's really helpful.
In terms of the differences between projected
and estimated cost, I mean,
some of these are multiple times different.
Do you have any insights into
what's going on with some of that?
-: Some insight.
Thank you for the question, again.
Many of these projects were approved years and years ago.
Sometimes there's a decade delay.
So sometimes you're just looking at the changing situation.
One of the most obvious examples is the $1.7 billion
Tehachapi project, at least that's when it was approved.
I think I believe back in 2007,
it went online, I think,
it was finally energized in 2016,
but between that time it went from 1.7 billion
up to about three (cuts out),
now about 3.1 billion has been put into rate base.
Now, what occurred there was some undergrounding
and as there's it seems like as there's delays over time,
there are certain approvals.
And then through the CPCM process,
the permitting process here at the CPUC,
estimated costs, that then can be adjusted.
And that was adjusted more than once
for the Tehachapi project.
The other, the largest one though,
you're probably picking up on is the Riverside transmission
reliability project.
Initially a $48 million project,
it's now expected to be $580 plus million.
I believe during that time, there was actually a new city
that's been incorporated, demanding some undergrounding
of the utilities and so forth.
So that's a really profound example, I think,
of what you're seeing in the way of cost escalations.
So it varies, but a lot of it just has to do with
changing situations over what can be very quite lengthy
delays in many of these projects.
However, we would love it if there was more of an ability
to monitor these costs and perhaps revisit projects
that have been approved years and years before
to monitor the progress and the cost
as they're being developed.
-: [Commissioner Douglas] Okay, thank you.
That's really helpful.
I have one last question and it may be,
if it's a longer conversation we can follow up.
But I'm really curious about this self-approved category,
especially with the dollar threshold.
Is it certain types of projects?
What has been built under that category?
It looks like it's a lot,
but I don't really have much insight into what it is.
-: Simply put, the self approved projects
would be any projects that aren't approved
in the CAISO transmission planning process.
So any expansion, any capacity expansion projects,
be them substations or actual transmission lines,
those projects are approved through the TPP.
Any project that aren't,
granted, some of them are our compliance projects,
whether it's the Geo 95 clearance order
for CPUC and so forth,
but still, when and how the utilities choose to do
those projects that are outside of TPP approval,
we consider those to be self approved projects.
So that's, and of course,
as we see fewer of the really large transmission projects,
and we see that declining load,
more and more of the capital work that's being done
is not part of expansion needs,
capacity expansion needs under the TPP.
So an increasing proportion of the work being done
is self approved by the utilities themselves.
-: So just to add, there is no dollar limit.
It's just whether or not they expense capacity
is the criteria, whether or not they're going through
the CPUC process versus
being self approved by the utilities.
-: Hi, this is MC, I'm so sorry to cut in here.
This is such an interesting conversation
and great questions, but we do need to move onto
the next panel.
And we can circle back to this topic later in the day.
Thank you to our staff who presented today, that was great.
So we're now going to start the first panel of the day,
and I am very happy to introduce Dorothy Duda.
Dorothy is the manager of the market structure costs
and natural gas branch within energy division at the CPUC.
And she will be moderating this panel
for a team of analysts and engineers,
provides advisory support to CPUC decision makers
on all electric and gas utility rate matters,
including general rate cases, fuel and purchase power cases,
pipeline safety investments, wildfire related,
and nuclear cost matters.
Dorothy served 16 years as an Administrative Law Judge
here at the PUC, handling major telecommunications
and energy cases, including four years
as an assistant chief judge.
So Dorothy, can I hand it over to you?
-: Absolutely, thank you, Mary Claire.
It's a pleasure to be here.
Hello, Commissioners, legislators, Board members.
Welcome to panel one, can we afford the future?
In the last hour, we heard a summary
from our Commission energy division staff
regarding their thought provoking white paper
and analysis of estimated tenure trends in electric costs.
We heard the extent to which wildfire mitigation spending
and growth trends in capital investments
are impacting electric rates.
I'm a California native.
I grew up in the 1970s and lived through the inflation
and spiraling energy costs of that time.
My very frugal dad was ahead of his time,
he grew up during the depression,
and he put solar water heating on the roof of our house
in the 1970s to shave our energy costs.
He certainly taught me the value of money.
And so in my 30 years here at the Commission,
or close to 30 years, I've worn a lot of hats,
but ensuring just and reasonable rates
has really been the heart and soul of my work.
And watching the pennies for California customers
is near and dear to my heart.
So now we turn to our distinguished panel
to tackle questions, including the significant context
and importance of the current cost trends
that we are seeing.
What do these rising electric costs mean for affordability,
for Californians, and for our important climate goals?
Will these trends hinder electrification efforts
or dampen our demand for electric vehicles?
What research and analysis has been conducted
on this question?
What does that research indicate
as priority for our consideration?
So I would now like to introduce our first panelist,
which is Michael Campbell.
Michael Campbell is program manager of the electric pricing
and customer programs branch at the CPUC.
His branch is responsible for advocating on the behalf of
California's small consumers at the PUC
on proceedings matters related to rate design
and customer programs.
Mike has worked on energy policy since 2000,
including as an advisor to former Commissioner,
Loretta Lynch.
And he's also been director of San Francisco's
community choice aggregation program at the
San Francisco Public Utilities Commission.
So let me turn it over to Mike Campbell.
-: Thank you, Dorothy.
This has been a great panel so far,
and I didn't realize that about your history.
My first job in college was working on roofs,
repairing hot water heating systems,
which definitely taught me that I wanted to work
behind a desk the rest of my life.
So I really appreciate all the hard work
that went into this white paper.
My group that deals with rate design has been working
on a variety of ways of rate forecasting
and trying to understand what's driving rates
and where rates are going.
It's been a pretty concerted effort of ours
for many years now.
And so I'm very aware of how hard it is
to pull those pieces together, understand the rate drivers.
One of the key things that I wanna leave everyone with
here today is as really excellent as is to be looking
and trying to anticipate where rates are in 10 years,
we're in a rates crisis now.
We are not in a place where we should be worried about
what happens a few years,
obviously we should be worried about that,
but we need to understand that we're standing right now
on shaky ground from a rate payers perspective.
The esteemed focused on the virtual dais
made a number of remarks, which I think highlight
what we're gonna hopefully hear from
the experienced people in all the various panels,
which is that we really need to be focusing on
prioritizing rate payer funds,
and taking a comprehensive look at all the different
incentive mechanisms that are out there
that are intended to drive the state's equity
and environmental goals, as well as other goals,
but those two big ones.
And really working to avoid unintended consequences
where those goals and incentives can be conflicting.
And unfortunately many times
can be directly traced back to rising inequity.
So before going into the forecast,
I thought it would be worth spending a little bit of time
to put today into perspective.
The comment about how we expect rates to increase
at a pace faster inflation going forward.
Our analysis bears that out.
We expect that as well.
But that's been happening for some time now.
And so we're already in a bit of trouble.
So if I can go to the next slide, please.
I guess it's up, I'm just seeing myself on the screen.
I don't know if that's big for everybody else.
So on this slide,
as this just to show over the last 10 years,
where are we by utility?
You can see that the comments about
how we've been able to track, add inflation for roughly,
that story, I think really stopped being something
that we could say in the mid-2013 to 16 timeframe,
Edison deserves some credit for their work on
trying to keep rates tracking at inflation.
They've been very aggressive about that
in a number of areas.
But we see that they are starting to significantly diverge
there, and we expect some big wildfire expenditures to hit
in the coming years that may see rates get up even further,
I'll touch on that in a moment.
One of the just in terms of rate design,
just to level set for just the basic arithmetic,
there's more to it than this,
but basically you take the total authorized costs
for the utility, and you spread it over the amount
of kilowatt hours that are sold.
And this analysis I'm gonna provide here today
is going to be all focused on the residential side.
In the past, we've been able to have some increase in sales
be able to offset some modest increases in
the authorized amount of money that utilities can collect.
That has stopped being true around the same time
you start seeing this divergence between the inflation
and how much utility customers are paying.
So if you go to the next slide here, please.
I've got three slides in a row.
I'll describe this one.
And we can sort of click through.
This is intended to just really describe
what I was talking about,
about how the average rates are they tracking,
what has the Commissions authorized revenues
they're allowed to collect or not.
And we see that as we're moving towards 2021,
those numbers are starting to diverge
and that we're seeing significant growth there.
So here's Edison, if you go to the next one, please.
So PG&E, you can see in like 16,
it starts getting a bit wider.
And as the next slide, please.
And here is SDG&E,
with that whopping 78% residential average rate.
And I should point out that if I had more time,
I would drill down into things
that get obscured by averages.
I know director Eccles was able to give a presentation
a couple of years ago to the emerging trends committee
of the Commissioners to describe how
looking at the averages can blunt the,
make it look like things are better than they are
because your average in some of the lower and higher.
So suffice it to say that this is the average.
There are customers in all the territories
that are seeing a rate and bill impacts
that are more significant than this.
So I'd like to drill into this a little bit.
And we talk about, I mentioned incentive mechanisms,
one significant incentive mechanism that's baked into rates
have to do with how we compensate rooftop solar generation
and the growth of rooftop solar has led to declining sales.
Paul talked about that a bit.
So can we go to the next slide please?
So what's key here is to see where, and again,
I'm gonna go through each of the major utilities here.
The blue line shows the percent change in sales.
So you can see that growth in sales going on,
positive increases in kilowatt hours being sold
to the residential class for a time.
And then it really starts to decline,
and then actually go negative.
And so that is as a big driver as to why we're seeing that
the rate of change of the authorized revenue
and the rates being divorced significant.
You're gonna see this trend for the other utilities.
Can you go to the next slide, please?
Here's PG&E, for example.
And then the next slide, please.
And here is SDG&E with that steep drop there.
So just what this means in real terms,
I'll just give a quick simplifying assumption,
pretending I'm an economist for a moment.
And let's just presume that next year
there is no authorized change in revenue.
So each utility is going to collect the same amount of money
next year as it is this year.
We obviously know that is not true.
So it's an extremely simplified assumption.
My rates team is still going to tell me that
we're going to, we'll be seeing a rate increase of about 4%,
more or less dependent on utilities.
And that is just going to be,
if there are no policy changes,
that's going to be because of additional customers
being able to take advantage of the rooftop solar incentive
and the reduced sales with that would be associated with.
We also know that the folks that are able to
take advantage of that rooftop solar incentive
primarily are not wealthy, they are lower income,
they are communities of color, there are people
in rental environments and those types of things.
So that's exacerbating an equity concern
that we need to keep in mind.
Dorothy: I'm just gonna break in line.
Quick time check: just two minutes.
If you can wrap up your slides in two more minutes.
Mike: Oh my goodness, I even did a readthrough.
So, okay.
One of the key things I just want to point out is that
the white paper does a great job of
touching on regulatory drivers,
it lays out a bunch of the costs,
and it makes an estimate of those overall costs
being about $7 billion a year.
We've calculated that the rooftop solar subsidy,
if it were added as a authorized amount of money
that the Commission would say the utilities could collect,
that's about 3 billion.
So you could bump that 7 billion up to roughly 3 billion.
That has real meaningful effects on bills.
For SDG&E's bills, their rates are about 20% higher
than they would be otherwise.
PG&E in the 10% range.
And Edison is around six or 7%.
So if you can go to the next slide, please.
I wanna look at some forecasting.
I'm just going to focus on the vehicle,
the gas equivalence for charging,
using electricity to fuel your vehicle versus gasoline.
That's what this blue line is intended to draw.
We're just making a rough prediction beyond the 2021
timeframe that is based really on the last five years trend.
And this is again at the average rate.
I want to go to the next slide, please.
I want to zoom in on the forecast.
So here's just what it looks like,
we're looking at the average rates.
Remember I'd mentioned average rates can obscure things.
So go to the next slide, please.
And these darker bars are what those rates,
forecasted rates would look like.
If I'm looking at rates that for customers
that don't get a low-income customer discount.
So these are non-discounted bills.
And if we're being realistic, probably it's more likely
to be customers that are non CARE
that are going to be adopting electric vehicles.
So you can see already right now,
we're in a place where, just on a pure economic basis,
fueling your vehicle with electricity
in San Diego's territory it's at a dead even,
and then it gets worse, and likely will be crisscrossing
over the next 10 years with the other utilities.
This doesn't presume any policy changes,
the line is very, very flat there.
The rate design for electric vehicles
and electrification matters as well.
I think this gets a little bit to what Severin Borenstein
was potentially highlighting, which is
when we work on creating rates for the charging
of electric vehicles,
we can try to make those rates be as economic as possible,
but we really shouldn't be designing rates so that
we're having exacerbating equity problems.
In other words, that we are creating rates
where the kilowatt hour going into the vehicle,
and getting the customer for charging their vehicles
is paying less money than it costs to provide it.
In other words, that we're raising other customers rates.
And as the overall rates continue to go up,
we have less and less tools to be able to address that.
We do as much as we can, but we're already finding ourselves
having a challenge there.
Dorothy: Now, Mike.
How many can you wrap up?
Mike: I think I can actually wrap up there.
I did have, I know the slides are going to be available.
I did have some slides at the end that just tries to break
things out into bills because I know people understand
bills better.
So I would just, if folks are interested in that,
they can see what we're talking about in terms of bills.
So I won't go through these,
but just know that they're there.
-: Thank you, Mike.
I wanna make sure we have some time for Q and A
from our dais members.
So let me turn now to our second panelist,
Mad Stano from Greenlining Institute.
Mad is energy, equity, senior legal counsel
at the Greenlining Institute in Oakland, California,
as well as the lecturer at Berkeley Law School.
Mad started their legal career as an attorney,
with the center on race, poverty, and the environment,
where they work with residents impacted by
oil and gas pollution in the San Joaquin Valley.
Mad previously worked as a program director
of the California Environmental Justice Alliance.
According their climate justice, energy equity,
and (mumbles) work.
Their litigation, legislation, and work experience
include among other things, anti-discrimination,
land use, climate change, and community-led just transition
away from fossil fuels.
So welcome, Mad.
-: Wonderful, good morning, everyone.
My name is Mad.
Thank you so much for the opportunity to spend time
with you all today,
and participate in this vital conversation.
Thank you so much to the Commission for organizing,
for preparing and sharing the white paper,
and for the invitation.
And thank you so much to Dorothy
for the introduction and facilitation.
Now let's get into what will undoubtedly be a highly rated,
somebody had to do it, conversation.
So can I have the next slide please?
As an attorney,
I have to start with a little bit of a roadmap.
And this is building on Mike's presentation,
so I think it fits well.
First as a starting point, the white paper details
how California's policy goals could result in rate
and bill increases that would make other policy goals
more difficult to achieve, and could result in overall
energy bills becoming unaffordable for some Californians.
Unfortunately, the electric rates crisis is already here,
as Mike stated.
It is devastating, it has disproportionate,
and at times life-threatening impacts on low-income people
and people of color, who are simultaneously
disproportionately experiencing the greatest social cost
of California's energy system, with the least amount
of access to its benefits and services.
It demands systemic rate reform, focused on rate protection,
especially for low-income and overburdened people.
Our electric rates now are unjust and unreasonable,
in violation of the Commission's mission,
and are projected in this white paper to become
increasingly more unaffordable and inequitable.
Second, the promise, the benefits, and the material shifts
required for energy decarbonization will simply not occur
under inequitable financing and rate scheme.
Functionally, we cannot and we will not be able
to decarbonize the grid and California's economy
if low income people disproportionately impacted
by fossil fuels are the ones required to pay for it.
Next slide, please.
I think these are out of order.
Previous, actually, next slide, please.
We'll go back to this one.
Thank you.
How do we know rates are unjust and unreasonable?
People can't pay them.
Research confirms that if people have the money
to pay utility bills, they paid them.
Prior to the economic recession connected to
the COVID-19 pandemic, California had significant
residential arrearages.
As of December 2020, over $1 billion
in residential arrearages across IOU territory.
Hundreds of thousands of people on rate assistance programs
still are unable to pay.
Unjust and unreasonable.
Households inability to pay for electricity
doesn't just jeopardize access to life-sustaining services,
technologies, their credit worthiness,
or financial future of their household,
or even their housing security,
energy and security jeopardizes early childhood development,
at times the custody of children,
and the lives of chronically ill,
and medically vulnerable people.
Any rate increase is an extremely high stakes question
that cannot be obscured as a demonimous
because it's only part of a penny increase
per kilowatt hour per program, consistent with
Commissioner Shiroma's remarks earlier today.
Questions raised in the white paper and in this panel around
decarbonization focused price signals,
and how they may impact low income households
need to be reframed.
What is the true price tag of the price signal
we're imposing on low income families, and why?
Does it mean they will go without cooling
in the sweltering heat?
Does it mean youth can't attend remote schools?
Does it mean people have to choose between food, medicine,
and other health, safety, and comfort necessities?
And as the data in this white paper and other sources
confirm, low-income people pay three times the percentage
of their income on energy.
And upper income households are more likely to be
excessive energy users.
Upper income households can afford to pay higher prices
for unchanged behaviors, while lower income households
cannot and should not.
Please go to the previous slide.
Sorry, I switched up the order.
These graphs from the California Budget and Policy Center
demonstrate just some of the disproportionate impacts
of the ongoing housing and economic crisis on Black,
Indigenous, and people of color in California,
both prior to and during the COVID-19 pandemic.
I won't go through all of this information,
but I'll just read you some of these headlines.
More than one in two renters,
and more than one in three homeowners with mortgages
were cost-burdened before COVID-19.
Black and Latinx Californians were most likely to have
unaffordable housing costs before COVID-19.
About three in five Latinx and Black households
in California lost earnings during the pandemic.
Most Latinx and Black households with children
are having difficulties paying basic expenses.
During the pandemic, people of California
are also experiencing higher job loss, unemployment rate,
COVID infection rates, and mortality rates.
We also know that low income communities and households
face greater barriers to accessing and benefiting from
the DER programs highlighted in the white paper,
like transportation electrification, net energy metering,
and building electrification.
We have two slides from now, please.
Thank you so much.
E3 and others predict low income communities and households
are more likely to stay on the natural gas system longer
because of these barriers.
They're also more likely to be left paying for
the utility death spiral predicted for future gas rates,
and stranded assets, whose rate based values,
the useful life of many of these assets
are no longer accurate, due to our climate mandates.
In decarbonization, the Commission must stop completely
bifurcating electric and gas rate design,
as households and communities move from dual fuel
to all electric.
As these shifts continue, the Commission must develop
specific rate protections for low income households.
Why do these barriers exist?
And how do we redress them in terms of the DER programs
highlighted in the white paper?
We have great foundational documents
for the energy Commission.
So you can see there's a variety of structural barriers
and policy barriers and additional burdens
that also impacts the cost assumptions
and functional success of some of the assumptions
built into projected savings, specifically for
low income people on some of these DER programs
that were highlighted in the white paper.
We have that next slide, please?
So this is a graph from a June 2020 UCLA report
analyzing the degree to which disadvantaged communities
have been able to participate and benefit
in California's energy transformation.
And it remains far from equal.
The trends they found are consistent with state trends
and DER programs.
As you can see, they found the higher
the CalEnviroScreen percentile,
meaning the more environmentally and socially overburdened,
the lower the clean TAC access.
And this was along electric vehicle plugin hybrid, EVs,
rooftop solar, energy consumption,
and participation in state energy transformation programs.
They also found that electrifying excessive energy consumers
for their participation in DER programs,
the GHG abatement impacts are more marginal,
and those were more likely to be affluent households.
The conclusion being, trickle down equity doesn't work,
unless these DER programs are community-led
and designed to benefit low income communities,
they will not.
Go to the next slide, please.
A few closing thoughts and recommendations
and bird pictures, I had to add something.
The time for studying whether rates are inequitable
or unaffordable are over.
The Commission's electric rate design
must set equity protection goals and metrics,
focused on redressing current, historic,
and projected inequity.
The Commission must value and prioritize non-energy benefits
and DER programs for overburdened,
environmental, and social justice communities
to ensure they reach and benefit them.
The Commission must center and give the material support
necessary for impacted community participation
in these conversations, like this conversation today.
The Commission must engage in holistic rate planning
across the electric and gas system,
in order to reach decarbonization.
Thank you very much for the time,
and looking forward to the conversation.
-: Thank you so much, Mad.
Those are some fascinating slides.
So now I want to turn to our third panelist,
and I just wanna remind our dais members,
we will have time for Q and A at the end.
But we're gonna move to Michael Colvin,
who is director of legislative and regulatory affairs
for California energy programs
at the Environmental Defense Fund.
Michael's work focuses on building decarbonization,
gas utility business model, wholesale electricity markets,
and transportation electrification.
Prior to joining EDF, Michael spent 10 years
at the Public Utilities Commission
working on various energy and utility safety matters.
He also served as an advisor to Commissioner Mark Ferron
and Commissioner Catherine Sandoval.
So, welcome Michael Colvin.
-: Oh thank you, Dorothy, and members of the dais,
it's a pleasure to be here today.
Thank you to Dorothy for moderating.
And to all the staff organizers for including me
with such esteemed company.
If the theme today is ensuring access to an affordable,
clean, and safe energy system,
then the theme of my remarks are going to be
how do we advance those priorities
within this new state identified priority,
which is deployment as medium and heavy duty vehicles.
So let's go to the next slide, please.
I'm not seeing them up.
So I'm hoping that they will catch up.
While we're doing that, let me just mention that
EDF is a multi-disciplinary organization
with members throughout California
and every single (mumbles) territory.
And I'm hoping that we can get onto our slides,
to slide three, please.
Dorothy: Right, can we get Michael's slides pulled up?
Oh, there we go.
-: While we are doing that,
I'm going to just keep marching forward.
So zero emission vehicles and heavy duty vehicles,
in particular, are our new frontier for California.
California's revenue requirements and rate design
are not the same for a skyscraper or a single family home,
even though they have similar attributes
like a door or window.
So similarly, an electric car is not the same as
it's a passenger car or a heavy duty truck,
even though they all have batteries and wheels.
We need to change the state's approach to accommodate this,
this is a major new category of electric usage.
And it's an identified priority both within the Governor's
executive order and the advanced clean truck rules
that are out there.
This is more than just prudent management
of the revenue requirements, it's also about
proper allocation of that revenue requirement,
and then reasonable rate design that will mean
operational profiles of the vehicle operators.
So let's move onto slide four.
It looks like the slides are finally up.
Great, thank you so much.
So a lot of this morning's remarks were focused on
combating climate change,
but I would argue we also need to be focused on air quality.
California suffers from the worst air quality in the country
with emissions from medium and heavy duty vehicles
being a primary contributor.
And surprisingly, there are direct local hotspots
within major transit corridors,
and disproportion and health impacts, such as asthma
and chronic respiratory disease
on California's most vulnerable communities.
These negative impacts can be hyper-local,
as you can see from this map,
with major differences in emissions and outcomes,
even within a two mile radius.
But luckily your response can also be hyper-local.
Let's go to slide five, please.
What if we started targeting policy levers,
such as rate design, baseline electric usage allocation,
targeted marketing education and outreach,
infrastructure deployment, based on this health data
with electric infrastructure laid on top of it?
I make this suggestion to target investments
to get the best bang for the rates they're buying,
and not just assume that the market's gonna work on its own.
We really need to start targeting this.
And that's one of the things that I think that
the white paper tried to draw out.
While this type of geographic health targeting
is somewhat new for an energy policy regulator,
the concept itself isn't.
California has a long history of authorizing
geographically distinct rates within
a utility service territory, we call them climate zones.
I'm just suggesting that we extend this concept
to a major new category of electric usage
to meet the decarbonization challenge that we're in.
Next slide, please.
So I want to make two key points on this slide.
The first one is the lower the fuel costs,
meaning the lower the rate,
the greater the difference is going to be
between a conventional internal combustion vehicle
and a zero emission vehicle.
And that will lead to faster payback.
That will drive vehicle adoption, pun semi-intended there.
EDF and many other stakeholders have developed
a total cost of ownership calculator,
where we can consider how rate design will influence
the go, no-go decision of adopting a vehicle.
As demonstrated in this chart, the more the fuel is used,
meaning the more that it's on the road,
the more vehicle miles traveled there are,
the better along with the better rate design,
there's going to be a better total cost of ownership.
And that's the difference that you're starting to see
between that first and second bar.
And if we have smart rate design,
that's going to be the difference between
that second and third bar.
We also imply from this that we wanna keep
charging rates low,
but we also want to keep them predictable.
Small businesses are gonna finance their vehicle acquisition
on these operational savings,
and predictability's gonna be important.
The second key point I wanted to make is that
fuel savings itself through the rate is one key aspect,
but there are other upfront costs of the vehicle.
And the cost of charging infrastructure
is really key in there as well.
We don't ask every fleet to install their own gas station.
So we might want to think about multiple models
of deploying charging infrastructure,
and how we pay for that charging infrastructure.
With an individual fleet doing it
might not be the best use of capital,
and there might be a benefit of having a rate tear here.
I do want to also note before we leave this slide that
Senator Leyva is offering Senate Bill 37 to this session
to help coordinate the financing of these vehicles.
And I think coordinating upfront cost purchases
with rate design and with charging infrastructure deployment
for the entire package is going to be really critical.
Let's move to the next slide, please.
So as I mentioned earlier, there is going to be a need for
very targeted marketing, education, and outreach.
There are very different operational constraints.
If you're a bakery that's small and only delivers
to a couple of local supermarkets
versus a big heavy duty drayage vehicle.
So we need to think about how we communicate
infrastructure programs and rates
to these different customers within this new broad category.
Think of it this way, we don't treat an office park
and a skyscraper the same,
even though they're both technically commercial,
we need to start doing different segmentation,
even within this new category (mumbles).
And I argue that we could prioritize early adoption,
where it's gonna provide the most good.
Targeting vulnerable communities
and disadvantaged communities
with a variety of different charging models.
And so any and all plans need to be designed accordingly.
Let's go to the next slide, please.
So let's start putting these pieces together.
What if we started deploying subsidized charging
and smart dynamic rates, where it would be
the most cost effective for the grid,
utilize excess low cost renewables,
and yield large health benefits.
That seems to be the kind of sweet spot of where
it makes sense for rate payer investment
to really be targeted.
And we're working to get that kind of thing for the box.
The Commission has the opportunity,
along with the other partners that are on the dais today,
to design programs that are gonna capture these
economic savings and health savings
and climate savings simultaneously.
And as noted in the white paper,
changes to how we aggressively procure new clean generation
to meet this new predictable demand,
charging behaviors are going to be relatively predictable
because the operational profiles and vehicles
are going to be much more predictable.
It's gonna be important
and it will help contain overall costs,
and I think more than maybe what was projected
in the white paper itself.
Next slide please.
Dorothy: Michael, I'm just gonna break in
with a time check.
Michael: I've gotten the last up in this slide,
so I think we're on track.
So I agree with both what Mad and Mike just said that yes,
we need to keep rates low,
but I also think we need to invest.
Zero emission vehicles are going to be using
existing generation assets frequently,
and more usage with the same assets means
the per unit cost of rates will go down.
We also need to think about the unique attributes
of these vehicles.
They're big batteries on wheels,
which means that we can use them for grid support
and compensate customers for the services of grid support.
And we can do that more cost effectively
than the high utility rate on return on equity
that's out there.
We should be thinking about these in a very dynamic way,
and that they can provide multiple benefits
for any rate payer investments that's out there.
And last, I think we can connect this
with environmental benefits.
We can charge in favorable grid conditions
and in favorable low emission time,
and that's gonna mean a more affordable
and a cleaner electric grid.
So next slide please.
I know this was a very high-level overview,
but I'm hoping to give you some food for thought
on how we can approach medium and heavy duty vehicles
as this new category.
With new approaches to revenue requirements,
allocation of that revenue requirement, and rate designs
within that (cuts out).
I know this was very fast,
so I look forward to more questions
and to further discussion.
Thank you again so much for having me.
-: Thank you, Michael.
Again, wonderful slides.
And I'm sorry to move everyone along,
but I do want to introduce Professor David Rapson,
our fourth panelist.
David Rapson is an associate professor at UC Davis
in the department of economics.
And he's director of the Davis Energy Economics Program,
also known as DEEP.
He studies how firms and consumers make decisions,
primarily about energy use,
and what this implies for optimal climate regulation
and government policy.
His current research topics include
transportation electrification, electricity markets,
energy efficiency, and climate policy.
His research appears in the American Economic Review,
Science, Nature, and other academic journals.
So welcome Dr. Rapson.
And I'll turn it over to you.
-: Thank you, Dorothy.
And thank you everybody for inviting me to speak today,
and for hosting this important discussion.
Dorothy and the organizers have asked me to discuss
some of my recent research on electric vehicle demand
and energy prices.
And this research is all in collaboration with other
fantastic scholars, two from UC Davis economics,
Jim Bushnell and Erich Muehlegger,
as well as a paper with Catherine Wolfram at UC Berkeley,
and Fiona Burlig at University of Chicago.
So I hope this, some of this research is useful
in helping you to achieve your dual goals here,
which I've been hearing throughout of cost control,
as well as ambitious climate change mitigation.
So next slide, please.
Today, I'm gonna focus on three main questions.
Each of these looks backwards in order to learn from
the observed consumer behavior over the last few years,
with the idea that what we learn from that
can inform future decisions.
So there are three main questions
that I'm going to focus on.
One is how effective are electric vehicle subsidies,
and what can we learn from this?
The second is do energy prices affect
electric vehicle demand?
Gonna look both at the effective electricity
and gasoline prices on EV demand.
And how much electricity do electric vehicles consume?
Next slide please.
So increasing electric vehicle adoption
requires very large subsidies.
And this is because electric vehicles are not yet
cost competitive, relative to conventional vehicles.
And while battery costs are declining steadily,
it's likely to take several years before they actually reach
before EVs reach parity with gasoline cars.
So there are three points I'm gonna highlight on this slide.
The first is that subsidies actually work.
I found this graph to be quite provocative,
and even though it's not from California,
I thought it might be helpful.
In 2015, the state of Georgia removed
a state electric vehicle tax credit.
And you can see that when that happened,
demand for electric vehicles in Georgia fell dramatically,
almost to zero.
And this tells us two things.
It tells us that in the absence of subsidies,
very few people were desiring electric vehicle technology
in this place and at this time.
And that electric vehicle subsidies actually worked,
that when they're in place, they do induce people
to buy a different technology.
If you could push forward one, please.
So California, we haven't had an experiment like this
where a tax credit was removed,
but in work with Erich Muehlegger,
we've attempted to estimate the sensitivity
of electric vehicle demand, to subsidies in California.
And what we find is that in California,
it takes about 15 to $25,000 in total,
California plus federal subsidies,
for each incremental vehicle purchase.
Now this is high relative to what might be implied
by this Georgia graph,
and that's because a lot of people in California,
probably more people in California than in Georgia,
would purchase an electric vehicle without the subsidy.
And yet, the subsidy is available to them.
And it's very difficult for us to identify
who would purchase without the subsidy and who wouldn't.
And that means that for each incremental electric vehicle
induced by these subsidies, the cost can be quite high.
And push forward one more, please.
So what does this tell us about the total cost of achieving
our electric vehicle adoption targets?
Well, when we took the sensitivity of EV demand
to these subsidies and projected it forward,
this is actually from 2018 through to 2025.
We included very aggressive cost reduction estimates
for associated with batteries.
And we estimated that from 2018 to 2025,
it would cost roughly 12 to $18 billion,
at least in state and federal subsidies
to reach the 1.5 million EVs on the road goal.
So these are very expensive ways to induce demand,
while it is also true that they're effective.
Next slide, please.
I wanna turn now to how energy prices affect
electric vehicle demand.
So you can actually push forward one more,
just to see the results here.
So in a study with Jim Bushnell and Erich Muehlegger,
we took advantage of the fact that there are many
municipal utilities in California
that have very different electric rates than the IOUs.
And this gives us an opportunity to look at
electric vehicle adoption behavior,
right along the boundaries of those utilities.
And on one side of the boundary,
the electricity price can be very low.
And on the other side, they can be very high.
And this gives us an opportunity to estimate the effect of
high electricity prices on EV demand.
And what we find is that every 10 cents per kilowatt hour
increase in electricity prices,
decreases electric vehicle demand by roughly 15%.
And there's also quite a bit of variation both over time
and space and gasoline prices.
And so we can ask a similar question
about the effect of gasoline prices on EV adoption.
And we find that actually gasoline prices appear to be
an even more important determinant of EV demand
than electricity prices.
A 50 cent per gallon increase in gasoline prices,
increases electric vehicle demand by about 30%
in our sample.
So prices do actually affect EV demand,
and they do so in ways that I think are important
to understand if we want to be efficient
in inducing demand for EVs.
If we can find the next slide there, that would be great.
Thank you.
So this is the final result that I'm going to discuss.
It has been a struggle to figure out how much EVs
are charging, particularly at home.
And the challenge here is that unless a home
has a dedicated EV meter, when they plugged their EV in,
that electricity demand is intermingling with
the rest of the demand from other electricity end uses.
And so the approach to date has been to take
the 500 households in California that have dedicated meters
and assume that they reflect the home charging behavior
of the hundreds of thousands of electric vehicles
that are charging at home.
And this I think has been a necessary,
but perhaps not representative assumption.
And so in this paper, my coauthors and I,
we take an indirect approach to estimating
the amount of EV load.
And what we do is we match electric vehicle
registration records at the household level,
so we'll know when an electric vehicle shows up at the home,
and we look at using meter data from the utilities.
We look at how household electricity demand increases
at the time that the EV arrives.
And what we find, you can flip forward one, please.
What we find is that EV home charging is roughly
about 2.9 kilowatt hours per day in PG&E's territory.
And this is substantially below the amount that's implied
by the dedicated meters that have been used in the past,
and as reported in the joint IOU report of 2019,
they indicate that EV charging at home
is roughly 7.2 kilowatt hours per day.
So more than twice as much as we're finding.
This has implications for both financial transfers
that are linked to EV electricity use,
as well as I think raising some questions about
EV technology and the how it's being used and the cost
and benefits of it.
And next slide, please.
So there are many potential explanations
for low EV electric load.
And I just want to list a few of them here.
And I think many people probably have beliefs
about what is the explanation.
Certainly the first that comes to my mind,
and likely many of your minds,
is that battery range was low during our sample period.
So we were looking at 2014 to 2017,
and battery range has increased since then.
And it's almost certain that that is going to make
EVs more desirable for providing transportation services,
and people will be charging them more at home.
However, there are also other potential explanations
that I don't think we have evidence to reject yet.
So one is that there may be desirable attributes
of conventional vehicles that make drivers prefer them
to EVs at this point.
It may be that the early adopters of electric vehicles
are simply different than future adopters,
they might just have lower transportation needs.
And it may be that in some cases,
electric vehicles are compliments to gasoline cars,
rather than substitutes.
With the idea there being that households own multiple cars,
and maybe they buy an electric vehicle that they don't use
all that much for some of their transportation services,
but they have other cars in the portfolio,
gasoline cars, that provide the rest of the services.
And I think that it's an open question,
which of these explanations or how much of
each of these explanations actually is relevant
to explaining the low load.
Next slide please.
Dorothy: And David, just to ask you to wrap up
if you can.
David: This is my last slide.
So the last observation I just would like to make is that
there's still much to learn about the costs and benefits
of electric vehicle technology.
We are striving for an affordable transition
to a low carbon economy.
And so it's important to figure out what the levers are
that are most effective at providing low cost
carbon abatement and local pollution abatement.
The effect of electricity prices on EV usage decisions
is not yet known.
And as has been a theme up until this point today
in the En Banc is that electricity prices are going up.
And if what we want to do is transition people
to electric technology, it's possible that this will both
change their decision of what cars to buy,
as well as how much they use them.
There are also potential for vehicle to grid services
that I think could increase the value proposition
of this technology.
And because of what's been going on in Texas, as well as,
the rolling blackouts in California last fall,
I think it's worth identifying that there is a risk here
of relying on the same energy source for transportation
and other electricity services.
Right now, gasoline is always going to be available
when electricity is potentially not.
And of course there are costs associated with that.
But moving to a single source for all of our energy needs
does include an additional risk.
So thank you for your time and consideration
about these points.
I hope that some of this research helps you
as you approach the difficult trade-offs
and decisions that you face.
And please let me know if I can be helpful going forward.
-: Thank you so much, Professor Rapsom.
Now I do want to point out for our panel,
for our dais members, that we did have
an unfortunate scratch this morning from
Professor David Roland-Holst from UC Berkeley.
He was going to be our fifth panelist,
but he did have a family medical issue this morning.
And everything's okay, it's not life threatening,
but he is unable to join us.
So we can now actually at this point,
turn to questions from our dais members.
And I will remind you to raise your virtual hand
over in the lower right-hand corner
of the participant window.
And I will try to call on you
so you can ask questions of our panelists.
Let me see if I see any hands raised.
Let me call on, I see a hand from Patty Monahan.
-: Yes, thank you.
I found this a really fascinating panel.
I have several questions.
I want to start with a question for Mad from Greenlining.
So I'm with the public utilities,
I mean the California Energy Commission, oh my goodness.
And we did an analysis of, required by SD 1000,
of the equity implications of charger of distribution.
And what we found was that perhaps not surprisingly
chargers follow where EVs are being used.
And that's a problem in terms of making sure that
lower income families have access,
but no matter where you live, if you're in a rural
or mountain community that you have access.
And then I'm curious about the fact that
we want to make sure that we contain rates,
and we want to make sure that lower income families
and families that live in disadvantaged communities
have access to electric vehicles.
And part of this, the reason we wanna do this
is because they can save money, so much money.
In fact, a recent report from Consumer Reports found
over the lifetime of the electric vehicle,
it can be between six and $10,000,
and it's a combination of reduced fuel costs
and also reduced operation and maintenance costs.
And I'm wondering about what you think the appropriate role
of utility investments in infrastructure are,
and specifically, do they have a role to play
in providing access in low-income
and disadvantaged communities?
I mean, there is a rate payer implication there,
but there could be a very large benefit
if we can find better ways to get zero emission vehicles
into the hands of lower income families.
-: Well, thank you so much for the question,
and totally agree with the opportunity that you presented.
And I think it's all in the design of the program,
of the investment decision, and of the implementation.
So while I don't work on vehicles, I can connect you
to my esteemed colleagues at Greenlining that do,
I can speak to the questions that you highlighted
more generally, which is what's the role of the utility?
Absolutely, they need to invest and they need to prioritize
investment in the communities that are most in need,
both from an infrastructure perspective
and from a non-energy benefit perspective.
So one thing that I think would help would be
non-energy benefit analysis in both agencies,
decision-making around where investments go
because cost-effectiveness remains a significant barrier
to investments in TAC along these issues.
The second issue that, well, second thought
in responding to your question is we need rate protection.
Yes, we need to prioritize investments in these communities,
and also they're not the communities that should pay
a disproportionate amount of their income
to overcome a lot of historic disinvestment and inequities
that result in current investments around electrification,
whether it's vehicles or buildings,
being more expensive under certain upfront metrics.
Also in terms of making sure that low-income customers
benefit from DER programs,
one of the things that I've found that I would invite
both agencies to consider is that the assumption of use
and activity for low-income customers is often off.
So the projected savings are not rooted as closely,
and the assumptions are off because these populations
are under engaged with, and their behavior around energy use
and driving is often a least priority,
in terms of academic and institutional research.
So in the San Joaquin Valley,
affordable energy pilot proceeding,
we were able to focus on what are those rate protections
when we're making these investments?
And we are uncertain and we know that the
folks participating are extremely economically vulnerable.
They need a separate design policy to make sure
they are protected from these rate increases.
So in terms of the cost of shift question,
as a advocate focused on
low income rate payers and communities,
it has, I would say it has to go elsewhere.
And in terms of who's footing that bill.
But I think there absolutely is an extreme opportunity.
And if we delay investing in these communities,
it becomes more expensive, and their bills become
more expensive as well, as they're left out of
the transition in the longterm.
So I think the cost comparison, we need a lot more
individualized focus on low income
and extremely low income California.
And I think Michael, thank you,
and I think Michael Colvin made a great point earlier,
which is those targeted investments in TAC,
depending on how you do them, can help offset
some of the costs system-wide if you do it right.
-: Great, thank you.
I have a question for David.
So I appreciate the fact that you've caveated some of
your comments around the EV usage
with the fact that these were older vehicles
and that was when they didn't have much range.
I just want to say we recently did a survey
and found that a consumer survey and found that EV owners
said they drove more miles than their ICE vehicles
in internal combustion engines powered vehicles.
And when we normalize for vehicle age,
it was pretty equivalent.
So I think the data is shifting,
and as we find EVs with greater and greater range,
we may find that they're being driven as many,
if not more miles than their ICE counterparts
because of the fuel savings aspect.
I wanted to ask you a question about
the vehicle subsidies piece.
And I don't know if we can do this,
but can we go back to the slide that talks about
the vehicle subsidies?
Dorothy: We can try, you're asking for.
-: Well, I can ask my question whether or not
we go back to that.
Dorothy: Well one of the slides from David Rapson,
if we could have the folks pull that up.
But I do recall which slides you were talking about
with the, I think 12 billion, 12 to 18 billion.
-: Shocking number, I gotta say.
Yeah, and I do believe in vehicle subsidies.
I do think though the fact that we're transitioning
to using the low carbon fuel regulations,
a low carbon fuel standard to provide a consistent 1.5K
incentive for vehicles.
Here we go.
So California required, sorry my screen is, there we go.
15,000 to 25,000 per vehicle subsidies.
Is that right, David?
-: Yes, that's right.
So there were some over this period of time,
there were $7,500 in a federal subsidy and about $2,500,
so 10,000 per EV purchase.
And many of the EVs that were purchased
would have been bought without the subsidies,
and yet they got the subsidies anyway.
So that basically squanders some of those resources, right?
It's impossible to know who actually needs the subsidy
in order to be induced to buy an EV,
as opposed to somebody who just really wants to buy an EV.
And so that's why this number is so high.
-: I'm a little confused about the 15 to 25,000,
where did that come from?
-: So we estimated the sensitivity of EV demands
to subsidies.
And what this tells us is basically how many additional EVs
were induced by the subsidy programs.
We know how much was spent,
we know how many incremental EVs were induced by this.
Not all the EVs purchased were induced by the subsidies,
only some were.
And when you divide one by the other, it's gonna be some,
obviously there's some uncertainty about this,
but it's gonna be in the range of
15 to $25,000 over that period.
And that number is like could end up going down
as electric vehicles get more cost competitive,
as their cost goes down.
But also the population that's buying them
is probably going to change as well,
it's going to be fewer early adopters.
-: Yeah, I mean, it looks like according to
pretty reputable analysts,
but in the next two to five years,
battery electric vehicles should be cheaper
than their internal combustion engines counterparts
on the vehicle basis, let alone not counting for,
reduced operation maintenance and reduced fuel costs.
And so with that calculus I think becomes
more commonly known, one would think,
that the need for subsidies would go dramatically down.
And I just look at like the Ford F-150 is coming out
in electric model next year, it's gonna have
the best low end torque, great towing capacity,
if it has some performance characteristics
that are better than its ICE counterpart.
And so I just wonder your reaction to this idea of well,
if these vehicles actually perform better,
and the biggest barrier and become cost competitive,
I mean (mumbles), it's just infrastructure.
Would you agree with that?
-: Well, I think there are a few different marks.
I mean, I agree with the general point that this technology
is changing and EVs are becoming cheaper
and more attractive as more different models are available
to meet different transportation needs.
And absolutely, it's if they reach costs parity,
then subsidies will likely be either unnecessary
or far less necessary.
I think that there is one missing piece
to the subsidy puzzle that I just want to highlight,
which is it doesn't do anything,
if you are only subsidizing,
then you're not doing anything to create
the right incentives for on the usage margin.
So as long as there's some fossil fuel on the grid,
we want to disincentivize the usage of that as well.
And subsidies are not the best tool for doing that.
We kind of need some carrots and some sticks.
(crosstalk)
-: I hate to cut you off Commissioner Monahan.
I do have a couple other hands raised
and we have a stop time,
we're already a little behind schedule.
I want to turn to, I see Commissioner Rechtschaffen
has his hand raised, and then Severin Borenstein,
and if we have time, we will get both.
Oh, and we have some additional questions too.
But let's turn to Commissioner Rechtschaffen
with your question.
-: Well, first I just want the record to reflect that
Commissioner Monahan subconsciously said she's at the
Public Utilities Commission,
so it indicates that that's where her allegiance is really,
where she really wants to be aligned with.
So just putting it out there.
I have two questions that hopefully can be answered
relatively quickly, so I'll just pose them,
and then we can have the people answer.
Mad, my question for you is,
do you think given the needs that you identified,
do you think we need to have external sources of funding
from taxpayers more generally to fund the kind of equitable
transition that you envision?
So that's one thing.
We're here talking about rates obviously,
but some discussion is how much can we dare from
rate payers?
And then Mike Campbell, I have a question for you,
roughly straightforward question about your slide
showing that the cost of EV charging
will exceed gasoline costs as rates go up.
What rate design are you assuming?
What TOU rates or other dynamic rates,
and did you factor in some of the managed charging options
that were discussed elsewhere in the white paper?
And the white paper is, was as Paul presented earlier,
showed that especially with managed charging
and not even including ownership costs,
but just managed charging shows,
saved cost savings for electric vehicles,
as opposed to gasoline over the next decade.
Mike: Mad, I think you were first.
-: Sorry, phone computer.
Thank you so much, Commissioner, for the question.
In terms of outside funding,
a couple of things come to mind.
First, it has to be anchored in the protections
for low-income people.
So the treatment of other classes within rate payers,
that's not where the question and the research should start,
and that's not how we should set it up.
I think that significant amount of money is needed
to make the types of investments because of the barriers,
the significant barriers in historic disinvestment.
I think one way to help answer your question,
we need to pilot a lot more DER technologies,
decarbonization programs in different
disadvantaged communities because they are not a monolith,
regionally across the state to help
answering these questions with more precision.
Absolutely I think that wealthier customers
can afford to pay more, controversial statement.
And I think that there is a public good in investing
in DEC investments and that over the longterm,
it will be also more efficient on the system.
And I think that there's also a public health crisis
associated with our energy system.
And so there's an urgency that makes
outside funding attractive and necessary,
and I think something for the Commission to consider.
Also I will say, utility profits and dividends
during a crisis when folks are in precarious levels
of access to vital services, are also concerning.
So I think there are a lot of places to look for funding.
Dorothy: And let me let Mike Campbell
give a one minute response to Commissioner Rechtschaffen.
And then I think we really need to break for lunch.
We're behind our target.
Mike, do you have a quick answer for the Commissioner?
-: Yeah, I'll save the two hour answer for a different day.
The short answer is that, just looking at the average rates,
not a time of use and those other things,
but I think the key point there is,
and why I was using that as indicative, is the average rate
I think we can use that as a rough heuristic of
what we're up against in terms of how
we're talking about subsidizing EVs in a lot of ways.
And so I think that we should be careful about
how we could create inequities
and reducing the amount that creating costs
for non-participating customers.
And so one key thing is in the before COVID times,
most folks would, we're talking residential rates here,
but super off peak for charging vehicle is at night.
Really, if we're gonna be planning and thinking about this
holistically, we're probably need to be thinking about
how we're gonna be charging vehicles during the day
when we have, we can be absorbing that solar energy,
getting more of that environmental benefit,
and reducing costs.
Just as we all know, when you consume energy matters.
And so we need to be real looking at the underlying costs
associated with the charging of those vehicles.
So simply a kilowatt hour is not the same,
you really have to be thinking about when it's being used
and what it's offsetting.
We're at a place where the rates are getting
and underlying costs are getting so high.
We're not at a place where we could really
rate design our way out of it, so to speak,
by just adjusting the rates.
So that was the key theme there.
I hope that answers your question, Commissioner.
If you want more, obviously I'm more than happy
to stay on the soapbox.
-: Thank you, Mike.
I think I need to turn it back to Mary Claire, our emcee,
and have our lunch breaks.
Sorry if I didn't get to with your question
for our panel.
And thank you to my panel members.
-: Great, thank you so much, Dorothy,
and thank you for that great panel.
So we have a very full afternoon planned,
so to make sure that we have the full time allotted
in the afternoon, we are gonna shorten lunch a little bit.
So let's plan to be back here at one,
as the agenda calls for.
And a couple of housekeeping items before we go.
So the slides have not yet been posted to our webpage,
but we are working on that,
they should be posted very shortly.
And we do recommend that the panelists and the dais members
stay logged into the WebEx and on the phone line,
and just turn off your video and mute your phone
during lunch.
And if you do want to log off and then log back in,
please do log back in 15 minutes early
so we can make sure to get you squared away.
All right, thank you.
-: Thank you, MC.
-: Great (mumbles) put me on speaker view.
Welcome back everyone.
Thank you for joining us.
This is the California Public Utilities Commission
En Banc hearing on rates and costs.
Can we afford the future?
I hope you were all able to stretch your legs
and get some food and are ready for the afternoon
because we have some great panels planned.
Where this morning was really dealing with the issues,
this afternoon is going to be focused on solutions.
So we're going to have two panels
with a 15 minute stretch break in between.
And then after the panels,
we'll have closing remarks from Commissioner Shiroma,
and then half an hour of public comments.
And we'll provide directions on how the public can call in
to make comments closer to the end of the day.
So without further ado,
I'm going to introduce the moderator for panel two,
Leuwam Tesfai.
Leuwam served as Commissioner Shiroma's chief of staff
and legal advisor.
Prior to her Governor's appointment in this role,
she practiced in the federal section
of the CPUC's legal division,
representing the CPUC before FERC,
and advising on energy matters, including rate making,
transmission planning, procurement, and climate change.
Leuwam also previously served as an advisor
to Commissioner Leanne Randolph, and in the private sector
in renewable energy markets
and electric generation project development.
Over to you, Leuwam.
-: Thank you, Mary Claire.
Good afternoon, everyone.
And I hope everyone had a good lunch break.
We're moving into panel two.
What strategies for cost control
or reduction do we need to explore?
As we learned from our last panel,
customer acceptance through affordable rates is essential
to the success of California's climate initiative.
As California works to address our climate goals,
safety, and reliability,
affordability can not be lost on us.
We must tirelessly analyze the most promising opportunities
to contain utility costs.
Much of my time at the Commission has been spent wrestling
with these energy cost and rate issues,
both at the CPUC and litigating transmission costs
before the Federal Energy Regulatory Commission
to ensure rate payer value
and California's longterm climate success.
Our experts joining me on this panel will help us explore
these areas today.
As the child of immigrants from Ethiopia and Eritrea,
I also know that communities of color care deeply about
issues around climate change.
It is not news to us that communities of color
are disproportionately impacted by the climate crisis.
To build customer acceptance, we must also grow the benefits
to the California economy, from increasing investments
in renewable generation resources, wildfire mitigation,
and transportation electrification,
especially for disadvantaged communities
and communities of color.
I am pleased to introduce our next panel of diverse speakers
to explore both opportunities to contain electric costs
and the benefits of utility investments
in the California economy.
In order of their presentations, we have Robert Kenney,
vice president of regulatory and external affairs,
Pacific Gas and Electric Company,
Carla Peterman, senior vice president of strategy
and regulatory affairs at Southern California Edison,
Scott Crider, chief customer officer
from San Diego Gas and Electric Company,
Jennifer Dowdell, senior policy expert
from the Utility Reform Network,
Betony Jones, advisor from NextGen Policy
and CEO of Inclusive Economics,
and Rick Umoff, senior director and counsel at
the Solar Energy Industries Association.
So to start, we have Robert Kenney.
Robert is vice president of regulatory and external affairs,
responsible for strategic guidance of regulatory affairs,
federal, state, and local government affairs,
and community relations and marketing,
and communications for PG&E.
Previously, Robert was chairman
of the Missouri Public Service Commission.
Robert will present first.
We'll go through all of the presentations,
and then allow for questions from all of our dais members.
Robert, please go ahead.
-: Good afternoon.
Leuwam, thank you very much for the introduction.
Good afternoon Commissioners, both CEC and CPUC,
and members of the public and members of the CAISO Board,
and our elected officials that were with us this morning,
Chair Holden and Chair Hueso.
I'm Robert Kenney, our vice president
of regulatory and external affairs.
I'm really excited to be a part of this discussion
because we all share the goal of safe, reliable,
clean, and equitable energy.
And because we recognize that we will not be able to do this
and reach all of our goals if we don't take bold action now.
At PG&E, we are working hard to deliver
on our affordability goals, while continuing to make
needed safety and infrastructure investments,
including significant and substantial investments
to further mitigate wildfire risk,
along with meeting California's ambitious
clean energy mandate.
I appreciate and I meaningfully appreciate,
and really do appreciate, the challenge that the CPUC has,
and the challenge that you've presented to us to think big,
to think about impactful ideas that can help reduce
energy costs over the long term,
even as we continue to make strides toward
our shared safety and clean energy goals.
So I'd like to share briefly our thinking here
in some important areas.
And I'd like to advance to the next slide, if I may please.
Operational cost efficiencies,
transactions to benefit customers and electrification.
And then of course, I look forward to hearing from others
and having a productive discussion.
I'd first like to talk about operational cost efficiencies
and near term cost efficiencies
that we're looking to achieve.
And mitigate upward rate pressure in the near term.
We've identified a set of operational efficiencies
that we estimate can save on average a billion dollars
per year through 2025.
These efforts reflect potential opportunities to moderate
expected customer bill increases
due to an increase in infrastructure investment.
And this billion dollars is roughly comprises 800 million
a year identified in operational savings
and process redesign, and 260 million per year identified
in transactional savings.
So you'll see on this slide in bucket one,
process redesign includes several initiatives
that continue to evolve.
But what we've identified initially is
focusing on negotiations with our top suppliers,
largely concentrated on price and rate reductions.
Creating updated insourcing versus outsourcing
cost calculators to make the best decisions about
what work is done internally
and what work is contracted out,
and targeting specific groups that should be insourced.
Ensuring consistent and detailed quality planning
in our work planning,
making sure that our work is completed
in a timely and cost-effective fashion.
And then a bottoms up initiative from
each of our operating lines of business.
A lot of the benefits that we expect to be able to achieve
over the coming years will be through empowered employees
initiating improvements from groups out in the field,
and from groups like our IT
to streamline and improve processes.
The second bucket we see there are initiatives
that do also continue to evolve,
but include sales of excess renewables,
reducing customer costs through the sale of excess recs.
For instance in 2020, we realized about $129 million
in excess sale of renewable energy credits.
And we'll be able to do this while remaining on track
to meet our SB350 and SB100 goals.
And let me move to bucket three, the third column there,
is rationalizing our portfolio footprint.
Starting with the sale of our San Francisco general office
headquarters in the financial district,
and moving to a more effective, cost-effective location
in Oakland and the East Bay.
I can move to the next slide, please.
This next slide depicts from my perspective,
what is an innovative and creative transaction
that we believe will benefit all of our customers.
So in addition to the initiatives that I described
on the preceding slide, we're actively looking for
other assets that present opportunities for us
that can be used to benefit customers.
So increment are on top of the 1 billion per year
through 2025 that I just previously ran through.
Just a few weeks ago, I think you will have read,
that we announced an agreement with
SBA Communications Corporation,
a major operator of wireless infrastructure,
to whom we are selling future wireless license agreements
for an upfront lump sum, while maintaining control
over the safety and the operate of that infrastructure.
So to be clear, we aren't selling
any electric transmission towers.
But the sale of these licenses is expected to generate
approximately $973 million in initial proceeds.
And we estimate that approximately half of that
will be returned to electric transmission
and distribution customers in the form of
lower monthly bills.
Selling these licenses.
Leuwam: Two minutes left.
Time check, two minutes left.
Thank you.
Robert: Thank you.
Selling these license agreements is another way
we're continuing to reduce our financing needs,
which will then reduce costs, and ultimately will inure
to the benefit of our customers.
And with respect to this particular transaction,
the work on our infrastructure will continue to be required
to meet all of our regulatory safety requirements,
our wildfire mitigation procedures,
and other utility standards and protocols.
And the agreements with SBA include provisions
that will preserve existing and future safety requirements
and procedures.
We will also continually regularly inspect
and maintain these towers and audit the attachments.
So any work on our infrastructure will continue
to be performed by trained and qualified electric workers.
Finally, turning briefly to
California's clean energy future.
We do agree with the white paper's analysis that
building a transportation electrification
provides significant opportunity to reduce GHG emissions,
and as well, provide an opportunity to keep rates affordable
through incremental load on our system.
We also agree with the white paper that
to gain these benefits, we need to ensure that
the cost of accelerating electrification doesn't outpace or
outweigh the contribution of that new load's lowering rates.
Let me, I know we have a lot to talk about today.
So let me just wrap up quickly.
We all know that we can't avoid the costs of providing safe
and reliable service for our customers,
and we need to continue to innovate and drive efficiencies
where we can.
But as we've seen, and I think as we noted earlier,
our risk of wildfire mitigation from work
or the risk of wildfires requires that
our wildfire risk mitigation work continue.
And that regardless of the efficiencies and innovation,
there's more work that will need to be done
so that no matter our path, we still have the difficult
and expensive work of hardening our system,
being aggressive with our veg management program,
and continuing to treat hundreds of miles per years of
with all the resources we can muster,
just as we're doing now.
And as we conduct this work and plan for our shared future,
we have to keep the customer at the center of everything
that we do, all of our customers,
and we're committed to providing safe and reliable energy
while also working to keep customer rates affordable.
I look forward to the discussion,
and thank you very much again for this convening,
and thank you for inviting us to participate.
-: Thank you.
Our next speaker is Carla Peterman.
Carla is the senior vice president of strategy
and regulatory affairs at Southern California Edison.
She is responsible for the company's regulatory, energy,
and environmental policy and strategic planning.
Carla previously served as a California Public Utilities
Commissioner, California energy Commissioner,
and chair of the California Commission
on Catastrophic Wildfire Costs and Recovery.
Thank you, Carla.
-: Thank you, Leuwam.
We can move to the slides and I'll start on slide two.
Let me just start off by saying Commissioners,
Chair Hueso, Chair Holden, distinguished guests,
thank you for the opportunity to join today's
important discussion, and thank you to the staff
for the careful analysis of rate trends.
As the white paper shows,
Edison has a long standing commitment to and track record
with keeping rates as low as possible,
while ensuring power is safe and reliable.
Our investments, including our additions to rate base,
are informed by a Commission adopted risk framework,
and increases in rates are reviewed and vetted
through an extensive public process.
As the first two slides in my presentation highlight,
even as cost pressures mount from public policy initiatives,
wildfire mitigation and grid hardening,
increasing customer expectations, safety measures,
and the need to integrate new technologies,
Edison continues to take a broad and thoughtful approach
to finding areas where costs can be reduced.
Similar to the PUC's white paper, Edison's analysis,
Pathway 2045, shows that greater electrification
achieved greenhouse gas targets, as well as improved
overall energy bill affordability for customers.
We forecast that while electricity bills
increase over time, energy bills for an average household
decreased by 1/3 by 2045, driven primarily by
energy efficiency gains from transportation
and building electrification.
We also support these technologies being available
to all of our customers.
47% of the chargers for EVs that Edison has installed
to date are in disadvantaged communities.
And the target for our last approved program,
Charge Ready 2, is 50%.
But today I want to focus the remainder of my time
on one possible idea for reducing costs
in the next few years.
Customer funded self-insurance for wildfire.
Leuwam, let's move to the last slide.
So as an aside to that, I would just say as an aside,
some of you may know, that my dad spent 34 years
in the insurance industry.
So if he's watching right now,
I know he's happy that I'm finally excited
to talk about insurance.
And I hope by the end of these next few minutes,
you will be as well.
So like our customers and other businesses,
Edison carries insurance in order to manage your risks
and protect against financial loss.
Like other normal business expenses, where we cover
the costs for insurance premium and customer rates.
AB 1054 requires utilities to have 1 billion
in wildfire insurance.
At Edison, we aggressively pursue getting insurance
at the lowest cost possible,
but the cost of wildfire insurance premiums
have increased significantly for the utilities.
This is due to the frequency of wildfires,
more construction in the wild land urban interface,
inverse condemnation, climate change, drought,
and forest management issues.
Edison's current wildfire insurance expense
is about 400 million per year.
So for perspective, it was 55 million four years ago,
and 21 million 10 years ago.
We think there is value in foregoing
some of the highest cost commercial insurance,
which tends to be the insurance in the first layers
of an insurance tower, and instead, self-insure that risk
with customer funded self-insurance.
This approach could save over a multi-year period,
potentially hundreds of millions of dollars,
as long as actual claims costs do not exceed
the amount of premiums collected for funded self-insurance
over the period.
So you can see on this slide,
simple schematic about how this works.
A typical insurance program has multiple layers
and claims that are paid sequentially by layer.
As a result of the various drivers of insurance costs,
premiums for some layers may be well above
the expected loss in those layers.
So using customer funded self-insurance for some of those
layers could reduce costs for customers over time.
If there are no claims in a self-insured layer,
customers save the entire premium for that layer,
and those dollars can be used to fund self-insurance again
the next year.
So this is in contrast to commercial insurance,
where premiums are paid every year.
Funding needs to be established on a multi-year basis,
that claims, payments, and customer savings
will vary year by year.
Modeling a third-party actuarial analysis,
analyze the risks, establish the funding requirements,
and potential savings from self-insuring.
So if Edison gets timely authorization
in our pending 2021 GRC, to use the revenue requirements
for self-insurance, in addition to purchasing
commercial insurance, we can implement this tool
as part of the future wildfire insurance renewal,
using Edison's existing captive insurance company
to account for the funded self-insurance.
Benefits of this approach are that it's easy to administer,
provides potential for significant savings
over a multi-year period, and may actually result
in more competitive pricing for the insurance
we continue to purchase above the self-insured layer,
resulting in further savings.
Five minutes, that's it in a nutshell.
I'm wrapping up, and I look forward to your questions.
Thanks for the time.
-: Thank you, Carla.
Moving to our next presentation from Scott Crider,
chief customer officer at SDG&E.
Scott Crider is the chief customer officer
for San Diego Gas and Electric.
Scott oversees all customer related activities for SDG&E,
including customer service, digital channel management
and strategy, customer programs,
field and metering operations, revenue cycle activities,
and electric rates.
He is also leading an initiative to replace the utilities
customer information systems and digital portals.
Thank you, Scott.
-: Well, thank you very much.
And I really appreciate the invitation to join you today.
Again, Scott Crider, chief customer officer for SDG&E.
As we think about rate management and affordability,
these are very critical aspects
of our responsibility to customers.
And frankly, we understand this has very real implications
on families and companies across the state.
As we implement state policy and ensure delivery of safe,
clean, and reliable energy.
If you could go to the next slide, please.
So really our big idea is a little bit more thematic,
and it's really focused on opportunities to improve
efficiency through the utilization of new technology.
The conversation on innovation within our sector
is understandably focused on areas like micro grids
or batteries or electric vehicles,
but we view innovation and technology much more broadly,
and consider it a major driver
of improved efficiencies at SDG&E.
Whether it's cloud computing or process automation,
yeah, we are really just starting to scratch the surface
on this next generation of technologies
that really are changing the way that we run the business,
while improving customer service, reliability, and safety.
And as you can see on this slide,
I've highlighted just a few examples where technology
investments are delivering value to customers,
either through direct savings or more efficient spending,
that also deliver operational improvements.
In the interest of time, I'm just gonna call your attention
to a couple of examples.
First, is the use of robotic process automation,
and it really is an efficiency game changer.
We started automating manual and repetitive work
using RPA really back in 2018.
And this first investment in automation
is estimated to generate ongoing savings of about
165,000 labor hours per year.
That's about 80 employees by the end of 2021.
And by the end of 2024, we could have potentially
700,000 hours of labor capacity saved.
And that's gonna have a significant
positive impact on rates.
And really over time we think more and more complex tasks
can be automated using machine learning,
and potentially create even more savings opportunities
in future years.
The second is really the use of drones
and artificial intelligence for assessing grid assets.
Yeah, drones are providing an enhanced view
of the wires and other infrastructure
that may not be captured by inspectors on the ground.
And this improves safety, and reduces reliability risk.
And we're investing in intelligent image processing
to assess the millions of images that are created
by the drones, and detect potential damage
to electric facilities.
These models process images in near real time,
and this lowers the cost of inspections,
improves asset inventory data,
reduces the risk of wildfires, and minimizes faults
that disrupt power to customers.
And finally, technology and innovation
are also strategically important to deploying
physical asset solutions in the most
cost effective way possible.
And exactly what we're doing using advanced analytical tools
like the wildfire next-generation system,
or what we call at SDG&E, wings.
That data and analytics drive the best mitigation strategy
to reduce wildfire risk, whether it's hardening, PSPS,
vegetation management, or inspection on a segment by segment
basis, resulting in more cost effective use
of limited capital dollars.
And it goes without saying, the savings associated with
no significant utility related wildfires
at SDG&E's service territory since 2007,
is a tremendous benefit to our customers.
Again, these are just two examples of the tremendous value
technologies can deliver in terms of efficiencies.
If I could just shift gears,
while the panel's focus is on cost reductions,
I wanted to touch on two issues
highlighted in the white paper, and really highlighted by
some of the other panelists this morning.
If you could go to the next slide, please.
First, it's the role, the critical role
of declining energy sales has on rates.
Because of the success.
Leuwam: Two minutes left, two minutes left.
Scott: Because of the success of efficiency
and rooftop solar,
we are now experiencing an approximately 2% annual decline
system-wide, and this decrease is even more dramatic
for residential customers, declining at about 4% per year,
largely due to the fact that SDG&E has the highest
rooftop solar penetration in the mainland United States.
We see this impact only growing over time.
Now we are proud of this achievement at SDG&E,
I know the state's proud of this achievement,
and it's really a testament to why we're investing
in energy saving technologies.
However, this means that costs are being spread across
fewer kilowatt of sales, resulting in higher average rates
each year for customers,
even if we didn't invest another dollar in the grid.
And our service territory is largely comprised
of small businesses and residential,
with very little industrial load with higher usage
that could absorb these costs.
And in fact, if sales were flat since 2012, we estimate that
system average rate would be about 15% lower.
You go to the next slide, please.
And I'm wrapping up.
Second issue, and we don't need to belabor this,
I think we've heard it both in the white paper
and from the panelists this morning,
reforming net energy metering.
It remains one of the most impactful actions
the Commission can take to provide rate relief
to more than 80% of SDG&E customers
that do not have rooftop solar.
The annual NEM cost shift from solar to non-solar customers
in our territory is now $540 million and growing.
And just as a point of comparison,
that's about four times the current CARE subsidy.
Now with that, I'll go ahead and close there.
And thank you again for the invitation,
and I look forward to answering your questions.
-: Thank you, Scott.
And as a brief announcement for those of you
watching at home, the slides for all of the presentations
today are now available on the CPUC website,
on the page that was made for the En Banc,
or if you're watching on admin monitor,
the link should be right there below the video.
Thanks everyone.
Our next speaker is Jennifer Dowdell.
Jennifer Dowdell is a senior policy expert
at the Utility Reform Network,
where she focuses on financial
and regulatory cost recovery issues.
Jennifer has worked in energy, independent power,
and related financial services since 1984,
including various leadership roles and regulation,
and finance at PG&E.
Thank you, Jennifer.
And Jennifer, you're still on mute.
So we'll just let you edit that.
Thank you.
-: Thank you.
Good afternoon, I'm Jennifer Dowdell.
I'd like to extend a very brief and very broad thank you
to President Batjer, Commissioner Shiroma,
the entire Commission and Commission staff
for this convening.
And I feel very privileged to be healthy
and able to share some thoughts about affordability
with you today.
First slide.
I'm not seeing the slides, I'm just seeing
President Batjer.
Can we, okay thank you.
Thank you.
Next slide.
So quickly responding to the CPUC white paper
and some of the remarks of the other panelists today,
I just want to look at slide of what it highlights
is that indeed disadvantaged communities
may well be canaries in the coal mine
regarding affordability.
But as you see, the ability of Board rate increases
kind of across the Board, is not increasing.
And what this slide shows is the ratio of median income
to self-sufficiency income as a percentage.
Self-sufficiency income is the amount of household income
needed to cover living expenses without public assistance.
And these figures are for a family of four, two adults,
and two young children, comparing 2011 to 2020.
Looking at this, the upshot is that CA families
have less money to absorb rate increases upon inflation.
Next one.
Next slide please.
And so in this context, so my main remarks
are centered around three principles
to potentially increase rate affordability,
and actions that can be taken to support those principles.
The first of those is simply that we need to measure
and allow affordability directly inform utility rates
revenue requests.
We can't impact what we don't objectively measure.
And so in terms of actions, the CPUC could start applying
the metrics that come out of the Affordability Rulemaking,
which is R.18-07-006,
and using those metrics will help refine them.
It will also create a baseline for future discussions.
Additionally, another thing that we could do
is explicitly acknowledge affordability by requiring
a CPI constrained proposal.
Sorry, I got a call there.
A CPI constrained proposal along with IOU based proposals.
That would address the anchor bias
that I talk about on my slide,
which is essentially the fact that IOU proposals
are the starting point, the anchor for evaluation.
So requiring a CPI constrained revenue proposal
would book end that discussion.
And as has been discussed, IOU rate increases
have certainly outstripped inflation and general wage work.
So requiring a CPI constrained proposal
would drive in addition, wider risks and deficiency data,
and add transparency so that rate payers could
see specifically what they're paying for.
Next slide.
This is to us common sense.
Basically, investment in societal benefits
and policy objectives should not create shareholder
windfalls to rate payer's detriment.
And there are a number of actions we can think about
that would begin to address this.
First, we can consider state ownership
and alternative rate structures,
but certainly state ownership or strategic assets,
elements of transmission potentially,
and in addition, looking at funding
customer side infrastructure on expense
rather than capital basis,
and EV charging stations come to mind in this context.
I think TURN has raised this on number of occasions.
Next slide.
Finally, and my executive director, Mark Toney's,
gonna talk a little bit more about this
in his panel coming up,
but the idea, the takeaway here is that
other people's money needs to be part of our thinking
in terms of addressing rate affordability.
And those are my prepared remarks.
Thank you.
-: Great, thank you Jennifer.
Some very interesting opportunities in that presentation.
Let's move to the next speaker.
So next we have Betony Jones.
Betony is the founder of Inclusive Economics,
and is an advisor to NextGen Policy.
Betony has written extensively about the economic impacts
of climate and energy policy in California,
quantifying both the costs and also the benefits.
She focuses on distributional effects of policy
through an equity and job quality lens.
Thanks for joining us, Betony.
-: Yeah, thank you.
And I commend you for putting together such
an illuminating and rich day today
with such important presentations and dialogue.
If you can pull up my slides, I will get started.
You can go to the first slide.
So what I want to just briefly touch on today
is that investments in infrastructure,
EV charging infrastructure,
and wildfire mitigation activities like grid hardening,
do get passed onto rate payers as costs,
but they also yield employment
and economic benefits in the state.
And the more equitably we look at managing the energy costs
to cut to a rate payers, the greater the overarching
benefits for the California economy.
And finally, just wanted to point out that the IOUs
have multiple levers at their disposal
to improve affordability,
and looking at the types of jobs that are created
in the employment impacts of kind of these investments
also addresses affordability.
So I'm gonna go through these in a little bit of detail.
The next slide.
I show an example where we look at $10 billion investment
in wildfire mitigation,
or the $10 billion cost to residential consumers
that is proposed in the white paper.
And what we find is that the resulting investments
stimulate economic activity and create good in-state jobs.
So when we act, when we shift money
from residential households to direct investments
in infrastructure and wildfire mitigation,
we actually see net benefits of 22,000 jobs,
2.3 billion in labor income,
and 6.6 billion in increased economic activity,
just by shifting spending from household spending,
much of which trickles out of the state,
to in-state investments in infrastructure.
What's interesting is that when we look at
sort of insulating lower income households
from those rate increases, the net benefits are even greater
because low income households,
when they're able to keep money and spend it,
just the spending patterns are such that more of that money
stays in state by default.
So looking at how we fund these things
and who pays for them is important.
I show on the next slide, a bar chart showing this.
So I modeled really simply and in plan,
which is an input output model, a billion dollars
of investment in grid hardening and repairs,
and a billion dollars of reduced household income
modeled as rate increases.
And what we show is the net effect,
this is per billion dollars, the net effect.
And the next slide shows the same thing.
But for only looking at rate impacts for households earning
above $100,000 a year,
and we show actually 50% more net job benefits
when we do that, when we look at it that way.
Leuwam: You have about two minutes, Betony.
Betony: Thank you, of those household spending patterns.
On the next slide,
I just wanna point out some of the
affordability considerations.
So there's been a lot of talk around ways to manage
rate increases, but affordability really has
three components.
How much energy are you using?
What are the rates that you're charged?
And what is the household income?
As Jennifer from TURN just mentioned,
the disposable income to spend on energy?
And all three of those can address affordability.
So maybe we don't just have an affordability crisis
in California, but we have a poverty crisis.
And when we think about the investments that the IOUs make
or public agencies make,
are they creating good in-state jobs for California workers?
Are they ensuring access to those jobs for people
who have been excluded?
Are those investments moving the needle on household income?
Are they chipping away at the poverty problem
as a way of not entirely addressing affordability?
Everything that has been covered today
is still really important, but are we chipping away at it?
Are we creating and raising household income
to reduce the number of customers that require
rate assistance in the first place?
And I would argue that looking at things like
labor standards, wage standards,
diversity and inclusion standards,
every single time the IOUs or agencies make investments
is a way to chip away at the affordability crisis
by raising household income.
Leuwam: And if you could wrap up, Betony,
you're at time.
Betony: I'm finished, thanks.
-: Perfect, thank you.
Your wildfire mitigation investment example slide
was really interesting.
We might get to revisit that.
So moving onto our final panelist, Rick Umoff,
from the Solar Energy Industries Association.
So Rick Umoff is the senior director and counsel
at CS, where he leads the association's efforts
to grow solar markets in California.
In his role, Rick directs CS legislative
and regulatory initiatives, advocating on behalf of
all major solar market segments in the state.
Thanks, Rick.
-: Great, thanks Leuwam.
And I wanna thank the dais for having me,
for the Commission for pulling this together,
and for the opportunity to speak today.
First, I just wanna acknowledge the importance of the topic
of bills and rate (mumbles) today.
I thank the other stakeholders for providing
their perspective on this topic.
As we all know, the climate crisis is here
and the crisis is associated with increasing costs
from extreme weather events and other cost drivers.
We really do need to leverage all tools at our disposal
to address these challenges.
Distributed energy resources have been
and will continue to be play a critical role
in helping California meet these challenges.
And I want to talk a little bit today about
some of the strategies we can use to leverage DER's,
to help reduce costs going forward.
And I also want to acknowledge that we need to
continue to increase and expand access to DERs
and their benefits to all Californians
to ensure an equitable clean energy transition.
So with that, you can go to the next slide, please.
I just wanna take net-metering on head-on briefly here.
This is obviously a focus in the paper,
and it is a hot topic at the moment.
And CS position and is that NEM should continue to
evolve as the changing, as the needs of the state change,
as the needs on the grid change.
And some of the considerations the state should make
as it looks in that reform, include of course,
following AB 327 and ensuring the continued growth
of DERs and distributed solar.
But also ensuring that we see continued alignment
of NEM with the state's GHG target,
with its reliability needs,
and using them to do things like leverage
or like drive adoption of behind the meter storage.
Additionally, we need to expand access
to the various benefits of distributed solar storage
to more low income customers,
disadvantaged communities, and renters.
NEM provides an opportunity to do that.
We're looking forward to kind of having that,
continuing that conversation in the context of
the NEM proceeding, as the PUC.
And then finally, implementing policy changes
that are gradual and predictable
to continue to attract the private capital
and customer participation that we need
to make sure that we can meet our climate
and grid challenges cost effectively.
And the last comment I will make about NEM
before I move on, is that it is important we recognize
as a state, and that has been foundational,
as a policy to help support the growth of distributed solar
is put California on the map as a solar leader,
with over a million solar systems deployed,
supported the growth over 75,000 clean energy jobs
in the solar space.
And the industry has invested roughly $70 billion
in the state, and much of that has come from
this distributed solar space, as a result of NEM
and its success as a policy.
So it's important that we look forward
towards sort of what is the next iteration of NEM,
and how does that fit in with the state's needs.
But also acknowledge that it has been a successful policy
for the state in many ways.
Leuwam: Rick, you have two minutes.
Rick: Great.
So a few strategies that we think are ways in which
we can leverage distributed resources
to achieve the state's goals,
include supporting electrification and DER deployment.
So especially solar and storage can provide power,
low cost power at the point of use, off-peak,
to help facilitate electrification,
help charge EVs, help power heat pumps.
And so looking at strategies to incentivize
that kind of behavior from customers.
Reducing grid costs and enhancing resilience.
Using dynamic rates, using the aggregation of BDRs,
increasing the role of BDRs as a capacity resource
to help California meet its capacity needs
more cost effectively.
And also ensuring that we're leveraging BDRs
to avoid the costly T&D upgrades
that we can avoid with those resources
that are identified in the white paper
will be an important strategy
for reducing costs going forward.
And then finally, of course, solar and storage
provides a unique opportunity for our customers,
for communities to be more resilient
in the face of outages.
PSPS, which we see as only increasing
with extreme weather events.
And then last point is continuing to use
solar storage and other DERs to ensure that
customers are participating in this transition.
We need customers engaged in their energy bills.
We need them engaged in their energy use.
And we also need to attract private capital
into this process to help keep costs down for rate payers,
help keep costs down for the state
as we make this energy transition.
And then the final point I'll make is that
DERs do provide a unique benefit of unique land use benefit
that other resources, other renewable resources
don't provide, and we will need to use
the built environment as a way to help meet our climate
and reliability goals as we make this transition.
Next slide.
Leuwam: And you're at time, so please try and wrap it up.
Thank you, Rick.
Rick: Sure, I'll just leave you with this last slide,
which just shows the role that behind the meter storage
can play in helping reduce the peak.
The dotted brown line you see there shows
a goal that three people at the storage could have played
in reducing types of net load during August 14, 2020.
Thank you.
-: Very good.
Thank you to all of our speakers.
So now we'll be moving to Q and A.
A couple of thoughts on Q and A.
We're going to try and have each person be able to ask
one question, rather than several questions in a row,
just to make sure that all of our members of the dais
have an opportunity to ask at least one question.
And again, there is a raise hand feature in WebEx,
so you can use that,
or you can also just physically raise your hand
and I'll keep an eye out for you.
So the first hand I do see Commissioner Monahan's hand
is raised in WebEx.
Commissioner Monahan, is that from earlier,
or do you have a question for panel number two?
-: It is from earlier, I'm sorry about that.
I'll take it down now.
-: Not a problem.
Do we have any questions from the members of the dais?
I don't see any.
I see Commissioner Rechtschaffen, please go ahead.
-: I'm happy to defer to others
since I didn't get a chance to ask before.
But I'm wondering if we could hear from the utilities
about the comments earlier of how additions
to the capital base are driving costs up significantly?
And if you have any ideas about respond to that ways
to limit those additions and those costs drivers?
(crosstalk)
-: I was going to say, let's have Robert start.
-: Sure, thank you for the question.
I think one of the things that I want to emphasize
is was what I said before,
to the extent that we're making investments
that are going to drive safety and reliability,
we can't defer those divestments.
We've got to make them smartly.
We've gotta make them efficiently.
One of the things that we're learning with respect to
our wildfire spending is gaining increasing efficiencies
as we continue to learn more
and as we deploy smart technologies,
making our investments locationally specific,
making the right investments in the right spaces.
So I think one of the things that we've got to do
is find offsetting efficiencies and offsetting cost savings
to make head room for candidly,
what is going to be necessary additions to rate base
and necessary infrastructure investment.
There was one component I think of your earlier question
that was striking to me.
And you asked a question about the extent to which
we should be using third-party funds
for different types of investments.
And I think that is your question really goes to the heart
of what's the appropriate role of government
in helping to advance societally beneficial efforts.
And I think that that's something that merits
a lot of discussion as well.
And so are there ways in which we can
find additional sources of capital
for public policy spending or for things that are
societally beneficial, in order to make room
for this necessary spending that we're going to have
to for safety, reliability, and wildfire.
Leuwam: Thank you.
Next, I want to turn to Carla for a response.
I did get a note asking for all of the panelists to try
and be as concise as possible
with responses to the question.
Go ahead, Carla.
-: Duly noted.
So I'll just pick up on something that was asked earlier
about first rate base in particular,
and just add a couple of comments.
So what we see is that it can take 10 years
from proposing a project to actually seeing it
go into commercial operation.
And during that time there can be increasing costs.
And so efforts that can be done, for example,
the streamlined state permitting can be really helpful
in terms of lowering some of those project costs.
Tehachapi was raised, we saw the cost of Tehachapi go up
$350 million because of PUC direction to underground
about 3.5 miles of that transmission line.
Same thing with the Riverside project,
there were significant costs from some undergrounding.
And so when looking at some of these trade-offs
and what we're trying to accomplish,
it is important to look at some of the costs impact
per mile with some of these investments.
And then on transmission, greater utilization
of a transmission system with more transportation
electrification, building electrification
will lower the rate impacts for customers across the Board.
Leuwam: Thank you.
Scott, can you provide a response on that for SDG&E?
Thank you.
-: Thanks for the question, Commissioner.
I think much has been said already,
but as I said in my comments,
really as we look at kind of the capital and cost drivers
at SDG&E one of the biggest issues is our wildfire spending
and our wildfire investments.
And we've certainly seen good results
in our service territory,
but really moving towards using risk spin deficiencies,
and making sure that again,
we are using those capital dollars as effectively
and efficiently as possible,
to understand where we can get the best
wildfire risk reductions or the best PSPS reductions
and really getting down to that granular level.
So we're not looking at it as a system,
but really getting down into really that segment by segment
basis, again to make sure
that we're being as efficient as possible.
Maybe the second thing as well is also finding
capital investments that may not actually lead to
an increase in costs for customers,
but we're still be able to provide an important benefit
to customers.
For example, as we're replacing all of our
customer service systems at SDG&E,
it's a big capital investment,
we've got systems that are almost 25 years old.
But in the end, what we've found that is through
avoided costs, through actual direct savings,
that these are systems that can actually pay for themselves.
And we actually think there'll be a net benefit
to come up customers over the long-term,
while improving overall customer service.
And so I think those are the opportunities
that we want to continue to look at.
-: Great, thank you, Scott.
I know we have a question from Commissioner Guzman-Aceves.
-: Thank you everyone,
and apologies for my lack of connectivity now suddenly.
But just as a follow-up, I think some of the arguments
on cost savings and need to look for outside funding,
outside of the rate payer base for funding,
it's maybe more tangible when you think about
some of the clean energy programs,
even potentially transportation electrification,
as it was talked about earlier.
But in these larger pots of transmission
and wildfire investments,
it's particularly encouraging investments.
Those just in terms of greater transparency,
I know we talked earlier about the oversight needed
on the self-approved projects and transmission,
that's a clear one from my perspective
that needs some oversight.
But in addition to that, are there different models?
And maybe this is not a question to the utilities,
I don't think they're seeking out different models,
but for the panelists.
Are there different models on ownership
of both the responsibility of the work
on the wildfire safety side,
and ownership on transmission to lower
some of the longer term cost of rate payers?
Is there something really outside the box
that we're not thinking about for those sectors of the cost?
I think again, those are some of the higher growing areas
and they're less traditionally funded
from other government sources,
or other well, there's a lot of prejudice in there,
but I just wonder if there are other things
that we should be contemplating
to bring down those costs in particular?
Thank you.
-: Thanks Commissioner.
So did we have any further response to that question
from the panelists?
If not, Jennifer Dowdell, please go ahead.
-: Yeah, if I understood the question correctly,
the question is ownership outside of utilities
for things like transmission.
And I mean, I think there's potentially a state,
a role for state ownership of transmission assets.
And certainly right off the box,
you would reduce the costs by simply using debt funding,
rather than the equity component.
So if I've understood correctly,
I think that that is something that could make sense,
particularly in transmission projects
that have significant kind of Statewide support
for climate change goals.
Is that responsive?
-: Yes, thank you.
Thanks, Jennifer.
The next question I see Commissioner Shiroma
has her hand up.
-: Thank you, Leuwam.
Thank you everybody.
Very interesting ideas.
I appreciate that the utilities are looking at
a (mumbles) of different options for reducing costs
on customers, and that stakeholders are looking at
thinking outside of the box on this.
Now I'm going to go back and drill down for a moment
on self-approved projects.
And I do want to make sure that the viewing audience
knows that when we talk about self-approved projects,
this is a I'll call it an artifact,
but an artifact of FERC,
in terms of their overall regulation
of transmission projects.
The CPUC has an advocacy role in going in to argue at FERC,
or sometimes in the court to towards a cost-containment.
I also appreciate how long these projects can take,
whether it's a regular transmission project,
it's not a self-approve,
but also in the self-approved vein.
So my question to the investor owned utilities is
if those are big dollar amounts,
and what else can you share with us today
on what you're doing to much of those costs
to cost contain, to control that particular bin
of multimillion dollar costs?
-: And I want to maybe send that over to Robert Kenney.
Maybe you can talk about the star process or
and any other opportunities, go ahead.
-: Commissioner, thanks for the question,
and Leuwam, thanks for the clarification.
We do see a rise in FERC jurisdictional transmission
spending, a lot of it being driven by
lifecycle replacements and substations,
equipment enhancements and upgrades,
as well as capacity upgrades to meet load growth
in certain areas,
and then spending associated with large infrastructure
projects like Caltrain electrification or high-speed rail,
and then connecting large renewable generation stations
and energy storage projects.
That's probably what's driving it most significantly.
And then just going back to those projects that are approved
in the transmission planning process at the CAISO
versus those that are not those.
(cuts out)
-: Begin in FERC proceedings,
at least to me the RE segment.
So there is for folks, information,
there is a hearing April 16th, if I'm correct,
and we will be there.
So stay tuned.
-: Very good, thank you.
So I see Commissioner McAllister's hand is up,
please go ahead with your question.
-: Yes, great, thank you.
Thanks everybody for your presentation
and to Commissioner Shiroma and staff at the PUC
for putting this together.
This is so far been a great day,
and looking forward to seeing it through here.
So I guess my question is sort of on the other end
of the spectrum, we've talked about the transmission side
and the planning there,
and I guess I want to talk about
really our built environment.
It's sort of come up,
but I wanted to dig in a little bit.
How can it be part of the solution?
Load flexibility, for example,
as a way to avoid much of the large capital investment
and putting that into the rate base,
but providing services that does mitigate peak
and does manage the grid in a way that optimizes
the resources that we've already invested,
the physical resources that we already have.
So I want to get folks' opinions about the potential
to use load flexibility in a way
that does help manage costs, enhance reliability,
give us a little push along
the decarbonization pathway as well.
It seems to check boxes, but also has some complications
because we're talking about customer level resources.
And I'm not just talking about solar
and behind the meter storage,
but lots of different as we electrify transportation,
put in more heating and uses that are electric,
the opportunity to manage those.
So one, kind of want to get your handicap on that approach.
And then two, just maybe talk about
how the state could encourage,
and we've all obviously doing some stuff at the CEC,
I don't have to go into, but how the state
has sort of enabled that.
There's a really good conversation going on
across the three agencies to try to enable that,
and would love to have the panelists view of
paint that vision of how that could work
in terms of our buildings actually participating
in real time to enhance the operation of the grid
for reliability and cost mitigation.
-: I'm happy to start off with just a comment on this.
And so Commissioner (mumbles) very much appreciate
your recommendation and your point there.
And we saw real contributions in terms of
demand and response last August,
when we are having some supply constraints.
And so do agree that if we can have customers
a part of that solution,
that can be cheaper than the alternative.
I'll say very well we have,
we're still in the infancy of building electrification.
And so there really is a need to have customers
start adopting these technologies,
feeling comfortable with having an all electric home,
and there's opportunities both in terms of
improving the building codes to make sure that
homes are built that way with smart technology,
smart panels.
And there's also a need for significant funding.
So this is a particular space that
one of the examples of where it'd be great to have
some complimentary funding at the state level
to support the investment that the PUC
has already approved in this area.
-: Thanks, I see that Jennifer Dowdell's hand is up.
Did you have a response to that question as well,
or is it just?
-: No, I sure did.
And it's just my two cents.
I mean, and I think this is where (mumbles)
has been a lot of places.
When we think about funding for various solutions
to improve the operations of the grid,
we need to make sure that we get the pricing right.
And if we haven't got,
if there needs to be some kind of incentive,
ultimately everybody has to pay their fair share.
So subsidies really need to be fully considered
and vetted and understood.
And if there're on ramps on those kinds of things,
there really need to be off ramps too.
So that's just my two cents broadly
on funding for various load response, flexibility programs.
-: Yeah, thank you.
I see Rick's hand is up.
Do you have a response to that question?
-: Sorry, thanks.
So I'll just quickly, I wanted to, I guess point to
rate design as an important platform moving forward
for supporting DER deployment generally,
and harmonizing DERs and incentivizing the right kind of
customer behavior that we want to see to meet grid needs.
And I think that's going to be an increasingly important
area that the Commission should be focused on.
And you know, that we see is it needs to be,
we need to start looking at the (mumbles) not in silos,
but kind of across the platform
that supported by rates,
that send the right signals to customers.
I think the other comment I wanted to make was that
we do need to acknowledge today that not all customers
can access all DERs and there may need to be
some funding made available for customers,
where the cost is just too high to otherwise participate.
-: Thank you.
I know Severin's been patiently waiting.
Let's jump to his question.
-: Thanks.
So I was surprised both in the white paper
and the discussion of cost savings
that there wasn't a discussion of the authorized rate
of return on capital outside of the FERC discussion.
Most of that capital that the utilities are earning
rates of return on it, I believe,
is not FERC jurisdictional.
If you look back over the last 40 years the treasury bill,
and pretty much all the other interest rates have come down,
and the authorized rate of return hasn't come down
nearly as much.
And I'm wondering if somebody,
and I know there are lots of potential explanations
with risk and so forth,
but I wonder if somebody has done a study of this,
that really tries to pin this down
because the gap has really widened
over the last couple of decades.
And the authorized rate of return seems to not have
gone down as the cost of capital has.
-: Great, and Severin, I think you want us to focus on
rate of return but at the CPUC,
not the FERC jurisdictional rate of return, right?
-: Yeah, I mean, I think this also applies to FERC,
but there's nobody from FERC here to answer the question.
Though, if somebody has insight on that too,
I'd be interested.
-: Okay, so for this question,
I wanted to maybe turn to Carla.
-: Sure.
Hello professor.
Nice to be back in class.
-: Hello Carla.
-: So first of all, to your point about having them (mumbles)
yes, it's a study as a part of the
cost of capital proceeding and the utilities,
electric utilities went in for our last pop of capitol
proceeding in 2019.
Recent analysis that we've done shows that
our cost of equity we think has changed very little,
since Edison's last costs of capital case.
And I think what's been interesting,
there's been significant volatility in the equity markets,
as you know, with certain industries
fairing better than others.
Electric utilities have collectively seen
their respective equity risks increase,
relative to the rest of the market.
And even for EIS, our holding company,
there's 35 investment grade utilities.
We have the second lowest price to earnings ratio,
implying that investors are requiring a higher ROE.
So this is something I think that the Commission looks at
and we look at as well.
We think at this point, the ROE is accurate.
-: Thanks.
I wanted to turn to Scott.
-: I'm actually going to ask Bruce Folkman,
who's our chief financial officer's joining me today.
And I was wondering if
you could adjust this question, please?
-: Can you hear me okay?
-: Yes.
-: Thank you, thank you.
I appreciate the time.
I certainly echo Carla's comments.
With regard to cost of capital,
that obviously has two significant components,
the cost of debt and the cost of equity.
And I think most of this discussion
is usually about the cost of equity.
Debt rates have been relatively low and moderate
for a number of years since the financial crisis.
I think my main feedback here would be is
as Carla noted, we litigated the last cost of capital
in the state in 2019.
Even in the FERC jurisdiction, where we've been
touching on issues, we had a vigorous settlement discussion,
certainly including the CPUC,
and we settled our ROE, as well as the broader rate case
last year to determine those amounts,
which are ultimately approved by the FERC this year.
So I think there's a balance of interest
that's effective in this space.
And my final point would be, it's as we all know,
we rely, we at the utilities, to support the programs
in the state of California,
do rely on capital from our capital market.
We think that's an efficient design candidly,
and it's important to set those rates consistent
with market expectations and demands.
And so I think balancing all of these constituencies'
interests have been relatively recently,
in the last 18 months updated,
and I think reasonably reflect the realities that we're in.
-: Great, thank you.
So I just wanted to check on the hands that are up.
I see that Commissioner McAllister's hand,
took it down.
Severin Borenstein, do you have another question?
Or are you taking yours down?
I think he's taken it down.
I know that Ed Randolph has a question.
Ed, do you want to come on?
We'll give him a second, there he is.
-: Yeah, thank you Leuwam.
I would like to connect a few dots
and follow up on some questions that may not have been
fully answered, and heads up, this is for
the three large utility representatives here.
In this conversation about what the appropriate
cost of equity is or cost of debt or rate of return,
it ties back to the bigger question in the white paper.
It was noted that large drivers of this, earlier today,
I talked about it from a standpoint of
very particular investments,
but large drivers of the rate increases so far as
we look forward are increases in overall rate base.
And so for folks that aren't nuanced in
the terminology of rate making,
that's basically saying that utilities are making
more and more capital investments in infrastructure,
and that is really where they make their profits.
They don't make much profit, if any profit at all,
on operation and maintenance,
but do make a large profit or make all of their profit
off of those investments in actual capital.
And again, for other folks that don't follow this,
the great example of the modern era is
if the utility invest in cutting down a tree
to prevent a wildfire, there's no profit in that.
But if they put a new steel pole
or underground the infrastructure,
then there's profit in that.
And we do see a increasing trend
in that rate base out there.
And so I think a question earlier coming from
Commissioner Rechtschaffen was about that,
and the utilities in your response talked about, yes,
we need to continue to make these investments.
I'd like to turn it around to further go,
what are the alternatives?
And would you support some of the alternatives
that are out there?
For example, in SB 1054, there was a provision in there
that specifically said a certain amount of money
spent on wildfire mitigation would not go in the rate base,
and could be financed through a securitization.
And so we've gone through that process
on that particular investment and seen that
it does actually provide rate payer savings
relative to alternative forms of financing.
So I want to throw it back to the utilities on
should we continue to look for those alternative forms
of financing that can save rate payer's money?
Or are there other ideas you have out there
on how to finance these projects
that need to be made,
that would help reduce the long-term cost to rate payers?
-: I'll start off and just say
I think it's important to remember
what's driving the investments in the first place
and what informs them.
And the big investments that we're seeing coming up
are to harden our grid, is to really invest
in infrastructure is what you need
in order to really address wildfire risk.
And this is informed by our REM filings.
This is informed by, before we even go in with a GRC,
we're coming in, we're talking about our top safety risks,
our top reliability risks.
The Commission lets those stakeholders look at that.
And then our GRC is submitted to address those top risks.
And so we can't forget for what's driving
those initial investments in the first place.
Then in terms of looking at what are different ways
to finance, and again, these are big investments,
these are big dollar investments.
Edison is using securitization where it makes sense.
We've been able to reduce rates in 2021 by 3%,
by utilizing the securitization authority within 1054,
as well as AB 913.
But securitization isn't the solution for everything.
And there is a point in time when you actually don't get
the benefits from it because rating agencies
start to see less benefits if too much of your rate
is dedicated through a securitization.
So I think it's one of the tools we need to have,
but it's not the only tool.
In our rate cases, we have this process
where we are assessing some of those trade-offs.
And I think that continues to be the right forum
to look at whether these investments make sense.
And I think I'll just end by saying longer term,
this is a risk that we're looking to reduce.
So the intention is not to have wildfire spend
continue to multiply years out.
Our focus is on how do we get our grid ready
for this climate constrained future?
And then I think we need to think about it
in that context as well.
-: Thank you.
I saw Robert's hand go up in response to this.
Do you have an answer that you'd like to contribute?
-: Yeah, Carla said much of what I was going to say,
but I will just add.
We are making these investments based upon
a risk model that dictates whether we're going to do
system hardening versus undergrounding
plus enhanced veg management.
And so I just, I really want to emphasize that
the investments that we're making,
first and foremost are tied to robust risk modeling
that tells us and informs what we're going to do,
the spending that we're going to do,
and where we're going to do it.
We've also made use of securitization
and it's an effective tool, I think as Carla pointed out,
at a certain point though, too much of it will begin to harm
the balance sheet to the point where the markets
will not react appropriately to it.
To the extent that there are other opportunities to explore,
more creative financing options,
be happy to participate in that discussion as well.
-: Thank you.
Do we have a response from SDG&E?
I see Bruce, please go ahead.
-: Yeah, thank you, Leuwam.
One thing I think we should keep in mind
that's really valuable to the citizens of California
is the need to manage fire risk.
So I think the discussions we've had about the success
in mitigating fire risk to the maximum extent possible
is a benefit for everyone in California,
and the world more broadly.
In terms of a hyper-focus on rate case,
or a rate base rather forgive me,
one of the biggest opportunities I think to leverage this
better grid is that what we've been talking about
in part today is the potential to reduce
or perhaps even one day eliminate the purchase of gasoline
by all the households of California,
and replace that with electricity.
That inevitably will have some impact on rate base.
The goal would be to leverage what we've already built
to make it as cost effective as possible.
I think there's a downward impact on rates, potentially,
if we manage that well.
But I think this the biggest new source of revenue
that we should all be excited about
as an electric business is charging vehicles.
-: Thank you.
(crosstalk)
-: One quick nerdy comment about rate base.
Which is, one of the reasons we've also seen
rate base increase is because of a delay in actually having
depreciation expense go to customers.
And so we do want to make sure that current customers
pay for their share of assets.
And over time we've seen less depreciation expense
being approved for customer recovery by the Commission.
And although that might have some short-term benefits,
it also keeps the rate base higher.
And so that's an area when it began to catch up,
it would be helpful to be able to actually start
to have depreciation expense charged to customers
in a timely manner.
-: Thank you for that.
-: Thank you.
-: Of course, Commissioner Shiroma,
I think you had a question.
-: Yeah, thank you.
And this question is for Ms. Jones, for Betony,
really, I was intrigued by your presentation on
the wildfire mitigation investments,
in terms of the job creation,
the raising of household income,
the increased economic activity,
because most of our conversation today is about
the stresses and pressures of rates,
and these projects small and large
are rate design and so forth.
And so I was wondering if you have done a similar analysis,
when we look at renewable generation
or transportation electrification, have you expanded
this analysis to other parts of our energy landscape?
-: Yeah, I wrote a couple papers,
one looking at the San Joaquin Valley
and the other looking at the Inland Empire.
And it, among other things,
evaluated the net impacts of the RPS policies,
the renewable portfolio standards.
So there as well because of the structure of that,
where most of the complying power generation
has been built in the state of California,
and most of it with union labor,
we were able to quantify the job benefits,
the increase in lifetime earnings for those workers,
the contributions to our apprenticeship programs,
the expansion of apprenticeship programs,
and some of California's highest poverty counties,
the contributions to health insurance for families,
the contributions to retirement programs
through that construction
because most of it has been built union.
So the benefits of that, I mean, it's really extraordinary.
It's something really unique to California to reap
all of those, not only job benefits,
but quality job benefits
from the development of renewable energy.
I think similarly, I mean, we don't have
a lot of EV infrastructure yet,
but with BB 841 requiring the EBI TP certification,
that helps ensure that those are going to be
electrician jobs, trained people,
and expand opportunities for electricians,
which provides a good family sustaining
career track opportunity.
So wherever we can expand broad occupational training,
expand work opportunities for skilled workers in this state,
and ensure that those have labor standards attached to them
to make sure they're quality jobs,
we are really chipping away at the poverty crisis
and increasing household earnings.
So when we think about the broader economic impacts,
like what's good for the state as a whole
and think about the types of jobs that are created,
it's often when you're consolidating spending
to infrastructure investments,
you get a lot of good direct jobs for in-state workers.
-: Yeah, thank you.
I think it really points to the notion
that any Commissioners, regulators, what have you,
that we look at the larger holistic perspective as well,
that there is a lot that goes into
what happens to households.
And it does go back to my first question
of our own CPUC staff in terms of factoring in
what is a household's initial investment
into whether it's electric vehicles,
heat pumps and what have you,
how does that affect household income?
And along with what does that mean
for their household energy bills?
And if you have these other papers available,
if you could, maybe we already have the links to those,
but I'd be interested in seeing those.
And I'm really pleased that you have focused on
the Inland Empire and the San Joaquin Valley as well.
Thank you.
-: Earlier, I saw Commissioner Gunda's hand up,
and I don't see it anymore,
but I just wanted to check with him.
And also, Rick Umoff, I see your hand up.
Did you want to also provide a response?
Commissioner Gunda, is that you?
-: Yeah, I'm just say, I'm good, thank you so much.
-: Okay, of course.
Rick, did you also want to provide a response
to Commissioner Shiroma's question?
I see your hand up.
-: Thank you.
One thing I did wanna touch on
and something we haven't talked about here,
is on the supply side, on the utility scale side
of (mumbles) energy development.
And the extension of the EITC,
which recently happened the next couple of years,
provide a new kind of a renewed opportunity
for the state to procure solar storage is going to need
to meet its climate and reliability targets,
very cost effective right now,
at a 30% discount essentially.
And that procurement is sort of ramping up
sort of a new round of procurement,
has the effect of stimulating local economies,
bringing investment into local economies, creating jobs.
And we've seen that in previous rounds of build outs
of the state's renewable fleet.
And we really sort of have that new opportunity now.
And we've looked at some of the planning scenarios,
the 30 MMT versus the 46, for example.
And when you factor in that ITC extension,
it is cost effective for the state to move now
on getting those resources online.
And that's the benefit of sort of simultaneously happening
at a time when the state could use
that renewed investment in our economy.
-: Thank you.
And I know we're trying to end at 2:30,
but I think we have time for one more question.
If we don't have one from the dais, I have one,
but I wanted to give the dais members an opportunity.
Nope, okay.
So I'm going to direct my question to Robert Kenney.
In your presentation, you were telling us about
the opportunity with SBA communication
that PG&E was able to find.
Can you tell us a little bit more about your strategy
for finding more opportunities like that,
and how you're looking to leverage those benefits for,
I guess it's both your shareholders and rate payers,
but if you could tell us a little bit more
about that strategy.
-: Yeah, that specific strategy,
we have a lot of creative thinkers in the company,
candidly that are always looking for ways
to develop new revenue streams, non-tariffed products,
and or ways to make more efficient use of our real estate.
And so it's a broad strategy, candidly,
of making sure that we're getting maximum value
for both customers and shareholders.
That specific transaction was long in the making
and was an opportunity that we identified
that would bring value to both our shareholders
and to our customers while making sure
that we weren't relinquishing any control over the asset
to continue to ensure safety and reliability.
And that it was also going to maintain its open access
for purposes of wireless attachment.
And so there were a whole host of things that we looked at
in that specific transaction.
But it's something that we committed to,
it's something that we continue to be committed to.
It was just finding creative ways to bring value
more holistically to all of our stakeholders,
customers, and shareholders alike.
-: Great, thank you.
So with that, I just wanted to thank all of our panelists
this afternoon for your great presentations
and also your great responses to the many questions
from the dais members.
And I'm going to turn it over to Mary Claire
to lead us into our next item.
Thank you.
-: Great, thank you.
Thank you, Leuwam, and thank you to all the panelists.
It was a really interesting discussion.
So we're now going to take a 15 minute break.
So let's be meet back here at 2:45.
And again, please just stay logged in.
You can turn off your video and mute your phone,
but please do stay logged in.
Great, see you at 2:45.
Test has been restarted.
All right, hello.
Welcome back to the CPUC En Banc on rates and costs.
Can we afford the future?
I hope everyone had a chance to re-caffeinate
'cause we are approaching the end of the day,
we're to our last panel.
So without further ado, I will turn it over
to our panel moderator, Ed Randolph,
who is the CPUC deputy executive director
of climate and energy policy.
Over to you, Ed.
-: All right, thank you, Mary Claire.
And good afternoon everyone.
Hopefully this panel is so exciting
that you don't need caffeine.
If you are a true energy and rates nerd
with this group of people,
you definitely don't need caffeine here.
The final panel of the day,
I hope it's going to be a good bookend
to the conversation today.
I've titled, do we need a paradigm shift
on how California funds climate initiatives?
It's from the panelists this afternoon,
we'll hear some more about other ways to think about
how we fund programs, both in terms of
maybe other sources of funding,
but also other ways to look at the funding.
Our panelists this afternoon are Severin Borenstein,
Mark LeBel, Michael Wara,
Anthony Kinslow, and Mark Toney.
I will give each one of them eight minutes
to make their presentation.
And we will then once everybody's done,
do questions out there.
Our first panelist, Severin Borenstein,
I feel like doesn't need much introduction to this crowd.
He's quite known in Northern California, in California,
for his expertise on energy rates, energy rates design.
He's a professor of business administration
and public policy at the Haas School of Business,
and faculty director of the Energy Institute at Haas.
My first experience with him was 15, 20 years ago,
he was teaching a three day class on energy and economics,
which is, I highly recommend for anybody
who wants a basic level of economics
and wants to understand what a hockey stick price graph is.
But with that, I will hand it over to Severin.
-: Thanks Ed.
Can I have the first slide?
So this is joint work with Meredith Fowlie and Jim Sallee,
my colleagues, and is supported by Next 10,
and this is a study that we put out yesterday.
And if you want to get to the study,
you just go to the Next10.org, and they've got it there.
So the question we're trying to address is two issues.
One is, the efficiency of the rates that we're charging now,
and the other is the equity.
And it turns out that the problems we're facing
in California are failures that on in both these areas
in the same direction.
First of all, we'd like prices,
if we want people to start choosing electrification,
to reflect the cost of the additional electricity
they're going to need,
and they make those choices for electrification.
And in fact, prices in California are way above
the full cost.
That's just the social marginal cost,
meaning it includes all the pollution.
And the second is we have to cover those costs,
and we'd like to cover those costs, the additional costs,
we're going to need to cover all the costs of utility.
And we'd like to do that in an equitable way.
Next slide please.
So that's not the next slide.
What you will see in just a moment
is a map of the United States, there it is,
from a study Jim Bushnell and I did a couple of years ago,
comparing price to social marginal costs.
And what you see here is California actually has rates
way, way above the additional costs
of consuming electricity.
It's not true everywhere in the country.
In fact, much of the country is pretty close.
And other parts of the country like the upper Midwest,
actually, the prices are way too low,
and that's largely because they don't reflect
the very high levels of pollution
from coal fired power plants, both CO2 and SO2.
But California does have prices
well above social marginal costs.
And so we set out to figure out why that is.
Next slide, please.
So this is my waterfall graph, as we call it,
trying to break out what's going on with rates.
This one's for PG&E.
PG&E's sort of the middle case
between Edison, which has lower rates,
and San Diego, which has higher rates.
And what this shows is that the marginal cost
is actually a pretty small component of the total rates.
In fact, for PG&E, it's about a third,
about two thirds of the rates are additional costs
that are covering costs that have nothing to do with
the additional costs you impose
when you consume extra electricity.
Much of it is sunk, these fixed costs
of high-cost contract sign, some of it's from transmission,
that pink box in the middle is very high distribution costs,
some of which are associated with wildfire,
but there's gonna be a lot more of that going forward.
We did a calculation of how much is this rate pushed up
by some people with having rooftop solar,
and therefore not buying that power from the grid,
and that's the brown box on the right.
The CARE program, and the CARE program it's worth noting,
this isn't most of the costs, large parts of the CARE costs
are actually paid by commercial industrial customers.
Next slide please.
So this is showing what's happened over time again with PG&E
which is again, the middle case.
If you go back in time,
you'll see that rates were much closer
to social marginal costs.
In fact, CARE was pretty reflective of what it really costs
when you consume a little more electricity.
But as we got as costs have gone up,
marginal cost hasn't gone up,
both because we are getting cheaper and cheaper renewables,
and because California has an incredibly clean grid,
so there isn't much pollution associated with
the higher cost or with the higher consumption.
One thing worth noting though is when we talk about
higher rates and say, but CARE is helping low-income,
CARE is just the 35% discount off of the standard rate.
So when we pull up the standard rate,
we're also pulling up the CARE rates.
Next slide, please.
So California IOUs have to cover the residential rate,
the residential revenue requirement.
And if we just were to charge a volumetric price
that equals the marginal costs, how would we cover the rest?
Well, what we do now is we just raise
the volumetric rates.
And one way to think about that,
is that that is a tax on electricity above
the marginal cost to cover the additional revenue needed.
There are lots of ways you could cover,
this is a covering it through
raising the rate of electricity.
And when we do that, we're essentially charging
wealthier households about the same as poor households,
because at this point, poor households only consume
slightly less electricity than wealthier households.
So that's in part because the wealthier
has been putting more solar panels on.
This is a really regressive tax.
Next slide please.
In fact, what we did is we took
the consumer expenditure survey for California,
and we looked at well, how do expenditures
on electricity vary by income bracket?
And these are the five income Quintiles,
from lowest to highest, versus other things.
And what we found is electricity expenditures
are much flatter across the income brackets
than all of these other categories, including gasoline.
So essentially we are taking the most regressive thing
that we can, in order to recover these costs.
Now, some people say that well, we got to recover them.
And this is associated with electricity.
Next slide please.
And that's true to some extent,
but there's a lot of that's going on here that's really not
that associated with electricity consumption.
Energy efficiency programs are fine programs,
but there's no reason we have to pay for them
through electricity, volumetric charges.
Low-income programs, we have low-income programs
on food and medicine and lots of things in the state,
and again, there's no reason, and those are not financed by
taxing the other people who consume food
and healthcare and so forth.
Here, we are choosing to do it.
So one way we could reduce the problem
is to lower fewer costs into electricity bills.
These very good public policies could be paid for
through the state budget.
Now, politically that might not be very popular
in Sacramento, but practically it would be essentially
treating electricity the way we treat many other things
when we have public policies to change technologies,
help low-income people, and so forth.
Next slide, please.
An alternative that I will close with
is that we've proposed in the study,
and obviously I'm rushing through all of this,
is income-based fixed charges.
We would still be paying for it through our bills.
We would lower the price, the volumetric price
of electricity to eight to 10 cents,
which is our calculation of the social marginal costs.
And we do the rest through a fixed charge,
and the fixed charge would be probably zero
for the poorest people and going up to higher levels
for wealthier households.
Next slide, please.
We sketch out a couple of examples here
of how that might be structured
if you made it as progressive as the sales tax here,
which is not thought to be a terrible.
Ed: Severin, two minutes.
Severin: Or as progressive as the income tax.
And what you see is these would be substantial fixed costs,
fixed charges, but they would be associated with
massively lower marginal costs.
And this would be a much less regressive way
to raise revenue than what we're doing now,
which is essentially a tax on every kilowatt hour
that hits the low-income customers much more
as a proportion of their income,
than higher income customers.
Next slide please.
So I will just wrap it up saying that
the current residential rate schedules create
very perverse incentives by charging people too much,
relative to the real costs they're imposing
and discouraging electrification and decarbonization.
Most of the revenue collected through those rates
is not really a marginal cost.
It doesn't pay for costs that change
when you consume more electricity.
And the differential is due to all sorts of costs
that are essentially fixed cost relative to
the consumption of it, of people making those choices,
everything from infrastructure, wildfires,
subsidized rooftop solar, subsidizing low income,
energy efficiency, et cetera.
The way we're collecting this
in a time of increasing inequality in this country
is the most regressive tax you could practically imagine.
And so we're proposing that we consider alternatives,
including paying for many of these programs
on the state budget and income-based fixed charges.
Thanks a lot.
-: Perfect Severin, thank you.
Next up we have Mark LeBel.
I have not worked with Mark much,
but I have worked with and PUC works with his organization,
Regulatory Assistance Project, quite a bit.
They provide support to organizations across the country
on regulatory and policy design.
Mark specifically is focused on rate design
and compensation for distributed energy resources,
as well as broader issues of regulatory reform
and beneficial electrification.
Mark, why don't you get started, please?
-: Great, thank you very much, Ed.
Glad to be on this great panel.
Thank you for the invitation.
The extremely important issue
wrestling with some tough problems,
a lot of great ideas earlier today, and a lot of these ideas
that should be able to work together.
So great, great to see some good thinking on these topics.
So I thought I'd zoom out a little bit
and start at a higher level,
on why and how do we regulate utilities?
So that's our next slide.
And I don't need to read all the text here,
but the point is that utility regulation is hard
and requires balancing of lots of different goals
in the real world.
Efficient pricing is an important goal,
it is one of many different goals.
Efficient competition and control of monopoly pricing,
environmental and public health requirements,
societal equity has always been part of utility regulation.
Traditionally, that's been universal access
and affordability.
Now we have some new societal equity goals
and that's a great thing, and an increasing center of focus.
So there are three traditional steps
to the rate making process,
I believe that separated the two phases in California.
There's the revenue requirement,
there's allocation of costs across customer classes,
and then there's rate designs.
So there's all of these different moving pieces,
lots of different goals and constraints
that you have to meet.
Next slide.
So if you're primarily worried about socially efficient
price signals, this is sort of a oversimplified algorithm,
four step process.
So you can start with short run marginal costs
where you can, and that could be real-time pricing
for large industrial customers.
For small customers, you probably can't do
real-time pricing yet.
Or you could do critical peak pricing or peak time rebates
for small customers.
With a short run marginal cost, there's a very small
customer charge for billing every month.
Then you layer in long run marginal costs.
That should primarily be done in multi period
time of use rates.
Demand charges can be a proxy for certain costs,
that should be very small.
And you can have a slightly bigger customer charge
to connect a customer to the grid.
Then we get the unpriced externalities.
And then last, residual costs and Professor Borenstein
talked about this, though maybe he didn't use
this exact term, that the hard part here is
where does the lump of cost that's left over,
where does it go?
And the hard part is all the answers are wrong.
No matter what you do, you're distorting
the correct incentives that you might wanna have
in a perfect system.
But because you need to recover a certain amount of money,
then you have to do it somewhere.
So while all the answers are wrong,
you can have better and worst answers,
and there's different opinions on this.
So next slide please.
So if you just wanted to create a marginal cost rate,
the New York Value of Distributed Energy Resources
export credit structure, it's a pretty good example
of a combination of short run marginal costs,
long run marginal costs, and externality-based pricing.
The first three elements are all time bearing
kilowatt hour pricing.
The last element of environmental value
is constant per kilowatt hour,
but it's only available for qualifying clean technologies.
All four of these elements are only applied
to export credit value,
and it's primarily designed for community solar
and projects onsite at larger CNI customers.
For those CNI customers, the more traditional
import rates apply on their bills as well.
But in principle, this could be implied as an import rate.
But it would not be designed to recover all the costs
that need to be recovered,
unless you really had to jack up the environmental value.
And even then the numbers might not work out.
You still need to figure out
how to recover those residual costs.
Next slide please.
So it's often helpful to look at competitive market examples
when you're thinking about principles
and utility regulations.
And while these aren't dispositive, they are informative.
Different market definitions and structures
lead to many good thing priced per unit.
And the units can change from industry to industry.
All industries have fixed costs and big investments,
but that doesn't automatically lead to
high fixed monthly charges.
Most competitive business to do not charge you
for entering their store without buying anything.
Some do, but some do not.
To take the gasoline example,
refineries are massive fixed capital investment,
but everyone still pays for gasoline by the gallon.
Furthermore, a lot of these industries
basically have delivery grid,
delivery networks associated with them.
With oil and gasoline, it's literally pipelines,
but there's trucks that serve similar purposes.
Again, this is just informative, it's not dispositive.
So next slide please.
So I'm going to spend a little more time on this slide,
it's a little complicated.
And this is an illustrative example.
The numbers might work out very differently
in a real rate case, but this is our best guesstimate
looking at different things
that have been coming out recently in California.
The label here, the advanced residential rate design.
And the general idea is to identify a large subset
of residential customers that can be moved
onto more sophisticated rates fairly quickly.
That could be larger users, people with EVs,
people adopting distributed generation.
It can be rolled out geographically if you really want.
If you subdivide the residential rate class,
it does give you another tool to spread costs
in the cost allocation process.
One other way to do it is to just have
low-income customers on the simpler rate,
although I'm not quite sure if that's allowed
under the CARE statutes.
But in any case, the other customers
that are not on the advanced rate,
can stay on a less complex rate,
and you can shield them from certain costs if you want.
You could allow low-income customers to opt onto this
advanced rates and offer them a discount at the same time.
So again, I'll walk through the different elements
here pretty quickly.
This would be some.
Ed: Two minutes.
Mark: From current rate results.
There are some metric charges and credits at the bottom
or combination of short run cost and marginal cost pricing.
For residential customers,
it's probably too soon to do real-time pricing,
but you can have a critical peak element.
At the top, there are three elements
that are cost recovery only.
$10 per month customer charge,
a $1 per month per kilowatt demand charge.
But the really new innovation here is
a bi-directional kilowatt hour charge
on both imports and exports,
that would in fact, recover significantly more costs
than currently from distributed generation customers.
It has a clear link to the size of the customer
and user to the system, and distribution network
is no longer being built just for deliveries and sales,
being built for flows.
So I think this makes some intuitive sense.
Next slide please.
So another rule for how to allocate residual cost
is called Ramsey pricing,
where you place it on the least elastic pricing elements.
In many cases, people argue that that means
just put it on the customer charge.
There are number of problems with that,
often that's regressive.
Elasticity estimates are not always obvious and can change.
One issue with a tier six charge
is that you give the highest income people,
the biggest incentive, disconnect from the grid.
The Ramsey model also has some other issues with it.
It puts a lot more pressure on the regulatory process
to monitor utility investments,
and the distributional impacts can be quite challenging.
So thanks again.
And that is my presentation.
-: All right, perfect Mark.
Next up, we have Michael Wara.
A lot of us know Michael,
and I'm a little curious to know if
he loves or is somewhat begrudgingly just accepts
his new, what he's known for most now,
which is becoming a expert on utility wildfire measures
and utility wildfire costs.
But he's actually the director of climate and energy
policy programs and a senior research scholar
at Stanford Woods Institute for the Environment.
His legal and policy scholarship actually goes far beyond
wildfires, and focuses on carbon pricing, energy innovation,
and regulated utilities.
And he's also an expert on international environmental law,
with a particular focus on ozone and climate treaty regimes.
I will also add he's quite an informative person
to follow on Twitter.
I learned probably more about energy happenings
across the country from his retweets than anywhere else.
So Michael, the floor is yours.
-: Thanks very much, Ed.
Good to know I'm big on Twitter.
I would definitely be put myself in the latter category.
I wish that I didn't have to know as much
about wildfire as I do, and probably a lot of us in the room
or whatever we call this environment, feel the same way.
Nevertheless, we are here.
I've been asked to talk about wildfire,
and I think before I start,
I just want to say that I'm speaking on my personal behalf,
and the opinions I express are mine,
and not and the views don't reflect
the California Catastrophe Response Council,
in which I serve, the Wildfire Fund,
or the Earthquake Authority that manages the Wildfire Fund.
So with that out of the way,
I'm gonna talk about wildfire, before I do,
I just wanna provide three kind of broad comments on today,
and on the issues at play in the both in the
wonderful report that staff put together for this En Banc,
and also in the conversation.
One is just to note at the outset and to reinforce something
that's been said by a number of parties,
most recently Severin Borenstein,
that breaks are an extremely regressive way
to pay for anything.
And so we need to be extremely careful about
what we decide to pay for in rates,
and what pathways we walk down in terms of investments
and strategy, because some pathways are going to be
more rate dependent,
and some are going to be less rate dependent.
And I'm going to talk more about that,
but I think it's just a really important part to start with.
Secondly, we're talking about affordability here,
but I think everybody who lives in California
and pays a mortgage, knows that the real affordability
challenge in California is housing.
And if we can solve the housing crisis as a society,
then energy becomes much more affordable.
There is much more room in the household budget
of normal Californians to afford the kinds of investments
that we need to make in order to be safe
and reliable with our energy,
and also want to make in order to achieve the kind of
clean energy outcomes that we have set ourselves.
Obviously that's beyond the scope of today,
but I think it's important to keep in mind,
and important to keep framing as a key component
of affordability when we talk about
the affordability of energy.
There's a total budget, it includes other things.
Finally, I just say that well,
I really enjoyed the staff report.
I generally enjoy everything that the PUC puts out
about rates, I look forward to the AB 67 report every year.
I would emphasize that the report is kind of,
if everything goes as planned assessment of the situation,
and it doesn't really take account of risk,
and especially downside risk.
And I think anyone who has dealt with the history
of the California energy system knows,
starting with the energy crisis,
moving onto San Bruno and then the Camp and Woolsey fires,
that everything doesn't always go according to plan.
And so one way to frame this report is not so much that
we need to worry about affordability and energy, we do.
But another way to think about it is that
we essentially have no margin for error.
Everything has to go right for this scenario to play out.
And there are lots of things that could go wrong.
And so we should be really focused on creating some space
and some room for things not to go as planned.
So moving to wildfire, I would just note that first of all,
stepping back to the science basis,
there's been a ton of work on fire science since 2017.
I mean, of course there was before, long before,
but since 2017 in particular, minds have been focused
on understanding risks of wildfire in the western US,
and in California in particular.
And what we can say is that the climate modeling
and the meteorology strongly suggest
the problem is gonna get worse, not better.
If the climate change is an important driver
and it's a non-linear driver, so that as we warm California,
wildfire is likely to get worse faster
than the warming is occurring.
And so this is a problem that is not going to go away.
It's not going to go away for our utilities,
and it's not going to go away for our state.
And I'm going to get to why that's important in a second.
I think the so far to date, the Wildfire Safety Division
has emphasized the need, and I think the utilities
have been making best efforts here as well,
to move toward a risk-based spending approach.
And this is consistent with RAMP and S Map
and all of the work the Commission has done,
even prior to the wildfire crisis to move in that direction
after San Bruno.
And that emphasizes quantification of risk
and cost effectiveness.
And that's essential.
I mean, we need to make sure that our risk spend
is appropriate and we're getting value for every dollar
of rate payer money that goes into this issue.
But I would argue, and this is really based on experience
serving on the Wildfire Commission,
and now on the Wildfire Fund,
that the real problem that we have in California
is that we're not evaluating the problem with wildfire risk
in a holistic enough fashion,
that expands really beyond the silo of the utility sector.
We need to be evaluating costs and benefits
of other activities, like fuels reduction and home hardening
in conjunction with decisions regarding utility investments.
We created a $21 billion Wildfire Fund.
We spend billions of rate payer dollars on activities
in the wildfire mitigation plans every year.
We spent three and a half billion this year on Cal Fire.
But we spend just hundreds of millions on fuels reduction.
And if the Governor's January budget is approved,
we'll be in the tens of millions kind of scale,
25 million to be precise, on home hardening
to reduce the chance of home ignition.
And I would argue that the biggest kind of benefits
from cost effectiveness probably would come
from an overarching evaluation of state policy,
which the safety division is
maybe the wildfire safety division,
once it's part of resources,
could begin to walk down the road on.
But an overarching evaluation of what is a cost effective
approach to reducing societal risk from wildfire.
We saw this summer that utilities are not the only reason
that catastrophic wildfires can occur,
and we need to be thinking more holistically,
and not just thinking about how to avoid
every single ignition during dangerous times,
which is what the utility spend is really oriented at.
But how to reduce the consequences when inevitable ignitions
do occur, even during contexts where the utilities
have made best efforts, including turning the power off
for hundreds of thousands of Californians.
Another aspect of the wildfire spend that I would suggest
that the Commission think about as they consider rates
and affordability, is relates to cost shift.
Today's discussion to focus extensively on cost shifts
related to NEM.
And I think that's an issue to focus on, to consider,
and we need to balance all of the interests,
value of solar, value solar in terms of avoided investments,
in conjunction with the fact that there are costs
that are shifted from rooftop providers.
But a cost shift we haven't really talked about much
that I think is increasingly important
in terms of the future of rates,
is one that was raised by former President Picker,
at least in his discussions before the legislature,
and that's the cost shift from wildfire prone parts
of the distribution system, to non-wildfire prone parts
of the distribution system.
President Picker, suggested I think it was prior
to the PG&E bankruptcy actually,
is sort of an SB 901 timeframe,
that there might be a rationale to consider a separate rate
for tier three customers,
customers located in tier three wildfire areas,
that better reflects the cost to serve them.
Now that rate wouldn't include all of the costs
in a wildfire mitigation plan,
but it might include many of them,
especially investments related to the distribution system,
and not the backbone transmission architecture.
And obviously, geographic segregation of rates
is challenging, as was pointed out earlier,
we already do this when it comes to.
Ed: Michael, I actually got so enwrapped in your thing,
I forgot to give you a two minute warning,
and we're at eight minutes.
So if you can wrap it up, that'd be great.
-: Done.
So I think that's something that's worth considering.
I think we all need to be realistic,
and I applaud this report for being realistic
in suggesting that wildfire costs are unlikely to fall,
and could well increase.
And that there's a lot of downside risk,
and we need to be thinking about that.
We should be considering whether,
and I'll just close by saying,
I think there are opportunities to think about resilience,
in particular, in resilience related to wildfire
and customer sided generation and storage.
Especially also pushing I would push the Commission
to consider really, really asking and trying to get
solid answers about why we cannot use electric vehicles
as backup generation in homes.
I think if we could kill two birds with one stone,
and find resilient solutions that enable PSPS,
which is going to happen anyway,
and achieve our EV deployment goals,
that would be fantastic for the state
and probably save money.
Thank you very much.
I appreciate the opportunity to speak to everyone.
-: Thank you, Michael.
And our next panelist is somebody I didn't meet
before last week, and doing the briefings for us,
but I've heard great things.
And I'm just going to read from his bio directly
'cause it's actually one of the best bios I've ever read.
Anthony Kinslow II's purpose in life is making meaningful
impact toward mitigating global warming.
He spent the last decade working for making
meaningful impact through research,
implementing, and educating on energy efficiency.
Anthony is the CEO of Gemini Energy Solutions,
which provides energy efficiency services
to businesses historically under served.
Anthony holds a BS in civil and environmental engineering
from North Carolina A&T, A&T State University,
and a PhD and CEE, which I don't know what that is,
from Stanford University.
Anthony is committed to improving the quality of life
of those most disadvantaged.
He is actively involved in understanding wage theft
in the construction industry,
was recognized by the city of San Jose.
Moreover, he has introduced the concept of
environmental justice to hundreds of high school students.
Anthony, that is quite the impressive bio,
and the floor is yours.
-: Well, thanks Ed.
I want to start by thanking all those who were possible
for putting this En Banc together,
and to say it is encouraging to see the increased level
of racial diversity on the screen during this En Banc.
As Ed mentioned, my name is Anthony Kinslow II,
and a little bit about me.
On top of what all of that was said,
CEE is civil and environmental engineering.
And that's where I got my PhD from Stanford,
where I focused on developing scalable models
to identify energy saving measures in single family homes.
Following when I founded Gemini Energy Solutions,
it was to address both the lack of diversity
in the energy efficiency space,
and the lack of affordable quality energy audits
to support a small commercial sector.
I serve on the California Energy Efficiency
Coordinating Committee, underserved working group,
which is actually working actually meeting right now
to review the final analysis.
And the goal of that working group is to investigate
what groups of customers are currently underserved
by energy efficiency programs.
And then devise the appropriate strategy forums
to address these problems.
I am wearing many hats,
with one of them being a consultant for Clean Energy Work,
a nonprofit whose mission is to accelerate investments
in cost-effective distributed energy solutions,
to open a clean energy economy to all.
And lastly, I'm also a lecturer at Stanford University,
where I co-teach two courses, racial equity in energy,
and quest for an inclusive clean energy economy.
Now, I believe we are all here to support an equitable
and accelerate transition to a clean energy economy.
I want to pause for a second because I don't see
if my, there's the slide.
So as I was saying, I believe we're all here to implement
an equitable and accelerated transition
to clean energy economy.
And the science tells us the sooner the better.
So while we have a goal of 100% zero carbon electricity
by 2045, getting there by 2040 or 2030 is preferable.
And would directly result in more aligned states.
The question to this panel is whether or not
we need a paradigm shift in how California
is funding our climate change initiatives?
To that, my answer is yes.
But I want to go deeper into what that means and why.
Next slide.
Great, thank you.
To do so, I want to introduce everyone
to the point of intervention in a system,
authored by Donella Meadows,
who was an environmental scientist
and expert in systems thinking.
As you look at the list of 12 options,
the further down the list you go,
the more impactful the change,
but also the harder to accomplish.
I'm going to highlight a few of these in relation to
how we find climate change initiatives,
and to end with number two, the mindset or paradigm.
Next slide.
The first is the length of delays in a system relative.
Excuse me, one slide back, sorry.
All right, thanks.
The first is the length of delays in a system
relative to the rate of system change.
The delay between approving an initiative,
implementing an initiative,
and determining the efficacy of said initiative,
is simply too long to meet our climate goals.
Now next slide.
And then we can take a look at
the residential energy efficiency loan program,
which was a funding was approved in 2012.
The first loan was not given out until 2016.
And the evaluation report of the REEL program
was not complete until 2020.
So eight years and only a couple of hundred households
reached, which is inherently problematic
in terms of our California climate goals.
Now the technology to track real time metrics for success,
which I should also add should also include
human based quantitative metrics,
such as reducing hospitalizations, racial equity,
excitement for the upgrade.
So why does it, so then I'll ask the question.
So why does it take four years to evaluate
whether this initiative was successful?
I'll also add that it's my understanding that folks
managing REEL do send out monthly updates.
And so the responsibility to address this
is not necessarily on their shoulders.
Next slide.
Now by reducing the delay in approval, implementation,
and evaluation, we can then connect both
the positive and negative feedback loops.
The feedback loop should be connected to performance metrics
and tied to funding.
And the speed of that feedback
should be fast to ensure equity and impact.
What we don't want is to analyze initiative after a year
and find that not one Black family was breached,
for example.
Next slide.
Implicit in the evaluation of how we fund climate change
initiatives is the funding of information flow,
so that we can ensure Californians
are aware of those initiatives.
The commercial on-bill financing program,
which my company helps small customers receive,
has been around for eight years.
And of the dozens of business owners, property owners,
and nonprofits that I've talked to across California,
I've not met one that was aware of this (mumbles).
Now when you transpose this with a 0% loan
from the federal government last year for COVID relief,
and awareness for that.
To that point, community based organization's ability
to spread information will be essential to realize
and adjust transition.
They should be compensated for the effort
in an equitable way.
I know CPUC does the paid (mumbles) status,
which reimburses those who can demonstrate hardship.
But I would argue that a reimbursement is not an equitable
method of payment, as it requires those organizations
to find alternative means for income,
which has a cost associated with it.
Next slide.
Now I recognize that some of what I've just discussed
is not feasible based on the current rules.
So rules must be changed to ensure that they can happen.
In addition, and incentives, constraints, and punishments
should align with what is required to execute
inclusive solutions at scale to reach our climate goals.
Now due to time, I'm not gonna go dive into
the goals of the system, other than to refer everyone
to the CPUC's environmental and social justice action plan,
which should be central to the goals of the system.
Next slide.
Now to the.
Ed: About two minutes.
Anthony: Perfect.
Now to the crux of this paradigm.
Our current paradigm reflects the assumptions
and perceptions prevailing in the decision making process.
Racial biases are pervasive and impact us all,
no one's immune.
As such, our assumptions and perceptions are impacted
by those biases.
To counter racial biases and other biases,
we must make our assumptions and perceptions explicit,
and validate or disprove them.
Next slide.
Now, here are some examples of problematic perceptions
that I've seen espoused.
People of color do not care about
or not interested in clean energy,
clean energy being whether it be energy efficiency,
electrification, renewable energy,
battery storage, et cetera.
Addressing low income customers
also addresses minority customers.
To kill two birds, one stone.
Other ones results that negatively impacts
communities of color at a higher rate
only occur when decision makers are racists.
It has to be active that you make these things happen.
And then the last one, we can have either a fast transition
or a just transition.
Now let's look at the data backed (mumbles).
Next slide.
Black and Hispanic individuals have a measurably
higher degree of concern about global warming,
and want more action.
Controlling of in response to poverty and income and race,
controlling for income,
households in majority Black communities
are 69% less likely to have rooftop solar
than communities with no racial ethnic majority.
I will add that there was several studies
of variations around this, that also find similar results.
Next, our system's institutions were made to privilege
and uplift white Americans.
Therefore, without designing solutions
to oppose this reality, i.e. anti-racist solutions,
the results will be solutions that uplift
and benefit white Americans.
And then lastly, a just transition is a fast transition.
When we look at the results of inclusive solutions
that push a just transition,
such as site specific investment
with site specific cost recovery,
also known as CARE form bill,
the adoption rate is considerably greater
than non-inclusive solutions,
such as the debt-based energy efficiency programs
that are currently used in California.
Next slide.
Now, part of the concern with rising electricity rates
is that it makes electrification less cost-effective,
and thus harder to implement.
However, as more buildings are electrified,
gas rates will most likely increase at a faster rate
than electricity rates.
This is good for our electrification transition,
but not great for whomever is left with gas.
The question is, who will have to shoulder that burden?
Is it going to be those who have historically
and currently have disproportionately shouldered it?
Or the time for other Californians to take on that burden?
Californians who happen to do better financially,
who happen to financially be able to do so.
Or as one of my students proposed last night,
is there a way that no one has to bear this burden?
Next slide.
I will end with this, we need a paradigm shift
in how we fund our climate change initiatives
because our current paradigm was not created
with everyone in mind.
Thank you.
-: Thank you, Anthony.
And our last panelist, Mark Toney, someone else
many of us have worked with for many years.
He's executive director of TURN,
he's been the executive director of TURN since 2008.
Before he was with TURN,
Mark served as executive director of
the Center for Third World, organizing for four years
and for direct action for rights and equity for eight years.
He holds a BA from Brown University,
a sociology PhD from UC Berkeley.
And his leadership has been recognized
as a Kellogg National Leadership Fellow,
National Science Foundation Fellow,
Mother Jones Hero for Hard Times.
Mark, you are our cleanup hitter today.
And Mark bragged that if I give him five minutes,
he'll take five minutes exactly.
If I give him eight minutes,
he will take eight minutes exactly.
So Mark, you have eight minutes.
-: Thank you very much, Ed.
I really appreciate the work that the staff
have put into this white paper,
and appreciate the Commissioners from CPUC, CEC,
and other agencies for taking the time
to look at this question of what's happening with rates.
When it comes to paradigm shifts,
the paradigm shift I'm looking for
is ending rate payer funding of non-utility
climate change initiatives.
Customers want the most green for the least grief.
The cost of greening the grid should not be cutting off
Black, Brown, Indigenous, or any low income communities
from the grid because the prices are too damn high.
100% clean energy goal to be matched with
a 100% goal for residential service.
Zero carbon emissions need to be matched by zero shut off
for lack of payment.
So I'm gonna talk about three paradigm shifts
to get us there.
One is regulatory mandates need to replace
ratepayer subsidies.
An example to move customer adoption of electrification
is when it comes to regulatory mandate,
we have the electric vehicle mandate by the Governor,
100% by 2035, that's a step in the right direction.
And in fact, it's driving the market for automobiles.
We just had General Motors making this huge announcement
that they will no longer sell non-electric vehicles
after 2035.
GM is going 100% EV.
We've got the four dozen municipalities
who have banned natural gas hookups in new construction.
That's another regulatory mandate.
Zero rate payer subsidies needed for that mandate.
Outside of clean, safe, reliable energy,
there should be no new rate payer subsidies
of climate change by 2025.
That's a goal I have.
RPF procurements? Yes.
Rate payers should pay for that because that's part of
providing the basic services, but not for EV,
and not for building electrification.
So paradigm shift number two,
let's look at developing alternative revenue streams
to replace rate payer subsidies.
I'm going to talk about two quick examples.
One is, electric vehicle charging stations.
We can replace rate payer subsidies
with revenue from the transportation sector.
Let's say that we impose a $1,000 carbon fee
on average per gasoline vehicle.
You can have a sliding scale,
$2,000 for the gas guzzler SUVs,
maybe 200 bucks for a one of the high mileage.
$1,000 times two million new vehicles sold in California
each year, equals $2 billion of revenue.
Every year that we can put,
if you want to put them in the charging stations,
you want to put them into buying down
the cost of electric vehicles,
but we're doing it at the point of sale.
And we're placing the cost where it belongs,
on the people who are choosing to buy gasoline automobiles.
And we're talking about new automobiles here.
So let's talk about building electrification.
What if we decided people are talking about
rate payer subsidies for electrification,
for tens of thousands of dollars.
You're only gonna have,
you're not even going to move the needle.
Only 8% of GHG emissions come from
the residential buildings anyway.
So if you want to do it on a big scale,
how about a requirement that existing homes
sold in California must be electrified.
That the heating, cooling, heat pump, water heater,
and the stove, you electrify them
as a condition of closing escrow.
And you take the cost and put it into the escrow cost.
$25,000 at 3% is $105 additional monthly, over 30 years.
And everybody keeps telling me that with the new heat pump
technology, you're going to be saving money.
So we would be electrifying 400,000 homes a year.
Now those are some real numbers.
My position on residential electrification is
either go big or go home.
We need big ideas.
Paradigm shift number three.
The CPUC needs to do more to push other agencies
and the legislature to do their part.
I encourage the PUC to follow the lead
of the environmental justice group that insisted that
the GRIP report on the future of gas go beyond
CPUC initiatives.
Then urge the CPUC to purport leadership of car,
CEC, and CAISO in achieving climate goals.
Here's the basic challenge we have,
any time the CPUC sees itself as the lead agency
to solve the climate problem,
it means rate payers are gonna pay.
That is a problem.
The CPUC also needs to advocate more strongly
against further legislative rate payer mandates.
This making the utilities pay for programs
that legislators are always talking about,
means one thing and one thing only,
it means making rate payers pay.
Bottom line here is that rate payers have invested
billions of dollars in decarbonizing the electric grid
over the last 20 years.
And it has been worth it, we have supported it,
and in fact, GHG has reduced a lot.
Lot more work to do, but there's been a lot of progress.
If the CPUC wants any chance at capping
utility revenue requirements at the rate of inflation,
then the transportation and building sectors
are gonna have to (mumbles) to decarbonize
their own sector, instead of looking for rate payers
to bail them out.
-: Okay, thank you, Mark.
Thank you to all the panelists.
Are there questions from the dais?
I have a few, but we'll open it up to the dais first.
Commissioner Rechtschaffen?
-: Thank you Ed, I have a comment and a question.
The comment is for Professor Wara.
Your question about EVs providing backup power to homes,
the reason we're not doing it yet
are both technical and regulatory.
And for example, until now basically no vehicles
would warrant their engines to be used
to provide bi-directional power.
It's something though that we are actively looking at,
in our resiliency proceedings and otherwise,
not at the speed that Anthony has pointed out we need to go,
but we're definitely looking at it.
The very real and important point you made.
Professor Borenstein, I have a question for you.
Your proposal about six charges that vary by income,
obviously there are many utilities
that charge fixed charges.
Has anyone done what you are proposing?
Have you seen this elsewhere?
Fixed charges that vary by income?
-: Well, no, not in this structure,
but we have done a couple of things.
One is we obviously have volumetric charges
that vary by income.
We do it here in California,
and we do it in lots of other places.
A fixed charge that varies by income at the magnitude
we're talking about would probably require
a bit more monitoring than the CARE program,
meaning some monitoring.
So what we proposed in the paper in the report,
a number of ways of doing that.
Now there are precedents outside the utility industry.
What we're proposing is pretty much a parallel
of the way the discount for the Affordable Care Act is done,
where you actually declare your income
and then it gets trued up later when you file your taxes.
That could be done through the franchise tax Board.
We also propose alternatives, where the franchise tax Board
doesn't actually do the true up, but they inform the utility
of the category that customers are in.
And then we also propose some other ways.
So we've thought about the various enforcement issues,
and we think there are ways to do it.
It would be a left,
but the alternative is not only, I think,
going to really undermine decarbonization,
but also we're basically balancing the cost
of all of the carbon reduction programs
on the back of the people who are least able to pay for it.
-: Ed, you're muted if you're talking.
-: My second error on that today.
Anthony, it looks like your hand's up.
Did you want to respond to that?
Or respond to a different panelist's comments?
-: I quickly wanted to touch on what
Commissioner Rechtschaffen,
am I pronouncing your name right?
I apologize.
To your point about the vehicle to building
as a essentially a portable battery.
I want to point out that Roanoke Electric in North Carolina
is doing that.
They started this at the beginning of this year,
their first demo of that.
And I believe that the Nissan Leaf does allow for
kind of bio-directional provision
from the car to the building.
We definitely need more electric vehicles to provide that,
such as Tesla obviously, would be a great boon.
But I just want to just bring to the attention that
this is being done by Roanoke Electric Cooperative,
which I have to say is predominantly
Black and lower income areas.
So I would offer that California
should be able to push this as well.
-: Other questions from the dais?
Commissioner Shiroma?
-: Thank you.
Mark Toney, you described what more would you need,
and I really appreciate the conversations
in this last panel as well.
And where were you tasked, you need to really to think.
Think out from the usual paradigms,
what other ideas out there.
And he said that about low-income areas
and disadvantaged communities that are paying their bills,
subsidizing programs, what have you,
that but I think you were saying that that should justify
no disconnection.
Did I understand that particular idea from you?
-: What I meant to say is that it's important to link
climate goals with equity goals.
That's my main point.
So explicitly, link the two.
And if we say 100% carbon free,
which TURN absolutely supports and as I've said before,
we wanna couple that with 100% electrical service.
That doesn't mean that we cut people off
because they can't afford to pay their bills.
That's what I mean.
So that if it's zero carbon, let's connect that
and link with a zero shut off for non-paid.
Yes, these are aspirational goals, but guess what?
Climate goals are 100% is pretty aspirational.
And it's good, we want it to be aspirational.
I'm saying we should have equity goals
as aspirational as our climate goals,
and let's connect them.
That was my main point.
-: Okay, thank you.
And yeah, a follow on question for Professor Kinslow.
Nice to see you again, thank you, Professor Kinslow.
Also helped us out at our finance seeing workshop.
And you mentioned our environmental
and social justice goals,
and there's a handful of the goals that we have outlined,
that we want our proceedings to look through those lenses.
And we do have them folded into our CARE ISA proceeding
and in some of our transportation efforts and so forth.
But would you amplify a bit more about
are you saying that if we more consciously and purposefully
use that environmental social justice plan
as our first lens, that will help us to get past
some of the incorrect paradigms and misconceptions?
Or I just wanna give you a chance to amplify
a little bit further on that.
-: Thank you, Commissioner Shiroma.
Yes, that is in part what I'm saying is that
by putting these goals first and foremost,
and having them drive how we think about
our transition to a clean energy economy,
we will be the decisions we make,
the choices we consider reasonable
start to become more inclusive inherently.
And as a result of being more inclusive,
it also translates that we will reach more people.
And by reaching the folks that historically
have not been able to have access to these solutions,
we've seen from the data that those people adopt
the clean energy solutions at a higher rate
when they had the option to.
Which means a faster transition.
-: All right, thank you.
I'll relinquish the microphone for now.
-: Thank you, Commissioner.
Other questions?
Commissioner Guzman-Aceves, go ahead.
-: Thank you.
And thank you so much for this great panel.
It really is a lot of old and new ideas, in some ways.
I was just reflecting on some of Michael's comments
on these geographical areas,
and even a second to the general fund,
which is an income tax primarily based budget,
property taxes probably the next in line
in terms of having more progressive taxation and assessment.
And we used to have a state responsibility area fire fee
on the property tax owners that are in these high hazard
fire areas, that unfortunately I will say I was no longer
the GO and that was trade in for (mumbles).
But at the time we didn't have a super majority.
So maybe we should re-look at that.
And many of these things are obviously outside
of our control, and the ability to have more progressive
forms of paying for a transition,
more progressive ways and holistic ways of dealing with
our terrible climate crisis in our high risk fire areas.
And I agree that we cannot obviously deal with that alone.
And so I just want to go back to a question I had
in terms of, and maybe this is a question
for all of the panelists,
but is there a different organizational structure
that we should be looking at for
things that are even outside of our control,
that we could potentially all advocate for,
for dealing with these other high cost areas?
I think kind of talking about these incentive programs
is a kind of a easy target.
We know that one's understood, we have jurisdiction there.
We could phase out, potentially eliminate,
what have you, or focus solely on low income customers.
But what do we do with the wildfire situation?
What do we do with this high transmission cost situation?
And Michael talked about maybe a holistic government
approach on one end, but what about this transmission issue?
How are we looking at the wrong model?
Should we be thinking of a different way to pay
and therefore own those assets?
So I think I really appreciate any thoughts you have there.
-: Well, I don't mind starting out,
Commissioner Guzman-Aceves.
A couple of things.
Let's talk about the transmission.
My colleague, Jennifer Dowdell,
in the earlier panel alluded to
one of the recommendations that TURN has made is that
the Commissions or the states should really look at
base ownership of the transmission system.
What that does is it would allow for
much lower rates of borrowing money
because when it's a state owned entity,
state owned entities have access to bonds,
government bond market,
which is at a much lower cost,
much lower rates than private capital markets.
So that's one very concrete thing
that I believe answers your question.
Let's go to your property tax question,
because when we were negotiating and arguing about AB 1054,
one of the things that I had talked about
with the Governor's office and the legislators was
a, first of all, we need to look at the wildfire crisis,
as Michael Wara said as a Statewide issue,
and not just a utility issue.
And that we need to look for more progressive ways
of funding the insurance fund.
Our proposal wasn't back property taxes
because property is one of the ways
that wealth is stored in society.
Income is one of the ways that they're the stratification,
but property is another.
My only other point is
when we are trying to figure things out,
I get so tired of people talking about the poverty problem.
What we have in California and the US is a wealth problem,
is a concentration of wealth problem.
And until we look at that,
and actually Severin Borenstein's proposal about
the fixed charges based upon income,
actually starts to move to solving that.
I think that's very (mumbles), but I'll stop there.
-: If I could just respond briefly to the wildfire question.
And I think part of the challenge that we face in this state
is that we have a set of organizations
that are not well-posed to advocate for systemic change,
in terms of wildfire risk and investment in
the kind of things that we need to do
to reduce home ignitions.
Cal Fire is trying to change,
but is primarily a firefighting agency,
and I think the PUC is not the right place
to have this conversation,
even though because of the legal liability regime
in California, the utilities have ended up
being the cost bearer and the risk bearer.
And so I think one thing that I'm hopeful for
is that other elements of state government can become
a better resource, perhaps the wildfire Safety Division
when it moves to resources this year,
so that they are more capable of thinking about
these problems and articulating needs
in the general fund context, and perhaps in others.
-: If I can jump for a second.
First of all, I want to say the white paper
the CPUC put out was great.
I have been recommending it to everybody for the last week.
It covers a huge amount of ground.
And then I guess I should say in this context,
my views do not represent those of CAISO necessarily,
but I have learned a bit being on the CAISO Board
for a couple of years.
One of the things, my understanding is that
for large transmission projects,
those are not built necessarily by the utilities
at this point, they are competed.
And so there is a competitive process to try to get
a lower cost for them.
They are competed among private entities.
State ownership could have some advantages.
State ownership has not always worked out well
in all areas of industry.
And the idea that the state can finance everything
more cheaply, while true in one sense,
there's a reason that state bonds are so cheap
is because everyone knows the state's gonna pay them back,
meaning a really bad outcome, you still have to pay for it.
And so the state has all the downside risks
if and when they do this.
And there's certainly plenty of cases where the state
has done big projects and they have had huge cost overruns.
So I'm not saying state ownership's
necessarily the wrong model,
but I think we have to be cautious about it
when we start looking at alternatives,
and that there is this competitive process now.
-: I will jump in after that.
And to the question of increased cost high cost,
the reality is, and we're seeing this in Texas,
is that the centralized system is not the future.
We need to decentralize the grid.
And we have a choice, we can do that slow and painfully,
and with a lot of battling between
utilities and private companies,
or we do have an alternative option,
which is fast and a lot less problematic for the utilities,
in terms of their increased costs.
And that would be an inclusive solution where
utilities are investing on in specific sites.
So instead of them trying to fight for
to keep solar from going on roofs,
or keep private entities from going on roof,
they are actually doing that themselves.
They are investing on the roof themselves.
And in turn, receiving of that compensation
back into benefits for that back as a way to counter
the obvious increased cost as the distributed energy
becomes more and more prevalent.
I'll also add to the wealth that Mark mentioned,
ownership has to be tied to this.
But people have to have solutions where
ownership ends up with the customers needs to be
a staple in whatever is going on
because ownership is one cornerstone of wealth building.
And if customers are just continually and perpetually
paying for clean energy, as opposed to,
well, let me rephrase that.
If some customers who can't afford the upfront capital
are constantly paying for clean energy
by those who can afford the upfront capital
of say solar, are not, they have that ownership,
then we get result in a larger gap increase.
-: Okay, thank you.
I had a question that I was going to ask,
but we're supposed to wrap up at four.
And the answer to my question is probably
about a 10 minutes answer.
So I'm gonna, I'm passing it.
I am gonna throw out a thought here to encourage folks
from other panels and who are listening,
if they are going to submit any written comments,
just to think about this.
And this is, I was going to try to tie back
some of the proposals in former panels
to some of the suggestions here.
And throw out the idea that I'm a little concerned
of unintended consequences
with some of the proposals out there.
And for example, and I think this cuts both ways,
there was a proposal earlier that we do
a geographically based rate structure with lower.
The people with the higher rates were the people who then
had the biggest incentives to install solar,
and thus kind of made that cost shift
more of a wealth transfer than maybe originally intended.
And I think there's ways to mitigate against that.
But I just wonder if we look at different ideas,
if we're also looking at the unintended consequences
that come, so we can mitigate against those ahead of time.
But I'll just throw that as food for thought for right now.
We're right at four o'clock.
I really want to thank this panel.
As I told the panel when we were preparing for it,
anytime somebody says, oh yeah, I'll do that panel,
you estimate that it's going to take you
a half an hour to prepare for it.
And it takes you three hours to prepare for it,
or whatever the timeframe is.
So this is a really important conversation.
I deeply appreciate your time this afternoon.
And I deeply appreciate everybody's efforts
in putting into it.
And I deeply appreciate Michael Wara's compliment
of the AB 67 report,
that is also my favorite report of all time,
and I look forward to it every year as well.
So with that, thank you.
And I'll hand it back over to you, Mary Claire.
-: Mary Claire, you're muted.
-: Thank you.
I was just thanking the panel and thank you, Ed.
So we are now going to turn to closing remarks
from Commissioner Shiroma.
But before we do, I wanted to present information
about public comments.
So we're going to start the public comment period
immediately following Commissioner Shiroma's remarks,
so in just a few minutes.
And to make a public comment, you want to dial into
+1 800-857-1917,
passcode 5180519.
And these numbers are also on the admin monitor page
and on our En Banc webpage and on the agenda.
Once you're dialed in,
you'll press star one on your keypad
to connect with the operator, who will put you in our queue.
And if you'd like to cancel your position in the queue,
just press star two.
So we'll provide those directions again
once we start public comments.
But folks may want to start getting into the queue now.
And the last thing I'll mention is we've had
a couple of questions about whether this is being recorded
and will be available later.
And the answer is yes, and yes.
This will be posted to our webpage in a couple of days.
So with that, Commissioner Shiroma,
are you ready to give closing remarks?
-: [Commissioner Shiroma] Yes thank you, Mary Claire.
Folks, it's been a long day and I want to thank all of you,
all of my colleagues on the virtual dais,
the panelists and all of the attendees for sitting with us.
I have some brief closing remarks,
but before I provide those,
I want to give our president, President Batjer,
a chance to say a few words, if you would like to.
-: Oh my goodness, Genevieve,
Commissioner Shiroma, thank you.
This has been an unbelievable day.
Very, very thought-provoking.
I go through many days feeling like I'm in a vice,
a tough vice between our very important climate goals
and the liability and the cost of the liability.
And this day both scared me at times and made me worry more.
But these big brains, your big brains,
have given me some solace that we're going to make it,
and we're going to get through this,
and we're going to lead the, not only the country,
but the world in doing so.
I want to thank again, the energy division
and Professor Borenstein, thank you for saying
that you have been recommending everyone read
the white paper and that you think it's just great.
Let's all tweak that and share it more.
But it's a lot of work and we so appreciate
what Ed and his team have been able to do.
Thank you all for your time,
your very valuable time, and what you gave to us today.
There's so much that we can work from here.
And I dare say that we can work all together on.
So Commissioner Shiroma,
thank you for giving me that little,
that I didn't plan on it.
So thank you.
And I look forward to your comments as well, of course,
the public comments.
-: [Commissioner Shiroma] Thank you.
Thank you, President Batjer.
Indeed, we heard today that we should expect rates
to continue to rise over the next 10 years,
and that this threatens one of our most basic tenants,
to provide Californians with affordable utility service.
We also heard ideas from utilities, rate payer advocates,
and academia on how to combat the rise in rates.
It was very impactful to hear how essential affordability is
to California achieving our climate change goals,
and the impact of energy burden on California today.
Also that there are some innovative opportunities out there
to reduce utility costs,
and it needs to take a step back and reassess business
as usual to harness these savings,
these potential savings for customers and rate payers.
It was also very helpful to see how dollars spent
on utility bill go back into
the pockets of California customers.
The larger economic analysis of the investments
coming back to provide for lifting all of us.
But in the meantime, we need to be strategic
to ensure that living wages
and appropriate workforce training get to the people
who need it and who are ready to participate
in the next phase of our clean economy.
And finally here at the Commission,
we are deep in the nuts and bolts,
as you can tell from the discussion today
and all the questions.
Even the nuts and bolts of leveraging rate payer dollars
to fund climate change initiatives,
but there are opportunities to think about
outside of the box on how we fund programs,
whether it's wildfire mitigation,
transportation electrification, and so forth.
It's really up to the community gathered here today
to consider what we've heard, and ultimately to take action.
The CPUC will certainly be looking to lead this effort,
but we need the support and collaboration of everyone
gathered here today, the legislature, our sister agencies,
the utilities, the stakeholder community,
the advocates, academia.
Again on the white paper,
comments are being gathered,
with the deadline set of March 19th.
Please email them to CostsEnBanc, one word,
CostsEnBanc@cpuc.ca.gov.
That will be on our website.
I'll have every state, that together we can mitigate these
troubling rate and cost trends, and ensure that all of us,
all of us in California,
and as a model to the rest of the nation,
that we will continue to have access to safe, clean,
and affordable utility services and infrastructures.
It really goes to the very quality of life
that we depend on.
And I do want to thank this team again,
and we will be going to public comment shortly,
but I'll thank the team again that made this event happen.
Paul Phillips, Ankit Jain, Bridget Sieren-Smith,
Franz Cheng, David Zizmor, Simon Baker,
Dorothy Duda, Mary Claire Brown, and Leuwam Tesfai.
Hard to overstate how much work goes into pulling this off,
from the white paper to soliciting all of you on the panel,
you do this with a little sweat equity,
and to really make a difference for our day today.
Put in tremendous effort.
Thank you so much.
Back to Mary Claire.
And we will be hearing from folks who have queued up
to provide public comment.
Thank you.
-: Great thank you, Commissioner Shiroma.
We will now open the floor to public comment.
So to comment, again, dial +1 800-857-1917,
passcode 5180519#.
Those numbers are on our webpage and on the slide here.
Once you're dialed in, press star one on your keypad
to connect with our operator, who will put you in the queue.
If you wish to cancel press star two.
Commentors will have two minutes to speak,
and you'll hear a chime when your time is up.
We are only able to accept public,
chime just like that,
we're only able to accept comments from the public,
not questions.
So please do not pose questions to the dais
or the panelists.
And please note that we have created
a dedicated email inbox, it was mentioned earlier,
to receive informal written comments on today's event.
So if we reach the end of our allotted time
before we're able to reach you in the queue,
or if you would just prefer to submit written comment,
you can email those at any time
to CostsEnBanc@cpuc.ca.gov.
Comments on the white paper that you would like
energy division staff to take into account
when revising the paper, should be submitted by March 19th.
And that email address is listed here on the slide
and also on the En Banc webpage.
And we are going to have a soft cutoff for comments at 4:45,
and if we still have, if we have people in the queue
at 4:45, we'll go until five.
But at five we do lose the line.
All right, operator,
will you please announce the first speaker?
Operator: The public comment line is now open.
Our first speaker is Claire Broome.
Claire: Good afternoon, can you hear me?
Operator: Yes, we can hear you.
Claire: Wonderful, thank you so much.
This has been a wonderful and idea inspiring day.
I'm Claire Broome, I am a professor of public health
at Emory University and a California rate payer.
I really appreciated the focus on transmission
as a substantial and accelerating part of costs.
I was surprised no one mentioned the recent LA Times study
or the Times report on the new model,
showing that achieving our clean energy goals
for the country using local clean energy,
including behind the meter,
but also local generation and storage, would say.
(crosstalk)
The amount of savings there comes largely from
avoided transmission.
So it fits with what we're hearing today.
My three comments are, there are three very concrete ways
current California policy does not encourage
local clean energy generation.
Specifically, we are not providing a resiliency value
to either behind the meter or in front of the meter
storage and generation.
Secondly, our reference system portfolio created
in the integrated resource planning proceedings
does not even let the models select
in front of the meter clean energy.
The options are behind the meter PV
or utility scale in the desert,
which of course requires transmission.
This oversight needs to be corrected.
Finally, we mentioned the TAC,
and that was wonderful to recognize how important this is,
the transmission access charge,
but the way it is currently built charges the same amount
if the energy is generated locally,
or if the energy is generated in the desert.
That's crazy.
We are basically disincentivizing local clean energy,
which could help us meet our affordability
and our clean energy goals.
So I hope the Commissioners and CAISO and the CEC
will pay attention to removing the barriers.
And I think actually this very much fits with the point
that Anthony was making about clean,
decentralized energy systems.
Thank you very much.
Operator: Thank you, Claire.
Our next speaker is Tammy.
Tammy: Hi, how are you guys today?
Can you hear me okay?
Operator: Yes, thank you.
Tammy: Okay, I'm actually my issue I'm calling about
is a little different,
but it has to do with rates and pricing.
I am an opt-out meter customer,
and because I'm an opt-out meter customer,
I'm charged extra each month,
though they only read my meter every other month.
So on the month they read my meter, my bill is accurate,
but on the following month, they guess,
and they just guess at a basic rate.
So for instance, one bill, my meter that they read,
was my bill is 300 some dollars.
The following month, they only charged me $69,
which I knew could not be a good guess.
So because of that, the following month,
my bill was 600 and something dollars.
So what's happening is everything above what they charge,
like so they estimate all of the kilowatts
that I use above that, go to my next bill.
So it makes my next bill look like I've used so much energy
that it tends to put me in second and third tier.
So I'm paying more for that energy,
even though I actually used it in the month before.
I contacted So Cal Edison, who is my electric company,
and was told that they can't read the meter every month,
and that that's the way they have to do it
because there was a mandate from you guys, from the CPUC,
stating that, and I was told that they would love
to be able to read the meter every month
because they're getting a lot of calls like me,
from people who their bill is just way off
and it's causing them to pay more each time
on the non-reading month.
So yeah, I'm asking, just reaching out to ask that
if you could change that mandate and make it possible
for the utility companies to actually read the meter
so that those of us that are on the opt-out
aren't being penalized for having the opt-out meter.
And I've tried the smart meter,
so that's not an option for me because once I got it,
I started getting massive headaches
as well as my two daughters did.
So we had to have it removed within a week.
So I have tried that option.
But yeah, just reaching out to see
if you could consider changing that mandate,
and making it to where the utility companies
can actually read the opt-out meters every month.
So just wanted to put that out there
and just request that that be something maybe you consider
or take up or can change.
And I appreciate your time.
-: And operator before we go on,
if I can encourage this caller to go to the CPUC website
and reach out to our customer affairs bureau,
and give specific information.
And we're happy to look in this
and see what we can do to resolve the problem.
Tammy: Okay, so I did send an email.
I was told to send an email and I'd have to be, I'm sorry,
I'm not at home in front of my computer
to know exactly to who,
but you said look for the customer care department?
-: Yeah, customer affairs bureau,
and then more appropriate to have a separate conversation.
So if we can get your contact information,
we can reach out to your public advisor's offices, sorry.
Tammy: Right, yeah.
I'm happy to leave my information.
-: Conversation with you.
Yeah okay, thank you.
Tammy: That'd be great.
Thank you so much, have a beautiful day.
Operator: Thank you, Tammy.
Lauren Rosenberger-Hider, your line is open.
Lauren: Hello, you hear me?
Hear me?
You hear me now?
Yeah, please increase the benefits of net energy metering
with incentive for homeowners providing electric
during times of high demand.
And there is a large supply of used lithium car batteries,
but I wish some expert would help the homeowner
actually incorporate that into their house.
We use lithium car batteries.
Or their own car for storage of energy.
And at the same time, give incentives
for disadvantaged communities and low-income people
and disabled people because they're the ones that kind of
really need the air filters, and they're running off
their electric, and the water purifiers the most,
and they have more of a need for electric.
But also give incentives for those who
just turn off their electric
when they know when the demand is high,
and actually save money and put that money,
save money toward to getting something electric,
electric equipment for their home
and improving their home with.
Actually net energy metering benefits will conserve
natural resources and avoid the social cost of carbon,
and expenses like uranium in people's hair
after Aliso Canyon blew increasing the cancer rates
and emergency room visits in Culver City,
larger than usual number of asthma cases
every time the oil wells leak,
and the high radioactive scale, high reading radioactivity
and the scale on oil and gas pipes that can harm workers.
But the benefits of rooftop solar
is also closer to where electricity is used,
and there will be less transmission cost,
saving the TAC funds.
Also the solar panels for electric vehicle charging stations
should be positioned along the highways,
then people can charge their cars
during power outages elsewhere.
And also I liked your fire prevention technology,
new technologies, to make it do a better job at it.
And there'd be less fires due to climate change too,
with mid-energy metering.
Thank you very much.
Operator: Thank you.
And our next speaker is Michael Alcantar,
your line is open.
Michael: I believe that's Alcantar,
which many of you know,
I've represented a number of industrial customers
before the Commission for decades.
I'm going to try and fit into my two minutes
as much as I can,
but this is such a broad topic and such an important topic.
I wanted to try and touch it well.
Western State Petroleum Associates, who I represent,
operate a number of critical infrastructure facilities
and operations throughout the state.
And it is both a supplier and a major consumer
of natural gas and electric generation services.
We sought but we were denied a panel position
for this En Banc, which disappointing,
but we understand given the range of views
that you wanted to hear,
there were limitations necessary.
We will provide written comments to address
some of these issues that are of concern,
but I wanted to make a few key observations
to the Commission at this point in time.
While the white paper is I think,
properly lauded within its alley of work, if you will,
and it's a most informative tool
for residential customer interests,
there is a missing aspect in the scope.
It doesn't address the affordability and costs
for all rate payers,
and the implications of elections by commercial
and industrial customers who can make
alternative energy choices, can be profoundly negative
for residential and other customers
who don't have alternative choices.
Alarms are being sounded by this new report
from Severin's group at UC Berkeley,
noting that the affordability of California electricity
natural gas is a current and expanding crisis
that will impact the capacity
to meet emission reduction goals by the state.
The legislative report that's to come from this white paper
should not be limited solely to residential focus.
It needs to be not isolated from all rate class interests.
When you look at the most recent data submitted by
the Energy Information Administration,
there is a almost 50% of the utility revenues
provided in California through 2019,
come from commercial and industrial customers.
If those customers continue to decline
at the same deep, steep loss of words,
there will be negative implications for others.
We're going to seek and will seek,
and I know the Commission seeks and shares the view
that there are three objectives here
we're all trying to reach, optimizing our reduction
in emissions, dealing with costs
to make things affordable, and have a reliable grid.
We're failing to get all of those three competing principles
successfully accomplished.
And thank you for the opportunity to speak with you today.
Operator: Thank you.
And our next speaker is Bruce Vaegle,
your line is open.
Bruce: Thank you, can you hear me?
I assume that's a yes, that was kind of noisy.
-: Yes, we can hear you.
Bruce: Okay great, thank you.
I want to thank you for this very comprehensive look
at the situation and the utilities market.
And I especially want to thank you for mentioning
at least a number of times, the low-income challenge
that we're facing and how do we address that?
I don't think we came up with any answers today,
but we at least have people
that are trying to think about it.
It's a great concern to me that when we move people
to renewable energy,
we need to be able to do it in a way that
does not cost them more because if that happens,
they won't change.
And if we don't get the people who are on gas,
moving towards electricity for those
who will be able to do that, gas prices will go very high
and we'll be at a great disadvantage.
I wanted to also comment about the fact that there is a
piece of this that really didn't get mentioned today.
And Michael Colvin, who is one of your speakers,
is an expert on part of this,
and another person is Greg Harris,
and that's the cost of transition.
And the cost of transition imply involves things like
the actual cost of the equipment
that will no longer be useful.
And there's a human cost that Greg Harris goes through
in his white paper that explains
the fact that we have to find new jobs for people.
And this became especially true, as I was at a time
where that specific issue was mentioned.
So I think it becomes important that we start to think about
more of the pieces that are outside of what you guys did
as part of a holistic view of this.
I think the view on TAC is important.
And the other part that was implied,
but not stated is, it affects reliability.
If we build more micro grids, we'll be in a better position,
(cuts out) services up and running,
and that's an important issue for us.
Thank you for the good presentations
that you guys have put on today.
Operator: Thank you, Mr. Bruce Vaegle.
And our next speaker is Mohit, your line is open.
Mohit: Good afternoon, I'm Mohit.
I'm a senior scientist with
the Natural Resources Defense Council.
Thank you for having this timely conversation.
Clean electricity must have remain affordable
in absolute terms and relative to other fuels,
to equitably decarbonize the economy.
And I want to focus my comments on two things.
First is the need to make prudent investments.
And the second is the policy evolution necessary.
Both of them were somewhat touched upon by the speakers.
Prudent investments, including beneficial EV demand response
and investments in electrification that cause
incremental uptake, reduce bills and rates for rate payers.
And prudent investments also means taking a look at
existing investments, like net energy metering,
that need to evolve to meet, to better equitably
help meet climate goals.
In evolving policy, I'd like to reiterate
the importance of co-funding policy climate policy goals,
where possible.
Electricity really is the engine for decarbonization,
and we can't make it unaffordable.
One good example is the federal tax credits for renewables.
That's a good example of co-funding climate policy goals.
Agree with the need to evolve rate design
and some of Professor Borenstein's great work.
Also would like to remind everybody that
such change needs to be managed carefully
through policy action, to make sure that all customers,
especially vulnerable customers,
have the ability to make the most
out of the evolving tariffs, through customer education
and programs and working with those customers
to make sure they can avail of those.
Finally, understanding how we can take advantage of
why the grid integration to lower costs for everybody
is another thing that should be considered.
Thank you for giving me the chance to speak.
California doesn't have a choice, it has to do both,
need as clean climate goals, and do so affordably,
and we need to prioritize investments
in vulnerable communities while doing so.
Thank you.
Operator: Thank you, Mr. Mohit.
Our next speaker is Dr. Hari Lamba,
your line is open.
Hari: Hello?
Can you hear me?
Hello?
Can you hear me?
Operator: Yeah, we can hear you.
Hari: I am a resident of East Richmond Heights,
and I'm an author of a recent book on climate change,
called "Brighter Climate Futures,
A Global Energy, Climate and Ecosystem Transformation."
And it's still this white paper,
I read significant parts of it, it's an excellent document.
The points that I wanted to make were as follows,
that we are at a stage where federally,
we are finally getting support for decarbonization
and the clean energy and things,
so we should be taking advantage
of all of those opportunities.
We need to be proceeding with a total decarbonization
of each, of electrical energy by replacing all
the fossil fuel power plants we have with renewable energy.
And I have proposed solar plus battery plus hydrogen
power plants for that.
And locate it as close to the original natural gas
power plant as possible.
As we electrify everything that we can electrify,
we need the additional energy to be produced
in the same work, but all of this energy should be
as distributed as possible,
so as to reduce the chance for
the transmission excess charges,
so that those don't get out of control,
and those are.
We should make any effort to encourage distributed energy.
So the NEM process really needs to be strengthened.
Any weakening of NEM is going to be hitting
renewable energy development and its needs.
And then as the point, which Ms. Broom,
Claire Broome pointed out,
we need to be encouraging in front of the meter,
that's good power generation also.
I just wanted to add that aspect of energy democracy
needs to be there so that as solar energy, as you know,
it's just a cost fuel, we need to be
so energy democracy makes plenty of opportunities available
for disadvantaged communities, for businesses,
for local energy businesses, and for congenital benefits.
And we are to consider alternative models for utilities,
such as municipal utilities,
or even follow marketing administrations.
But my other key message would be please
let's strengthen them and not weaken it.
Thank you.
Operator: Thank you, Dr. Lamba.
Our next speaker is Ed Snowoff.
Ed: Greetings everyone.
I wanted to really congratulate the organizers
of this En Banc discussion for the wonderful information
that was provided, particularly from the final panel,
which was very thought provoking.
I also commend the Commission and the Commission staff
for the excellent white paper.
When I read the white paper, I was drawn to figure 38
on page 77, which I think makes two really important points.
One point is that we really do need to think holistically
about energy across sectors, electricity, natural gas,
and gasoline.
That's the burden of those combined uses of energy
is the burden that Californians have with energy.
And the white paper shows that we can reduce that burden
significantly through electrification,
by moving away from gasoline and natural gas,
to use electricity for buildings and transportation.
In fact, it shows that we can save on a monthly basis,
about $128 per month for a customer who lives
in a hotter climate in California.
The other point that this table points out is
that the difference between a 46 million metric tons
resource portfolio, and a 38 million metric tons
resource portfolio is diminimous.
In 2030, the difference is $9 a month.
So we really do need to promote electrification.
That's going to require the procurement
of an enormous amount of new electricity.
Your procurement plans has seven gigawatts to 10 gigawatts
just to replace the Diablo Canyon
and the ones through cooling plants.
So we to begin to do that.
To do that, we're going to need to invest in transmission.
Transmission is going to need to be firm
to deliver the electrification centers.
And I will point out one new idea
because we do need to lower the cost of transmission.
President Biden and the federal administration
is considering an infrastructure bill.
And one idea would be to extend the investment tax credit,
which now applies to renewable technologies,
to high voltage transmission projects
that are needed to deliver that electricity.
Thank you, and I really appreciate
the opportunity to speak to you.
Operator: Thank you, Mr. Snowoff.
Our next speaker is Jose Trinidad-Castanera.
Jose: Good afternoon chair, Commissioners, and panelists.
My name is Jose Trinidad-Castanera.
I am the Orange County policy manager
with the Climate Action Campaign,
and our mission is to stop the climate crisis.
So very briefly, my comments today are regarding
the content of the white paper.
From what I understand the CPUC's narrative
and framing of DER is that residential and commercial
rooftop solar plus battery storage is the problem,
and not part of the solution to addressing the need
for climate resilience and equitable sustainability.
And as we all know, the frequency and severity of wildfires
changes in atmospheric river behaviors, Santa Ana winds.
Other climate changes are huge risks to the long-term
maintenance of investor owned utility poles and wires.
And we at Climate Action Campaign know that in order to stop
the climate crisis in an equitable way,
we need the CPUC to take greater efforts in local power
and net energy metering, in addition to utility scale
plus long distance transmission lines.
These are not mutually exclusive for boosting
the cost savings we need as rate payers.
And just to share a quick story about my community,
which we're talking about equity.
This is my community we're talking about.
Our homes were built in the 50s,
and we have few functioning streetlights.
We are in the 95th percentile
of environmentally burdened communities.
And last year and the year before that,
we've had so many blackouts that I lost count.
Vulnerable neighbors are asking me what they can do,
and I know that the only way is really if they have
rooftop solar plus battery storage.
And so I'll end with the fact that
at the Public Policy Institute of California
at their conference last year,
Governor Gavin Newsom said it best,
we must invest in more local solar plus battery storage.
Thank you so much.
Operator: Thank you, Mr. Castanera.
And our next speaker is Ben Schwartz.
Ben: Hi, my name is Ben Schwartz.
I'm the policy manager for the Clean Coalition.
And I just wanted to take a moment to thank everyone
who contributed to the white paper,
and then to expand a little bit about what Claire Broom
mentioned on transmission access charges.
One of the most important things we can do for
net energy metering and, well properly valuing
infrastructure, is to ensure that the resources we use
are valued properly, and there's not a cost shift.
And the way that transmission access charges,
which were mentioned today are currently assessed,
does create a cost shift to the tune of about 3 cents
per kilowatt hour.
And so properly valuing that
will increase the value of DER's, and ensure that
people who have rooftop solar
are not paying more than they need to,
to develop and deploy that.
Thank you.
Operator: Mary Claire, there are no more speakers
in the public comment telephone line.
-: Great, thank you so much.
So that brings us to the end of our agenda.
And before I let you all go,
I just want to do a final thank you
to everyone who was involved in organizing today's events.
There were so many people, but I really,
I want to make sure to highlight a few people's
contributions, David Zizmor, Franz Cheng,
Robert Stanford, and Joe Haga,
they have been working tirelessly behind the scenes
to organize this very complicated event,
and they have pulled it off with flying colors,
and really just not thank them enough.
So thank you.
And with that, our agenda is finished.
And I hope you all have heard a lot
to give you food for thought, and have a great evening.
Thank you.
Operator: Thank you.
That does conclude today's conference.
We appreciate your participation.
And you may disconnect.