Energy Utilities — 2026-05-12 (partial)

Mr. Chair and senators, members of the committee, thank you very much for inviting us to present on the SB254 Natural Catastrophe Resiliency Study. This was an undertaking that we took very, very seriously and worked diligently on. The chair has provided a lot of the background and context of what gave rise to the study. So I'll touch very just briefly on and resonate some elements of that. The wildfire fund of course grew out of and was a direct result of both the 2017 wildfire season and PG bankruptcy the downgrades of the investor utility companies in response to that and the recognition that in the beginning of 2019, there was a genuine crisis regarding the stability of the investor-owned utilities. AB 1054 was the solution, and that was a wide-ranging set of solutions. You will hear from other people during the course of this hearing who were involved in and even had their organizations created under AB 1054, including the Office of Energy Infrastructure Safety. I want to just highlight a brief note about the California Earthquake Authority. We were asked to undertake initially the administrator role on an interim basis, and that was simply because the passage of AB 1054 was an urgency measure, and it took effect immediately. It created a natural catastrophe insurance fund, as the chair mentioned, of $21 billion in claim-paying capacity, and yet it had no money, no capital. but the moment Governor Newsom signed that bill on July 12, 2019, the fund was on risk and it needed to immediately get prepared. The state surplus money investment fund loaned us an initial $2 billion to stand up the fund and we had to set up our infrastructure very, very quickly to be ready in just a matter of days to take on that money and get it reinvested prudently for the benefit of the beneficiaries of the fund. We were a standby-ready organization that was already managing a multibillion-dollar natural catastrophe insurance fund. So we were able to leverage all of our existing infrastructure in a way that was balanced between the interests of the Wildfire Fund and the interests of our California Earthquake Authority residential policyholders in a way that ensured that neither fund subsidized the other. And then in early 2020, the California Catastrophe Response Council, which is an oversight body created under AB 111, a companion bill with AB 1054, named us the permanent administrator. As the administrator, our focus has just been principally on nonpolitical, prudent administration of the wildfire funds, strictly within the statutory confines of AB 1054. So we stuck to our lane, we stuck to our knitting, and we're very efficient and have historically been very efficient administrators of the Wildfire Fund. This SB 254 opportunity to facilitate the study that's in front of you today and will be the subject of conversation throughout this session, I think, was essentially a six-month interlude into very deep and challenging policy positions. SB 254 necessarily laid out a scope of topics that we were required to look at. Yeah, thanks. I wasn't able to get it working. So you should have copies of the slide. I'm not sure I'm able to get the presentation deck moving on the live presentation. But the SB 254 codified a set of topics that we were required to look at and address necessarily because there are no simple solutions to this interconnected set of challenges that the state faced and the sense of the legislature and the governor was that you would all benefit from a disinterested analysis of all of these topics in a way that looked at a whole of society, whole of government approach, and did not exercise any fear or favor with respect to bringing forward options and recommendations. And we think that we achieved that. What was important to us was the process, a very inclusive process. I will talk about the process. Dr. Johnson will lay out an overview of the strategic pathways and options that we included in the report. And Andy Neal from Aon will talk about some of the larger state interventions. But with respect to the process, it was our immediate goal to be as inclusive as possible. The first thing we did within a couple of days of the bill being signed was sent out a call for stakeholder submissions. And we sent it out and publicized it as broadly as we could across the full array of stakeholders and beyond the array of stakeholders that are specifically mentioned in SB 254. And we were really gratified with the vigorous responses and the really thoughtful responses that we got because it formed a baseline understanding of the issues and where we needed to focus our attention. We got 83 unique responses from both in preliminary form and then in final form from 65 unique individuals and organizations across an array of sectors in the economy. and in not just the economy, but among people who are interested in the topic of wildfires and utility-caused wildfires in particular. We then set about building a team of subject matter experts. The California Earthquake Authority is a lean, efficient operation. I have 120 employees who execute our $20 billion in claim-paying capacity. the earthquake business and also do all the work necessary to administer the wildfire fund. So we're lean, and we knew that we needed to tap into subject matter experts. And the first person I hired was Dr. Johnson, who is an urban planner but is a – I would refer to, I guess, in baseball parlance as a utility player with broad subject matter expertise across an array of natural catastrophe spaces. And we then built a team and charged them with going out and interacting deeply with stakeholders, personal interviews, making sure that we could pick up all of the voices and all of the opinions and all of the recommendations so that we could synthesize those and carry those forward. We literally spent hundreds of hours with individual people who were interested in this space. You'll hear from Joy Chen from the Every Fire Survivors Network. Thank you. And, you know, it was really important to us at the outset to make sure that we got to hear those voices of survivors, local business people, community members who were impacted by that, and not just stick to the business interests that are also centered on the subject matter topics. that we were asked to study. And those hundreds of hours of input that we got were Very, very important to our ability to bring forward a broad set of recommendations that hopefully will be helpful to the legislature as you think about the issues that you face and that will come before you. In the report, one of the things we elected to do was to recognize that among the spectrum of options that are available to the legislature is the choice, the option not to take any action to address the topics that were embedded in the scope of the report. So we added, I asked the work stream leaders to reach out to people and start talking about what their views were on the cost of doing nothing, the cost of inaction. So there is an entire section in the report that highlights what we believe are the potential costs of a decision not to act to preserve the status quo. the bottom line of which was that as we solicited input from stakeholders, the status quo really is not working for anyone. It's not working well for survivors. It's not working well for communities that are impacted, not working well for utility rate payers, policyholders, the insurance industry, and the utilities. So we tried to catalog and organize that as a baseline from which you could look at and consider the options. Before I pivot over to Dr. Johnson to talk about the strategic, the pathway strategies and options that are presented in the report, it's important to note that CEA does not come here as an advocate for any particular outcome. We were asked for recommendations, but the scope of the study was so broad, and it became apparent that there was so much inherent conflict built into these difficult topics. We did not think it was our place to put our thumb on any scales, and so we really tried very hard to be balanced and neutral and candid in bringing forward the options that we thought were going to be ones that could be undertaken and considered by the legislature. And to go into more detail on what those pathways and options look like, I will pass it along to Dr. Johnson.

Great. Thank you, Laurie. And thank you to the committee and Chairman Allen for the opportunity to share information about the option development, the modeling, and analysis that we performed to support the SB254 study as the financing catastrophes work stream. As the name implies, our work stream focused on considering design options for how to fund losses for catastrophic wildfires across stakeholders, and on providing a consistent framework for evaluating how those options are financed We did not seek as Tom mentioned to favor one option over another rather to compare and contrast options as objectively as possible As an actuary I deal with numbers I about to talk you through a lot of numbers I want to say that underneath these numbers are real people, are disaster survivors. I used to be a FEMA employee, very familiar with, and my heart goes out to all the survivors, both now and in the future, that these numbers represent. So although it may seem like as an actuary I'm being cold and calculated, that's by no means the intent. So picking up where Laurie left off under Pathway 2, we considered options on making a wildfire fund more durable and more permanent. by increasing the capital used by increasing capital and perhaps using risk transfer under option 2.4.1, by diversifying funding sources under option 2.4.2, or by implementing liability reforms under option 2.4.3. And so now on this slide, you're going to see a lot of numbers and a lot of graphs. I'm going to walk you through a little bit. But let me start by saying that I want to give a little bit of context. Wildfires and the losses and liabilities that result from those wildfires are highly variable. Our analysis is intended to provide understanding in two areas for each of the options. First, we want to provide an order of magnitude about how much capital and or funding is needed for an option to be durable over time, whether as an initial capitalization or as an ongoing cost. Does it require a billion dollars? Ten billion dollars? Tens of billions of While the report provides estimates that appear to have a degree of precision, so for example, on the left-hand side of the page, the more durable wildfire fund requires an initial capitalization of $36 billion. That precision is not intended to be an exact amount of funding. That precision is intended to allow for comparability of options, to allow the policymaker to understand directionally the difference between options and the degree to which they are more similar or dissimilar. The second thing we wanted to illustrate is to show the range of outcomes possible under each option. Once again, the size and frequency of wildfires are highly variable, and the analysis modeled thousands of multi-year scenarios to show how the fund could perform over time. The durability metric we chose to use for the study for comparability is that the fund should have a 75% probability of being solvent over 20 years. That means over 20 years, the worst thing that's going to happen to you is you're going to get to zero 75% of the time. But the analysis also shows the range of outcomes to illustrate the degree to which that funding may be insufficient and require yet more funding. Now I'm going to turn to the analysis that you have in front of you. First, consider the capital required. A more durable wildfire fund would require $36 billion, much more than the original AB1054 fund. If this were funded by utility rate payers, the monthly cost would add $8.50 to the current $2.50 for a total of $11 per month on average. Now, as we go through these examples and I talk about those average utility costs, the purpose of that is not to say, oh, do we tack on this amount or that amount, but rather to be able to translate a big number like $36 billion onto what it might mean for a typical household in California. It is absolutely an inadequate measure. All of these are inadequate measures, but they're there to allow for comparability. The graph shows that even with greater funding, there's still the possibility of needing to recapitalize the fund before the end of 20 years. If you follow some of those lines, there's a lot of lines and graphs. I'm not going to talk through them all here. But those lower two lines intersect the red line, and that means that before you get to the end of 20 years, you've hit zero, and you may need to recapitalize. An additional $36 billion could be needed if you wanted to make yourself durable again. That would add another $8.50 if you wanted to fully recapitalize, bringing, if that eventuality occurs, $19.50, and so forth and so on. Now, risk transfer can greatly reduce the initial capitalization costs. Instead of $36 billion, not shown in this slide but in the report, you'd only need $11 billion of capital instead of $36. But you're going to pay a premium for that risk transfer, $3 to $4 billion a year. That translates to $2.50 for the $11 billion. That's not so bad. But then an additional $9.75 for the risk transfer for a total of including the current $2.50, so $2.50 plus $2.50 plus $9.75 is $14.75. But it evens out and makes it so you don't hit those sudden jerk recapitalization needs. Option 2.4.3 on the right-hand side of the page is there to illustrate how liability reforms change capital requirements. The liability reforms shown reduce the requirements from $36 billion to $29 billion, which does reduce the total capitalization need. It could be funded through a $7 a month surcharge instead of the $8.50. There's a little bit of an apple and orange between some of the numbers on the left-hand side and the right-hand side. I want to acknowledge that. So the $7 surcharge on the right-hand side is comparable to the $8.50 on the left-hand side. Next slide, please. Now, for the state rules for addressing catastrophic funding, California has created several entities to help manage disaster risk, including the CEA, the Wildfire Fund, the Fair Plan. Other states and countries have established state-sponsored mechanisms to address natural catastrophe risk, including fair plans and wind pools around the U.S. Federal approaches to flood and terrorism and natural catastrophe financing approaches are also executed in other countries. But among all these examples, California is unique in needing to address the tail risk of electric utility liability for wildfires caused by their equipment or operations. Introducing a revised role for the state of California could enable expansion of broader cost sharing and scaling of catastrophic risk. By pooling risk across a wide base of policyholders, taxpayers, or regions, the state can spread the financial impact of low-probability, high-severity wildfires and address gaps in current recovery protection systems. A state-sponsored mechanism can be designed to complement rather than replace private insurance and existing catastrophe risk financing programs. First, the study considers the role of the state in financing the catastrophe risk, with two options focused on addressing utility liabilities and two options focused on insurance markets in addition to utility liability. Second, we consider state roles in financing community wildfire mitigation. So next slide. I will quickly walk through the study's four options for the state to finance catastrophe risk for utilities insurers. This isn't going to be able to do real justice to these options because they're very complex, but I will give an overview of each one. Option 3.1.1 contemplates establishing a state insurer for electric utility payments. As seen in the more durable wildfire fund analysis, utilities are exposed to a large capital requirement with both uncertain timing and size. The state program would allow the utilities to pay known premiums and the state would address that volatility through bonding loans and other measures to spread the risk over time that is incurred by the utilities Option 3.1.2 would establish a state backstop for utility liability, not only perhaps for the three IOUs, and also the previous option could also be for other utilities, the POUs, the SMJUs. The backstop would cap the amount of losses utilities are responsible for to a specified limit, and then the state would cover losses, not necessarily for negligence or imprudence, but those losses that they occur under strict liability. The state would then cover those losses above that limit. Rather than pre-funding losses, which requires lots and lots of capital, the state could spread the costs when and if they occur through using a temporary sales tax or other broad-based assessments after an event occurs. Next slide. Option 3.1.3 seeks to address the availability of insurance in high-risk areas by allowing for insurers to write high-risk policies without bearing the full brunt of the risk by sharing the risk with state-sponsored reinsurers. Option 3.1.4 removes wildfire risk from private insurance policies and create a state-sponsored insurer. The state would provide consistent coverage in high and low risk areas alike. The state insurer would waive subrogation rights for utilities caused by wildfires, thereby reducing the utility exposure. Currently, the state's insured wildfire risk is well diversified by private insurance companies. This option would concentrate the state's wildfire risk, requiring potential increases in policyholder premiums and also significant capital or post-event assessments that are detailed more in our report. Finally, while not on this slide, I will close with 3.2.1, a statewide funding for community wildfire mitigation. I want to highlight it even though it's not necessarily the utility jurisdiction, but by creating a more coordinated statewide program for targeted household and community mitigation, not just the utility mitigation that's been taking place, California can accelerate statewide mitigation and maximize, bending the curve of wildfire risk. Through this statewide coordination and targeting to prioritize mitigation to the highest risk communities that are most prone to conflagration risk, the risk reduction achieved can be more than double the risk reduction for an uncoordinated approach. Targeting mitigation can decrease funding requirements of a more durable wildfire fund from $36 billion to less than $24 billion. Assuming mitigation can decrease risk in California by 50%, addressing only the 10% highest risk communities and properties, you can reduce 20% of the total risk with targeted mitigation. And now with that, I'll turn it back to Tom to close us out.

Thank you, Mr. Welsh. Our plan is to have PUC come and present and also OEIS, and then we'll have a full panel discussion with all the members, if that works. So let's invite CPC Chief Deputy Executive Director Forrest Kaiser, who's here to present, and that will be followed by... You guys can stay, yeah. Yeah, stay, stay, stay. We're going to have everybody. Yeah, it's going to be a fun adventure. Sure. So let's start with Forrest, and then we'll go to Tony from the OEIS.

Thank you, Mr. Chair, Madam Vice Chair and members. I have a couple slides. They're mostly just to demonstrate who we are and how we work, and then I'll go into the recommendations. I want to thank all of you for all their continuing ongoing support for this type of work, and definitely thank Senator Becker and other members for your work on SB 254. There are several provisions related to energy safety that we're implementing right now. Energy safety was created by Assembly Bill 1054 and 111 in response to the tragic fires of 2017 and 18. Energy safety's job since our establishment, 2021, has been to drive California's investor-owned utilities and transmission owners to both better understand their risks of catastrophic wildfire, and to take meaningful action to reduce that risk. Energy safety's primary mechanism for doing so is the wildfire mitigation plan. The IOUs submit these plans. We review and evaluate them to make sure that the utilities are consistently demonstrating improvement in understanding their risk and mitigating those risks. Upon plan and removal, we also ensure that the utilities are implementing those plans through our performance oversight process. This includes field inspections, audits, an independent evaluation by a third party, and our own annual report of the utility's performance. As part of this process, last year we conducted field inspections of about 5,000 poles and 20,000 trees. AB 1054's great advance was in tying these forward-looking accountability measures to the Wildfire Fund. And so our recommendations aim to build on the statutory framework of forward-looking accountability. And when I talk about forward-looking accountability, basically it is, you know, once a disaster happens, it's too late. really we need to hold people accountable for what their actions they're taking to prevent the disaster. So we have seven recommendations, but in the interest of time, I'll highlight the two that might be of most interest. Our second recommendation is on safety reporting and information sharing. So Wilbur Wright of the White Brothers once said that carelessness and overconfidence is more dangerous than deliberately accepted risk. He also deliberately accepted his brother flying the plane first, in case you were wondering. The utility's biggest risk is not those that they've identified and are mitigating. It's those that they have not yet identified. And so the best tool that we have to find out those unknowns is the effective sharing of safety information. And there are three components to this. One is employee reporting systems. So workers see the problems before those problems escalate into disasters. While all of the IOUs have programs to have their employees report safety issues to them, they're all at different stages of getting them to work effectively. Component two is information sharing across utilities. In our wildfire mitigation plan review, we find that the utilities generally do a pretty good job from learning from their mistakes. Not as much from learning from each other's mistakes, though. And then three is public trust. So the public and regulators need confidence that this whole system is working. And again, successful safety reporting systems really do depend on that trust. Employees need to trust that they won't face negative repercussions from reporting safety issues. And utilities need the confidence that sharing their experiences, including their failures, is a better option than locking those lessons down and hoping they don't come out in discovery later. So energy safety, the PUC, and partners at utility commissions across the West have been working to implement components of this recommendation. The second one I'll present is our third recommendation related to executive compensation. So energy safety doesn't set compensation values and rates. We look at the structure. And we look at the structure to essentially ensure that there safety there financial stability in the three components The three components are base salary so what most people get for their job The second one is annual bonuses so the short-term compensation. And the third is the long-term compensation, which is generally over three years. So executive compensation can really align management incentives with those of shareholders, bondholders, workers, ratepayers, and the public. One of the things that brings all these groups together is safety. The current framework, however, allows for relatively low safety weightings across the whole compensation package. As IOUs are really only required to provide those safety elements in the short-term plans, and those are often only 20% of the compensation package. Long-term incentive components are usually about 60% of the package, and those are tied to generally stock performance. PG&E is the only one of the three large IOUs that has safety measures in its long-term incentives, and given this clear alignment of safety with all the parties involved, we believe there's room to make this important component of the forward-looking accountability even stronger. So I've highlighted two of our seven recommendations, but I would be happy to, of course, elaborate on any of the other ones and happy to answer any questions you may have.

Okay, so compensation plans for most people are just salary, right? But for executives at major U.S. companies, there's three components. There's a base salary, which is usually about 20% at the highest level. It's a short-term annual bonus structure, which often has various different performance elements. And then there is a longer-term structure, which is generally defined as measuring performance over a period of three or more years. And that is 60% of the compensation of the highest levels. The measures that are usually used for that are stock performance, and that's kind of just the way the American corporate world works.

Okay. Thank you. Thank you, Mr. Chair. All right. Let's take this opportunity to open up the floor for questions and discussions. Remember, folks, we have this panel, and then afterwards we'll have a stakeholders discussion. But this is a great opportunity for us to talk to the folks who are at the heart of the report. So we'll start with Senator Stern. Thank you, Mr. Chair. I'm honored to join this hearing today, both as a member of this committee and chair of emergency management as we endeavor on the grueling task ahead. Honored to have our budget subcommittee chair, as well as chair of Senate Natural Resources and other members. I think it's a testament to the Senate and the Senate president's seriousness about these issues that we're going to dig deep. So I appreciate you making this initial convening into the CEA and the other agencies engaged here the diligence is much appreciated A lot of important numbers and concepts to wrestle with It's also super personal, right? So it's hard. And as somebody who's gone through this stuff and walked through the ashes of my neighborhood and my own house and just felt that sting and doesn't really go away, when you go home, it's like, it doesn't feel like it's home anymore, you know. It was hard to, it's always hard. And the crazy thing for me, at least, growing up in Malibu, which is a pretty charmed life to get to live, except when it's not. And that's the strange thing about it is there's such plenty, and yet there's such danger. And that's how I come to this whole conversation, just somebody who, yeah, seen two neighborhoods, first in Woolsey, and up behind my old high school, and then next in this most recent one, we had moved out, and Big Rock is gone now. And, you know, it's strange, though, when you look over the hills, those canes, you see those power lines, and you're like, how did they get that here? It's amazing. because in all those other parts of the year, my power's on, and it's perfect, and it feels like magic because you're in the hills, and yet someone engineered this feat to get it to you. And I actually pay the same rate to the people who live by the power plant, like next door to it. I literally pay the exact same rate on my utility bill, and I always wrestled with that because, like, Why did I deserve to have that risk insulated from me? And why even at that time, you know, growing up there, my insurance bills weren't that much higher than other people's insurance bills who didn't live in those areas because they were writing policies very differently. And we got to sort of enjoy the, yeah, enjoy a life sort of insulated from all that risk with such plenty. Again, it's Malibu. I don't need to overstate what that place is and how special it is and how privileged I was to get to live there. So I just, yeah, I'm trying to get my head around some of the solutions here. I know we sort of talked about a lot of detail on the solution side. The piece I missed or I'd like a little more on is the cost of the status quo side. So we sort of talked about how to recapitalize or things like that, but there are some startling conclusions that I've read in these reports that seem to – I just want to hear the sort of broader, I guess, economic or rate impacts of sort of keeping things as they are, as the status quo goes and what rate payers as a whole could shoulder here more. I was looking back at the numbers for the high fire threat areas and just how much of the costs we generate in our communities for the rest of the rate base. And so when you're thinking about what the future could look like for what more is everyone not in the fire zone is going to have to pay to make sure that people like my folks pay the same rate that they do, what happens? If the fund isn capitalized sufficiently there a final clause in the PUC report that says maybe you could comment Mr Kayser absent a continuously well-capitalized fund, whether California's electric utilities could remain credit worthy is unclear. Could you expound upon that point, the broader financial risk to the system, and perhaps is that just a utility issue at that point, or does that become a broader economy issue? And maybe if the CEA has a comment there as well.

And, you know, our condolences to you and the rest of the survivors that have been unfortunate enough to experience what you've experienced in your communities. I'm going to start to answer your question by going back to 2019 when AB 1054 was passed and the Wildfire Fund was created. We had a genuine crisis there that was imperiling the state's ability to keep power on for the entire state. And that was the existential crisis that was faced. We've never tested, we mentioned in the report, we've never tested the notion of having utility companies operate under the supervision of a federal bankruptcy judge, which was the situation in 2019. AB 1054, one of its achievements was getting that PG&E out of bankruptcy, back to where it could be regulated here without a federal bankruptcy court overlay. As it went into bankruptcy, not fully detailed here in the report, but there were questions about the ability of PG&E to continue to honor its power purchase contracts. And so there was work behind the scenes that was done in cooperation with the bankruptcy court to keep PG&E running in that immediate aftermath and just before its bankruptcy filing. And that uncertainty then rippled out across the other investor-owned utilities in the form of being subjected to the potential of very severe rating downgrades. And simply a rating downgrade to junk bond status could have precipitated bankruptcy filings by the other two. I don't want to speculate about how that could have been worked out without a bankruptcy. but debt holders always have covenants that say that if your ratings drop to a certain point, that can result in a call on all of your outstanding debt. So it could have been a liquidity crisis. That was the atmospherics that existed when the wildfire fund was created and the other solutions that emerged from maybe 1054 were enacted. And so the The ultimate answer to your question is we now have a wildfire fund, the original wildfire fund, which still has about $22 billion worth of claim-paying capacity, because that claim-paying capacity has grown over the years through investment earnings and prudent investment returns. But it now has to respond to the Eaton Fire, the total magnitude of which may exceed the total claim paying capacity of the original fund, and that's why in Senator Becker's SB 254, you created the continuation account. The important element of the continuation account and the reason why the study asked us to focus on durability is that the original wildfire fund is funded 50% from the stockholders of the three utility companies, And then 50% comes from non-bypassable ratepayer surcharges that we all pay on our electricity bills. And the original fund is collecting non-bypassable charges through the end of 2035 to go back and make sure that we have all the liquidity that we need. We can borrow against that revenue to bring liquidity in. but that revenue stream all the way through 2035 is now essentially spoken for in the first wildfire fund. The continuation account capitalizes another up to $18 billion. Whether or not we will ever get to $18 billion will depend on the timing of a wildfire necessary to fund recovery for survivors. That has the same 50-50 split between stockholders and ratepayers. The non-bypassable surcharges, though, go from 2035 to 2045. There's another 10 years. So the structure and the challenge about the durability of the wildfire fund as a risk-bearing mechanism to create liquidity, create claim-paying capacity, emerges from the fact that we are borrowing against the future. And that's why Senator Becker's bill asked us to study the issue and to look at whether there are more durable solutions. And so we made eye contact with that and we looked at those solutions and we put them forward in the report. But it is, to Senator Stern's point, a potential existential problem if we don't have stable utility companies that can meet not just affordability but long-range carbon reduction goals and clean energy goals. Do you think this is just an IOU issue, or do you see broader risk in the public sector as well, in the POUs?

so we can get a good, robust conversation going. Just maybe something to contemplate here. I mean, one of the solutions you put forward in... I forget if it's 2.4.1. I don't know if you're following along. the more durable wildfire fund with risk transfer. There's sort of this presumption that the only tool you've got is non-bypassable surcharges and that that's sort of the only way to, within the rate base at least, deal with these issues because that's sort of the structure we've leaned on. But there are other risk-adjusted ways I would imagine you could do that, right?

But I guess just on this piece, like since we're in energy here, this non-bypassable charge, could it in theory be focus A on high-fire threat areas? and get to the same sort of end number? I mean, when you're doing your modeling at Aon, you're trying to get to an end number, right? You're not necessarily trying to figure out how you got to that number. You're modeling, okay, we accumulated this much from the rate base. So in theory, if you got that from a different mechanism through the rate base, it could arrive at the same result. Is that a fair?

Oh, dear. All right. Every member has questions. So we're going to start with Caballero, go to Richardson, Becker, McNerney, Reyes, Rubio. Let's start with you, Ana. Thank you very much, Mr. Chair. I actually don't have a question. I really appreciate the panel and I think the last statement, the conundrum. Okay, here it is. Put it on your lap. I want to riff a little bit off of something that my colleague said and recognize that he's been burned out twice. And that is a tragedy all in itself. But it also, I think, puts a real spotlight on some of the challenges that we face. And let me just say that I'm interested in prevention because in the end it costs us all more money, however you parse it out. And I think you made a really good point about the risk that doesn't get passed on in high risky areas. So part of the challenge is I visited an area in Southern California in Orange County where they had a massive fire come through, and they've repaired the homes that were burnt, and they're planning another 300 or 400 homes in the same area, in a high-fire-risk area despite the objections of the homeowners in the area that said, we didn't have enough egress and ingress to begin with, and now you're putting hundreds of more homes. This is not safe. So there has to be some local government skin in the game, and I don't know what that looks like, quite frankly, But what used to be a downgraded fire risk area has now become, because of climate change, has become a high-risk area. And I think we need to go back and take a look at that and figure out how we built in areas that maybe shouldn't have been built in, or if we're going to build there, that the residents assume the higher risk so that we're not spreading the risk out to everyone. And I say that because we've adopted this model in climate change that everybody should pay a little bit so that we can share the risk. But in poor communities, it's incredibly difficult. And yet, well, and so as an example, in the Central Valley, which is where I represent, people are paying $500 to $700 a month in energy costs. And there's no relief. Bringing in solar doesn't give them any discount in their neighborhood. And it is obviously a really good thing to do in California, but there should be some benefits to people who live in the area that have to look at it in place of agricultural land. So I think there an issue of building local government responsibility and then I really do think that the residents are going to have to assume some responsibility for home hardening because there some fairly cost ways I mean, you take a look at some of the fires we've seen. Nothing was going to save those homes. I mean, that's just the bottom line. But there is home hardening that needs to happen. And I guess what I'm interested in is this risk on our tally sheet, lack of affordable housing, homeless population, wildfire risk, flooding risks. All of that affects our bond rating when we go to the market. and we've got these great bonds for affordable housing, for park space, for climate change, and it makes our financing more expensive. So if we don't come up with some solutions, it's got a much broader picture on Wall Street than – and I don't mean to, as you said, not look at the human cost because the human cost is just horrific. I had family that was burned out in the Paradise Fire. And they never went back. They sold because they just couldn't afford it, quite frankly, blue-collar workers. So I think we're going to have to figure out how to solve the issue without burdening rate payers. And I venture in terms of my district, it's all on the valley floor. We don't have wildfire risks. It's in agriculture right now. but they're paying for it either because the energy is so high or because their insurance rates have gone up regardless of the fact that they don't live in a high-fire zone. So I don't have a solution for it, but I just want to be able to put a finer point on what you were talking about, Senator, is that this really does have a cost for everybody, and it's a question of how do we deal with this and not put the burden on people who can least afford it. And all that talk about our bond ratings makes you think you're interested in treasure or something like that. All right, let's go to Senator Richardson. Thank you, Mr. Chairman. I want to first take a moment to applaud Senator Becker on his leadership with this bill. Had we not had people who were strong and visionary to say we need to look at the bigger picture, I was just somewhere earlier this morning and said one of my biggest frustrations as a senator is I don't feel we're looking at the bigger picture. I don't think we're really answering the questions, what's happening, why is it happening, and what do we do before we start doing all these wonderful bills that oftentimes are not consistent, work separate from one another, end up being hurtful. So I want to thank you, Senator, for the stand that you took of bringing this forward. And for those of you who took the charge seriously, timely, and gave us really good information. This is not something we get every day, unfortunately. So I want to say thank you for the leadership that you took to do this. Because now at least we can have that discussion. And now it's on us, frankly. You know, you passed us the football, and now we've got to punt or throw or run or do something, but we can't just not do anything. And so I want to thank both of you. I have not had the opportunity, sir, with the CEA to talk to you, so I'm going to ask you three very brief questions, and then I'll give my final comments. And, you know, a lot of people historically have not been around to know these answers. When was the CEA founded? Why was it founded? And how many homeowners today are utilizing, you know, and are being insured through your way? And the reason why I'm asking these questions, because I think it's frankly, potentially where we're going again. and it would be helpful to kind of know, look back a little circumspect of how the whole earthquake situation happened and what we did as a state to begin to address it. But if you could be very brief because those are really questions for the gentlelady from Baldwin Park in the insurance committee, but I'm going to take advantage of you being here.

Approximately how many homes are there?

Absolutely.

Thank you. So, you know, there's an old saying, there's nothing new under the sun. And I didn't ask those questions because I was ignorant. I asked the questions because I really think we're kind of back in the same situation, just another topic. You know, maybe it's not earthquakes, maybe it's fires, maybe it's not fires, maybe it's floods, but it's the same issue that when we have a catastrophe, the question becomes, can the current insurance market support it? And if it can't support the current catastrophe that's occurred and the potential that's coming, that could happen down the line, what do we do? So I just have three comments, and then I'll summarize. One, to me, it seems like today there's a discussion of who pays, and what I got out of it is potentially the state may need to pay, some utilities may need to pay some, and ratepayers may need to pay some. Various options, but essentially those were our options. The second thing I heard, but I think we need to focus more on, is what are we paying for? For my constituents, if we were to come to my constituents and say, you're going to pay $10 more per month, but God forbid a catastrophe happens, you're going to have the coverage, you're going to have insurance coverage that's going to pay for if you have a one-off issue or that's going to be affordable. Because to me, I don't think it's fair that if we come up with a scenario that ratepayers are paying and the state is paying, then I think the insurance companies also then have to make sure that people are insured and that to me is one of the problems we're facing today is whether insurance is accessible and whether it's affordable. So to me, what are we paying for? If we're going to come up with a scenario that rate payers are going to pay, utility payers are going to pay, and the state is going to pay, then that means we need to get something out of it, which is coverage. And we need to have risk assistance, risk protection, that when this God forbid thing happens, people then are in fact covered. I think the average Californian, if you tell me I've got to pay $10 a month for this, I'll pay $10 a month if I know if there's a fire, if there's an earthquake, if there's a flood, whatever it is, I'm going to be covered. And to me, that's our challenge is I think we're hearing we're going to have to pay. Yes, things are going to happen. But I think the challenge is going to be working in conjunction with the insurance committee, which I also serve on, is that then we're going to have to say if we're going to pay, then people have got to get something for what they pay for. And then that leads me to the last point, which is it has to be equitable. And that's why, in my mind, this is a more broader end-up solution I think we need to get at, that people, whether it's an earthquake happens, horrible, whether it's a fire that happens, whether it's a flood that happens, because if everyone's going to pay, then everyone needs to be protected. So in my district in Watts and in Compton and in Carson where we don have you know as many trees and you know land and hills and all these things where these fires and things can happen if we not you if we because I a part of the you now if we going to have people pay then everyone needs to benefit So to me it not right that if we going to have a wildfire mitigation fund that people in Watson Compton and every place else Wilmington are going to pay for, then I don't think it's fair that they're expected to pay for wildfire protection, but then they don't get their earthquake protection. So it's all going to have to kind of work together of disasters, all these things and say okay you may not have the fire but you may get the earthquake so that's why you're paying you may not have the earthquake but you may have the flood and so i'm really going to challenge both this committee and the insurance committee that i think you know one yes we need to fix the immediate band-aid which is the wildfire situation that we see is reoccurring reoccurring more continuously faster. Yes, we need to fix that, and I'm committed and on board to doing that. But I think we also have an obligation to fix the broader problem, which is disasters, things are going to occur, and how can we make sure that if everyone's going to pay, then everybody needs to be covered. And then the final point I want to make is the issue to do with local government. I happen to live, I'm blessed, I bought the most horrible house on the block, but it happens to be on a bluff looking at an ocean. Okay, well, the bluff going below me from my home down to the ocean, who's supposed to keep that clear? All of that vegetation that's grown up. Okay, am I, as the homeowner, that I don't have the rights to the ocean that's below me? Am I supposed to pay for the mitigation clearing of the brush from my home up on a bluff down below to the ocean? Okay, I clear that. But then my neighbors on both sides of me, they haven't cleared it. So God forbid this, you know, a fire comes up, you know, is it going to jump over my little cleared area or is it going to burn and then rise up to those homes? So I think also a part of our ending solution is going to have to be those other areas, the hillsides, everything that's not your home, not my home, but it is out there and can eventually get to your home. Who's responsible for that? And how is that going to be mitigated? So I think we have so – I just – I'm excited and I commend the committee for getting the information. But now I think the pedal is now on our shoes to take it and to do something with it. And what I find frustrating, and this will be my last point again, is that we're getting ready to vote on a bunch of bills that are piecemealing trying to fix the problem. And I really think we as the Senate, as the Assembly and the governor, we need to collectively sit down at some point and say, what is the big issue? What is it that we need to do to fix this? And what are the bills to fix it? And we need to have the courage to stop these one-off bills here, one-off bill here, you know, 100 different bills that people are going to attempt to implement that collectively are not really going to solve the problem. So that's my comments. And count me in. But I just want to let's get going on ultimately solving the problem would be my challenge. Thank you. Thank you very much Thank you Thank you Senator I agree Let go to Senator Becker Thank you Chair I thank my colleague for your words and appreciate all the work that went into this that reflected in the report I've been fortunate to have some long plane rides, so I get to really dive in. And also, you know, for my colleagues as well, that all the stakeholder contributions are also available on the cawildfirefund.com. cawildfirefund.com. Yeah. And, yeah, so all the, you know, from Tern and others and, you know, all the letters. And there's a lot of, you know, good reading and detail that went into all of this report. and I appreciate and also my colleague, Senator Caballero, that it starts out with the community-wide risk reduction and we will tackle that in a joint hearing and natural resources and emergency management, but the other big part is how do we pay for that? Senator Richardson has a bill and we've been working on that already this year, but that's going to be one of the big pieces of all this and that undergirds this. I do appreciate how you've highlighted in the report the cost of the status quo, because I think we don't fully appreciate that.

Thank you for the question. There are a number of countries that have undertaken similar state interventions, the creation of protection, what we call protection gap enterprises, where the private markets are not filling the gap. So the state steps in and creates a mechanism. What's interesting about this spectrum of approaches is that they all work in their own way for their own communities. Some of them are more pre-funded, the creation of large funds that have a lot of claim-paying capacity, like the Earthquake Authority does right now, awaiting the event. Other examples of protection gap entities that also work for them are like Turkey, for example. They have an earthquake claim paying capacity. They had a very large earthquake several years ago, incredibly devastating. But it was a post-event capitalized organization, but it was an existing distribution mechanism to help recovery after the fact. It worked for them and is working for them in part because they didn't have the economic flexibility to do a lot of pre-funding. Across that spectrum, you see a mix of approaches that work for the local communities. I'm hesitant to call out anyone as working particularly better than others because each state has an opportunity to create a mechanism, fill that gap in a way that works for them, works for their economy, but creates some kind of recovery-focused, survivor-focused enterprise.

I wanted to ask.

So CEA is actually a founding partner of something called the World Forum of Catastrophe Programs, W-C-A-T something else is their website. But there are a couple of papers that are referenced there that are very useful. There's also some books on this. But I will say most of these organizations that deal with climate hazards are all facing the same challenge right now, which is the hazard is changing and anticipating that for the future and what that means in terms of capitalization, Capitalization, either what is needed pre-event to capitalize it or what would need to be set aside and planned for post-event is a challenge that most of these public protection gap entities are facing. So New Zealand has something called, it was the Earthquake Commission. It's evolved into, it always did cover some climatic issues, so they've changed their name to the Natural Hazards Commission. They right now are doing a study on the insurance market constraints and the impacts that that will have on the government. in the next large climate disaster that they may face. So most countries, Australia is doing some of the same thing. Most countries are actually starting to sort of look at how their hazards are going to change, if they're covered under their current system, and what they need to do to sort of understand the magnitude of that, the rate at which it's going to be changing, and how they have to set aside some protections for that. That would be what I would add.

Yeah, that's right. That particular intervention option focused on the fact that we don't have to just collect money from Californians and create a self-funded catastrophe fund. There is a robust international reinsurance market where we can essentially buy at a cost, a market-driven cost, insurance or protection for the fund. And so that option looked at the availability of that market to help meet essentially the insurance needs for utility-caused wildfires as one way of making the fund more durable and reducing the initial capitalization demands on the fund.

So that's a notion of a couple tiers. You have one mechanism that gets you to sort of a certain level, cover a certain level of risk, and then another mechanism. To cover risk above that. Correct. Yeah, and those markets are very dynamic. They will sell you insurance or reinsurance with different attachment points based on the severity of the event. So the less probable the event, the lower the cost of buying that reinsurance. if you want that insurance to attach at a lower, more frequent event, smaller but more frequent, the cost is higher.

Thank you. Okay. We'll go to Senator McInerney.

Thank you, Senator. We very carefully hewed to the subject matters that were in SB254. I could have probably, in retrospect, construed the statutory scope of topics that we were asked to study to expand out and reach that, but we didn't, simply put. I mean, everyone, it's been part of the conversation, but the focus of the scope of the study was really around looking at our existing systems and our existing mechanisms to equitably allocate the cost of catastrophes and focus on where those intersect, where they are in conflict with each other and what solutions might be brought to bear to help make those systems stronger and more equitably allocate losses. So the short answer is we did not go off on a deep examination of the opportunities to hold fossil fuel companies accountable, but that certainly remains there. It would have occupied a huge amount of our attention at the expense of the topics that were specifically called out in SB 254.

and Neil, I think you mentioned in section 3 that that might help mitigate the risk for insurance companies I mean for utility companies Am I reading that correctly So I would say 3 is it acknowledges that there is a large liability that created and it seeks to have a way to apportion that where there's a limit to what the utilities would face, and then the state fund would then pay for the rest. It does not address directly in first condemnation. There's other places in the report that talk about the way that the liability could be changed based on what would be the utility's responsibility, what would not be the utility's responsibility. And I'm not the liability expert, so I'll let Tom and Laurie talk about the way that we looked at other states and said this is not universally true in every state that what falls into the liability bucket in California is universally accepted as a liability associated with a wildfire. At the risk of oversimplifying, the genesis of this report was focused on the decision to create a wildfire fund. You created the Wildfire Fund in part because the insurance markets were getting so expensive when it comes to selling insurance directly to the utility companies. So you created a nonprofit, low-cost insurance facility to provide wildfire insurance to the three utilities to reduce the cost to rate payers, ultimately, even though they bear part of the cost, half of the cost through surcharges. Balanced against that is the fact that they no longer go outside to the private markets to buy insurance. But when you focus on the creation of an insurance fund, you've got inflows. How do you capitalize it? What's the mix of capitalization? How much capital do you bring in before an event? How much do you wait to collect until after an event? But then there's the issue of outflows, how much money flows out of the fund and when to help survivors recover. And that's pathway two within the report focuses on a variety of opportunities and looking at other states that have addressed this same problem. California is not unique here. There are other states that have created funds like this and have looked at ways to make their funds more resilient by controlling some of the outflows. And we called all those out as opportunities to address the outflow element to make this low-cost insurance mechanism more durable and longer-lasting. So it's a annual office.

I lost the thread on the question, so thank you for bringing it back to inverse. The source of the utilities liability is constitutional principles, and that's what generates the more challenging pathway because you'd have to amend the Constitution to eliminate that strict liability. Balanced against that, is the fact that the utility companies, even if you rescinded or the state voted to change the Constitution to eliminate inverse, it is not a relief of liability for negligent conduct on the part of the utilities. And so you would still have a circumstance where utilities can be held accountable for negligence or imprudent management of their infrastructure, irrespective of inverse. So we call that out and note in the report that simply dealing with inverse or trying to get to that constitutional amendment isn't necessarily going to suddenly relieve the utility's burden of liability if they are negligent. It just moves from a strict liability for the property damage to a cause-based liability system.

Did you have a question?

Let me start with the first part. How does prudency work within the regulatory system? The first thing we have to recognize is the existence of the wildfire fund does not relieve the utility companies of their liability to survivors. So even if we run out of claim-paying capacity, they keep paying, and they then have to find sources to fund their liabilities. So it's not a bailout. It's simply claim-paying capacity and liquidity tool. And we reimburse them under AB 1054 after they pay a claim. And then when they're done paying claims after a covered wildfire, they start a catastrophic wildfire proceeding in front of the CPUC in which if they have a safety certificate, they go in with the presumption that they were prudent in the operation of their system. It's a rebuttable presumption, so other people can bring forward evidence to contest that and show reasonable grounds for eliminating that presumption. And then the utility company resumes having the burden of proving that they were prudent operators. The prudency decision isn't always binary, and the CPUC can talk about this some, but in a nutshell, a finding that they are imprudent or were in some manner imprudent is not exactly negligence, but it's akin to negligence, and the consequence for a utility company that has drawn money out of the wildfire fund is they have to reimburse the wildfire fund, but only up to a cap. So if you take the Eden Fire, for example, it's going to be a tens of billions of dollars of liability that will flow out of the wildfire fund The reimbursement obligation if they were to be found imprudent and had a reimbursement to us would be capped at 20 percent of their transmission and equity rate base which is currently calculated at $4 billion. So it's that rate base that existed at the time of the covered wildfire. So the fund would get back $4 billion. and if that leaves a shortfall, it would be up to the utility stockholders to capitalize that loss.

Sorry for the sidetrack.

So the prudency process at the CPUC is after the fact and really is about whether or not the utilities have to repay the fund or not. That's way downstream of the victims actually receiving their compensation.

No? I think I see what you mean now. So, I mean, establishing whether or not the utility was put in earlier on.

I see. I could see the benefits of the potential benefits for that. All right. Let's go to Senator Reyes. We'll continue the discussion.

Who is it from your various organizations that would be in the best position to have that conversation with me? It's a great question. Every funding option involves necessarily tradeoffs, so that conversation kind of permeated all of the work streams to one extent or another. But we'd be happy to take that back and reach out to your office with some recommendations of thought leaders who emerged through the process. And they may be people who actually came in as stakeholder contributors. So we'll take a look at that and bring something back to your office.

I would like to have more information as we make a proposal on how we best work. fund this, the wildfire fund.

Thank you. Thank you, Mr. Chair. Thank you. Thank you, Madam Chair. Appreciate that. Well, one of our senators wanted to ask some questions, but she needed to go to a meeting, and we've got to get on to the next panel, too. So if any of you stay, I may subject you to more questions from her, which is not a reason to leave. But I really do appreciate you being here, and this is obviously the first of much discussion on the lines of what Senator Richardson had to say. Thank you for the invitation and the opportunity. Thank you. Okay, let's bring up some key stakeholders who are going to share their perspectives on the report, discuss the tradeoffs entailed with these proposals. Obviously, there are so many stakeholders who have interest in these issues that we were not able to incorporate today. But we're going to start with Joy Chen from Every Fire Survivors Network to provide an important perspective of wildfire survivors. She will then be followed by Tyson Smith, who's the Vice President of Law, Strategy, and Policy at PG&E, to speak about things from the perspective of the IOUs. Then we'll hear from the publicly owned utilities, Fernanda Valero, who's Executive Director of Strategic Issues at LADWP on behalf of California Municipal Utilities Association, and Mark Toney from the Utility Reform Network. who will share the perspective of utility rate payers. And finally, Melissa Spark Krantz, who's the legislative advocate for the League of California Cities to provide the perspective of local governments. We'll ask each of you to speak three to five minutes regarding the recommendations related to electric utilities from your various perspectives, and then we'll have opportunity for discussion. So we'll start with you, Joy.

And the for-profit company that caused all of this is enjoying record profits. Last September, we were very disappointed to read in the Los Angeles Times that in the final hours of the ledge session SB 254 was gutted and amended from protecting survivors to protecting corporations The LA Times called it effectively a bailout We were told these backroom deals were necessary to protect utilities from bankruptcy and to maintain financial stability, and that's the rationale that is now driving the SB 254 study. In October, the CPUC approved a massive Edison rate hike and nearly $1 billion in back pay. Just two months later, in December, Edison increased shareholder dividends to pay out $1.3 billion in 2025 alone. Its three largest shareholders are all out of state. Vanguard in Pennsylvania, BlackRock in New York, State Street in Boston. Instead of protecting against bankruptcy, the backroom deals forced Californians into a massive transfer of wealth to these Wall Street shareholders. And the shareholder enrichment didn't stop there. In 2025, Edison's profits tripled from $1.3 billion to $4.5 billion in one single year. Was that from innovation? Operational excellence? No. On Edison's own earnings call, CEO Pedro Pizarro is explicit. These profits came from regulatory decisions. from the backroom deals that state leaders handed Edison last fall. For 2025, as we heard Senator Reyes say, Pedro's own compensation rose 20% to $17 million in the same year his company caused one of the most devastating fires in United States history. So who's paying for all of this corporate excess? The same families fighting to stay housed. AB 1054 explicitly tied wildfire fund access to executive compensation being linked to safety records. So what happened to that accountability? These three private companies are granted monopoly status because the public is supposed to get something in return. Safe, reliable, affordable service. But I'm a former deputy mayor of Los Angeles. We oversaw the LADWP. And I want to know this. Why is it that publicly owned utilities don't cause catastrophic fires, while California's three for-profit electric monopolies charge rates twice the national average, deliver much worse service, and keep burning down communities? Because we do not hold them accountable. People often ask how our group, the Every Fire Survivors Network, or EFSN, grew to more than 10,000 survivors and allies so quickly. It's because we're built on principles every Californian agrees on, regardless of party. Every fire survivor should have a real shot at getting home. Insurance companies should honor their contracts. And corporations that repeatedly cause catastrophic harm should be held accountable. With Senator Sasha Renee Perez and more than 250 nonprofits, we asked Edison to advance urgent housing relief that's desperately needed to the families whose homes they burned down and poisoned. Edison would be fully reimbursed through the California Wildfire Fund. We did not ask them to pay survivors $1 more than they already owe. We simply asked them to pay sooner But Edison said no Instead they launched what they call a fair and timely compensation program that requires survivors to sign away lifelong legal rights in exchange for payments that would make recovery impossible for most Renters, under Edison's plan, get a flat $25,000 when the median renter losses are $250,000. Smoke damaged survivors get a flat $10,000. My smoke remediation cost is $200,000. The SB254 study was supposed to evaluate how to equitably allocate catastrophe burdens. Instead, it is a bailout for utilities, dressed up in policy language. Every burden it shifts away from these utility shareholders lands on someone else, on survivors, on policyholders, on taxpayers. It's a zero-sum game. If companies that start fires pay less, everyone else is forced to pay more. Californians are furious at these backroom deals. The system meant to regulate these companies instead keeps protecting and enriching them, even when they cause massive harm. Many of your constituents are reaching the point where they just want to throw all the bums out. Full compensation for survivors is not radical. It is the baseline that allows markets to function and risk to be priced accurately. Continuing to protect utility executives and shareholders from the consequences of their own negligence has one predictable outcome, more catastrophic fires. So I'm glad to discuss any aspect of the SB 254 study with you, but I'll leave you with three things that you can do right now. One, demand that Edison advance urgent housing relief, because survivors should not be going homeless while funding Edison's record profits and shareholder dividends. Two, pass AB 1774, requiring independent audits of utility wildfire mitigation spending. The last audit done in 2021 found utilities got $6 billion in wildfire mitigation spending and couldn't account for $2.5 billion of it. In the four years before the Eaton Fire, Edison failed to spend $500 million in wildfire mitigation funds they already collected from us. Had AB 1774 been law, the Eaton Fire may never have happened. Third, reject any proposal that strips protections from survivors. The SB 254 report proposes capping non-economic damages, which means compensation for death, pain and suffering, and losing everything. Does Boeing compensate families after crashes? Yes, it does. Did big tobacco pay billions of dollars after spending decades hiding the public harm its products caused while lobbying government to block accountability? Yes, it did. Well, we are at a big tobacco moment for California's three-for-profit electric monopolies. Will government stand with the public or simply continue to protect and enrich the private companies that repeatedly burn down our communities? We hope you'll stand with Californians on this point. Families across our state are depending on you. Thank you very much. Thank you, Jim. Thank you. All right, we're next going to go to Tyson Smith from PG&E.

Thank you. All right, well, next go to Fernando Valero, who's here representing California Municipal Utilities Association.

Thank you. All right. Let's next go to Mark Toney from TURN.

All right. Can you hear me okay? There we go.

Thank you. All right. Great set of perspectives. Very valuable to hear everybody's thoughts. Let's open up to Florida questions from the members. We'll go first to Senator Becker. Okay.

Yeah, you know, on that one – Press your button, please. It's very interesting that the LA Times – and I was quite shocked by this – on everyone's compensation. So you're saying there's the executive compensation. Well, if shareholders are paying for that, but we're providing all this extra money to shareholders, I mean, money is money. It's fungible, right? So we're still paying for it indirectly. But the second thing that was really shocking to me that the LA Times found was that the median Edison employee gets paid $220,000 a year, which is 2.4 times the median household income of California. Yeah. That's a median employee. That means half of employees get paid more than that. And so here we are paying these rates, which are twice the national average, second highest in the country. It not just the CEO It everyone is getting paid so much more more than twice than us if we have two people working in the household then it like four times more than us right And so I think that something that we really need to think about, that we keep on raising rates. We keep on, as you say, increasing the wildfire mitigation spending. They get $9 billion a year now that there's no accountability for. The last time they did, PUC did an audit was in 2021, where $6 billion were gotten by the three for-profit electric monopolies. Out of $6 billion, they could not account for $2.5 billion. And yet the PUC allowed them to keep that $6 billion and keep on charging more and more and more. So I think, you know, it's great that the 254 study says we need wildfire mitigation. They need money to do wildfire mitigation, but we also need to make sure they're actually spending the money. If Edison actually spent the money that they got from us for wildfire mitigation, it's possible the Eaton Fire could not have happened. I mean, that just haunts me. You know, all of this senseless loss of life from not spending money like they got $500 million from us that we couldn't afford to give them, and they didn't spend it as they promised. And as a result, so much destruction.

We'll go to the vice chair.

I'm not familiar with that specific number or that specific report. What I can say though is that there is ongoing extensive oversight of our activities by the CPC by the Office of Energy Infrastructure Safety and others So while an audit may I not familiar with those results I do know that there is very extensive oversight ongoing review both after the fact and as well as on a go-forward basis what we plan to spend our money on in terms of wildfire risk mitigation.

And again, the lobbyists didn't have an answer. I mean, that can be looked up. It was the CPUC. It was the last time that wildfire mitigation spending was ever audited. By whom?

And it was in 2021. They got $6 billion, and they couldn't account for $2.5 billion. It's cited in our letter, our sponsor letter, on the – do we have the information here? It's cited in our sponsor letter on AB 1774. We can get you documentation on that if you like.

Los Angeles Times spent nine months studying how Edison spent its money on wildfire mitigation and found that for the four years before they eaten fire, Edison got $500 million for wildfire mitigation that they never spent. Senator, do you want to?

but you're doing the review of those wildfire mitigation plans annually and multi-year, correct?

Thank you. And I'm sorry I had to. We were running back and forth as always, so we don't always get to be here. And I wanted to address the previous committee members, I'm sorry, panel. So one of the things that I find sort of interesting the way the legislature works is that, for example, I was part of the committee that put together 10, what was it, 1054 back in 2019, and we had hours and hours of getting together or talking about what solutions we can push forward to, first of all eliminate risk, keep communities safe, and making sure that we had the financing to ensure that we don't always pass it on to rate payers. As a chair of insurance, seven years of committee hearings, listening to everything in a very comprehensive way. So I've been part of this committee for seven years, and so I have the privilege of having a big picture. And I'll tell you, sometimes my frustration is that we have committees, and then we get to hear snippets right here. And then people leave, and then we have, you know, I guess I'm going to start by saying I agree with the gentle lady from Carson that then we leave, and then there's like 20 bills that come out, and people trying to solve all these little pieces, and that's not the best way to solve policy. Because I remember even with 1054, and I think you guys were part of that committee, we were meeting with the governor. We were hearing from stakeholders, I mean, hours and hours, and that's not how we pass bills per se. You know, a member passes a bill, we get to hear it in snippets. So, for example, earlier today, and I'm sorry if I didn't get to address it, I heard Senator Becker ask, you know, what other countries have a solution that might work that are doing it well? And then I heard New Zealand and I heard Australia, that they have a good insurance system that works. Well, I'm here to tell you that's not accurate because I hear that often and often where California is compared and the solutions are simplified. If we only did what other countries did, it would work. Well, I went to New Zealand. I talked to their insurance agency and I went to Australia and I talked to their agencies as well because I wanted to see is it really what everyone saying And the answer is no because the way the insurance works in New Zealand and Australia is that the government pays for every fire up to Then the insurance kicks in. See what I'm saying? So we're comparing insurance to other countries that unless California is willing to pay for every household up to $300,000, then put it on the insurance, then that's a false comparison. And I even asked the, I think it was New Zealand, I said, well, what have you had, let's say, an Eaton fire at the time? It was like a paradise, a Woosley fire. They admitted that they don't know what would happen, and they admitted that probably their system would collapse because they don't have enough funding to sustain an Eaton fire or a Woesley fire or a Paradise fire. And so I find that we come in, we hear these snippets, like this is the solution, and then we put – I won't say false because that's what I keep hearing, so I'm not going to say false. is just that these topics require more in-depth conversation. And I'm hearing frustration because I've heard a lot of things today that I don't agree with. And I have depth of knowledge, having had committee hearings for seven years, having traveled to all these other countries when people say this is the solution. So I go to these countries to see, let's bring it down, let's solve it. And then with the information I get, it's not accurate because, again, unless California is willing to pay $300,000 per household, then the insurance kicks in, then we can't be comparing ourselves to New Zealand or Australia. So you're going to hear my frustration because, you know, and with due respect, I mean, I think I just heard a statement right here. You know, had they spent the six, you know, what I think was the six billion and there's two billion loss, had they just spent this money, that fire wouldn't have happened. I find that to also be inaccurate because it's not that simple. There's so many elements that are colliding. I mean, we heard, you know, some of the water pressure wasn't working at the Eaton Fire. You know, we had unusual, you know, winds that are unusual for our territory, and I live right next door, so I know how bad it got. There's so many elements, and I also hear sometimes like PG&E and other agencies, as well as insurance agencies, saying that they run into red tape from local government because they want to do some things. And, you know, it takes time. It's not like you give them money and then they could spend it in six months and then it gets taken care of. Like, these things take time. And so the reason I'm a little frustrated because there's a solution somewhere, but my caution is that I think it has to be comprehensive. It just has to be because we keep passing these bills that end up pushing the costs onto rate payers. And then we keep saying that we're tackling the affordability issue. And here we are trying to pass bills that will end up pushing the ratepayers, you know, to pay more. And so we have this cycle of us saying we want to do better, and then, again, we continue to do what we say we're not going to do. So I just wanted to clarify the New Zealand statement, the Australia statement, and, again, respectfully disagree. Had they just spent this money, this fire would not happen because we're dealing with so many colliding factors. We're dealing with, you know, again, climate change is getting, you know, it's something that's real, something that's created a year-long fire season. When I came in in 2019 and I took over insurance, we had just had the Paradise and the Woosley Fire, where Senator Stern lives. And at the time it was the deadliest the costliest fire in California history And then here we are with the fire the deadliest the costly and then we just going to keep moving forward in this way and I just would like to petition and encourage my colleagues to figure out if we can have that sit down. I remember Hertzberg, Senator Hertzberg once told me and I wasn't part of that era but we had an in-depth conversation about how policy was standing years past and I think I'm not putting it on you. I'm putting it in the system here in the legislature, he says that they would have these 24-hour marathons on how to solve these issues, and they would not leave until they solved it. I can't remember what it was called, reconciliation or something, where that's how, and I see you nodding, maybe you know what I'm talking about, they would not solve it in a bill where we move forward, and then we find out what the unintended consequences are, and then we're back square one. It was a 24-hour marathon on an issue, and they would put stakeholders together, and I would like to go back to those days, because we're going to be here two years from now, three years from now, with the same crisis, only because you have someone that's set on energy and I have set on insurance, and I've toured the world trying to find those solutions when people say this is a solution, and they're not accurate. So I think my statements that we make, that propels policy forward, and at the end of the day, that's not a solution. So I just would like to actually ask my colleagues to at some point, let's review what we used to do in years past, where they would not go home until they had spent at least 24 hours or days in and out on one issue. Because unless we do that, I just don't see a solution. And so I want to clarify for the record that, I mean, I've heard a lot more other statements that are inaccurate, but we don't have time. And I just want to say little snippets, little statements here. At home, people are listening, and then they think that's accurate. There is truth. I'm not saying it's not, but it's everything together, not just one thing. So I just want to say in terms of an idea, I think earlier someone said that when we ask, for example, the utilities for solutions, I think I heard a statement, they're not wrong, where we know that the way we fix things is by trial and error. Let's see what works, what doesn't work. And if the utility companies had some kind of safeguard where they can tell us what went wrong, what they're fixing, and how we can move forward without being penalized, then we would have more accurate information coming forward. Because I've heard it over and over again that they would like to tell us, like, this is what went wrong. You know, this is what we need to fix. But if they put information out, they're afraid that we then later on penalize them by saying, in 2020 PG&E admitted to doing X, Y, and Z, but yet we need their truthfulness. We need their engagement, and we need them to tell us what they did wrong so that in collaboration we could either hold them accountable or do better, right? But at some point, I also want to discuss that a little time. I just didn't want to take all of the time from all of you, but to everyone that's listening, the Eaton fire, the Palaziz fire, the Woosley fire, the Shasta fire, you know, I think it's I just went to so many tours, and we keep just moving forward, and it's time that I think we take a step back and really do more of a comprehensive analysis and in-depth look at how do we solve this issue because we're at a time where we're just going to keep moving forward, then we're going to be here. So forgive my rant, but, again, it's been seven years of informational hearing after informational hearing, and I'm not hearing anything different. And it's easy to accuse and point fingers, but at the end of the day, if we, I'm talking about the way the system is set up, not legislators, not any of the stakeholders, not any of the The system is set up to fail because we listen to bills right here and it takes like 15, 20 minutes and then we move on. This is a critical issue. It's time we stop and we really listen to each other, no matter who you are and what side you are. Because as legislators, we cannot solve problems when we're coming to committee hearings and you have two to three committees and you're running back and forth and we don't have that time to really go deep into it. But anyhow, please forgive me for maybe making assumptions that you're not being truthful. But again, it's about solutions and not pointing fingers or else we're never going to solve the problems. But anyways, thank you, Chair, for letting me make those statements.

Thank you, Chair. One, appreciate all of you for participating today and for us having stakeholder perspectives and really want to recognize Joy Chen, who's here from the Every Fire Survivors Network, who's done a tremendous amount of work on the ground and is here representing survivors of these catastrophic events. And I think that's what's most critical is that we really ensure that that is the center focus of these conversations. And I bring that up because I want to raise a couple of things that were pointed out in the SB254 report. From the report, insufficient and delayed claim payments following a natural disaster are common and create significant financial burdens for survivors. As financial difficulties mount, some survivors have struggled to make mortgage payments or have opted to walk away from their damaged property rather than rebuilding. Post-catastrophe mortgage forbearance programs can assist to temporarily stave off foreclosures, but the relief alone does not resolve the challenges arising from uncertainty over the timing and sufficiency of insurance benefits. Their work goes on. Survivors of fires sparked by electric utility equipment can seek compensation from the utility that ignited the fire, but the litigation process is inherently drawn out and uncertain. Survivors frequently wait many years for compensation, and the compensation provided is often insufficient to rebuild after litigation costs and attorney's fees are paid. I think that this is really so central to the discussion that we're having today. And honestly, as the senator representing the victims of the Eaton fires, I think has really unveiled for me the inherent problem that has been built into the system that was created before my time even coming into this role, which is there is really no system that we have to provide folks with emergency cash relief during that period of time when individuals are waiting to tap into the wildfire fund. And so our situation in the Eaton Fire is very different from the Palisades Fire. The Eaton Fire was very likely, as investigations have shown, to be caused by the investor-owned utility equipment versus the Palisades Fire, which was not. And so you have survivors that are then waiting and hoping that they'll be able to tap into the Wildfire Fund. but that does not happen until determination has been made, until that investigation is complete. And in our case, it's been, I wanna say 16, 17 months since the fires happened, and a determination has still not been made. So my constituents are waiting to receive answers and waiting to tap into the wildfire fund During that time you are relying on your personal savings you drawing from your retirement accounts and you doing everything you can to stay afloat. Now, you would hope that maybe your insurance company is then providing you a payout, but as we've discovered and through the work that I've done with my constituents, that is not the case. We have individuals that have ran out of ALE. We have individuals that have not received any claim from their insurance company, and so they are left to fend for themselves. The reality is that most Californians are not prepared for this kind of catastrophic event. I don't know about you, but I don't have enough savings to keep me afloat for two, three years potentially of not having a home, of having to front all of those costs. And so the system has been designed with this assumption that the individual that's been impacted by these fires is financially set up to be able to support themselves through that recovery process until determination has been made in the fire. But that is not the reality for most Californians. Most Californians are actually in significant credit card debt. That's the reality for most working class people. They are paying over 40% of their income for rent. And then we anticipate that fire survivors are going to be able to keep themselves and their families afloat based off of their savings and their retirement accounts. That's not reality. What I think is most critical, and the report points this out, actually, in pathway to equitably allocate catastrophe burdens. Strategy 2.3, efficiency and compensation improvements for utility-caused wildfires to accelerate recovery and reduce legal costs. Option 2.3.1, create a fast-pay facility for survivors of utility-caused wildfires. This, I think, is what's most critical. Now, I've worked directly with the Every Fire Survivors Network in making this request to SoCal Edison to provide emergency housing relief to fire survivors up front. So we do not face a situation where you have hundreds, potentially thousands of people falling into homelessness because they are not able to financially recover. How do we keep these individuals afloat and give them a lifeline while we wait for a determination to be made into the fund? And unfortunately, we have not been successful in having those conversations with SoCal Edison. And I recognize that these conversations are difficult. They're hard because they require investments up front. But I'd argue that it is more expensive for us to do nothing about this and allow people to fall into homelessness because that then becomes something that the state needs to make investments in to resolve. The cost of allowing that to happen is insurmountable, in my opinion, and I hope that many others would feel the same way. Now, I recognize and I have some documents here from from turn and other folks that, you know, have talked about supporting a state managed fast pay facility to accelerate payments to survivors and reduce litigation cost. And so this is an idea that we're now talking about. It been highlighted in the 254 report this idea that survivors already came up with You know as we do this work I continue to point to and I have other bills that are not related to this committee in the insurance space that also were highlighted in the SB 254 report. Survivors know what they need. If we put them at the center of the conversation, they will tell you the reforms that need to be made. And I understand the need to want to make sure that we're addressing the concerns of industry, that we're making sure that our investor-owned utilities are not going under. I understand that. But it's also really important and critical that we center the voices of survivors, the people that are directly impacted who have lost absolutely everything. We talk about these things in dollars and cents, and sometimes it feels like we talk about these things like it's monopoly money. This is people's lives that we're talking about. I have friends that lost their siblings. They are never going to see them again. That is the reality. That kind of painful losses are not just things. We have permanently changed people's lives. And they deserve justice. That is what needs to be at the center of this conversation. I would love, I know Mark, we have you here from turn for you to speak a little bit about what it would look like for us to set up a state-managed pay facility and also, Joy Chen, for you to share a little bit about why this is so critical and some of the stories that you've heard on the ground from survivors who right now are struggling and right now need immediate help and immediate relief. Sure.

Yeah. Joy, we'll just give you one minute to respond. Okay. And then we can start wrapping up.

We're getting, like, hammered right now by the caucus. You're being hammered. We've got to get down there.

Sure. We're going to be having – so you know this afternoon we've got an insurance committee, which is going to be discussing – Yeah, I'll be tomorrow at the Senate Emergency Management Committee. Thank you. In the morning, and then tomorrow afternoon I'll be at the Assembly Energy Committee. Yeah. So we'll have much more opportunities. Let's pick up this thread then. You should come as well. if anyone wants to I've got to give public comment if we can give you like a minute apiece I'm really sorry we're so time pressed right now but if anyone wants to make a quick comment you're welcome to come to the microphone but we do have the good news come on up please please oh god or should we come back I mean I don't know what to do no because we're going to get back to the Okay, please, as fast as you can, everybody. Go for it. Okay, Kim.

Please, please, please proceed.

Thank you.

Thank you, Leanne. Thank you.

I appreciate that. Good afternoon, Jeff.

Thank you. I appreciate you, Jordan. Thank you.

The other thing I want to ask for your consideration is, None of the solutions that were put into that 400 thing when it got condensed, a lot of those solutions instead of just policy were not included. But the last piece I want to do and consider, a lot of our vegetation mitigation efforts are not also keying in on response efforts and preparing for the response. So when the fire does ignite, what are we doing? For instance, SB2911, we're trying to identify those locations that could also benefit from helicopter tanks. Thank you, sir. Thank you. Hi, John. Hi, John Kennedy on behalf of the rural counties. I'll align my comments with Melissa with Cal Cities. Wanted to briefly mention a couple responses to a few of the proposals that we find particularly troubling. One is getting rid of punitive damages. It seems incredibly egregious to us to have no real financial penalties when someone goes in and kills dozens and dozens and dozens of people. Two, eliminating local government recovery for response costs and rebuilding can be absolutely catastrophic, especially for some of our smaller jurisdictions and volunteer fire departments that are already under-resourced. And then finally, as we were talking about imposing consequences for local governments and homeowners who are living in high-fire risk areas, we'd like to continue those conversations about how we build better and more sensibly in those communities. But we have RHNA obligations, right? And a lot of our local governments are 100% in high-fire risk areas. We have no choice but to build in those areas. So imposing consequences I think is troubling for us But finally on higher costs for those living in local in high fire risk areas that came up multiple times today A lot of our communities in those high fire risk areas are already having their power shut off many, many, many times a month. So we're getting very little reliable power in those communities, and now we're being asked to pay more for not getting power. We'd love to dive deeper into those weedy issues. They're tough. They sound good, but we need to have a lot of discussion. So thank you for the opportunity. Thank you.

Appreciate it. Thank you.

I didn't just go through one cruel wildfire. I have lived this cruel wildfire every day since 2018. It's the aftermath, the after effects that are just as devastating as the fire itself. I want my normalcy back. I want to rebuild. I want closure. Why am I having to fight for fair and full restitution while everyone else is making millions, even billions in profits off the backs of us victims? We need you to figure this out, how to ensure utility companies that are burning down California and are murdering our loved ones and destroying our communities are held 100% accountable. and all victims, all victims are fairly and fully compensated. Thank you.

Thank you for listening to me today. My name is Doreen Zimmerman, and I'm here on the behalf of the Utility Wildfire Survivor Coalition. I am both a wildfire survivor, and I'm a property valuation consultant for devastated markets throughout the nation. I've just completed a cost differential analysis of pre- and post-rents for Eaton. Very, very eye-opening. However, I've seen firsthand recovery from utility wildfires from Lahaina, the Marshall Fire in Colorado, Spokane, my own fire in Paradise, Tubbs, Woolsey, Dixie. I've worked them all. And these fires, they may be contained, but they're still smoldering. They are still going through our lives seven years now. And last week, Thursday, I had a dog that I had to give up for because I had to choose between shelter and keeping a family member. And I chose shelter. And my dog had to go. and last week a man heard me say, oh, I only saved a basket full of puppies when I ran from a burning house. And a man behind me said, a basket full of puppies. How old were those puppies? They were five days old. I ran back and saved them. And he said, was their mother a poodle? And I said, you mean a standard poodle? And he said, was she black and white? And I said yes He said is her name Diva And I just I so sorry I became a snot locker I just cried my eyes out They have been looking for me for seven years I gave Diva up for rescue right after the campfire because I couldn have shelter and my dog And I took my shelter and my dog went off. And last Thursday, this man just heard of me. These fires are not contained. And as Joy and Will said, we have to have a seat at the table. Thank you for listening to me. I appreciate your time.

Thank you so much, Chair and members of the committee. My name is Marquis, the Natural Resources Defense Counsel. Thanks for convening this really important conversation. It's getting a lot of spotlight this week, so we really appreciate that. Roughly 17 to 27% of California's electricity bills go to wildfire-related costs. These costs discourage electrification and regressively fall on low-income households who are more likely to depend on air conditioning. California needs a solution to prevent future utility bankruptcy and stabilize insurance markets, but electricity customers should not be asked to continue to contribute more to wildfire funds. The state needs durable funding to pay for wildfire costs that directly benefits victims. We look forward to continuing to engaging on solutions to solve this crisis. Thank you so much.

Good afternoon, Chair and members. My name is Jennifer Gunther. I'm the Director of Government and Regulatory Affairs with Liberty Utilities. We serve around 50,000 customers in the Lake Tahoe area. As a worldwide travel destination, we're visited by over 15 million tourists every year. Nearly our entire service territory is in a high-risk fire zone. We invest heavily in wildfire prevention and mitigation, yet despite this preventative work, Liberty remains exposed to a catastrophic risk that we cannot reasonably manage under current law. If a major wildfire were to occur, even absent negligence, Liberty faces potentially existential liability due to California's strict liability and inverse condemnation framework. Unlike the state's three largest investor-owned utilities, Liberty does not have access to the wildfire fund as a meaningful safety net. We're hopeful that reforms can be implemented this year to address these issues that are unique to small, multi-jurisdictional utilities and the customers we serve. Thank you.