Capital News & Notes

For Clients & Friends of The Gualco Group, Inc.

IN THIS ISSUE – “California is sort of the cutting edge” in rising electricity rates

Severin Borenstein, energy expert & UC Berkeley economics professor

Capital News & Notes (CN&N) curates California policy, legislative and regulatory insights from dozens of media and official sources for the past week. Please feel free to forward this unique client service.

FOR THE WEEK ENDING AUG. 9, 2024

 

Legislators Must Decide Fate of 1,350 Bills Next Week

Sacramento Bee

Lawmakers have until Saturday, Aug. 31, to send bills to Gov. Gavin Newsom. There are about 1,350 bills remaining to be debated in the Senate and Assembly, including more than 1,000 that are set to be heard by the two houses’ powerful appropriations committees next week.

On Monday, the Senate Appropriations Committee will hold a hearing, where it will determine whether to place nearly 500 bills on its suspense file or advance them to the Senate floor

The Assembly Appropriations Committee meets Thursday to do the same thing with the nearly 300 bills on its docket. The suspense file is intended to serve as a place to hold bills that have a significant financial impact — it also tends to be where lawmakers dump controversial or unpopular bills.

https://www.sacbee.com/news/politics-government/capitol-alert/article290653024.html#storylink=cpy

 

Central Valley State Senator Departs “Unrecognizable” Democratic Party for GOP

Politico CA Playbook

State Sen. Marie Alvarado-Gil blasted the Democratic Party as “unrecognizable” as she confirmed her switch to become a Republican.

Alvarado-Gil, who represents parts of the Central Valley and eastern portions of the state, said Democrats’ control in Sacramento is not working for the state.

“I cannot stand by a party that ignores the will of the people and disregards the core American values that my very community supports and believes in,” she said in a joint statement with Senate Republican Leader Brian Jones and California Republican Party Chair Jessica Millan Patterson.

 Senate President Pro Tem Mike McGuire said in a statement that the move was “disappointing for voters who elected Senator Alvarado-Gil as a Democrat.”

“They trusted her to represent them, and she’s betrayed that trust,” McGuire said, but added: “One silver lining is Republicans are gaining a pro-choice, pro-LGBTQ+ rights, anti-Trump colleague.”

Alvarado-Gil flipped her rural, Republican-plurality district in 2022 after she and another Democrat advanced to the general election, dealing a stunning blow to an already diminished Republican caucus. Then-Republican leader Scott Wilk spent money to boost the other Democratic candidate in a failed bid to prevent a Republican lockout.

 

Newsom to Ink AI Training Pact, First in Nation

Politico CA Playbook

California is leaning into the AI boom, today announcing a partnership with semiconductor giant Nvidia to ramp up training for the state’s workers, educators and students.

The agreement, obtained by Politico, is the first of its kind in the nation — part of Gov. Gavin Newsom’s broader push for the state to embrace artificial intelligence and maintain California’s reputation as a hub of tech innovation. But it also comes amid a federal investigation into Nvidia on antitrust grounds over its acquisition of an Israeli AI startup.

Last year, Newsom issued an executive order to study how the state can use AI while also mitigating its potential risks — a critical balancing act as Silicon Valley looks to forge ahead with development while some tech-cautious groups are pressing lawmakers to help pump the brakes.

Newsom, a longtime innovation evangelist, has not yet weighed in on a controversial bill in the state legislature that would require safety testing for the largest AI models, a proposal that as we’ve reported this week has now received national attention and has tech scions worrying it will squelch the burgeoning industry in its infancy.

In his State of the State address in June, Newsom touted Nvidia by name, praising the company for nurturing a startup ecosystem and calling AI “the fourth industrial revolution.” His memorandum of understanding with the company — which plays an essential role in the advancement of AI through its chips — is the clearest signal yet on the governor’s thinking.

The agreement also bolsters California’s tech bona fides at a time when some high-profile tech companies and figures — most frequently, Tesla CEO Elon Musk — are threatening to leave the state. Amy Tong, secretary of government operations for the state, said the Nvidia pact helps sustain California’s dominance in the tech sector.

“Anything that shows that California is invested in the workforce, it’s a good message to the employers to think about, where do you find talent,” she said.

The MOU aims to both shore up the workforce in California dedicated to AI as well as train educators on how to apply the technology across different disciplines, from health care to agriculture. Through the agreement, Nvidia will work with the state and its community colleges to craft curriculum, design AI laboratories and workshops, and promote the use of AI across the state.

The rapid acceleration of AI has created a skills gap in the workforce, said Louis Stewart, head of strategic initiatives for the developer ecosystem at Nvidia. In addition to California, the company is considering similar workforce-development initiatives in other states.

“Absolutely there’s folks that are feeling a little left behind,” Stewart said. “And we’ve got to make sure that everybody feels like they can participate in what’s next.”

There could be more coming down the pike in California, too. The Newsom administration said it will aim to launch similar initiatives with the University of California and California State University systems, and that there could be additional partnerships with other tech companies in the future.

 

California Powers Up…In “Untenable” Electricity Costs

Wall Street Journal excerpt

California is doing all it can to expand renewable energy production and rebuild its electrical infrastructure after flaws led to a series of devastating wildfires.

The state’s big utilities are spending billions to bury power lines and insulate wires, while at the same time moving quickly away from fossil fuels by building big solar and wind farms and transmission lines to carry the power.

As a result, resident Jessica Simpson Nehrer, who lives in Borrego Springs, near San Diego, has seen her electricity bill for her ranch-style house soar. It hit $1,873.90 in June, far exceeding her $1,200 rent and around double what it was two summers ago.

Grocery store owner Rodger Gucwa tried cutting his power bill by raising the thermostat to 85 degrees—but found that the chocolate bars melted.

Nationwide, the costs of utility companies’ capital investments are being passed on to customers. Those added fees, combined with higher inflation and a series of heat waves, mean painful bills for many this summer.

California has seen some of the sharpest increases in the country—electricity prices in the state have nearly doubled during the past decade and are now higher than those of anywhere but Hawaii. The consumer advocate’s office at California’s utilities regulator has called the trajectory “untenable.”

Lawmakers, regulators, utilities and consumer-advocacy groups in the state are battling over how to fix the rising power costs and questioning who should pay for them. Legislators are trying to make the state’s utilities regulator dial back a fixed monthly charge that big utilities will levy on consumers next year. Other politicians have tried to repeal a major cut in rooftop solar subsidies that had made it more affordable for some households to generate their own power.

Higher prices and less-reliable electricity, as utilities struggle with aging infrastructure, have become problems nationwide. At the same time, demand for energy has shot up as more AI data centers and electric vehicles come online.

Price rises are particularly drastic in California as the state pushes to electrify everything from homes to cars faster than many other parts of the country. Extreme heat and drought have pushed up demand for air conditioning, as well as heightened the risk of wildfires.

That adds more pressure to invest in infrastructure, after fires sparked by Pacific Gas & Electric equipment, including a 2018 conflagration that leveled the town of Paradise, created billions of dollars in damage and helped push the utility to seek bankruptcy protection.

“California is sort of the cutting edge” in terms of rising power rates, said Severin Borenstein, an energy-policy expert and professor at the University of California, Berkeley’s Haas School of Business. “It’s primarily due to what climate change is doing to us, and particularly wildfires. But it’s also due to what California is trying to do to reduce climate change.”

The big utilities and their regulator are hoping the high rates themselves will help change consumer behavior by encouraging households to become more energy efficient and reduce their power use when supply is scarce.

Many low-income households have struggled to afford the bills. California households owed $2.1 billion in unpaid utility bills at the end of 2023, more than four times the amount in 2019.

Around 27% of Californians have missed payments on utility bills in the past year, one of the highest percentages in the U.S. Last year, around 215,000 Californians had their power shut off for nonpayment; more than a fifth of those didn’t have their services restored.

Across the country, fires, hurricanes and other extreme weather associated with rapidly warming temperatures are prompting utilities to take expensive steps to protect electric lines and generators. Utilities are also pouring money into increasing capacity to handle surging demand.

U.S. utilities asked regulators for $18 billion in rate hikes last year, the third straight year of record requests. For the 12 months through May, the price of electricity nationally has risen at nearly double the rate of consumer prices overall.

“To pretend that the world will electrify without spending money is kind of like Alice in Wonderland,” said Ahmad Faruqui, a California-based energy economist who has spent much of his career advising utilities on rate designs.

In addition to producing more with renewables, greening the energy system requires investment in infrastructure to balance the surges and dips of generation that varies with the weather and time of day.

California now has so much electricity during the day in some months because of its growing portfolio of solar power that the grid operator is turning increasing amounts away—roughly 840,000 megawatt-hours in April alone, enough to power more than 930,000 homes.

There aren’t enough batteries to store the excess. Then, not enough power is generated after dark, when it’s needed most, as people come home, turn on their air conditioners and watch TV or do household chores.

Some consumer advocates in California argue that rate increases could be reined in by managing utilities better and increasing the scrutiny of pricey grid-rebuilding plans. They point out that some of the state’s smaller community- or city-owned utilities have much lower rates than SDG&E and the other two big, investor-owned utilities, which need to boost returns.

In addition to PG&E, the third is Southern California Edison, which serves around 15 million people in southern and central California.

California’s utilities regulator said it is trying to protect lower-income families from electricity costs. It said it cut rooftop solar subsidies because they shifted costs to lower-income households—since they couldn’t afford to install the solar panels that would help lower their bills, or as renters didn’t have the ability to do so.

The regulator is now preparing to add a monthly charge to ratepayers’ bills that will increase with income level.

Both moves have been challenged by some lawmakers and others.