August 31, 2026 · Utilities And Energy · 10,402 words · 12 speakers · 68 segments
Thank you. Thank you. Thank you Thank you. Thank you. Thank you Thank you. Thank you. Thank you Thank you. Thank you. Thank you Thank you. Thank you. Thank you Thank you. Thank you. Thank you Thank you. Thank you. Thank you Thank you. Thank you. Thank you Thank you. Thank you. Good evening. I am calling to order this hearing of the Assembly Committee on Utilities and Energy. We are here to discuss wildfire issues, specifically as presented in SB 492. We're welcoming our colleague, Senator Becker. Before we begin, I have some brief housekeeping announcements. Public comment is welcome here in person. Otherwise, it can be submitted online via the committee's website. As is customary, we will not accept disruptive behavior and will apply assembly rules to maintain order and run a fair hearing. I also want to recognize chairs of relevant policy committees that this topic touches upon. I think they'll be joining us this evening. We are joined by Assemblymember Bennett, who is the chair of the Budget Subcommittee on climate and energy policy. Assembly member Brian, the chair of the Natural Resources Committee. Assembly member Calderon, who is a member of this committee as well as the chair of our Insurance Committee. Assembly member Calra, who chairs our Judiciary Committee and sits on Utilities and Energy. And lastly Assembly member Ransom will be joining us the chair of Emergency Management Before we turn it over to Senator Becker just a few brief comments to kind of frame this conversation We began our 2025 session with the devastating Los Angeles wildfires, which I think brought into very sharp relief for many of us the need to modernize and revisit California's wildfire liability structure and our wildfire response framework. Senator Becker teed up much of that work with his SB 254, and that report was delivered to the legislature in, I believe, April of this year. The report really laid out in very, very stark terms the cost of inaction, what it costs the state, ratepayers and victims if we fail to act. And that report really has set the terms of the conversation that we have been having in the months since. Many of you will remember in May, the Assembly as well as the Senate convened informational hearings built on that foundation with a number of hearings that surfaced a range of topics before the legislature. This is an issue that we've been working on certainly together for the last couple of years. It's an issue and a challenge that has bookended the Newsom administration. And certainly what we will be diving into today, I just want people to understand, is not the end of this journey. And so I hope that as we have today's conversation, we certainly want to dive into what is in the bill before us today. We also want to highlight the issues that remain open and the work that this committee and our body needs to continue to do together. So with that, Senator Becker, appreciate your partnership and all of the work that you have been doing on this incredibly complicated and incredibly important challenge. The floor is yours.
Well, thank you. Thank you, members and chairs of various committees. I feel like I'm turning a lot back and forth here. I want to thank you. I just wanted to thank you, Chair Petrie-Narris, before we get going. Thank you. It was an honor to work with you on SB 254 and jointly authored that bill. And as you mentioned, that bill called for the report and that set off a lot of these different conversations. I think you teed it up well, so I'll go focus on the bill in front of us. And the bill does a number of very important things. I'll just do high level and then I'll I'll dive in a few of the details. And it's about 92 pages. I'm sure you all have been pouring over it since the early hours of Saturday. But, you know, it really does center the survivors and victims of fires. It does that in a number of ways. Most importantly, one of the key provisions is the fast pay provision. We have to make sure we can have a situation where we have survivors and victims waiting for years to try to rebuild, to figure out what they're going to get, to get on with their lives. I'm sure you experience this as well, as I have for many every year. The campfire victims come in front of us and talked to, by the way, before we had any kind of fund where they got, you know, really on average, I think 50 cents on the dollar, you know, 50 percent of what they should have gotten. and how their lives are still dramatically affected. And that continues to that. They're still looking for proper compensation. And we can't have that. So we have to make sure they're paid fairly and... And quickly, we believe that this proposal, this fast pay in this bill does do that. Number two, we make sure that hedge funds and third party, like private equity firms who have been profiting, in some cases of billions, literally, on the PG&E bankruptcy, that we don't allow them to profit off the human tragedies that have been unfolding in these giant fires. And this bill takes major steps on that direction. Number three, I think it – well, it certainly does something that I know all of us are very concerned about, which is it makes it clear that CEOs and C-suite executives of utility companies should not profit, should not get their bonuses, should not get that compensation in years or even years after where their utility equipment has been determined to cause major fire. And this bill does that. That's something I think that's been a near universal call for that. I do want to focus on some of the, what's called the wonkier details, but the pieces around wildfire prevention. And, you know, I know many of you have been working on these issues. And as you said, this isn't going away. This bill is not going to solve everything. But there are a number of very important pieces there. Number one, it focuses on getting better data to understand how to prioritize our mitigation efforts. So the data commons idea has been out there for a while. We've been working towards it. This bill, I think, will codify that. Requires CAL FIRE to take the lead in developing a data commons where state agencies, local governments, and insurance companies can all contribute data and have access to that combined data set to get a shared understanding of risk and mitigation progress. Second, it will improve coordination among state and local government efforts. It tasks scenery with developing a statewide community wildfire preparedness strategy. I want to thank all of your work, especially Assemblymember Bennett. We've realized if I harden my home, great, God bless, but we don't know if that's enough. We don't think it's enough. It has to be community-wide hardening, and that's something that there are a number of bills outside of this that also work towards that end. But this bill will be helpful in developing a statewide community wildfire preparedness strategy and requiring the state fire marshal to help cities and counties create their own community wildfire protection plans aligned with statewide strategy. There's a number of other pieces of this that I'm happy to go into, but with that, why don't I stop and we'll leave it.
We do have a witness, Mark Toney, from TURN. We'd love to have you join us and then really open up to discussion.
If I may, Chair. Thank you very much, committee members. My name is Mark Toney. I serve as Executive Director of Terran's Utility Reform Network. We stand in support of SB 492 as an important first step to protecting ratepayers for the following reasons. One it does reduce some of the claims against the Wildfire Fund It eliminates the ability of hedge funds and private equity funds to purchase and collect on subrogation claims protecting rate payers and ensuring that wildfire survivor claims take priority over private profit taking. Two, it penalizes utility executives for starting wildfires. The bill requires senior utility executive compensation to be reduced when utilities start wildfires, including a 35% reduction in salary and bonuses when a wildfire results in loss of life. Three, creates statewide community wildfire planning strategy. It requires a formal state process for planning to implement community hardening measures in high-risk fire areas, and this will reduce wildfire spread and claims against the Welfare Fund. I just want to take a second to say that there's a lot more that needs to be done next year to address the issues that were brought up in the SB 254 wildfire study that was published in April, and I will ask that next year that we have a lot of work to do, and TURN will be there. But for this year, TURN strongly urges your iVote on SB 492.
Happy to answer any questions. All right. Thank you. And then, do we have witnesses who are sort in opposition or opposed if amended? Okay. We've got a bunch of people jumping out.
Okay. Madam Chair, member Scott Wetch on behalf of the California Coalition of Utility Employees and the State Association of Electrical Workers. I'd like to first preface-
Sorry, just one second, Mr. Wetch. Let me just clarify. I think that Mr. Dunmoyer was set to speak. I don't know if you were. Are you speaking in support? No, in opposition,
I filed a position letter in opposition, but whatever the chair feels is.
Oh, it's, yeah, it's an informational hearing. So if that's, and then we'll, I think we're going
to hear from additional witnesses momentarily. Okay. Thank you. Madam chair, I'd like to preface my comments by acknowledging that all the staff and the members who worked on this and the governor's staff worked really hard with the best of intentions. Unfortunately, they fell extremely short. Workers got screwed. Ratepayers got screwed. Lawyers and insurance companies win. That's the story. Already we've seen the ramifications. You can go home to your districts tomorrow, we'll be back here. In the year of affordability, it's astonishing to me that Turn and the author of this bill presented and never used the word affordability once, because the only thing in this bill that addresses affordability is on the wrong side of the equation. We've already seen that. Edison and PG&E lost $20 billion of market capital since Thursday. Hedge funds are already circling both of these and Edison still hasn't yet to be downgraded, which we anticipate. In a matter of weeks or months, perhaps, you're going to have zombie utilities with Edison and PG What do I mean by zombie utilities Interconnections the grid infrastructure investments that we all know we need to do the clean energy projects and the jobs that go with them will start to slowly grind by a halt We've already been noticed that it's likely in the next few weeks our distribution crews at PGE and Edison are going to be reduced by 80%. The CEA report presented to you was not off the mark. We're looking at upwards of 18,000 lost jobs. 18,000 lost jobs. How so? Let's talk about clean energy projects. Let me just talk about the cost of financing. Currently, long-term debt is costing Edison and PG&E roughly between 6% and 7%. The analysts that my leadership was on the phone with all day today project that those borrowing costs are going to exceed, well exceed 10%.
And I'm sorry, Ms. Ritch, that that is two minutes. And so for the additional comments, I think if members have questions, we'll come back to you. Okay, ma'am. And then Mr. Abrams, I think we're going to have to hear from you during the public comment section, if that's all right. And then Mr. I guess we can only hear from so many folks here. And then Mr. Dunn-Moyer, welcome.
Madam Chair and members, Dan Dunn-Moyer, President and CEO of the California Building Industry Association. This is my 42nd end of session in California, so I say this with some respect for what Mr. Becker and you have been working on. Everybody, as my colleague here said so eloquently, a lot of work has come into this. I'm here today because this bill fails to address the real issues of California's utility, wildfire insurance, and home building crisis. Specifically, what may not be known is we, as the California Building Industry Association, obviously build homes, but we also need utilities to turn our home lights on. We need insurance in order to sell homes. It's just the reality of how home building works in the state. So we really haven't picked sides here. We have just realized that we have to solve this problem. While this bill takes positive steps in certain areas, make very clear the results of the failure of this measure to address the real underlying issues of creating a solvent, robust, investor-owned utility marketplace means that we're not going to be able to turn the lights on our homes. Now, you may think that's an exaggeration, but we have been here before. This is not our first rodeo. Specifically, when PG&E was bankrupt last time, it took us six months after our homes were completed to turn the lights on our homes. We now have a 85% success rate with PG&E and turning them on within a few days. Same with SCE. So as a result of that, we have seen what happens when the utilities are in an imperiled position. Also, just from the investment side of this, you have our joint letter. Jan gave some great comments there, too. We are trying to build our homes with renewable energy. We need utilities robust enough to be able to do that. This measure does not allow for that at all. So we would just urge you, Madam Chair, and to respect also Mr. Becker, this fails horribly to address the crisis we confront, and this will add to the crisis of housing. So we'd urge you to step back and take another look at moving forward with this in a more robust and thoughtful manner to truly solve this crisis. Thank you, Madam Chair.
Thank you. All right. I think we'll open it up for any questions or comments from committee members, have some discussion, and then we'll be able to hear from the public.
with public comment members Mr Bennett welcome thank you Thank you very much Madam Chair I think I on now Just make a few quick points. One, the only thing that I think has unified everyone in this, at least everyone in the legislature, is the fact that victims need to come first. We all feel that way, not just victims, but all of the citizens that are being served by our electricity utilities. I would offer that from what I've learned being on the working group for the last three weeks is that victims suffer the most during a bankruptcy. And I don't think that point has been emphasized enough, but victims suffer the most during a bankruptcy. Victims are in last place, at least in the last bankruptcy. Victims were in last place. Insurance companies got their money, others, but the victims did not. That's something we have to really pay attention to. And so avoiding bankruptcy, I don't think captured the sense of urgency that it really needed to capture over the last three weeks. Second thing I would point out is that we need education, I think, on three things. One, we need more education about what do we mean when we say victims are in last place? How bad are victims served when they are in last place? We as legislators need to make sure we get better educated about that. We need more information. Second thing we just heard is there's bond rating downgrades, right? What is the effect on electricity affordability of bond rating downgrades? I've asked that question. I know that if you double my interest rate on my home mortgage, I have a significantly bigger nut to crack every month. And the question is, how much does that translate into actual rates? And I think that's really valuable for us to get that information. The third thing that I would offer is we need good data and better education about exactly what the current system is doing in terms of its income effect on people. Who is disproportionately paying more and who is disproportionately paying less? And there will be some subjectivity to that. But that's another issue that I think was revealed in stark contrast during these last three weeks. So if Madam Chair doesn't mind, I'd like to ask just one question because I asked you this question before. But what about the impact of increased borrowing cost or lower bond ratings? How much is that going to affect electricity bills from your perspective?
Well, and according to, thank you, Senator Bennett, we've been on the phone all day to day with the analysts. Currently, as I was saying earlier, long-term debt is running about 7%. They project that it's going to cost north of 10%. The yield on corporate bonds for PG&E and for Edison, we'll use PG&E as an example, have been running between 9% and 11%. they say that the bond yield, the return on investment that's going to have to be offered after this week is going to be 15%. So I can run down exactly what that means. So let's say you have a $10 billion piece of infrastructure you need to finance. If you finance that at 60%, right now they're cap, 52% equity, 48% debt. If the cost increases on the long-term debt to 10% on a $10 billion purchase, where you're financing, let's say you finance 40% with debt because of their situation, and somehow we get the cap lifted and they're able to go to 60%. percent. At 10% debt, that's $500 million. The equity piece at 15%, that's $900 million. That's $1.4 billion. That is $2.4 billion more over the 40-year life of that $10 billion asset than if you did it the traditional way, which would be 50% equity, 50% debt. At today's interest rates of 7% on the debt and 10% on the equity. That's out the door. That's not going to happen any longer. And in terms of bankruptcy, Q chaired the creditors committee in 2019. So we were a party to all the negotiations in that bankruptcy. We were lucky that we had a governor that wanted to see a healthy PG&E emerge. So he told them, you're not going to do any of the draconian things that you could potentially ask a bankruptcy judge to do, like suspend the collective bargaining agreement or do what Pacific Lumber did and just dissolve the pension for existing pensioneers. You're not going to do that. He also said, you're also not going to do away with expensive renewable energy power purchase agreements. We're not going to let you do that. But you know what? The bankruptcy judge in the Northern District of California, he decided that he wanted to do away with a lot of the PPAs on renewable energy. And FERC objected and said, you don't have the authority, bankruptcy court. Only FERC has that authority. And it was appealed to the 9th District Court of Appeals. Right before they ruled, we had an all-party settlement on the bankruptcy. And so the court said that issue is moot. But you know what happened last year in the 6th District in Ohio? Same issue. The Court of Appeals ruled with the bankruptcy judge. And then the Supreme court denied review. So if we did have a bankruptcy, it would be a far different situation this time. Our CBA could be completely eliminated. Pensioners could be put at risk. And all the PPAs that we have currently could be thrown out the window for coal, and all of our climate goals would go out the window. It's a step we do not want to come close to. Madam Chair, just one sentence that I made to your question too, Mr. Bennett, for PG&E since 2019, because of their reduced financial status, their rate payers have paid $5 billion more than they would have otherwise if the ratings had been higher. So it's a profound impact on the actual rate payers. What does that translate into on an average monthly bill? I don't have an average, but you can see those numbers are so large as to what the consumer's paying when you're downgraded as a utility. And that's just the point I think you should see those numbers are huge. The CAA report said hundreds of dollars per household. The only other thing, Madam Chair, I'd like to add is that if we are going to convert over to a clean economy and a renewable economy, that means we're going to electrify almost everything. And there will be significant capital costs involved in that. I would love to be educated about how much that capital cost potentially could be but at a later date just want to get there out there Thank you very much I appreciate the opportunity Thank you Assemblymember Calderon Thank you Madam Chair This question is for Mr Wetch
So you mentioned that the potential to lose 18,000 jobs. How will this affect the employees, the men and women that keep the lights on?
Well, according to the estimates of the CEA, 55 to 60 percent of those job losses will be with the internal workforces of the utilities. And the remaining 40 to 45 percent will be my members who work for what's called outside line contractors. PG&E's employees and Edison's direct employees don't do all the hardening and all of the infrastructure work. They contract it out to contractors signatory to the IBEW, and that's where the 18,000 jobs will come. They will begin by cutting back the crews to skeleton crews. So people with the highest seniority will retain their work. The folks in the lower will be sent back to the hall where they'll just sit unemployed while they see their benefits run out. And then eventually there will be an attrition of jobs and they'll just shut those jobs down because there's no work to go with it. Because even if the $100 billion worth of infrastructure work that has to be done in the next 10 years per the CEA report may not even be financeable, the little bit that they may be able to finance is going to come at such exorbitant rates that it's going to greatly diminish how much we get to Assemblymember Bennett's point. And that's what's going to lead to all the massive job losses. The other job losses that aren't even calculated in there is right now there's over a dozen utility-grade solar and battery projects waiting to be interconnected in order for them to be able to qualify for the federal tax credits. They will all be getting phone calls in the next two weeks saying it's not happening in 2027 and 2026, sometime in 2027. That will lead to job losses. That will lead to subcontractors and others who are working who will be told to stop, and there will be a domino effect of bankruptcies to small businesses that are all relying on those projects.
Thank you. And then – and so – and I think – and I don't know, Senator Becker, if you have a comment. But again, I think if I understand, Mr. Rett, your point is not this bill is going to lead to job losses. It's – I think you're urging us to act on the structural reform piece. We don't have a – the problem with this is the signal that it's going to send.
It's going to send the signal. I'm not—there's—we're not objecting to most of what's in this bill. But it is going to give the signal to Wall Street that the legislature is done. You can make all the pronouncements and press releases you want, that there's more work to be done. But they're going to say, this is what they did. This is what we have to then judge the future on. And all these dominoes are going to start to fall. If we don't—we'd be better off not passing this bill and sending the signal that we understand that it doesn't get us there and then redouble our efforts now to do something substantial. Because we're all going to be back here. We're all going to be back here. It's just a matter of if it's going to be in four months or if it's going to be before.
Thank you Assemblymember Rogers Thank you Chair So I think before I talk about the substance of this bill I think the only comment that I really want to make about what not in here is you know we were here a year ago I made comments from this dais as we were talking about the reauthorization of the Fire Victims Trust and agreed to support that in exchange for talking about the impact that wildfires had had on my community and people in my community who still have not been able to rebuild. And there was discussion and commitment about trying to address some of that this year. None of that happened. And I think when we sit here and we hear the testimony, it is really frustrating as a legislator that we talked about the need to do something a year ago. We had the report that came out. We did an oversight hearing on it in April. And then yet we still get jammed in the last two weeks of a legislative session. And now here we are with a bill where we're being yelled at that it's inadequate, where most of the members of this committee didn't actually get to see what was in it until the final days before it was too late to actually do anything on it. and I hear you about the signal that that sends to the market. I think the signal that I as a legislator want to send is if you expect to back us into a corner and then approve something without an opportunity to amend it, to talk to our constituents, to talk to groups that are impacted by it, this is the outcome, is everybody's going to be angry when we get a bill, because these significant reforms deserve their own standalone bill. If they're such a good idea, you should invite people to have an actual discussion about the language. And I know that a lot of this has to be done behind closed doors trying to put some of it together. But there was no opportunity for most of us to actually talk about the people most impacted. And so when I sit here and I hear even in this bill, it centers the wildfire survivors. but I have wildfire survivor groups from my district that are saying that this bill is terrible for them and have questions about it. And I haven't had an opportunity to go talk to them. You shouldn't expect my support for a bill. And so that's all I'll say about what's not in here. I'm going to evaluate the bill based on its merit, not based on what it's lacking. And for me, I have some significant questions about the fast pay system. So I'm hoping the author can get into that a little bit. Tubbs Camp did not have a fast-paced system. And I think some of my colleagues might be able to shed some light on how did that system actually work in Altadena and in Eaton? And did it actually serve wildfire survivors better? I talked a lot in the committee hearing about faster can't equal less. What have the actual experiences of implementing that fast-paced system been for wildfire survivors? Why are we making this mandatory that they have to apply for this before they can go the legal route? What impact is that going to have? And I'm going to kick it over to the author and see if you can start answering some of those questions. Yeah. And we will be
relying on our technical assistance as well. We have members of the pro tem's team here.
So the claim is to be submitted with either one year, the date of wildfire is determined, or the expiration of the applicable statute of limitations if a claim asserting entitlement damage was filed in court So I think what was important one of the aspects came up in certainly in our conversations I sure here too is mandatory or not or how do you sort of structure it So I think a lot of things were considered looking at 9-11, what happened there,
the compensation, various pieces. So what this bill tends to do is says, yes, everyone has to apply for FastPay, but it does not limit the ability to sue. So that's sort of the process. Now, it may be stayed while discovery is going on, but ultimately people retain the right to sue themselves. If I can dive in a little bit, one of the directions that it seemed like some of the discussions were going was a requirement that attorneys had to make sure that their clients knew about the fast-paced system and provided them information on it. So how did we move from that to it being a requirement? And what is the thought process behind being, requiring fire survivors to go this route? Yeah. Again, for the technical assets, we may bring some folks up, but in terms of requiring, there's a lot of trade-offs. all this, right, in structure and, you know, again, after evaluating various systems. My understanding, and you can probably clarify better here, Assemblymember Harbedian, is that the fast-paced system that Edison ultimately stood up works pretty well. It's pretty intuitive in terms of getting the estimate. Unfortunately, it was set up late. It was set up by Edison at a time there was not a lot of trust with the community at a time when you know, yeah, mostly that.
It was late and maybe a year afterwards or something, maybe a year. Yeah, I mean, and I'm sure there's representatives from Edison here. I mean, it did take a long time. Madam Chair, if I can. Yeah, thanks. Sorry.
It took quite a bit of time to stand up.
Because of that, I think it had some structural hurdles because of the trust issues. I do think that a key component of it is it's optional. I think that it is working well for survivors, and we'll see, I guess, as it continues to progress, how well it does, how many folks actually take the offers. And I think the jury's still out. But I think to Mr. Rogers' point, I think a big difference is the optionality. And I think some of the worries of that program, the Edison program, is the caps on non-economic damages. And obviously, it's going to be less money, but obviously, these are trade-offs. So I mean, that's my perspective. And I do think the key difference is the optionality. My understanding of Edison, and this was data as of like a month ago, I don't really know, but they processed, I think, $300 million worth of claims and maybe paid out $150 million or something. So there was some take-up, even despite all those limitations that we – or whatever external factors we just mentioned. So, yeah, I think the key part here was retaining the right to sue, but still having people go through the process. So that was a trade-off that was made.
a couple of additional questions on this if you want to bring up a technical expert that's fine too if a because I worked with folks, they're overwhelmed. They've lost everything. They're trying to figure out how to get their documentation back, what they're going to do in terms of work commitments, school commitments. If they were to miss the opportunity to apply for the fast pay, is there a cutoff deadline to where they would no longer be able to sue because they didn't go through the fast-paced system and deny it first. How do you account for people who might just be late? Yeah.
Again, I think this extends it up to about a year, so hopefully that is sufficient time. But would you – any additional comments here? Sure.
Assemblymember Eric Deng with the Pro Tems office. So this is obviously a reflection of a three-party agreement. Certainly there has been conversations about the desire that this be a volunteer program and to kind of try to strive that compromise, part of the conversation was figuring out how do parties continue to be able to file a claim in court while they're pursuing a claim during the fast pay program. And so the way that the bill is structured is that it allows parties to continue to file a claim. And then while discovery is happening, which is kind of the key step in a lot of this process, that parties basically can continue to move through the discovery process, which can take months, possibly years. And then once discovery ends, there is a pause post-discovery. And then as long as the party has filed a claim 45 days before that period and has actually just filed the claim, they don't have to look at the number. They don't have to accept the number. They can reject it. As long as they file, they can continue to move forward with that lawsuit.
Okay, and if they didn't? file for the fast-paced system?
If they didn't file for the fast-paced system, then there would be a stay on their lawsuit while they're moving through discovery.
Okay. So one of the challenges that many wildfire survivors found was that they could only move at the speed of their insurance companies. There's about a 30% increase in the cost of materials, 30% increase in the cost of labor for folks. they didn't know whether or not they actually had enough coming in from their insurance to cover the costs to rebuild or whether that they would need to seek additional funds from other avenues, whether it was a lawsuit or whatever have you. There was also, as many of my colleagues have heard me talk about, many insurance contracts that would not allow people to rebuild smaller, but they had a like-for-like provision, so they couldn't just take that 30% shortfall and build 30% less house, how would the fast-paced system account for the speed at which people are able to determine the cost to rebuild, how much their insurance is going to offer, and what their
shortfall might be? Yeah, Samira, again, because of the nature of this three-party agreement.
I don't care about a three-party agreement. Sure. I mean, there was a request that during
the conversations was making sure that this process had efficient timelines within the bill, So there's kind of benchmarks in terms of how fast some of these things have to happen. I think there's at least 45 days. There has to be some of these metrics in place. And certainly the concern was making sure that in case something is buckling based on the procedures that have been set in place that there would still be a chance for the parties to be able to kind of file the litigation and move forward with the litigation And again this is kind of the product of kind of the negotiations Yeah okay
I'll have more questions, but not right now. Then I'll turn it over to my colleagues in a minute. But on the executive compensation piece, where do the executive bonuses come from? Do they come from a general rate case paid for by rate payers, or do they come from shareholders?
There's two categories of executives. The very top executives, a very small number, due to a bill passed some years ago authored by Assemblymember Gonzalez, prohibits rate payers from paying those salaries. So those are 100% shareholders. There's another layer of senior executives that are rate payer paid. I am, I'll be honest, I am not clear where the cutoff is in this bill as to which executives will be directly impacted. That's one part that reading the bill, I have had as much less time than you have perhaps to review it. So I'm not sure of that piece. Yeah.
So the question is then, if in the event of a wildfire, and just as a side note, I don't need to belabor it, but 500 homes being taken as the trigger for most of the communities that I represent, that's the entire community. So it's a pretty high bar already. In the event of a wildfire that takes 500 homes, we don't know or it's unclear if that's coming from ratepayers or shareholders for the bonus. And if it's coming from shareholders and they don't pay out the bonus, do they retain that as shareholder value that gets paid out to the folks who have invested? Or is there any requirement that that money still be used just in mitigation, vegetation management, whatever shortfall there is?
Right now, it requires the electric utilities to have compensation plans. These plans will have to get sign-off from the Office of Energy Infrastructure Safety to have real teeth there. And the plans have to specify exactly how it will be implemented. So that might be a little bit left, but where investor-owned utilities lose all of their short-term incentive compensation for the two years after the equipment causes a significant fire. So they will develop plans to make this clear how this will happen, and the Office of Energy Infrastructure Safety has to sign off on that.
Okay. All right. Assemblymember Burr?
Mr. Burr. So first of all, I want to thank you. I know that a lot of hard work has gone into coming, you know, putting this bill together. I had some amount of optimism after having some conversations with our insurance chair and our UNE chair in the last couple days that we might be able to do something that was significant. I have to admit that I just really disappointed in where we are I think this is a disaster that we are coming up with a bill that does not result in any structural reform I do think that our governor has brought us an issue that is a real one and I think if you look at the stock price of all our major IOUs that just tanked in the last couple days, it's pretty clear that we have to do more than what's in this bill. And I, you know, I do, you know, we, I think it's a fair point that the amount of time that we actually had to reach consensus was too short, obviously. And that's, I don't think that's anyone's fault. I think, you know, when we've got a big issue, we've got to sort of tackle it. But it's also something where I don't think that this kind of problem is something that can be solved in individual bills. It's something where everyone has to be brought to the table. We do have to have our victims. It does need to be a victim-centered approach, but it also needs to be centered on our rate payers and people who are actually paying for the cost of insurance and losing their insurance. And all of those entities need to have skin in the game and need to be brought to the table, and everyone needs to give up something in order for the greater good. And so I'm just really disappointed in where we are. It's not a good thing that we have the potential for all of our IOUs, bonds going into junk status in the next couple weeks. It's not good that we are going to have significant losses in employment for people working at the utilities. We cannot let the signal be that we're done. And I don't, you know, it's a bit above my pay grade in terms of what the path forward is. But the path forward cannot be just passing this bill. I think there are good things in the bill, but, you know, we're nibbling around the edges and we're not dealing with the structural issues. And so with that, I'm just really disappointed. But it doesn't take away any of the – I know that everyone coming to the table was working hard and trying their best. You know, I can't tell you the number of times I met with our UNE chair and with our insurance chair, and I was really optimistic that there were things on the table that were going to result in some structural reform. And why that didn't happen, I don't know, but I'm disappointed in it, and I will be looking to our leadership about direction about how we move forward.
Okay, Assemblywoman Pappin.
So I would just dovetail on Assemblymember Zabur's comments, But let me, if I may, take it out 30,000 feet just for a moment. Now, it is such that the utilities need some reduction on future exposure. Do I have that right? For wildfire damages, right? Okay. And when they didn't get some reduction in the risk, the exposure, the risk of exposure for wildfire loss, that has an impact on their financial stability. Got that right. OK, because and I know you're all going to say yes to these questions are very leading questions, but I'm doing it for a reason. And that is, it is lost on a lot of folks that you need to convince that this risk somehow can't be eliminated. And that's not on the table. But it didn't get reduced enough by this bill. And while we might reference that it's a three-party agreement, this bill doesn't meet the mark. I think as three parties we could do a whole lot better to reduce that risk And again we not looking to eliminate it I want to be very clear because there are folks that need to get reimbursed along the way but it can be all on the backs of ratepayers. So while we might all get that in this room and we sit on these committees with a lot of exposure to these concepts, that doesn't necessarily translate and leave this room. So I don't think I agree with some of our visitors. We haven't gotten there. And when we wake up to the markets we woke up to today, now let's talk about that. When the markets look on you disfavorably, you are correct, Mr. Wedge, that that means what? More expensive money. And what does that do to rate payers? Somebody has to pay for that. And that's all the other people that we go home to represent, or we come here to represent, I should say. So I just wanted to take it one step at a time so that somehow the message gets out there that there needs to be, not nibbling at the edges, but some real modification of the equation, keeping people that are injured at the forefront, recognizing they don't do well by a bankruptcy either. That was a very interesting comment, certainly, to make. But the liability has to be spread out a bit more because we did come here to affect affordability, and I'm not sure this gets it done. So I agree with you. I had conversations along the way, and I thought we might find something palatable to the carriers. We might make something more reasonable for rate payers, but that's just not happening. So I'm disappointed as well, and we're going to press forward with this, we'll see. And one more thing, Mr. Dunmore, your contention is we're going to try to build homes, but if we can't build homes where we connect electricity because we have utilities that can't give you all that you need, that interferes with housing, right? Is that why you're here today? Ms. Pavick, exactly. So when you look at this issue, when a utility, when you have to make these tough financial choices. You first focus on your existing customers, which makes total sense. But then the whole issue Mr. Wetsch brought forward is then you don't build out the future of the utility. You don't build the new transmission lines. We are building all electric homes now. We're building zero emission buildings. These rely heavily on electricity, which is great. This is what we've been trying to do with our climate goals. But when you have to make tough choices as a utility, then you're going to effectively have to push these other projects off, push these jobs off. And for us, it means they'll literally tell
us, please don't build any more homes until we can figure out how we're going to build a new transmission lines and substations and move this clean energy to your homes. And this is north and south in our state. So we'll just push the pause button on our homes, but even more tragically, we'll push the pause button on our clean energy transmission lines. And of course, as Mr. Wedge said, so articulately, it's going to stop jobs. For us, it's also jobs. All the framers we hire, We hire 900,000 people. So those are all pushed. This is called pushing the pause button. Again, I just want to reiterate what the chair said. It's not that this bill is a bad bill. It's that it really is signaling that we haven't solved this problem. We have not looked at the underlying crisis issue and addressed it. And that's just very troubling. Our hope is before you leave, and I realize you're going to leave shortly, but maybe you come back, you address these issues. So we can't. These issues can be solved. It just may take a few more days. But this is what needs to be done if we're going to build more housing, build more transmission lines, keep these jobs going and keep our utilities in place. Thank you, Ms. Papin, for asking that. So, again, it all comes down to how much more risk is out there. And there's got to be some way to reduce the risk so that these guys look better to Wall Street. They look better at Wall Street, but more importantly, when you have to increase basically the cost of money. And to keep in mind, everybody talks about shareholders like they're bad people. Everybody here, myself included, who worked for the state of California is a shareholder in these investment utilities. It's called purrs and stirs. It's not like the shareholders are bad people. You think of big, massive billionaires. I'm not one, but I worked in the legislature. I worked for the governor. So that piece of shareholders is not just billionaires. It's actually state workers, state employees, teachers. So it's the whole picture. We have to look at this holistically. This is not a one-person's-a-bookie man. This is a solution for the whole state. Thank you.
And, yes, and I'll just say I definitely want to certainly Senator Becker to respond. Um, we are, uh, we are being asked by the speaker's office to, uh, do our best to swiftly conclude, um, so that we can resume with session. So I know there's three members with questions. Um, if we can keep those questions as tight as possible and the responses as tight as possible, that would be good. Mr. Becker.
I can address that all.
Oh, you want to address some of that in your close or do you want to? Okay. Um, all right. So with that, Mr. Wallace.
Thank you, Madam Chair. I will go ahead and skip half of this because it sounds like we've already adequately addressed it. I do have concerns about how this is going to help victims with this bill. I think fast pay program without stabilization of the fund is obviously concerning, but I will just move to my opposition questions then. Um, Mr. Wach, I've heard my colleagues suggest that utilities should just have the shareholders fund all the capital work and that IOUs can spend their quarterly profits to, to get that done. Do you have a response to that? Or can you speak to that?
Yeah, this is the biggest, one of the biggest misnomers, um, that I hear in the capital this year. PG&E has a 1% dividend. Okay. The industry standard for healthy utilities is five, 6%. 13% of their net earnings goes to dividends. Where does the other 87% of net earnings go? It goes right back into investment into the system. I don't want to sound like Gordon Gekko. Profit is good because it lowers the cost to ratepayers when they do that, and they have been doing that. Appreciate that.
And then I have one more for you. Do you think utilities are at a risk of bankruptcy, and what does it look like if that were to happen? and let's just say it's just one or more, if something like that?
I'm very concerned with the fact that in the next week or so, we're going to see the Elliotts of the world, some of the worst vampire hedge funds swoop in and seize. Look, Elliot took 6% of San Diego Gas and Electric a decade ago and controlled the utility. They don't do that for ratepayers, and they don't do that to protect workers. That's what's going to happen, and then it's a slippery slope into bankruptcy because then they can really gut the utility. And that's what we're afraid of. All right. Thank you very much. Thank you, Madam Chair.
Thank you. Assemblymember Irwin.
Thank you. I will go quick. I agree with a lot of my colleagues. We just didn't meet the moment here. And I think it is a big disaster that we were not able to come up with that structural reform. So I just want to ask one of the things that's being pointed out. Oh, it's great that we have fast pay in here, but that was available before. So what does this bill do that is going to improve the fast pay situation?
Yeah fast pay previously as we mentioned Edison I think it was took maybe a year to set it up And of course it was run by Edison which was not reassuring I think to many people initially So this is independent, and it gets up quickly. We can talk about the exact timeline, but this will not take what would happen there. So it's really quite different.
So it's increasing the – it's shortening the timeline then?
Yeah, shortening the timeline for sure, and independent, which is critical as well.
Okay, and then just quickly for –
Even Edison, even after all that, as I mentioned, I think they processed – they said $350 million awarded, and they've given out about half of that. Okay. That was a long time ago.
When I said we didn't meet the moment, it certainly wasn't for lack of effort from the Assembly, the staff, our chair, you, yourself. I it's just it didn't come together. So I just want to ask Mr. Wetch, when will ratepayers start to see an increase in their bills? Because it seems that's the direction we're going. And how long does it take to recover if if the legislature doesn't start to deal with this issue before January?
January? Well, the rate impact on rate payers will not come for some time. There's $100 billion that's supposed to be invested in the next 10 years. I think this coming year, PG&E has somewhere north of $12 or $13 billion should be invested in grid improvements. They will finance some of that at an exorbitant cost, and that will find its way into a ratepayer's bills when they do their true-ups in a year or so. It's hard to predict because we don't know. It's so unstable now. No one can predict, even the analysts, how this plays out over the next several months. I think the CEA did a pretty good job. Everybody recognized that, and they pegged it at hundreds of dollars beginning in 2027 per household.
Right. Thank you. Thank you.
We're going to address some of this in the close. Some of the risks raised are real. I don't want to between those. But, you know, we should be pretty clear that, I mean, even the $2.4 billion over 40 years is, that's about $60 million a year, which is the scope of the utility spending, which I think the PG&E revenue requirement is, itself is in the $20 billion, you know, plus range just for electric. So, I just want to put that scale in perspective, what we're talking about here. Assemblymember.
Madam Chair, thank you. In the interest of time, just wanted – we've got to get back to the floor. I just want to say thank you to you, to our chair, Chair Calderon. I mean the last three weeks, you folks, the working groups, were literally in conference rooms nonstop. And the amount of work that you put in really was courageous and admirable. And it's the old Vince Lombardi saying of you didn't lose, you just ran out of time. And I think that really happened here. And I think we had great minds in those rooms. Many of us were trying to help and it just didn't come together. But I think that the hysteria and sort of this idea that somehow today is the the end of the process really just needs to be reframed. We aren't many of us other than, you know, one person here and a few on the Senate side. we coming back And we are committed to getting this right And I think that the market had false expectations Frankly whatever the market is reacting and how it reacting now was because folks miscalculated exactly what could get done over that period of time and they need to be better at their jobs. And I think that we are doing a very good job. And I'm not trying to, okay. I mean, that is kind of funny, but that was a miscalculation on the market. And the market should know that we have so many people, including the chairs of our working groups respectively, and I want to thank the senators as well, who are committed to getting this right. My community demands it. Mr. Rogers said it very well, and I align my comments with him and Mr. Zabur and everyone else. we don't have the choice but not to get this right. And I think the system and everyone involved requires this too. But I just want to thank the people who were involved with this, because I think that for the average person, no one knows just how much work has been put in. The last three weeks, yes, but we've been talking about this for years. I mean, since I became an assembly member, this has been a focus of this committee, the insurance committee, your respective committees. So I just want to take a moment to elevate the work. And the outcome may be disappointing, but the process was very enlightening. And I think many members up here, especially Mr. Bennett, as part of the working group, the problem that we need to solve became a lot clearer. And I think that is a victory. I think a lot of people around the Staius and on both of those floors now understand a lot more clearly just what that problem is. And so that wouldn't have happened but for the two authors of this bill, the chairs of the working groups, all the working group members. So I want to thank you for that and work to be done. And the market should hear that. Hopefully they're listening. We will continue to work. Thank you, Assembly
Member. And with that, Senator, what we're going to do is we're going to hear a closing statement from you and then we will open it up for folks in the room to provide public comment. Great.
And we were trying to, so I'd like to close and I'll let my, my business close as well, if that's okay. Yeah, listen, I want to reflect, number one, we're here to do the job in front of us and look at the bill in front of us, and I appreciate comments, good questions about the bill. There might be some things further to flush out, maybe some things to come back and clarify or work on next year on the pieces of the bill in front of us right now. I just want to say, and I think some of the members just heard beating on his comments, there was a lot of discussion. I know in the Senate side and your side, and a lot was unclear. And then we will have to hopefully now get better data on, for example, ending insurance subrogation. On one side, some folks said it would have very little impact. On the other side, folks said it would have a massive impact on insurance rates, possibly 20%, 30%, 40% in some regions. So we didn't really have the time to get clarity on what that real impact would be, just as an example, just on taking one issue. But I know this is very personal for so many members. Certainly here in the Assembly, in the Senate, we've had people who've literally their own homes have been destroyed, their own neighbors have died, and other folks that they're very close with have lost everything. I think it goes from down south all the way up to north. So we have to get this right. As was said, this has been subject of a lot of discussion, as you know, in the Senate. I personally participated in three hearings on the SB 254 report. I think the report came out in mid-April. By that time we were a little stuck in all the back and forth of just bills but also budget So it made it a little hard to get it through but there was a lot of discussion on a lot of these points And we will have a chance to do more on affordability. My bill, SB 905, for example, that came through this committee, has some significant pieces on affordability. Some of the work we did last year is just taking effect in 254. But we have the chance to do work on affordability outside of this bill as well. A couple points. Again, I don't want to minimize risks that are out there, but just, again, from perspective, PGE debt right now is at 6.8%. The worst utility in the country right now is at 10%. So, yes, is the increased borrowing costs real? For sure it is. is it as dramatic as was portrayed? Right now, it's not. Again, even $2.4 billion over 40 years is about $60 million a year, which is something, but not a lot in the scope of utility overall spending. I think the big question is fund longevity. One thing for Wall Street to hear, we still did create another $18 billion fund last year in 254. So that is out there. The Altadena, the Eden Fire, we don't quite know yet officially if it's a utility cause, and we don't quite know the impact. But it is unlikely, I would say, that it's going to exhaust the original $21 billion fund and that fund as well. So, you know, certainly we all have to be worried about another fire, you know, happening this year. We're doing a great job in California, better than other states in terms of our the, you know, our resources, everything we've done. And this bill will help with the community wide hardening as well. So I did want to mention a few pieces. I did want to turn it over. Allow my witness to close as well.
I think I'm going to need to have your close be the last word. I'm getting the hook from the speaker stuff. So bring it home, Senator.
Yeah, that's what I had to say. A lot of goodness in this bill. I want to thank you for your work as well. Let's focus on the bill in front of us. And then if people feel next year they want to do more work, awesome. We'll come back and do it. Thank you.
Thank you, Senator. I appreciate your partnership and look forward to continuing to dig into this work together. Great. All right. And my my absolutely sincere apologies. The speaker's team is telling me that we have to officially adjourn the hearing and go back to our floor session. Yes. OK. So we think public comment can be provided officially on the committee website. I will also I have to officially adjourn so the TV goes off. I will stay here and listen and have conversations, but we do have to officially adjourn the hearing so we can go to session. And with that, our hearing is adjourned. I'm sorry. All right. We are now we're happy to hear public comment, though. Thank you. Thank you.