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IT'S A BEAUTIFUL DAY OUTSIDE.[CALL TO ORDER]
UM,[PLEDGE OF ALLEGIANCE]
OKAY.I CALL ON JENNIFER ROJAS FOR THE PLEDGE OF ALLEGIANCE.
WHERE IS SHE? JENNIFER? NO, JENNIFER.
JENNIFER'S NOT HERE, SO, OH, OKAY.
I PLEDGE TO REASONS, TO THE FLAG OF THE UNITED STATES OF AMERICA AND TO THE REPUBLIC FOR WHICH IT STANDS.
ONE NATION UNDER GOD, INDIVISIBLE, WITH LIBERTY AND JUSTICE.
[ROLL CALL]
SHE'S PROBABLY WORKING ON HER PRESENTATION.I, UH, DINA FOR THE ROLL CALL.
HERE, VICE PRESIDENT SCOTT PRESENT.
COMMISSIONER RAINEY IS ABSENT.
COMMISSIONER RAINEY IS EXCUSED FROM TODAY'S BOARD MEETING.
ARE THERE ANY OBJECTIONS FROM THE BOARD? SEEING NONE, UH, WE WILL NOW MOVE ON TO THE REGULAR AGENDA.
[1. 25-54717 Recommendation to approve March 6, 2025 Board meeting minutes. Suggested Action: Approve recommendation. ]
ITEM NUMBER ONE IS TO APPROVE OUR MINUTES FROM MARCH 6 25.DO I HAVE ANY PUBLIC COMMENT? DO I HAVE ANY COMMISSIONER COMMENT? DO I HAVE A MOTION? MOTION TO APPROVE.
ANY OPPOSED? THE MOTION CARRIES.
[2. 25-54718 Recommendation to approve Transfer of Funds for March 20, 2025. Suggested Action: Approve recommendation. ]
TWO IS TO APPROVE A TRANSFER OF FUNDS FOR MARCH 20TH, 2025.ANY PUBLIC COMMENT? ANY COMMISSIONER COMMENT? YES.
I'VE DISCUSSED THIS MATTER WITH, UM, ANTO AND HE'S AGREED TO PUT, UH, SOMETHING ON THE AGENDA.
THERE ARE CERTAIN, UH, I'LL CALL THEM IRREGULARITIES IN THIS PARTICULAR, UH, DOCUMENT THAT, UH, HE INTENDS TO EXPLAIN TO US, UH, UH, IN THE NEXT AGENDA.
SO THEN, UM, WE'RE NOT GOING TO MOVE FORWARD WITH THIS.
UM, DO WE HAVE A MOTION THEN WE'LL MOVE TO, UH, CONTINUE FOR, UH, IS THAT OKAY? WE'LL CONTINUE TO THE NEXT, UH, REGULAR MEETING.
STEPHANIE, CAN WE CONTINUE THE TRANSFERS TO THE NEXT MEETING? YES.
UH, I HAVE A MOTION AND A SECOND.
ALL THOSE IN FAVOR OF CONTINUING THIS ITEM TO OUR NEXT MEETING, SAY AYE.
[3. 25-54719 Recommendation to approve Retirement Order Nos. 6183 and 6184 for inventory items that are no longer being used during the current year. Suggested Action: Approve recommendation. ]
AND THEN ITEM NUMBER THREE IS TO APPROVE RETIREMENT ORDER NUMBERS 61 83 AND 61 84 FOR INVENTORY ITEMS THAT ARE NO LONGER BEING USED DURING THE CURRENT YEAR.ANY PUBLIC COMMENT ON THIS ITEM? ANY COMMISSIONER COMMENT? MOTION TO APPROVE.
THANK YOU COMMISSIONER SHANNON, WE HAVE A MOTION AND A SECOND.
ANY OPPOSED? THE MOTION CARRIES.
[4. 25-54720 Recommendation to authorize the General Manager to execute a Schedule I, Transaction-Based Natural Gas Storage Service Agreement and any necessary amendments with the Southern California Gas Company for natural gas storage capacity rights in an amount not to exceed $1,846,510, for a period of one year. Suggested Action: Approve recommendation. ]
ITEM NUMBER FOUR IS TO AUTHORIZE THE GENERAL MANAGER TO EXECUTE A SCHEDULE ONE TRANSACTION BASED NATURAL GAS STORAGE SERVICE AGREEMENT WITH SOUTHERN CALIFORNIA GAS COMPANY FOR A NATURAL GAS STORAGE CAPACITY RIGHTS, AND TONY FOSTER WILL PRESENT.ALRIGHT, GOOD MORNING COMMISSIONERS.
UH, I'M HERE THIS MORNING, UH, SEEKING YOUR AUTHORIZATION OF OUR GAS STORAGE CONTRACT, MORE FORMALLY KNOWN AS THE SCHEDULE I TRANSACTIONAL TRANSACTION BASED NATURAL GAS STORAGE SERVICE AGREEMENT WITH THE SOUTHERN CALIFORNIA GAS COMPANY.
AS A SNEAK PREVIEW, OUR ATTORNEYS, LISA GAST AND SUSIE BERLIN WILL FURTHER DISCUSS THE IMPORTANCE OF STORAGE TO OUR OPERATIONS IN TODAY'S WORKSHOP, WHICH IS ITEM NUMBER EIGHT.
SO I WILL EFFORT TO COMPLETE THIS REPORT TO YOU EXPEDITIOUSLY.
SO AN OVERVIEW, SOME OF OUR GAS, UH, SOME OF THE DEPARTMENT'S GAS IS STORED IN UNDERGROUND RESERVOIRS TO HELP US MAINTAIN ADEQUATE SUPPLIES OF NATURAL GAS IN A VOLATILE PHYSICAL AND FINANCIAL COMMODITIES MARKET.
OUR GAS IS INJECTED AND HELD FOR WITHDRAWAL ON AN AS NEEDED BASIS.
STORAGE FACILITIES STORAGE FACILITATES A RELIABLE SUPPLY OF PHYSICAL GAS AT TIMES WHEN THE DELIVERY INFRASTRUCTURE IS DISRUPTED BY OUTAGES.
BOTH PLANNED OR UNPLANNED OR MARKET CONDITIONS GENERATE UNFORESEEN
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SPIKES IN THE COMMODITY COST BY INJECTING GAS INTO STORAGE WHEN PRICES ARE LOW, GENERALLY SUMMER MONTHS.WE ARE ALSO ABLE TO PROTECT CUSTOMERS BY WITHDRAWING THIS RELATIVELY CHEAPER STORED GAS WHEN SEASONAL PRICES ARE HIGH, GENERALLY WINTER MONTHS.
SO THIS GRAPH HELPS ILLUSTRATE HOW STORAGE IS A KEY COMPONENT OF OUR OPERATIONS.
THE Y AXIS REPRESENTS GAS VOLUMES IN M-M-B-T-U UNITS OR 1 MILLION BTUS.
I'LL DEFINE MM BTUS IN A MOMENT.
THE X AXIS REPRESENTS TOTAL MONTHLY CONSUMPTION FOR THE DARK BLUE BAR SHOWS PREPAID VOLUMES, AND THE LIGHT BLUE PRESENTS ADDITIONAL GAS CONSUMED ABOVE THE PREPAY VOLUMES.
AS YOU CAN SEE, OUR PREPAY VOLUMES ARE OFTEN INSUFFICIENT IN COOLER WINTER MONTHS AND IN EXCESS IN WARMER SUMMER MONTHS, WE CAN UTILIZE STORAGE TO OFFSET UNDERSUPPLIED AND EXPENSIVE WINTER, UH, GAS WITH CHEAPER OVERSUPPLIED S STORAGE, SUMMER GAS.
LOOKING AT THE 2024 AS AN EXAMPLE, WE SEE THAT TOTAL MONTHLY DEMAND RANGE BETWEEN 400,000 MMBTU IN A WARM SUMMER MONTH, LIKE JULY TO NEARLY 900,000 MMBTU IN A COOL WINTER MONTH, LIKE DECEMBER BEFORE I GO ON A BRITISH THERMAL UNIT, BTU IS A MEASURE OF ENERGY DEFINED BY THE AMOUNT OF HEAT REQUIRED TO RAISE THE TEMPERATURE OF ONE POUND OF WATER BY ONE DEGREE FAHRENHEIT.
IN THE CONTEXT OF NATURAL GAS, ENERGY CONTENT IS OFTEN EXPRESSED IN MILLIONS OF BTUS.
A TYPICAL SOUTHERN CALIFORNIA HOME CONSUMES ABOUT 400 THERMS ANNUALLY OR ABOUT 40 MM BTUS.
AS A UTILITY COMPANY, WE HEAR IN LONG BEACH, ON AVERAGE PROVIDE OUR CUSTOMERS BETWEEN NINE AND 9.5 MILLION MMBTU ANNUALLY.
HERE'S ANOTHER PERHAPS CLEAR LOOK AT THIS CYCLICAL SUPPLY PATTERN.
THE DASHED HORIZONTAL GREEN LINE REPRESENTS OUR SUPPLY.
THE BLACK WAVY LINE REPRESENTS OUR CYCLICAL DEMAND.
IN THE WARMER SUMMER MONTHS, OUR SUPPLY OFTEN EXCEEDS OUR DEMAND.
REDUCED DEMAND DRIVES DOWN PRICES.
SO IN THE SUMMER, GAS IS TYPICALLY LESS EXPENSIVE THAN IN THE WINTER.
WHEN THIS OCCURS, STORAGE PROVIDES THE OPPORTUNITY TO INJECT AND SAVE THIS RELATIVELY, RELATIVELY CHEAPER GAS.
CONVERSELY, IN COOLER WINTER MONTHS, SUPPLY OFTEN EXCEEDS DEMAND, UM, I'M SORRY, IN COOLER WINTER MONTHS.
SUPPLY, UH, IS INSUFFICIENT AND AS DEMAND INCREASES, SO DOES PRICING.
WHEN THIS OCCURS, WE RELY ON STORED VOLUMES OF LESS EXPENSIVE GAS TO COMPENSATE FOR THE SHORTAGE OF SUPPLY.
WHY IS STORAGE IMPORTANT IN A NUTSHELL? VOLATILITY AND RISK MITIGATION.
STORED STORAGE OFFERS PROTECTION AGAINST PIPELINE AND RELATED INFRASTRUCTURE DISRUPTIONS THAT CAN INTERRUPT SUPPLY AND SEVERELY IMPACT COMMODITY PRICING.
STORAGE OFFERS PROTECTION AGAINST OTHER TYPES OF SUPPLY DISRUPTION SUCH AS THOSE CAUSED BY SEVERE WEATHER.
HOT OR COLD STORAGE PROVIDES A PRICE STABILITY AS WITHDRAWALS CAN INTRODUCE CHEAPER GAS INTO OUR DELIVERED SUPPLY.
TO MITIGATE, PREPAY OR SPOT MARKET PRICING SPIKES, STORAGE CAN PROVIDE A BACKUP OF NATURAL GAS SUPPLY DURING NATURAL DISASTERS, PIPELINE OUTAGES OR OTHER DISRUPTIONS LIKE FINANCIAL RESERVES.
STORE GAS IS A PRUDENT OPTION AGAINST OPERATIONAL RISKS.
UH, THERE WILL BE, THERE WILL BE GAS SUPPLY DISRUPTIONS IN THE FUTURE.
ARE WE ALIGNED? I'M ON SLIDE SIX.
IN FEBRUARY, 2021, UH, BEFORE THE MERGER, EXTREME WEATHER ACROSS THE EAST AND MIDWEST, BUT PARTICULARLY IN TEXAS FROZE ALL WELLHEADS INTERRUPTING PRODUCTION, WHICH QUICKLY LED TO A NATIONAL, UH, NATURAL GAS SHORTAGE.
PRICES SKYROCKETED TO NEARLY $200 A DECATHERM, UH, BUT BACK HERE IN LONG BEACH WE WITHDREW 18,000 118,000 DECATHERM FROM STORAGE AT A PRICE OF $3 AND 41 CENTS.
THIS SAVED OUR CUSTOMERS APPROXIMATELY $15 MILLION.
AND IN JANUARY OF 2023, AFTER THE MERGER, RIGHT AFTER THE MERGER, A NATURAL GAS PRICE UH, SENT OUR FIRST OF THE MONTH BORDER PRICE TO OVER $40 A DECATHERM.
AND IN RESPONSE, WE UTILIZED A CONTRACTUAL CLAUSE TO DECLINE PURCHASE OF LOCALLY PRODUCED GAS, WHICH PEGGED, WHICH IS PEGGED AT THE BORDER PRICE AND INSTEAD
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WITHDREW IN-KIND VOLUMES FROM STORAGE, WHICH REDUCED THE AVERAGE CUSTOMER'S BILL BY $65.THIS STORAGE CONTRACT ALLOCATES LONG BEACH UTILITIES, A STORAGE VOLUME OF 853,298 DECATHERM ON THE SOUTHERN CALIFORNIA GAS COMPANY'S SYSTEM, WHICH INCLUDES A MAX DAILY INJECTION VOLUMES OF 4,603 DECATHERM A DAY AND MAX WITHDRAWALS OF 20,686 STACK OF THES A DAY.
THESE FIGURES ARE UNCHANGED FROM LAST YEAR'S AGREEMENT.
THE COST FOR THIS ANNUAL AGREEMENT IS 1.83 MILLION, WHICH IS AN INCREASE OVER LAST YEAR'S FEE OF 1.35 MILLION.
AND THIS INCREASE WAS APPROVED BY THE CPUC.
SO TO RECAP, WE SEEK YOUR AUTHORIZATION FOR OUR GAS STORAGE CONTRACT IN THE AMOUNT OF $1,836,510.
AND THIS CONCLUDES MY REPORT AND I'M HAPPY TO ANSWER ANY QUESTIONS.
DO I HAVE ANY PUBLIC COMMENT? ANY COMMISSIONER COMMENT? SOUNDS PRETTY MISSION CRITICAL TO ME.
DO I HAVE A MOTION TO APPROVE? MOTION TO APPROVE.
ANY OPPOSED? SEEING NONE, THE MOTION CARRIES.
[5. 25-54721 Recommendation to adopt Resolution No. UT-1533 authorizing the General Manager to execute a contract, and any necessary subsequent amendments, with W.W. Grainger, Inc., of Lake Forest, IL, for furnishing and delivering maintenance, repair, operations supplies and related materials for a wide range of fieldwork needs, on the same terms and conditions afforded to the City of Tucson, AZ, through Omnia Partners, in an annual amount not to exceed $750,000 until the Omnia Partners contract expires on December 31, 2027, with the option to renew for as long as the Omnia Partners contract is in effect, at the discretion of the General Manager. Suggested Action: Approve recommendation. ]
OKAY.ITEM NUMBER FIVE, CATCH UP WITH MYSELF, UM, IS TO ADOPT RESOLUTION NUMBER UT 1533 AUTHORIZING THE GENERAL MANAGER TO EXECUTE A CONTRACT WITH WW GRANGER INC.
OF LAKE FOREST, ILLINOIS FOR FURNISHING AND DELIVERING MAINTENANCE REPAIR OPERATIONS, SUPPLIES AND RELATED MATERIALS FOR A WIDE RANGE OF FIELD WORK NEEDS.
TODAY I WILL BE PRESENTING TWO RESOLUTIONS FOR YOUR CONSIDERATION, EACH OF WHICH WILL, EACH OF WHICH IS ESSENTIAL TO MAINTAINING THE EFFICIENCY, SAFETY, AND OPERATIONAL RELIABILITY, RELIABILITY OF THE LONG BEACH PUBLIC UTILITIES DEPARTMENT.
I WILL WALK THROUGH EACH RESOLUTION REQUEST AND THEY NEED TO BE VOTED ON INDIVIDUALLY FOR THE FIRST RESOLUTION.
WE SEEK AUTHORIZATION FOR THE GENERAL MANAGER TO EXECUTE A CONTRACT WITH WW GRANGER INCORPORATED FOR MAINTENANCE, REPAIR AND OPERATIONAL SUPPLIES.
THE DEPARTMENT REQUIRES A BROAD RANGE OF SUPPLIES, INCLUDING TOOLS, BUILDING MATERIALS, SAFETY EQUIPMENT, AND TRAFFIC CONTROL DEVICES TO SUPPORT DAILY FIELD OPERATIONS.
INSTEAD OF INITIATING OUR OWN BID PROCESS, WE IDENTIFIED A COMPETITIVELY BID CONTRACT THROUGH OMNIA PARTNERS ORIGINALLY PROCURED BY THE CITY OF TUCSON, ARIZONA.
GRANGER WAS SELECTED FOR ITS COMPETITIVE PRICING, BROAD PRODUCT SELECTION AND LOGISTICAL EFFICIENCY, INCLUDING LOCAL STORES AND ONLINE ORDERING.
THIS CONTRACT WILL BE VALID UNTIL DECEMBER 31ST, 2027 WITH THE OPTION TO RENEW FOR AS LONG AS THE OMNIA PARTNERS CONTRACT REMAINS ACTIVE.
THE ANNUAL NOT TO EXCEED AMOUNT IS $750,000 COVERED BY THE WATER, SEWER AND GAS FUNDS AND IS ALREADY BUDGETED.
STAFF RECOMMENDS THE ADOPTION OF RESOLUTION NUMBER UT DASH 1533 AND AUTHORIZATION FOR THE GENERAL MANAGER TO EXECUTE A CONTRACT WITH WW GRAINGER INCORPORATED FOR MAINTENANCE, MAINTENANCE, REPAIR AND OPERATIONAL SUPPLIES.
ANY PUBLIC COMMENT? COMMISSIONER COMMENT? WE JUST HAVE A QUICK QUESTION.
LISA, I THINK WE TALKED ABOUT THIS, UH, BEFORE THAT, THAT BASICALLY WHAT WE DID, WE FIND AN AGENCY OR AN ORGANIZATION THAT HAS ALREADY ESTABLISHED SOME SORT OF A, A, A CONDITION AND SO WE FIND THAT IT'S BENEFICIAL FOR US TO ENTER INTO AN AGREEMENT WITH THEM TO PURCHASE KIND OF LIKE A BULK IT THIS IS THROUGH A COOPERATIVE CONTRACT? YES.
SEEING NONE, DO I HAVE A MOTION TO APPROVE? NO MOVE.
THANK YOU COMMISSIONER SHANNON.
DINA VICE PRESIDENT SCOTT AYE.
[6. 25-54722 Recommendation to adopt Resolution No. UT-1534 authorizing the General Manager to execute a contract, and any necessary subsequent amendments, with Majestic Fire, Inc., dba Kord Fire Protection, of Van Nuys, CA, for providing fire extinguishers and maintenance services, on the same terms and conditions afforded to the County of Orange, CA, in an annual amount not to exceed $100,000, until the County of Orange, CA, contract expires on November 15, 2028, with the option to renew for as long as the County of Orange, CA, contract is in effect, at the discretion of the General Manager. Suggested Action: Approve recommendation. ]
ITEM NUMBER 7 0 6.[00:15:02]
OKAY.UM, TO ADOPT RESOLUTION NUMBER UT 1534 AUTHORIZING THE GENERAL MANAGER TO EXECUTE A CONTRACT WITH MAJESTIC FIRE INC.
DBA CORD FIRE PROTECTION FOR PROVIDING FIRE EXTINGUISHERS AND MAINTENANCE SERVICES AND LISA? OKAY, SO THE SECOND RESOLUTION REQUESTS AUTHORIZATION TO ESTABLISH A CONTRACT WITH MAJESTIC FIRE INCORPORATED.
DOING BUSINESS AS CORE TO FIRE PROTECTION FOR THE FIRE EXTINGUISHER SERVICES.
FIRE EXTINGUISHERS ARE, ARE CRITICAL FOR WORKPLACE SAFETY, REGULATORY COMPLIANCE, AND EMERGENCY PREPAREDNESS ACROSS ALL OF OUR FACILITIES.
THE CITY OF LONG BEACH PURCHASING DIVISION EVALUATED COOPERATIVE CONTRACT OPTIONS AND DETERMINED THAT THE COUNTY OF ORANGE COUNTY OF ORANGE'S COMPETITIVELY BID CONTRACT WITH COURT FIRE PROTECTION OFFERS THE BEST VALUE.
WE WOULD LIKE TO TAKE ADVANTAGE OF THE CITY'S EVALUATION EFFORTS AND ALSO PIGGYBACK OFF OF THE COUNTY OF ORANGE'S CONTRACT.
UM, COURT OF FIRE PROTECTION PROVIDES COST-EFFECTIVE MAINTENANCE, INSPECTION AND REPLACEMENT SERVICES ENSURING WE REMAIN COMPLIANT WITH FIRE SAFETY REGULATIONS.
THE CONTRACT IS VALID UNTIL NOVEMBER 15TH, 2028 WITH THE OPTION TO EXTEND IF THE COUNTY OF ORANGE CONTRACT IS REMAINS IN EFFECT, THE ANNUAL NOT TO EXCEED AMOUNT IS 100,000 WITH COSTS COVERED BY THE WATER, SEWER, AND GAS FUNDS IN OUR BUDGET.
STAFF RECOMMENDS THE ADOPTION OF RESOLUTION NUMBER UT DASH 1534 AND AUTHORIZATION FOR THE GENERAL MANAGER TO EXECUTE A CONTRACT WITH COURTIER PROTECTION FOR EXTINGUISHER SERVICES.
THIS CONCLUDES MY PRESENTATION AND I'D BE HAPPY TO ANSWER ANY QUESTIONS.
EXCUSE ME, DO WE HAVE ANY PUBLIC COMMENT? COMMISSIONER COMMENT? OKAY.
COMMISSIONER SCOTT, WE HAVE A SECOND.
ANY OPPOSED? NO, THE MOTION CARRIES.
COMMISSIONER RAININESS ABSENT PRESIDENT MCGUIRE? YES.
NOW ITEM NUMBER SEVEN, PRESIDENT MCGUIRE.
YES IS I JUST WANTED TO CHECK 'CAUSE I WANTED JENNIFER TO BE ABLE TO PRESENT THIS AND I DON'T SEE HER JUST HERE AT THE MOMENT.
COULD WE MOVE THAT OKAY IN YOUR DISCRETION, MOVE IT TO LATER IN THE AGENDA? SURE.
DO I, DO I NEED A MOTION TO DO THAT? NO, I DON'T BELIEVE SO.
YOU CAN DIRECT THAT WE HAVE A RECOMMENDATION TO MOVE ITEM NUMBER SEVEN TO UM, YOU CAN JUST SWITCH IT IF WE'RE NOT QUITE SURE WHERE, BUT
WE'LL, YEAH, IF YOU JUST MOVE IT TO, IF WE CAN JUST SWITCH UH, SEVEN FOR EIGHT.
UM, SO WE'RE TAKING OUR BREAK AND UH, 15 MINUTES TO RECESS TO ALLOW STAFF TO REARRANGE THE ROOM FOR A BOARD WORKSHOP.
WE'LL RECONVENE IN 15 MINUTES.
KEVIN, HOW WAS, UH, ROBERT'S THING? IT WAS,
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I[00:32:20]
WANTED[00:32:20]
HIM TO THINK I WAS LIGHTNING.[8. 25-54728 Board Workshop: Recommendation to receive and file Natural Gas 101 and Regulatory Update. Suggested Action: Approve recommendation. ]
OKAY.AND WE ARE READY FOR ITEM NUMBER EIGHT OF OUR BOARD WORKSHOP, WHICH IS OUR BOARD WORKSHOP TO RECEIVE AND FILE GAS, NATURAL GAS 1 0 1
TONY FOSTER WILL HEAD THIS UP.
GOOD MORNING BOARD MEMBERS, UH, I AM PLEASED TO INTRODUCE THE NEXT, UH, THE, THE LATEST SESSION OF OUR ONGOING WORKSHOPS LEADING UP TO THE MARCH 31ST RETREAT, UH, YOU MIGHT RECALL, UH, BACK IN FEBRUARY 20TH WE HAD A WATER EXPERT AND CONSULTANT ED MEANS PROVIDE SORT OF A BACKGROUND AND OVERVIEW OF THE WATER INDUSTRY AND PROVIDING IDEAS OF THINGS THAT WE MIGHT WANT TO BE ON THE LOOKOUT FOR MOVING FORWARD INTO THE RETREAT AND BEYOND.
UH, THIS MORNING I'M PLEASED TO, UH, INTRODUCE LISA GAST AND SUSIE BERLIN OF THE LAW FIRM, DUNCAN WEINBERG GINZA AND PEMBROKE.
UH, THEY ARE HERE, UH, FOR THIS MORNING'S WORKSHOP TO PROVIDE AN OVERVIEW OF GAS 1 0 1 TRENDS IN THE MARKET AND WHAT'S NEXT.
AND TO PUT THIS IN CONTEXT AS WE HEAD INTO OUR RETREAT, UH, NEXT MONDAY, THE 31ST, UH, WE WANT TO PROVIDE THIS FRAMEWORK FROM WHICH THE BOARD CAN SORT OF UNDERSTAND THE CONTEXT OF THE ISSUES THAT WE WILL PRESENT, UH, IN THAT RETREAT.
SO I'M VERY PLEASED, UH, THIS MORNING TO INTRODUCE ELISA AND SUSIE AND I'LL HAND THE FLOOR OVER TO THEM NOW.
AS A REMINDER, MY NAME IS LISA GAST.
I'M FROM THE LAW OFFICES, UH, DUNCAN WEINBERG GENZER IN PEMBROKE OUT OF WASHINGTON DC AND WITH ME TODAY IS MY COLLEAGUE SUSIE BERLIN FROM THE LAW OFFICES OF SUSIE BERLIN.
AT THE OUTSET OF TODAY'S PRESENTATION, WE'RE GONNA EXPLAIN WHO WE ARE AND WHAT WE HOPE YOU'RE GONNA TAKE AWAY FROM TODAY'S INFORMATION SESSION.
DISTINCT FROM THE WATER UTILITY CONSULTANT YOU HEARD FROM LAST MONTH, WE ARE LONG BEACH UTILITIES GAS LAWYERS.
THAT'S AN IMPORTANT DISTINCTION BECAUSE NATURAL GAS, UNLIKE WATER, IS HEAVILY REGULATED, IS SUBJECT TO DIRECTION RULES FROM DIFFERENT ADMINISTRATIVE AGENCIES, AND FRANKLY HAS LESS FLEXIBILITY REGARDING RATES AS ITS WATER COUNTERPART AND AS AN INDUSTRY, OOPS, EXCUSE ME, SORRY.
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AND AS AN INDUSTRY NATURAL GAS, BOTH OF THE FUEL SOURCE TO CREATE ELECTRICITY AND AS A FUEL SOURCE FOR USE BY THE END USE CUSTOMER WILL BE REQUIRED TO MAKE CHANGES THAT WILL SIGNIFICANTLY IMPACT ALL ASPECTS OF THE GAS BUSINESS AND CHANGE THE LANDSCAPE OF THE GAS INDUSTRY.ADD TO THAT, THE FACT THAT YOUR NATURAL GAS UTILITY, UNLIKE YOUR WATER UTILITY, IS SUBJECT IN LARGE PART TO MARKET-BASED RATES, IS DEPENDENT ON OTHERS FOR BOTH THE COMMODITY AND THE DELIVERY OF THE PRODUCT, AND IS REQUIRED PURSUANT TO THE LONG BEACH CHARTER SECTION 1403, TO ENSURE THAT B'S GAS RATES ARE GENERALLY BASED UPON THE PREVAILING RATES FOR SIMILAR SERVICES AND COMMODITIES SUPPLIED OR SOLD BY OTHER LIKE UTILITIES OPERATING IN THE SOUTHERN CALIFORNIA AREA, WHICH IS CODE FOR YOUR RATES NEED TO BE COMPETITIVE WITH SOCAL GAS
GIVEN ALL THESE FACTORS, WE'RE BASICALLY HERE TO HELP YOU UNDERSTAND WHAT'S GOING ON OUTSIDE OF LONG BEACH THAT HAS A DIRECT IMPACT ON WHAT HAPPENS INSIDE LONG BEACH.
SO WE'RE HERE IN ADVANCE OF YOUR STRATEGIC PLANNING RETREAT TO PROVIDE YOU WITH AN OVERVIEW OF THE REGULATORY FRAMEWORK IN WHICH YOUR GAS UTILITY OPERATES, TO PROVIDE YOU WITH AN OVERVIEW OF WHAT IT TAKES THE GAS UTILITY TO GET GAS TO LBS CUSTOMERS AND HOW THOSE ELEMENTS TRANSLATE TO INPUTS IN YOUR CUSTOMER RATES TO PROVIDE YOU WITH A MORE DETAILED LOOK AT SOME OF THE TRENDS IN THE STATE AND NATIONAL LEVEL AND TO PROVIDE YOU WITH SOME INFORMATION ABOUT WHAT'S COMING DOWN THE PIKE THAT WILL IMPACT THE GAS UTILITIES OPERATIONS AND REVENUES MOVING FORWARD.
HERE'S OUR AGENDA FOR THE MORNING.
I'LL START BY GIVING YOU A BUNCH OF BACKGROUND INFORMATION ON THE REGULATORY FRAMEWORK THAT THE LONG BEACH GAS UTILITY OPERATES UNDER, AS WELL AS ON THE SUPPLY CHAIN FOR GETTING GAS TO LBU CUSTOMERS.
I WILL GET THROUGH THIS AS QUICKLY AS I CAN BECAUSE I KNOW THIS STUFF IS TERMINALLY BORING.
HOWEVER, IT'S REALLY IMPORTANT TO HAVE THIS BASE LEVEL OF UNDERSTANDING TO BE ABLE TO HAVE A DIALOGUE ON THE STRATEGIC ISSUES FACING THE UTILITY.
SPEAKING OF UTIL SPEAKING OF STRATEGIC ISSUES, AT THAT POINT SUSIE'S GONNA TAKE OVER AND SHE'LL PREPARE YOU FOR THE REAL WORK YOU'RE GOING TO DO DURING YOUR RETREAT.
SHE'LL TELL YOU ABOUT THE CURRENT TRENDS SHAPING THE FUTURE OF THE NATURAL GAS INDUSTRY HERE IN CALIFORNIA.
SPECIFICALLY, SHE'S GONNA DISCUSS HOW THE STATE IS MOVING TOWARDS DECARBONIZATION AND ELECTRIFICATION, WHAT'S GOING ON WITH CAP AND TRADE AND HOW LONG BEACH UTILITIES FITS INTO ALL OF THIS.
SHE'LL THEN DISCUSS WHAT'S NEXT FOR NATURAL GAS IN CALIFORNIA.
SPECIFICALLY WHAT YOU NEED TO KNOW ABOUT THE TREND TOWARDS DECREASED GAS USAGE IN CALIFORNIA, THE EQUITABLE TRANSITION TO ELECTRIFICATION, THE STATUS OF BANS ON GAS APPLIANCES, THE MOVEMENT TOWARDS COMMUNITY CHOICE AGGREGATORS, AND THE USE OF HYDROGEN AS A POTENTIAL FUTURE ALTERNATIVE TO GAS.
THROUGHOUT THE MORNING SESSION, WE'LL TRY TO PROVIDE SOME IMPORTANT TAKEAWAYS FOR YOU, THE POINTS THAT WE WANNA MAKE SURE THAT YOU GUYS COME AWAY WITH AS YOU HEAD INTO YOUR STRATEGIC PLANNING RETREAT, AS WELL AS PROVIDE SOME TIME FOR ANY QUESTIONS YOU MIGHT HAVE.
FIRST, LET'S GO BACK TO BASICS IN TERMS OF THE REGULATORY FRAMEWORK, WHICH AGENCIES ARE RELEVANT TO LBU AND WHAT KINDS OF THINGS DO THEY REGULATE? THE THREE ENTITIES WE'RE GOING TO DISCUSS ARE FERC, THE CPUC AND THE CITY ITSELF.
AT THE BIG PICTURE LEVEL, THE FEDERAL ENERGY REGULATORY COMMISSION OR FERC REGULATES THE INTERSTATE OR BETWEEN STATES, TRANSPORTATION OF NATURAL GAS AND WHOLESALE GAS MARKETS.
AND THESE ARE JUST SOME OF THE THINGS THAT FERC HAS JURISDICTION OVER.
REGARDING NATURAL GAS, THEY APPROVE THE CONSTRUCTION AND MAINTENANCE OF INTERSTATE NATURAL GAS PIPELINES.
THEY SET TRANSPORTATION AND STORAGE RATES FOR GAS, MOVING BETWEEN STATES, THEY ADMINISTER THE NATURAL GAS MARKETS AND THEY OVERSEE THE MARKET TRANSPARENCY COMPETITION AND NON-DISCRIMINATORY ACCESS TO PIPELINES.
IMPORTANTLY, FERC'S REGULATIONS TAKE PRECEDENCE OVER STATE LAW REGARDING INTERSTATE GAS ACTIVITIES.
THIS IS CALLED FEDERAL PREEMPTION AND AT THE BIG PICTURE LEVEL, THE CALIFORNIA PUBLIC UTILITIES COMMISSION OR CPUC REGULATES THE INTRASTATE OR WITHIN CALIFORNIA NATURAL GAS TRANSMISSION AND RETAIL GAS SERVICES FOCUSING ON GAS DISTRIBUTION TO END USERS WITHIN CALIFORNIA.
AND THESE ARE THE AREAS UNDER CPU'S JURISDICTION, THEY REGULATE THE RATES, CHARGES AND SERVICE STANDARDS FOR THE RETAIL GAS UTILITIES.
THEY ENSURE SAFETY AND RELIABILITY OF YOUR LOCAL GAS INFRASTRUCTURE.
THEY APPROVE RATE CASES FOR THE INVESTOR OWNED UTILITIES LIKE SOCAL GAS.
THEY REGULATE THE DEMAND SIDE PROGRAMS LIKE ENERGY EFFICIENCY AND INTEGRATING RENEWABLE GAS INTO THE SYSTEM.
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A NUTSHELL, HERE'S YOUR FIRST TAKEAWAY.THE KEY DIFFERENCES BETWEEN WHAT FERC REGULATES AND WHAT THE CPUC REGULATES IN TERMS OF JURISDICTION.
FERC REGULATES INTERSTATE TRANSMISSION WHILE THE CPUC REGULATES ENTRU STATE TRANSMISSION.
IN TERMS OF PIPELINE OVERSIGHT, FERC APPROVES THE INTERSTATE PIPELINES AND EXPANSIONS WHILE CPUC REGULATES INTRASTATE GAS UTILITIES AND THE LOCAL PIPELINES.
IN TERMS OF RATE SETTING, FERC SETS RATES FOR INTRASTATE, TRANSMI INTERSTATE TRANSMISSION AND STORAGE SERVICES, WHEREAS THE CPUC SETS THE RATES FOR IN-STATE DISTRIBUTION AND RETAIL SERVICES.
THOSE ARE SOME OF THE KEY DIFFERENCES WITH RESPECT TO LONG BEACH UTILITIES, WHICH IS A MUNICIPAL OR PUBLICLY OWNED UTILITY, FERC DOES NOT HAVE JURISDICTION AS TO YOUR ACTIVITIES.
HOWEVER IT DOES, HOWEVER IT DOES IMPACT L B'S ACCESS TO PIPELINES.
THE PRICES LBU PAYS FOR THE TRANSPORTATION OF GAS AND INFRASTRUCTURE EXPANSION.
AND WITH RESPECT TO THE CPUC, WHILE LONG BEACH UTILITIES IS NOT CPUC, JURISDICTIONAL LBU MUST FOLLOW CERTAIN SAFETY REGULATIONS AND OTHER HEALTH SAFETY AND WELFARE TYPE REGULATIONS AND IT MAY NOT REALLY HAVE A CHOICE AS TO WHETHER TO FOLLOW THE CPU'S EFFICIENCY AND CONSERVATION EFFORTS.
IN ADDITION TO FERC IN THE CPUC, THE CITY OF LONG BEACH ITSELF SOMEWHAT REGULATES LBU IN SOME WAYS.
ONE EXAMPLE OF THIS IS THE UTILITY USER'S TAX OR UUT.
THE UTILITY USERS TAX IS A 5% TAX IMPOSED BY THE CITY THROUGH ITS MUNICIPAL CODE ON THE CONSUMPTION OF UTILITY SERVICES INCLUDING NATURAL GAS SERVICE LBU COLLECTS THESE TAXES ON AS A LINE ITEM ON THE BILLS AND TRANSMITS THOSE FUNDS TO THE CITY.
AND AS YOU MAY BE AWARE, THERE IS A CURRENT ISSUE WITH THE UUT.
JUST LAST NOVEMBER, THE CITY'S PROPOSED MEASURE LB PASSED, WHICH REMOVED A LONGSTANDING EXEMPTION FROM THE UUT ORDINANCE FOR THE CHARGES MADE FOR GAS TO BE USED IN THE GENERATION OF ELECTRICAL ENERGY BY AN ELECTRICAL CORPORATION OR GOVERNMENTAL AGENCY.
IN SIMPLE TERMS, THE TWO GAS FIRE GENERATORS LOCATED IN LONG BEACH OWNED BY A ES AND L-A-D-W-P NO LONGER ENJOY AN EXEMPTION FROM THE UUT ON THE GAS THAT THEY PURCHASE IN MAKING THE ELECTRICITY AT THEIR PLANTS.
AND WHILE NEITHER A ES NOR L-A-D-W-P SUBMITTED AN ARGUMENT AGAINST PROPOSED MEASURE LB BEFORE THE ELECTION, WE UNDERSTAND SCE IS THAT SOCAL EDISON IS LET'S SAY LESS THAN HAPPY.
UM, THIS IS AN OPEN ISSUE, IT'S NOTHING I CAN REALLY TALK ABOUT IN DETAIL HERE, BUT HAPPY TO TALK TO YOU MORE ABOUT THAT AT A LATER TIME IN A DIFFERENT SETTING AND WITH YOUR CITY ATTORNEY PRESENT.
NEXT UP WE'RE GONNA TALK A LITTLE BIT ABOUT PROPOSITION TWO 18 AND PROPOSITION 26.
ALTHOUGH PROPOSITION TWO 18 AND PROPOSITION 26 ARE STATE BALLOT INITIATIVES, THEY IMPACT HOW THE CITY REGULATES LBU.
LET'S START WITH PROP TWO 18 WITH WHICH I'M, UH, I UNDERSTAND YOU'RE A LITTLE FAMILIAR WITH.
IN 1996, CALIFORNIA VOTERS APPROVED PROPOSITION TWO 18, THE RIGHT TO VOTE ON TAXES INITIATIVE PROP TWO 18 REQUIRES A VOTE TO PASS A PROPERTY RELATED TAX.
AND AS YOU KNOW, PROP TWO 18 INCLUDES, AMONG OTHER THINGS A REQUIREMENT FOR A PUBLIC HEARING PRIOR TO THE ADOPTION OF PROPOSED RATE INCREASES FOR WATER OR SEWER SERVICES LIKE THE ONE YOU HELD LAST AUGUST REGARDING THE PROPOSED WATER AND SEWER RATE INCREASE.
THE REASON THAT PROP TWO 18 APPLIES TO WATER AND SEWER RATES IS BECAUSE THESE HAVE BEEN FOUND TO BE PUBLIC SERVICES HAVING A DIRECT RELATIONSHIP TO PROPERTY OWNERSHIP.
NOTABLY PROP TWO 18 SPECIFICALLY AGAINST EXEMPTS FEES AND CHARGES FOR GAS SERVICES AS NOT BEING PROPERTY RELATED FEES OR CHARGES IMPOSED AS AN INCIDENT OF PROPERTY OWNERSHIP.
SO YOUR GAS RATE INCREASES CAN BE APPROVED BY THE BOARD WITHOUT VOTER APPROVAL, AT LEAST UNDER PROP TWO 18.
PROP TWO 18 LIMITS FEES COLLECTED FOR WATER AND SEWER SERVICES TO THE COST OF PROVIDING THE SERVICE AND REVENUES RECEIVED CAN'T BE USED FOR NON-UTILITY PURPOSES OR FUTURE SERVICES.
AS A FOLLOW ON TO PROP TWO 18, IN 2010, CALIFORNIA VOTERS APPROVED ANOTHER STATE BALLOT INITIATIVE, WHICH IS RELATED TO PROP TWO 18.
THIS IS PRO UH, PROPOSITION 26, THE STOP HIDDEN TAXES INITIATIVE, LOVE THESE NAMES.
PROPOSITION 26 EXPANDED THE DEFINITION OF A STATE OR LOCAL TAX SUCH THAT MANY PAYMENTS THAT HAD BEEN CONSIDERED FEES AND CHARGES ARE NOW CONSIDERED ATTACKS.
THIS IS SIGNIFICANT BECAUSE APPROVING ATTACKS REQUIRES TWO THIRDS VOTE OF THE VOTERS, WHEREAS FEES
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ARE GENERALLY APPROVED BY A SIMPLE MAJORITY OF THE GOVERNING BODY.FOR LOCAL GOVERNMENTS IN CALIFORNIA, THIS NEW DEFINITION DEFINED TAX TO MEAN ANY CHARGE OF ANY KIND IMPOSED BY A LOCAL GOVERNMENT.
HOWEVER, PROP 26 PROVISIONS APPLICABLE TO LOCAL GOVERNMENT CONTAIN SEVEN SIGNIFICANT EXEMPTIONS TO THE VOTER APPROVAL REQUIREMENT AND THE VAST MAJORITY OF THE FEES AND CHARGES THAT CITIES WOULD SEEK TO ADOPT WILL FALL INTO ONE OR MORE OF THESE SEVEN EXEMPTIONS.
AND SO IT'S CLEAR PROP 26 PUTS THE BURDEN ON THE CITY TO PROVE THAT A FEE OR CHARGE SUBJECT TO PROP 26 IS NOT A TAX MEANING IT'S UP TO THE GOVERNMENT TO PRO TO PROVIDE THAT THE FEE OR CHARGE FITS INTO ONE OF THESE EXCEPTIONS AND IS NOT A TAX THAT NEEDS TO BE VOTED ON.
ONE OF THE EXCEPTIONS USED OFTEN TO PREVENT A CHARGE FROM BEING CONSIDERED A TAX IS A CHARGE IMPOSED THAT DOES NOT EXCEED AND IS DIRECTLY TIED TO THE REASONABLE COSTS TO THE LOCAL GOVERNMENT OF PROVIDING THE SERVICE OR PRODUCT.
OH, AND THERE'S ONE MORE NOTE FEES AND CHARGES THAT PREDATE PROP 26, UH, THAT HAVE NOT BEEN INCREASED SINCE GET GRANDFATHERED IN.
I KNOW THIS IS A REALLY TOUGH ONE TO UNDERSTAND, SO LET'S GO THROUGH AN EXAMPLE THAT'S HOPEFULLY GONNA HELP YOU A LITTLE BIT.
FOR THIS EXAMPLE, LET'S SAY THAT WE'VE GOT A UTILITY, A GAS UTILITY THAT GENERATES, THAT GENERATES $20 MILLION IN REVENUE AND HAS $15 MILLION IN EXPENSES LEAVING A $5 MILLION SURPLUS OR EXCESS REVENUES.
THEN LET'S SAY THAT THE CITY INCREASES ITS TRANSFER FROM THE GAS UTILITY TO THE GENERAL FUND FROM 2 MILLION TO 4 MILLION AND THAT REMAINING 1 MILLION IS GONNA STAY IN THE UTILITY FOR UTILITY REINVESTMENT.
SINCE THAT $4 MILLION TRANSFER IS GOING TO THE GENERAL FUND FOR NON-UTILITY SERVICE NON-UTILITY PURPOSES, IT'S LIKELY TO BE RECLASSIFIED AS A TAX UNDER PROP 26 UNLESS IT'S TIED DIRECTLY TO THE COST OF PROVIDING GAS SERVICE.
AND IF THIS TRANSFER IS CONSIDERED CONSIDERED A TAX UNDER PROP 26, THE CITY MUST OBTAIN TWO THIRDS VOTER APPROVAL BEFORE IT CAN LEGALLY INCREASE IT FROM, UH, INCREASE THAT TRANSFER FROM THE GAS UTILITY TO THE GENERAL FUND.
SO NOW WE'RE GONNA DO LIKE A A A DEEPER DIVE ANALYSIS TO, TO KINDA GIVE YOU A A BETTER SENSE USING THIS EXAMPLE.
FIRST YOU'VE GOTTA DETERMINE WHETHER THE TRANSFER COULD BE A TAX UNDER PROP 26, ANY FEE OR CHARGE THAT GENERATES REVENUE FOR THE GENERAL GOVERNMENTAL PURPOSES, LIKE TRANSFERS TO THE GENERAL FUND IS CONSIDERED A TAX UNLESS IT'S TIED DIRECTLY TO THE COST OF PROVIDING THE SERVICE.
A MUNICIPAL GAS UTILITY IS INTENDED TO COVER THE COST OF PROVIDING GAS SERVICE AND ANY EXCESS REVENUE IS GENERALLY INTENDED TO BE REINVESTED IN THE UTILITY OR USED FOR SPECIFIC UTILITY RELATED PURPOSES SUCH AS INFRASTRUCTURE INVESTMENT.
IF A SIGNIFICANT PORTION OF THIS SURPLUS REVENUE GETS TRANSFERRED TO THE GENERAL FUND AND IS THEREFORE USED FOR NON-UTILITY PURPOSES, PROP 26 COULD RECLASSIFY THE TRANSFER AS A TAX BECAUSE THE REVENUE IS BEING DIVERTED FROM THE GAS UTILITY RELATED PURPOSE TO THE GENERAL GOVERNMENT FUNCTIONS LIKE FUNDING THE POLICE AND FIRE AND PARKS AND THOSE TYPES OF THINGS.
AND THE EXAMPLE ON THE SCREEN, THE $4 MILLION INCREASE IN THE TRANSFER TO THE GENERAL FUND IS BEING USED FOR GENERAL GOVERNMENTAL PURPOSES.
SO IT'S LIKELY TO BE CONSIDERED A TAX UNDER PROP 26.
THE NEXT PART OF THE ANALYSIS IS TO DETERMINE WHETHER THE TRANSFER EXCEEDS THE COST OF SERVICE OR FEE CRITERIA.
IF THE CITY WANTS TO ENSURE THAT THE TRANSFER TO THE GENERAL FUND IS NOT A TAX UNDER PROP 26, THE CITY MUST ENSURE THAT THE TRANSFER OF THE SURPLUS REVENUE IS NOT EXCESSIVE RELA RELATIVE TO THE ACTUAL COST OF PROVIDING THE GAS SERVICE.
IF THE TRANSFER EXCEEDS WHAT'S NEEDED TO COVER THE UTILITIES OPERATING COSTS, PROP 26 MAY REQUIRE THE TRANSFER TO BE RECLASSIFIED AS A TAX.
AND IN THIS EXAMPLE, THE GAS UTILITY HAS 20 20 MILLION IN REVENUE, 15 MILLION IN COSTS.
THE $4 MILLION TRANSFER IS SIGNIFICANTLY GREATER THAN WHAT WOULD BE NEEDED FOR THE CITY TO MAINTAIN UTILITY OPERATIONS.
THE EXCESS IS NOT TIED DIRECTLY TO THE COST OF PROVIDING GAS, BUT INSTEAD IS BEING USED FOR GENERAL PURPOSES FUNDING THE GENERAL FUND.
AND BECAUSE THAT TRANSFER IS NOT TR NOT TIED TO UTILITY SERVICE COSTS, THE TRANSFER WOULD BE USED AT VIEWED AS A TAX UNDER PROP 26.
AND THE LAST PART OF THE ANALYSIS IS THE VOTER APPROVAL REQUIREMENT.
THE FACT THAT THAT $4 MILLION SURPLUS REVENUE IS BEING TRANSFERRED TO THE GENERAL FUND RATHER THAN BEING USED FOR UTILITY IMPROVEMENTS OR IS BEING DIRECTLY
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REINVESTED IN GAS SERVICE MEANS THE TRANSFER HAS TO BE TREATED AS A TAX AND THE CITY WOULD NEED TO PUT THE INCREASE IN THE TRANSFER TO A VOTER REFERENDUM AND GET TWO THIRDS APPROVAL TO PROCEED.LIKE MOST CITIES WITH THEIR OWN UTILITY DEPARTMENTS, EXCESS LBU REVENUES, WATER, SEWER, AND GAS HAVE HISTORICALLY BEEN TRANSFERRED TO THE CITY'S GENERAL FUND.
THIS PRACTICE IS USED TO SUPPORT THE GENERAL CITY SERVICES LIKE POLICE AND FIRE AND STREET REPAIRS AND PARKS AND LIBRARIES.
HOWEVER, IN THE MID 2010S THERE WERE LAWSUITS FILED ON THE CITY'S PRACTICE OF TRANSFERRING EXCESS UTILITY REVENUES TO THE GENERAL FUND.
ONE LAWSUIT WAS FILED AGAINST THE CITY ALLEGING THE REVENUE TRANSFERS FROM THE GAS UTILITIES TO THE GENERAL FUND ARE GENERAL TAXES REQUIRING VOTER APPROVAL.
UNDER PROP 26, ANOTHER LAWSUIT WAS FILED AGAINST THE CITY ALLEGING THE REVENUE TRANSFERRED FROM THE WATER AND SEWER UTILITIES TO THE GENERAL FUND WERE GENERAL TAXES REQUIRING VOTER APPROVAL.
UNDER PROPOSITION TWO 18, THE LAWSUIT CHALLENGING THE WATER AND SEWER FUND TRANSFER WAS SETTLED BY THE CITY AND WHILE THE CITY PREVAILED ON THE LAWSUIT CHALLENGING THE GAS UTILITY FUND TRANSFER, THE CHALLENGERS FILED AN APPEAL AND ULTIMATELY THE CITY, UH, SETTLED WITH THE PLAINTIFF TO TRY TO PREVENT FURTHER CHALLENGES.
IN JUNE, 2018, THE CITY PUT MEASURE M ON THE BALLOT A CHARTER AMENDMENT WHICH WOULD EXPLICITLY PERMIT THE CITY TO TRANSFER REVENUE FROM WATER, SEWER AND GAS UTILITIES TO THE GENERAL FUND WITH A CAP OF 12% OF EACH UTILITIES ANNUAL GROSS REVENUES.
MEASURE M WAS OVERWHELMINGLY APPROVED BY THE CITIZENS OF LONG BEACH.
UNFORTUNATELY, MEASURE M DID NOT HAVE THE INTENDED EFFECT OF PREVENTING ALL FURTHER CHALLENGES, AT LEAST FOR THE WATER AND SEWER SIDE OF LBU.
AFTER MEASURE M PASSED, MORE LAWSUITS WERE FILED ARGUING THAT THE CITY'S RAISING OF WATER AND SEWER RATES TO GENERATE MORE REVENUE THAN WHAT WAS NEEDED FOR THE SERVICE WAS A FORM OF ILLEGAL TRANS ILLEGAL TAXATION.
AS A RESULT, THE CITY WAS REQUIRED TO RETURN APPROXIMATELY $30 MILLION COLLECTED UNDER MEASURE M TO THE WATER DEPARTMENT AND LONG BEACH WATER ISSUED BILL CREDITS TOTALING 9 MILLION TO ITS CUSTOMERS AND EACH CUSTOMER GOT ABOUT A HUNDRED BUCKS.
THE RESOLUTION OF MEASURE M LAWSUIT ALSO LED TO THE CESSATION OF FUTURE TRANSFERS OF RATE PAYER FUNDS FROM THE WATER DEPARTMENT TO THE GENERAL FUND AS HAD BEEN OCCURRING UNDER MEASURE M ON THE GAS SIDE, WHICH IS OBVIOUSLY WHAT WE'RE HERE TO TALK ABOUT TODAY.
THERE HAVE NOT BEEN SIMILAR LAWSUITS FILED WITH RESPECT TO THE APPLICATION OF MEASURE M TO THE GAS UTILITIES TRANSFER OF EXCESS REVENUES TO THE GENERAL FUND AND MEASURE M CONTINUES TO BE IN EFFECT WITH RESPECT TO THE GAS UTILITY.
HOWEVER, ONE POINT I DO WANNA LEAVE YOU WITH IS THAT UTILITY TRANSFERS TO THE GENERAL FUND ARE OFTEN THE SUBJECT OF CHALLENGES.
SO IT'S IMPORTANT TO PERFORM THIS PROPOSITION 26 ANALYSIS WHEN CONS CONSIDERING ANY INCREASES IN THE UTILITY TRANSFERS TO THE GENERAL FUND.
LASTLY, THE CITY OF LONG BEACH APPROVED THE CLIMATE ACTION PLAN IN AUGUST OF 22 OUTLINING STRATEGIES TO REDUCE GREENHOUSE GAS EMISSIONS AND ENHANCED COMMUNITY RESILIENCE TO CLIMATE CHANGE IMPACTS.
THE CLIMATE ACTION PLAN EMPHASIZES TRANSITIONING TO RENEWABLE ENERGY SOURCES, BUT IT DOES NOT INCLUDE SPECIFIC MEASURES TO LONG BEACH GAS UTILITY IN TERMS OF WHAT THEY'RE SUPPOSED TO DO DURING THIS TRANSITION.
HOWEVER, THE CLIMATE ACTION PLAN'S BROADER GOALS, INCLUDING RELIANCE ON FOSSIL FUELS, WILL MOST CERTAINLY IMPACT FUTURE OPERATIONS OF THE GAS UTILITY.
OKAY, SO NOW WE KNOW WHO THE REGULATORS, REGULATORS ARE, WHAT AREAS THEY COVER, AND WE'VE GOT A HELPFUL CHART THAT YOU CAN LOOK BACK AT LATER ON.
NOW I WANNA EXPLAIN THE DIFFERENCES BETWEEN AN INVESTOR OWNED UTILITY LIKE SOCAL GAS AND A PUBLICLY OWNED UTILITY LIKE LBU.
UTILITIES LIKE SOUTHERN CALIFORNIA GAS ARE PROFIT DRIVEN SUBJECT TO STATE REGULATIONS LIKE THOSE OF THE CPUC SERVE LARGE METROPOLITAN AREAS.
THEY FOCUS ON MAXIMIZING SHAREHOLDER VALUE AND THEY HAVE A PROFIT MARGIN SET BY THE CPUC BASED ON A SO-CALLED REASONABLE RATE OF RETURN.
SOCAL GAS IS INVESTOR OWNED UTILITY AND AS I JUST NOTED, THE CPUC IS THE REGULATOR TASKED WITH APPROVING ITS RATES IN APPROVING RATES.
THE CPUC IS TASKED WITH APPROVING SOCAL GAS'S REVENUE REQUIREMENT, WHICH IS THE TOTAL AMOUNT OF MONEY THAT SOCAL GAS COLLECTS FROM ITS CUSTOMERS THROUGH RATES IN A GIVEN PERIOD OF TIME TO COVER ITS OPERATING EXPENSES, MAKE INFRASTRUCTURE IMPROVEMENTS AND MAINTAIN ITS FACILITIES AND PROVIDE A RATE OF RETURN FOR SHAREHOLDERS.
THAT REVENUE REQUIREMENT IS USED TO SET THE RATES FOR GAS TRANSPORTATION THAT LBU PAYS TO BRING THE NATURAL GAS INTO THE CITY.
THE LATEST SOCAL GAS RATE CASE FINISHED IN DECEMBER OF 2024 WHERE THE CPUC APPROVED SOCAL GAS'S REVENUE REQUIREMENT
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AND THAT DECISION APPROVED ACTUALLY FOUR YEARS WORTH OF, UH, REVENUE REQUIREMENT INCREASES.IN THE INTEREST OF TIME, WE'LL MAKE SURE THAT YOU GET, UH, MORE DETAIL ON THOSE REVENUE REQUIREMENT INCREASES IN ANOTHER, IN ANOTHER PIECE.
SO LET'S COMPARE THE IOUS LIKE SOCAL GAS TO THE PUBLICLY OWNED UTILITIES LIKE LBU.
PUBLICLY OWNED UTILITIES ARE OWNED AND OPERATED BY LOCAL GOVERNMENTS AND ARE NOT-FOR-PROFIT ENTITIES.
THEY'RE REGULATED BY THE LOCAL GOVERNMENT ITSELF FOR THE MOST PART.
THEY PROVIDE GAS TO SMALLER LOCALIZED AREAS AND FOCUS ON SERVING THE PUBLIC GOOD RATHER THAN GENERATING PROFIT.
AND THE RATES ARE SET BY THE LOCAL GOVERNMENT BASED ON COSTS RATHER THAN PROFIT, ALTHOUGH IT'S A, ALTHOUGH IT'S A PUBLICLY OWNED UTILITY, LONG BEACH GAS ITSELF IS SUBJECT TO CERTAIN STATE AND FEDERAL REGULATIONS WHICH INCLUDE THE CPUC, WHICH HAS OVERSIGHT OVER L'S GAS DISTRIBUTION SYSTEM.
FMSA, WHICH IS THE DEPARTMENT OF TRANSPORTATION'S PIPELINE AND HAZARDOUS MATERIAL SAFETY ADMINISTRATION HAS ENFORCEMENT AUTHORITY OVER L L'S PIPELINE SAFETY SYSTEM CARB, THE CALIFORNIA AIR RESOURCES BOARD PROMULGATES EMISSION STANDARDS THAT LBU MUST FOLLOW INCLUDING FOLLOWING THE CAP AND TRADE RULES.
LBU IS REQUIRED TO FOLLOW THE CALIFORNIA ENVIRONMENTAL QUALITY ACT OR CQA WHEN UNDERTAKING INFRASTRUCTURE PROJECTS SUCH AS CONSTRUCTING OR EXPANDING PIPELINES, INCLUDING ASSESSING ENVIRONMENTAL IMPACT OF PROPOSED PROJECTS AND MITIGATING ANY NEGATIVE EFFECTS.
AND LBU IS REQUIRED TO PARTICIPATE IN STATEWIDE ENERGY EFFICIENCY GOALS, INCLUDING ADHERING TO TARGETS SET BY THE STATE SUCH AS ENERGY SAVINGS GOALS AND STATEWIDE CLIMATE ACTION PLANS.
AND ANOTHER GREEN CHART FOR YOUR TAKEAWAY HERE ARE THE KEY DIFFERENCES BETWEEN THE INVESTOR OWNED UTILITIES AND PUBLICLY OWNED UTILITIES LIKE LONG BEACH GAS.
IN TERMS OF OWNERSHIP, IOUS ARE PRIVATE AND SHAREHOLDER OWNED.
PUBLICLY OWNED UTILITIES ARE OWNED BY LOCAL GOVERNMENT.
PROFIT MOTIVATION INVESTOR UTILITIES ARE PROFIT MAKING WHERE WHEREAS PUBLICLY OWNED UTILITIES ARE NOT FOR PROFIT IN TERMS OF SERVICE AREAS, THE IOUS TEND TO BE WIDE OR REGIONAL OR STATEWIDE SERVICE AREAS, WHEREAS THE PUBLICLY OWNED UTILITIES ARE LOCAL AND LIMITED TO SPECIFIC CITIES OR TOWNS.
AND IN TERMS OF AN OPERATIONAL FOCUS, THE IOUS MAINTAIN PROFITS FOR SHAREHOLDERS AND DEAL WITH LARGE SCALE INFRASTRUCTURE, WHEREAS THE PUBLICLY OWNED UTILITIES SERVE YOUR LOCAL COMMUNITY NEEDS WITH PUBLIC INTEREST FOCUS.
I KNOW THAT WAS A LOT OF INFORMATION, UH, BUT HERE ARE YOUR TWO MAIN TAKE MAIN TAKEAWAYS FROM THIS FIRST SECTION.
OTHER THAN THOSE GREEN CHARTS, LBU IS A PUBLICLY OWNED MUNICIPAL GAS UTILITY IS NON-JURISDICTIONAL WITH RESPECT TO FERC AND CPUC.
HOWEVER, THE REGULATIONS THESE AGENCIES ISSUE MAY STILL IMPACT LONG BEACH UTILITIES, WHETHER DIRECTLY BECAUSE LBU HAS TO FOLLOW THE RULE OR INDIRECTLY BECAUSE LBU IS IMPACTED BY EITHER SOUTHERN CALIFORNIA EDISON OR SOCAL GAS' OBLIGATION TO COMPLY.
SECOND, EVEN THOUGH THERE HAVE NOT BEEN ANY CHALLENGES TO THE GAS UTILITIES TRANSFER TO THE GENERAL FUND UNDER MEASURE M, ANY TIME CHANGES TO THE TRANSFER ARE CONSIDERED A PROPOSITION 26 ANALYSIS SHOULD BE DONE TO PREVENT SUCH CHALLENGES.
ANY QUESTIONS SO FAR? I KNOW THAT'S A LOT.
OKAY, WE'LL GO ON TO OUR NEXT, OUR NEXT FOCUS, THE NEXT FOCUS NATURAL GAS SUPPLY CHAIN.
I KNOW THE CURRENT REACTION TO THE TERM TO SUPPLY CHAIN THESE DAYS THAT BECAUSE OF COVID OR POLITICS OR WHATEVER, SOMEBODY CAN'T GET SOMETHING THEY NEED.
BUT THIS TERM IS ACTUALLY A GOOD WAY TO DESCRIBE THE COMPONENTS OF HOW LONG BEACH UTILITIES GETS THE GAS TO THE CUSTOMERS.
SINCE THE SUPPLY CHAIN IS MERELY THE LOGISTICAL SYSTEM OF GETTING GOODS TO CUSTOMERS.
SO IN THIS NEXT SECTION OF TODAY'S DISCUSSION WE'LL TALK ABOUT WHERE LBS NATURAL GAS COMES FROM AND THE DIFFERENT SYSTEMS INVOLVED IN GETTING THAT GAS TO L TO L'S RATE PAYERS.
LET'S FIRST TALK FOR A MINUTE ABOUT THE SOURCES OF L'S GAS.
AS I'M SURE YOU ALL HAVE HEARD BEFORE, ABOUT 70% OF L'S GAS COMES FROM THE MERRILL LYNCH BANK OF AMERICA PREPAY AGREEMENT UNDER THIS 30 YEAR AGREEMENT, WHICH LBU ENTERED INTO IN 2007 LBU RECEIVES A CONTRACTED VOLUME OF GAS THAT VARIES EVERY MONTH.
HAVING A PREPAY AGREEMENT IS A VERY IMPORTANT MEANS OF MITIGATING THE PRICE OF GAS, WHICH IS OFTEN INCREDIBLY VOLATILE.
THE PREPAY AGREEMENT LOCKED IN A FIXED DISCOUNT FROM THE INDEX PRICE OF GAS AND ALIGNS WITH THE PUBLICLY OWNED UTILITY PHILOSOPHY, A RELIABLE SERVICE AT LOWEST, AT LOWEST COST BY STABILIZING THE PRICE OF THE COMMODITY ITSELF.
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ADDITION TO THE PREPAY AGREEMENT, LONG BEACH IS ALSO FORTUNATE TO HAVE A HISTORY OF OIL PRODUCTION, WHICH AS A BYPRODUCT SUPPLIES LOCALLY PRODUCED GAS.THIS LOCALLY PRODUCED GAS SUPPLIES APPROXIMATELY FIVE TO 7% OF LBU DEMAND.
THE LARGEST OF THESE LOCAL SUPPLIERS IS THMS AND THE OIL AND GAS THEY EXTRACT BELONGS TO THE STATE OF CALIFORNIA.
LBU HAS ENTERED INTO AGREEMENTS WITH THE STATE WHERE LBU CAN PURCHASE THM SUPPLEMENTAL GAS AND YOU ALSO HAVE CONTRACTS WITH SEVERAL OTHER LOCAL PRODUCERS INCLUDING SIGNAL HILL, SAMSON AND BEACH OIL.
AND IN ADDITION TO THE LOCAL GAS, LBU ALSO SOURCES A SMALL AMOUNT OF RENEWABLE NATURAL GAS AND AS A LAST RESORT WHEN THE PREPAY AND THE LOCALLY PRODUCED AND THE RENEWABLE NATURAL GAS IS INSUFFICIENT, YOU CAN PURCHASE ON THE SPOT MARKET THROUGH ONGOING CONTRACTS WITH SEVERAL INVESTMENT BANKS LIKE GOLDMAN SACHS.
AND SINCE THESE SPOT MARKET PURCHASES ARE GENERALLY GONNA BE YOUR HIGHEST PRICE OPTION, IT'S USED AS LITTLE AS POSSIBLE.
SPEAKING OF PRICING, LET'S TALK ABOUT THE COST OF GAS.
YOU MIGHT THINK THAT BECAUSE LBU HAS A PREPAY AGREEMENT AND OTHER GAS SUPPLY CONTRACTS THAT THE COST OF GAS IS FIXED UNDER THESE AGREEMENTS.
UNFORTUNATELY THAT'S NOT THE WAY GAS WORKS.
NATURAL GAS IS A COMMODITY AND IS PRICED BASED ON SUPPLY AND DEMAND AS WELL AS OTHER FACTORS SUCH AS WEATHER, ECONOMIC CONDITIONS, OIL PRICES AND COMPETITION.
THE CONTRACTS LBU ENTERS INTO FOR GAS ARE USUALLY STRUCTURED AS A DISCOUNT FROM THE CURRENT MONTHLY MARKET INDEX PRICE FOR THE COMMODITY.
IN EXCHANGE FOR PER FOR COMMITTING TO PURCHASE A CERTAIN AMOUNT OF GAS OVER A CERTAIN LENGTH OF TIME AND THE SIZE OF THE DISCOUNT IS RELATED TO HOW MUCH GAS YOU ARE ARE WILLING TO COMMIT TO PURCHASE AND FOR HOW LONG.
SO YOUR GAS PREPAY AGREEMENT GETS YOU THE HIGHEST DISCOUNT FROM THE MARKET INDEX PRICE BECAUSE THE CONTRACT IS FOR A VERY LONG TIME AND COMMITS YOU TO PURCHASE A SIGNIFICANT AMOUNT OF GAS.
AND ON THE OTHER END, THE GAS PURCHASED ON THE SPOT MARKET, THE GAS YOU PURCHASED TO MAKE UP ANY SHORTFALL FROM THE GAS YOU'VE CONTRACTED FOR IS GONNA BE YOUR HIGHEST PRICED GAS.
ONCE YOU'VE SOURCED THE GAS ITSELF, THEN YOU HAVE TO GET IT HOME.
MOST OF L B'S GAS IS COMING FROM OUT OF STATE IN CANADA AND UNDER YOUR PREPAY AGREEMENT WITH MERRILL LYNCH, LBU HAS NEGOTIATED SPECIFIC RECEIPT POINTS ALONG THE SOUTHERN CALIFORNIA BORDER FOR DELIVERY OF THE GAS AND THESE RECEIPT POINTS WERE SELECTED BASED ON THE RELIABILITY OF THE PIPES AND THEIR COST.
IMPORTANTLY, SINCE THE AGREEMENT PROVIDES THAT LBU PAYS FOR THE INTERSTATE PIPELINE COSTS THEMSELVES AND LIKE EVERYTHING ELSE, THE PIPELINES ARE AGING AND THE COSTS OR THE COST FOR DELIVERY THROUGH INTERSTATE PIPELINES WHICH GET REGULATED BY FERC KEEP INCREASING.
SO PICKING THE RIGHT RECEIPT POINTS IS ANOTHER WAY OF TRYING TO MINIMIZE YOUR COST.
ONCE THE GAS GETS TO THE RECEIPT POINTS SET IN THE MERRILL LYNCH PREPAY AGREEMENT, LBU THEN PAYS SOCAL GAS TO TRANSPORT THE GAS FROM THOSE RECEIPT POINTS TO LONG BEACH AND THE RATES PAID ARE THOSE AUTHOR AUTHORIZED BY FERC IN THAT SOCAL GAS RATE CASE THAT I JUST TALKED ABOUT A MINUTE AGO.
AND AS TONY TALKED ABOUT EARLIER TODAY, NATURAL GAS STORAGE IS ANOTHER IMPORTANT PART OF THE NATURAL GAS SUPPLY CHAIN.
UNLIKE ELECTRICITY WHICH CAN'T BE STORED ON A LARGE SCALE LEVEL, ALTHOUGH YOUR BATTERY STORAGE IS GETTING BETTER ALL THE TIME, NATURAL GAS CAN BE STORED IN UNDERGROUND RESERVOIRS, WHICH HELPS IN A COUPLE OF WAYS.
FIRST, IT ENSURES THE STABLE SUPPLY TO MEET CUSTOMER DEMAND.
STORED GAS CAN BE USED IN THE EVENT OF TEMPORARY DISRUPTION IN PRODUCTION OR DELIVERY TO KEEP YOUR GAS FLOWING TO CUSTOMERS.
SECOND, IT HELPS MODERATE PRICE VOLATILITY.
GAS GETS STORED AWAY WHEN THE GAS PRICES ARE LOW AND GETS WITHDRAWN FOR USE WHEN THE PRICES ARE HIGH.
GIVEN THAT NATURAL GAS MARKET RATES, AS WE JUST DISCUSSED, ARE PRONE TO LARGE FLUCTUATIONS FROM PRODUCTION INTERRUPTIONS AND WEATHER CONDITIONS, HAVING THIS MEANS OF MODERATING PRICES IS VERY IMPORTANT.
AND ANOTHER WAY TO THINK ABOUT GAS STORAGE IS A MEANS OF BALANCING PRODUCTION CONSUMPTION AND RATES.
WHEN YOUR PRODUCTION IS HIGHER THAN CONSUMPTION, THE RATES GO DOWN AND WE SQUIRREL AWAY GAS FOR A RAINY DAY.
WHEN CONSUMPTION IS HIGHER THAN PRODUCTION, THE RATES GO UP AND WE USE SOME OF THAT STORED GAS TO MEET THE CUSTOMER DEMAND WHILE MINIMIZING THE VOLATILE PRICE.
SO AS YOU JUST HEARD FROM TONY, AND THANK YOU VERY MUCH FOR APPROVING THAT CONTRACT.
UM, THE UM, THE SOCAL GAS STORAGE AGREEMENT IS GONNA BE EFFECTIVE IN JUST A COUPLE OF WEEKS.
I THINK IT'S ACTUALLY STARTING APRIL 1ST
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OR TWO.UM, AND HERE, YOU KNOW, SOME OF THE ELEMENTS IN YOUR, IN YOUR, SORRY.
HERE ARE SOME OF THE ELEMENTS IN YOUR, UH, GAS STORAGE CONTRACT, WHICH TONY JUST TALKED ABOUT.
ONE THING THAT SOCAL GAS STORAGE AGREEMENT DOES NOT SPECIFY IS WHERE L B'S GAS IS STORED.
GAS IS A COMMODITY SO THERE'S NO DIFFERENCE BETWEEN YOUR GAS AND ANYBODY ELSE'S.
HOWEVER, A LARGE PERCENTAGE OF THE NATURAL GAS IN CALIFORNIA GETS STORED IN THIS FACILITY, THE ALISO CANYON NATURAL GAS STORAGE FACILITY, THE NA LARGEST NATURAL GAS STORAGE FACILITY IN ALL OF CALIFORNIA.
SO ALTHOUGH THE GAS LBU STORES THROUGH ITS CONTRACT WITH SOCAL GAS COULD BE INJECTED OR WITHDRAWN FROM ANY STORAGE FACILITY IN CALIFORNIA, THE STATUS OF ALISO CANYON IS IMPORTANT TO ALL GAS UTILITIES.
IN OCTOBER, 2015, SOCAL GAS DISCOVERED A MAJOR LEAK AT ALISO CANYON AND MORE THAN A HUNDRED THOUSAND TONS OF METHANE WERE RELEASED INTO THE SAN FERNANDO VALLEY AREA.
AND AS A RESULT IN 2017, FORMER GOVERNOR JERRY BROWN DIRECTED THE CPUC TO DEVELOP A PLAN FOR THE EVENTUAL CLOSURE OF ELISA CANYON.
AND IN DECEMBER OF JUST LAST YEAR, THE CPUC ISSUED ITS RULING REGARDING THE FUTURE OF ELISA CANYON.
IN THAT DECEMBER 24TH, 2024 DECISION, THE CPUC DETERMINED THAT ALISO CANYON IS CURRENTLY NEEDED FOR SOCAL GAS TO SUPPORT NATURAL GAS AND ELECTRIC SYSTEM RELIABILITY.
THEY APPROVED A PLAN TO CLOSE THE FACILITY WHEN NATURAL GAS DEMAND DROPS BELOW A CERTAIN LEVEL 4.121 MILLION METRIC CUBIC FEET PER DAY.
AND THEY ALSO ESTABLISHED A BIENNIAL ASSESSMENT PROCESS TO DETERMINE WHETHER GAS SUPPLY NEEDS ARE AT A LEVEL SUCH THAT THEY CAN CLOSE THE LASSO CANYON.
NOW THIS IS ANOTHER IMPORTANT POINT TO UNDERSTAND.
THE CPUC HAS DETERMINED THAT THE LARGEST GAS STORAGE FACILITY IN CALIFORNIA, WHICH HAS BEEN DETERMINED TO BE AN ENVIRONMENTAL HAZARD, WON'T CLOSE UNTIL THE ENTIRE STATE STARTS USING LESS GAS.
SO WHAT THIS TELLS US IS, FIRST JUST HOW IMPORTANT THE STORAGE FACILITY IS AND SECOND, HOW IMPORTANT THE STATE BELIEVES IT IS TO REDUCE THE AMOUNT OF GAS THAT EVERYBODY'S USING.
SO NOW THAT WE'VE DISCUSSED THE ELEMENTS OF THE NATURAL GAS SUPPLY CHAIN, LET'S PUT IT ALL TOGETHER USING THE LBU RETAIL GAS BILL, THE LONG BEACH UTILITIES RETAIL GAS BILL HAS FOUR ELEMENTS AND SORT OF A FIFTH THE COST OF GAS, THE SERVICE CHARGE, A USAGE CHARGE, AN AB 32 IMPLEMENTATION FEE AND THE UTILITY USERS TAX.
IN TERMS OF COST OF GAS, AS WE'VE DISCUSSED BEFORE, THE ACTUAL COST OF THE GAS COMMODITY LBU PAYS IS PASSED ON TO LBU RATE PAYERS AND UNDER A STATE STATUTE IS PASSED ON ON A MONTHLY BASIS.
LBU DOESN'T MARK UP THE COST OF GAS, IT'S A STRAIGHT PASS THROUGH WITH NO PROFIT.
THE GAS SERVICE CHARGE, IT'S A FIXED DAILY SERVICE CHARGE EQUATING TO ABOUT $5 A MONTH.
THE USAGE CHARGE AND ALTHOUGH IT'S CALLED A USAGE CHARGE ON YOUR BILL, THE USAGE CHARGE IS ACTUALLY THE CHARGE FOR TRANSPORTATION FOR DELIVERING THE GAS.
LBU IMPOSES THE TRANSPORTATION CHARGE ON A VOLUMETRIC BASIS, MEANING THE CHARGE IS BASED ON THE AMOUNT OF GAS THAT GETS USED AND LBU HAS TWO TIERS OF USAGE CHARGES.
THE BASE TIER, OR TIER ONE IS LOWER PRICED AND GETS APPLIED TO ABOUT 52 THE DURING A WINTER MONTH.
TO THE EXTENT A CUSTOMER USES MORE THAN THAT 52 TIER 52 THERM, TIER ONE AMOUNT LBU CHARGES A HIGHER TIER TWO PRICE FOR THE, FOR THE THERMS USED ABOVE THAT AMOUNT.
THE USE OF THIS TWO TIER SYSTEM WHERE YOU PAY A HIGHER PRICE FOR USING MORE GAS IS INTENDED TO INCENTIVIZE REDUCTION IN THE USE OF GAS, THE AB 32 IMPLEMENTATION FEE.
SUSIE'S GONNA GIVE A MORE COMPLETE EXPLANATION OF AB 32, BUT FOR THIS PURPOSE, SUFFICE IT TO SAY AB 32 IS A CALIFORNIA LAW THAT MANDATES THE STATE REDUCE ITS GREENHOUSE GAS EMISSIONS TO 1990 LEVELS BY 2020 AND IS GOVERNED BY THE CALIFORNIA AIR RESOURCES BOARD OR CARB.
THE AB 32 IMPLEMENTATION FEES GET PAID TO CARB AND ARE USED TO FUND COSTS DIRECTLY RELATED TO THE STATE AGENCY'S DEVELOPMENT ADMINISTRATION AND IMPLEMENTATION OF AB 32 PROGRAMS THAT REDUCE GHG EMISSIONS.
LBU IS ASSESSED A FEE BASED ON THE ANNUAL VOLUME OF NATURAL GAS DELIVERED, WHICH GETS PASSED THROUGH TO THE RATE PAYERS AND ALTHOUGH NOT A CHARGE BY THE UTILITY RATE PAYERS ALSO PAY THE 5% UTILITY USERS TAX ON GAS AND WATER SERVICE, WHICH GOES TO THE CITY'S GENERAL FUND.
HERE ARE YOUR TAKEAWAYS FROM THE SUPPLY CHAIN SECTION OF TODAY'S PROGRAM.
FIRST, IN TERMS OF YOUR GAS COMMODITY, THE MERRILL LYNCH PREPAY AGREEMENT IS AN IMPORTANT MEANS OF STABILIZING WHAT'S OTHERWISE A VERY
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VOLATILE COMMODITY PRICE, GAS DELIVERY, YOUR GAS COMES MOSTLY FROM OUT OF STATE ALL THROUGH FERC REGULATED INTERSTATE PIPELINES TO SPECIFIC DELIVERY POINTS UNDER THE PREPAY AGREEMENT.AND THEN LBU PAY SOCAL GAS TO DELIVER THAT GAS TO LONG BEACH AND GAS STORAGE.
IMPORTANT TO BALANCE PRODUCTION CONSUMPTION AND RATES.
AND THE FLEXIBILITY PROVIDED BY STORING THE GAS IS, IS THE KEY TO RELIABILITY AND COST STABILITY.
I'M NOW GONNA TURN YOU OVER TO SUSIE WHO'S GONNA PROVIDE THE SPECIFIC GUIDANCE YOU'LL NEED GOING INTO YOUR STRATEGIC PLANNING RETREAT.
SO START WITH THE BIG PICTURE.
IF YOU HAD TO IDENTIFY THE SINGLE BIGGEST FACTOR IMPACTING THE FUTURE AND CREATING UNCERTAINTIES FOR NATURAL GAS UTILITIES IN CALIFORNIA, THAT WOULD BE CLIMATE CHANGE.
IN THE STATE'S REACTION TO IT.
CALIFORNIA HAS BEEN AGGRESSIVELY PURSUING CLEAN ENERGY AND CLIMATE RELATED MANDATES FOR SOME TIME.
THE LEGISLATURE AND REGULATORY AGENCIES HAVE ALL HIGHLIGHTED THE NEED TO ADDRESS CLIMATE CHANGE AND TRANSFORM THE ENERGY SECTOR.
KEY FOCUS AREAS COVER A BROAD RANGE OF ISSUES INCLUDING DECARBONIZATION, TRANSPORTATION, ELECTRIFICATION, TECHNOLOGY SPECIFIC MANDATES, DECOMMISSIONING NATURAL GAS INFRASTRUCTURE, ENERGY AFFORDABILITY, AND ENSURING AN EQUITABLE TRANSITION.
FURTHER AS WE'LL DISCUSS, THERE SEEMS TO BE A HEIGHTENED SENSE OF URGENCY ATTACHED TO THOSE AMBITIONS RIGHT NOW, WHICH IS ALSO RUNNING HEADLONG INTO CONCERNS ABOUT ENERGY AFFORDABILITY.
AS LISA NOTED, THERE ARE A LOT OF ELEMENTS THAT GO INTO THE ACTUAL PURCHASE DELIVERY AND PROVISION OF NATURAL GAS TO LBU BUSINESSES AND RESIDENTS.
EACH OF THOSE ELEMENTS PLAYS AN IMPORTANT PART IN THE CITY'S ONGOING OPERATIONS.
HOWEVER, LBU IS ALSO DIRECTLY IMPACTED BY THE BIGGER PICTURE POLICIES AND DEVELOPMENTS OCCURRING IN THE STATE AND FEDERAL LEVELS.
IN THIS HALF OF THE PRESENTATION, WE'LL DISCUSS TRENDS IN WHAT THAT COULD PORTEND FOR LBU.
WHEN WE TALK ABOUT TRENDS, WE'RE REALLY TALKING ABOUT WHAT DIRECTION THE STATE IS HEADED IN CAL.
THAT MEANS DECARBONIZATION ESSENTIALLY REMOVING FOSSIL FUELS FROM CALIFORNIA'S ENERGY RESOURCES, ELECTRIFICATION OF THE TRANSPORTATION SECTOR, INDICES, SECTOR AND HOMES, THE CAP AND TRADE PROGRAM TO MONETIZE EMISSIONS TRADING AND PROVIDE REVENUES TO THE STATE AND PERSONAL PREFERENCES DICTATED BY INDIVIDUAL CONVICTIONS AND CHOICES.
ALL OF THESE HAVE IMPLICATIONS FOR WHAT'S NEXT, EQUITABLE TRANSITION, ENSURING THAT CHANGES TO THE ENERGY USE AND SOURCES.
DO NOT DISADVANTAGE OR LEAVE OUT ANY CUSTOMERS BEHIND BANS ON NATURAL GAS APPLIANCES, POTENTIAL MANDATES AND VOLUNTARY ACTIONS.
COMMUNITY CHOICE AGGREGATION OPTIONS FOR CITIES AND LOCAL GOVERNMENTS TO DIVERSIFY THEIR ENERGY PROVISION TO THEIR CUSTOMERS.
EXPANDED USE OF HYDROGEN WHICH COULD INFLUENCE THE FUTURE OF NATURAL GAS INFRASTRUCTURE AND ELECTRIFICATION, ESPECIALLY FOR INDUSTRY.
AND AGAIN, PERSONAL PREFERENCES BASED ON CONVICTIONS AND PERSONAL CHOICES.
WE'LL TOUCH ON EACH OF THESE IN TURN.
SO THE REGULATORY PROCEEDING AND GOVERNING LAWS COVER A LOT OF GROUND, BUT THE PROCESS TO GET THERE IS RELATIVELY SIMPLE.
THE LEGISLATURE AND ITS INFINITE WISDOM SETS, MANDATES DESIGNED TO MEET CERTAIN ENERGY OR ENVIRONMENTAL POLICY OBJECTIVES.
WHILE OFTEN THESE MANDATES ARE LAUDABLE, HAVE LAUDABLE INTENTIONS, THE LEGISLATORS THAT PASS THESE LAWS, NO LITTLE OR NOTHING ABOUT THE PRACTICAL DETAILS THAT WILL NEED TO BE DEVELOPED IN ORDER TO CARRY OUT THOSE MANDATES.
THE LEGISLATIVE MANDATES TURN INTO REGULATORY PROCEEDINGS.
AGENCIES LIKE THE CALIFORNIA AIR RESOURCES BOARD, THE CALIFORNIA PUBLIC UTILITIES COMMISSION AND THE CALIFORNIA ENERGY COMMISSION ARE DIRECTED TO DEVELOP THE RULES NEEDED TO COMPLY WITH THE MANDATES.
THESE RULES ALSO OFTEN INCLUDE ENFORCEMENT AND PENALTY, PENALTY AUTHORITY FOR THE AGENCIES.
THE END RESULT IS A RULE OF REGULATION THAT UTILITIES LIKE LBU MUST ADHERE TO.
FORTUNATELY THE RULEMAKING PROCESS REQUIRES PUBLIC ENGAGEMENT.
THIS PROVIDES STAKEHOLDERS LIKE LBU, THE OPPORTUNITY TO WORK WITH AGENCIES IN DEVELOPMENT OF THE RULES.
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OF MY PRACTICE IS ADVOCACY BEFORE THESE AGENCIES, WHEN WE'RE IMPLEMENTING THE LEGISLATURE'S INTENT AND TO ENSURE TO THE GREATEST EXTENT POSSIBLE THAT THE RULES ARE IMPLEMENTABLE AND WOULD NOT ADVERSELY AFFECT IMPACTED ENTITIES.A CAP AND TRADE PROGRAM IS ONE SUCH SUCH INSTANCE.
WHILE THE NATURAL GAS UTILITY HERE AT LBU IS COVERED UNDER THE CAP AND TRADE PROGRAM.
THROUGH REGULATORY ADVOCACY WHEN THE RULE WAS BEING PROMULGATED, STAKEHOLDERS WERE ABLE TO SECURE AN ALLOCATION OF ALLOWANCES FOR THE UTILITY TO HELP OFFSET THE COMPLIANCE COSTS.
WE'LL DISCUSS CAP AND TRADE FURTHER LATER.
WE'LL TALK MORE ABOUT SOME OF THESE OTHER LAWS AS WELL.
BUT WHAT WE WANT TO STRESS HERE IS THAT IT'S VERY IMPORTANT TO BE AWARE OF THE TRENDS AND EXTERNAL PRESSURES THAT WILL SHAPE FUTURE OPERATIONS SO THAT YOU CAN PLAN FOR THEM RATHER THAN BE FORCED ONLY TO REACT.
BUT BEFORE WE MOVE ON, WE WOULD BE REMISS IF WE DIDN'T TALK BRIEFLY ABOUT THE FEDERAL GOVERNMENT'S CURRENT ADMINISTRATION AND THE IMPACT THAT THIS MIGHT HAVE ON THE STATE AS WELL AS LBU.
IT IS NO SECRET THAT THE FEDERAL AGENDA IS DIFFERING SIGNIFICANTLY FROM THE STATE'S ENVIRONMENTAL OBJECTIVES.
IMPACTS ARE HARD TO PREDICT, BUT COULD BE SEEN IN SEVERAL WAYS.
FOR EXAMPLE, FEWER WAIVERS OF FEDERAL RULES FOR MORE STRINGENT CALIFORNIA RULES COULD REDUCE THE SUCCESS AND EFFICACY OF SOME ELECTRIFICATION PROGRAMS. AND CUTS IN FEDERAL FUNDING ARE LIKELY TO IMPACT HYDROGEN FUNDING GRANTS THAT ARE A LARGE PART IN THE STATE'S EFFORTS TO MOVE IN THAT DIRECTION.
ADDITIONALLY, INCREASED TARIFFS AND GOODS COSTS ARE LIKELY TO IMPACT ALREADY STRAINED SUPPLY CHAINS AND AVAILABILITY OF KEY ENERGY INFRASTRUCTURE COMPONENTS.
AND TRADE WARS COULD IMPACT THE AMOUNT OF GAS THAT DOES PASS FROM CANADA INTO LONG BEACH, WHICH IS LISA NOTED AS ONE OF OUR SUPPLY SOURCES.
SO THERE ARE A LOT
AND WHILE THE PROCESS TO GET THERE IS RELATIVELY SIMPLE, THE ELEMENTS THAT FEED INTO IT ARE MANY.
IN 20, IN 2005, GOVERNOR SCHWARTZENEGGER SIGNED THE GREENHOUSE GAS, SIGNED AN EXECUTIVE ORDER CALLING FOR GREENHOUSE GAS EMISSIONS TO BE 80% BELOW 1990 LEVELS BY 2050.
THIS WAS FOLLOWED IN 2006 BY ASSEMBLY BILL 32, THE CALIFORNIA GLI CLIMATE, THE CALIFORNIA GLOBAL WARMING SOLUTIONS ACT OF 2006.
THIS LANDMARK LEGISLATION REQUIRES CALIFORNIA TO REDUCE ITS GHG GREENHOUSE GAS EMISSIONS TO 1990 LEVELS BY 2020, A REDUCTION OF APPROXIMATELY 15% BELOW EMISSIONS EXPECTED UNDER A BUSINESS AS USUAL SCENARIO.
WELL, THIS 2015, GOVERNOR BROWN ISSUED AN EXECUTIVE ORDER THAT SET THE TARGET FOR 2030 TO BE 40% BELOW 1990 LEVELS.
AND IN 2016, SENATE BILL 32, THE CALIFORNIA GLOBAL WARMING SOLUTIONS ACT OF 2016 EXPANDED UPON A AB 32 AND IMPLEMENTED GOVERNOR BROWN'S EXECUTIVE ORDER IN 2018.
ANOTHER GO BROWN EXECUTIVE ORDER CALLED ON THE STATE TO ACHIEVE CARBON NEUTRALITY AS SOON AS POSSIBLE AND NO LATER THAN 2045 AND TO ACHIEVE AND MAINTAIN NET NEGATIVE EMISSIONS.
THEREAFTER, THIS WAS FOLLOWED IN 2018 BY SENATE BILL 100, THE 100% CLEAN ENERGY ACT, WHICH REQUIRES AMONG OTHER THINGS RENEWABLE ENERGY AND ZERO CARBON RESOURCES TO SUPPLY 100% OF ELECTRIC RETAIL SALES BY 2045.
AND IN 2022 ASSEMBLY BILL 1279 WAS PASSED THE CALIFORNIA CLIMATE CRISIS ACT.
THIS DECLARED THE POLICY OF THE STATE TO BOTH ACHIEVE NET ZERO GREENHOUSE GAS EMISSIONS AS SOON AS POSSIBLE, BUT NO LATER THAN 2045 AND ACHIEVE AND MAINTAIN NET NEGATIVE GREENHOUSE GAS EMISSIONS THEREAFTER, BECAUSE THIS WOULD REQUIRE CAPTURING CARBON.
A COMPANION BILL, SENATE BILL 9 0 5 ALSO ADDRESSED CARBON CAPTURE REMOVAL, UTILIZATION AND STORAGE PROGRAMS. SO WHY DO WE CARE ABOUT ALL THESE THINGS?
AND I KNOW THAT'S A LOT OF DIFFERENT LAWS AND MANDATES AND THAT THOSE ARE JUST ACTUALLY THE TIP OF THE ICEBERG.
THE POINT IS THAT THE LEGISLATURE IS DRIVING MORE AND MORE MANDATES, RESULTING IN MORE AND MORE RULES AND REGULATIONS THAT THE UTILITIES MUST COMPLY WITH.
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AND THOSE REGULATIONS AND RULES ARE PROMULGATED BY THE NUMBER OF STATE AGENCIES, AS WE MENTIONED, INCLUDING THE CALIFORNIA PUBLIC UTILITIES COMMISSION, WHICH WILL BE CPUC FROM HERE ON OUT THE CALIFORNIA ENERGY COMMISSION, CEC, AND THE CALIFORNIA AIR RESOURCES BOARD CARB.SO AS AN EXAMPLE, LBU IS REQUIRED TO COMPLY WITH CERTAIN REPORTING REQUIREMENTS PROMULGATED BY THE CEC.
YOU HAVE TO REPORT EMISSIONS AND ACTIVITIES.
THE CEC USES THAT INFORMATION IN COMPILING ITS STATEWIDE INTEGRATED ENERGY POLICY REPORT.
SIMILARLY, AT CARB, THERE ARE REGULATIONS THAT THE CITY MUST COMPLY WITH, INCLUDING MANDATORY EMISSIONS REPORTING UNDER THE REGULATION THAT WAS PROMULGATED AS PART OF ASSEMBLY BILL 32.
AND TOTALLY SEPARATE FROM THAT AS A LOCAL GOVERNMENT, LBU IS ALSO RESPONSIBLE FOR COMPLYING WITH THE NEWLY ADOPTED CARB CLEAN FLEETS RULE, WHICH SETS OUT A TRAJECTORY FOR PUBLIC AGENCIES TO TRANSITION THEIR FLEETS TO A HUNDRED PERCENT.
EV THIS HAS BEEN A CHALLENGING ISSUE FOR SOME, ESPECIALLY WHEN YOU'RE TALKING ABOUT SPECIALIZED UTILITY VEHICLES AND THE NEED FOR EMERGENCY RESPONSE AVAILABILITY.
SO AS IT PERTAINS TO THE CPUC, WHICH WE HEAR A LOT ABOUT THE CALIFORNIA PUBLIC UTILITIES COMMISSION, WHILE THE PO U ARE NOT JURISDICTIONAL, THEY ARE, THERE ARE SEVERAL DELIBERATIONS BEFORE THAT AGENCY THAT LBU MUST REMAIN AWARE OF AND ACTIVELY MONITOR, WHICH WE'LL TALK ABOUT, WHICH WE WILL FOCUS ON LATER.
BUT I WILL NOTE THAT FOR OVERSIGHT OF THE FACILITIES AND GAS LINES, LBU RECEIVES ITS SERVICE.
ITS TRANSPORTATION FROM SOCAL GASES SYSTEM AND SOCALGAS SYSTEM IS MONITORED AND UM, ADMINISTERED AND SUBJECT TO THE CPU'S REGULATIONS.
SO THEREFORE, WE ARE IMPACTED BY THE CPU'S REGULATION OF GAS TRANSMISSION IN THE STATE.
THE BIGGEST PROCEEDING AT THE CPU C THAT HAS DIRECT IMPACT ON THE UTILITY IS THE GAS CASE THERE.
AND THAT HAPPENS EVERY FOUR YEARS.
AS LISA MENTIONED, THEY JUST APPROVED THE LAST FOUR YEAR CASE, BUT THEY'LL PROBABLY START WORKING ON THE NEXT ONE WITHIN THE NEXT TWO YEARS.
SO WHY DO YOU CARE ABOUT ALL THESE THINGS? WELL TALK A LITTLE BIT MORE ABOUT IT.
BUT BASICALLY IT'S BECAUSE GREATER ELECTRIFICATION, EITHER THROUGH APPLIANCE SWITCHING OR NEW NO GAS ZONES EQUALS FEWER PEOPLE USING THE NATURAL GAS SYSTEM.
REDUCED THROUGHPUT OF NATURAL GAS IN THE SYSTEM EQUALS LOWER REVENUES.
LOWER REVENUES EQUALS LESS INCOME FOR THE CITY, LESS THROUGHPUT ALSO RESULTS IN HIGHER OVER CALL OVERALL COST FOR CUSTOMERS.
AS THE FIXED COSTS ARE SPREAD ACROSS FEWER CUSTOMERS AND HIGHER ENERGY COSTS EQUALS A GREATER TOTAL ENERGY BURDEN ON L B'S RATE PAYERS.
SO IF WE HAD ONE WORD TO SUMMARIZE THE STATE'S RESPONSE TO CLIMATE CHANGE IMPACTS, IT WOULD BE DECARBONIZATION.
THE OXFORD DICTIONARY DEFINES DECARBONIZATION AS THE REDUCTION OR ELIMINATION OF CARBON DIOXIDE REMISSIONS FROM A PROCESSES FROM PROCESSES SUCH AS MANUFACTURING OR THE PRODUCTION OF ENERGY IN PRACTICE.
HOWEVER, ELECTRIFICATION MEANS SWITCHING FROM THE USE OF FOSSIL FUELS SUCH AS COAL, NATURAL GAS, OR OIL TO CARBON FREE AND RENEWABLE ELECTRICITY SOURCES AS QUICKLY AS POSSIBLE.
AND ALL OF THIS IS WITH THE GOAL OF REACHING CARBON NEUTRALITY.
CARBON NEUTRALITY MEANS THAT ALL OF THE GREENHOUSE GAS EMISSIONS EMITTED INTO THE ATMOSPHERE ARE BALANCED AND EQUAL MEASURE BY GHGS THAT ARE REMOVED FROM THE ATMOSPHERE EITHER THROUGH CARBON SINKS OR CARBON CAPTURE AND STORAGE REQUIREMENTS TO PHASE OUT NATURAL GAS APPLIANCES OR ELECTRIC ONLY PURCHASE MANDATES ARE INTENDED TO REDUCE THE OVERALL DEMAND FOR NATURAL GAS ACROSS THE STATE AND FACILITATE AND DECARBONIZATION DECARBONIZING THE ENERGY SECTOR.
AND THE STATE IS DETERMINED THAT THE BEST WAY TO DECARBONIZE IS THROUGH ELECTRIFICATION.
BUILDING CODES AND NEW CONSTRUCTION MANDATES FOR ALL ELECTRIC APPLIANCES WILL REDUCE THE DEMAND FOR NATURAL GAS, CLEAN FLEET TRUCK AND BUS RULES LIKE THE ADVANCED CLEAN FLEETS THAT LOCAL GOVERNMENTS MUST COMPLY WITH ARE INTENDED TO INCENTIVIZE ELECTRIFICATION OF THE TRANSPORTATION SECTOR.
THE STATE'S ENERGY AGENCIES ARE USING STICKS AND CARROTS TO ENCOURAGE THIS TRANSITION.
A COMBINATION OF INCENTIVES FOR ELECTRIFICATION AND DISINCENTIVES FOR NATURAL GAS.
AGAIN, YOU MAY BE WONDERING HOW ELECTRIFICATION IMPACTS A GAS UTILITY.
AND THAT'S A GOOD QUESTION AND IT WOULDN'T IF WE LIVED IN A DISCREET AND INSULAR ENVIRONMENT WHERE THERE IS NO OVERLAP OR
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INTERCHANGEABILITY BETWEEN GAS AND ELECTRICITY.AND ELECTRIFICATION IS A VIABLE OPTION FOR CHANGING ENERGY USAGE AWAY FROM NATURAL GAS IN MANY INSTANCES ACROSS THE STATE.
AND BECAUSE THE STATE SEES ELECTRIFICATION AS A WAY OF REDUCING OVERALL GHG EMISSIONS AND MEETING ITS CLIMATE GOALS, THE STATE IS ENCOURAGING ELECTRIFICATION.
SO WHAT THIS MEANS IS THAT MORE ELECTRIC BUILDINGS, TRANSPORTATION OPTIONS AND INDUSTRIAL CUSTOMERS WILL DRIVE DOWN THE USE OF NATURAL GAS BY END USERS.
AT THE SAME TIME, THE ELECTRICITY SECTOR IS ALSO BEING CALLED TO REDUCE THE USE OF NATURAL GAS FIRE GENERATION FURTHER IMPACTING THE STATE'S RELIANCE ON AND NEED FOR NATURAL GAS.
THIS MEANS THAT THERE WILL BE MORE INCENTIVES FOR ELECTRIFICATION PURCHASE OF ELECTRIC VEHICLES, PURCHASE OF ELECTRIC APPLIANCES, AND A MOVE AWAY FROM NATURAL GAS APPLIANCES.
AND AS WE SPOKE TO EARLIER, THE FEWER CUSTOMERS TO SPREAD THE COSTS ACROSS, THE HIGHER THE COSTS ARE FOR THOSE REMAINING CUSTOMERS.
THE END RESULT ELECTRIFICATION EQUALS LESS NATURAL GAS USAGE, WHICH PUTS A HIGHER BURDEN ON NATURAL GAS CUSTOMERS THAT REMAIN ON THE SYSTEM.
THE STATE'S ENERGY TRANSITION REQUIRES A CLOSE LOOK AT THE TOTALITY OF THE NATURAL GAS INFRASTRUCTURE.
AS WE MENTIONED, INFRASTRUCTURE THAT SERVES LONG BEACH CUSTOMERS COMES FROM WHAT'S OWNED WITHIN THE CITY AND WHAT TAKES PLACE OUTSIDE THE CITY.
SO WE HAVE TO LOOK AT WHAT THIS INFRASTRUCTURE LOOKS LIKE BOTH PRESENTLY AND IN THE FUTURE.
THE CPUC AND THE CEC HAVE BEEN ASSESSING THE FUTURE OF GAS INFRASTRUCTURE IN DIFFERENT WAYS, INCLUDING IN SPECIFIC LONG-TERM GAS PLANNING PROCEEDINGS AND IN BUILDING DECARBONIZATION PROCEEDINGS.
THESE DELIBERATIONS AIM TO ASSESS HOW TO TRANSITION AWAY FROM NATURAL GAS AND HOW TO DECOMMISSION SUPPORTING INFRASTRUCTURE WHILE CONTINUING TO MAINTAIN SAFE AND RELIABLE ELECTRICITY AND NATURAL GAS DURING THE TRANSITION.
IT ALSO ACKNOWLEDGES THE NEED TO RETAIN IN GOOD WORKING ORDER SOME INFRASTRUCTURE THAT CANNOT BE DECOMMISSIONED, THAT WON'T BE NEEDED FOR THOSE CUSTOMERS THAT CANNOT BE ELECTRIFIED.
THE CPUC INITIATED A NEW RULEMAKING LAST SEPTEMBER TO CONSIDER THESE ISSUES AND CONTINUE THEIR COMPREHENSIVE REVIEW OF UTILITY NATURAL GAS INFRASTRUCTURE INVESTMENTS.
THIS IS IMPORTANT 'CAUSE THERE'S ALWAYS GOING TO BE A TENSION BETWEEN INVESTMENTS IN FACILITIES THAT WE MIGHT WANNA DECOMMISSION AND THE NEED TO ENSURE THAT THERE AREN'T EXCESSIVE STRANDED COSTS.
AND AGAIN, WHILE THESE PROCEEDINGS ARE FOCUSED ON THE INVESTOR OWNED UTILITIES, IT IS IMPOSSIBLE FOR LBU TO IGNORE ANY, AS ANY SIGNIFICANT DECISIONS MADE AT THE CPUC THAT IMPACT THE INFRASTRUCTURE AT LARGE WILL IMPACT LBU TOO.
IN THIS MOST RECENT PROCEEDING, THE CPUC HAS DIVIDED THE ISSUES TO BE CONSIDERED INTO THREE DIFFERENT PHASES.
PHASE ONE IS SPECIFIC ACTIONS THAT CAN BE UNDERTAKEN IN THE SHORT AND MEDIAN TURN TO RESPOND TO ANTICIPATED RISKS AND CHALLENGES OF THE GRANT GAS TRANSITION.
DOZENS OF STAKEHOLDERS HAVE WEIGHED IN ON THIS AND COMMENTS THAT WERE JUST FILED LAST WEEK.
PHASE TWO IS THE DEVELOPMENT OF PERTINENT INFORMATION NEEDED FOR THE GAS TRANSMISSION FOR CONSIDERATION IN THIS PROCEEDING AND IN OTHER PROCEEDINGS AS WELL.
AND THAT HAS TO DO WITH DETERMINING WHAT LINES SERVE, WHAT AREAS, AND HOW MUCH NEED THERE IS ON THOSE LINES.
PHASE THREE IS RELATED AND ITS IMPLEMENTATION OF SENATE BILL 1221, WHICH REQUIRES THE UTILITIES TO MAP THEIR INFRASTRUCTURE AND DESIGNATE NEIGHBORHOODS THAT SHOULD BE DECARBONIZED FIRST AS THE LEGISLATION REQUIRES THE IOUS TO ESTABLISH PRIORITY NEIGHBORHOOD DECARBONIZATION ZONES AT THIS TIME.
THE CPUC HAS ACKNOWLEDGED THAT SB 1221 MAPPING REQUIREMENTS ARE NOT APPLICABLE TO THE PUBLICLY OWNED UTILITIES LIKE LBU, BUT THAT IS NOT STOPPED THEM FROM THE PAST FROM TRYING TO GET THAT KIND OF INFORMATION FROM US.
NOR DOES IT MEAN THAT THEY WON'T TRY TO DO SO AGAIN IN THE FUTURE.
IT IS IMPORTANT FOR LBU TO BE A PART OF THESE DISCUSSIONS SURROUNDING DECOMMISSIONING NATURAL GAS INFRASTRUCTURE, EVEN IF IT'S NOT OWNED BY LBU AS THE UTILITY NEEDS TO BE INFORMED AND CONSIDER THE RAMIFICATIONS OF CPUC PRO PROPOSALS ON ITS OWN TRANSMISSION LINES.
STRANDED COSTS ARE ALWAYS GOING TO BE AN ISSUE CONSIDERING A LONG-TERM FIABILITY OF THE NATURAL GAS SYSTEM.
ALSO RAISES ISSUES OF POTENTIAL STRANDED COSTS.
THE STATE AS A WHOLE AND LBU AT THE LOCAL LEVEL WILL NEED TO ASSESS THE EXTENT TO WHICH INVESTMENTS MUST BE MADE TO MAINTAIN THE SYSTEM.
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EVEN THOUGH THE COST OF THOSE INVESTMENTS MAY NOT BE EASILY RECOVERED OVER THE REMAINING USEFUL LIFE OF THOSE ASSETS, THEY HAVE TO BE MAINTAINED IN WORKING SAFE WORKING ORDER NO MATTER HOW LONG THEY'RE GOING TO BE USED.AND THEN THERE'S ISSUES REGARDING NEW GAS LINE CONSTRUCTION.
NEW DEVELOPMENT AND EXPANDED SERVICE REQUIRES NEW INFRASTRUCTURE IN MANY INSTANCES, AGAIN, THE STATE AS A WHOLE AND LBU LOCALLY MUST CONSIDER THE FEASIBILITY OF INVESTING IN NEW GAS INFRASTRUCTURE TO PROVIDE SERVICE TO AREAS THAT HAD NOT PROCE PREVIOUSLY RECEIVED IT.
THE CPUC HAS ELIMINATED SUBSIDIES FOR EXTENDING NATURAL GAS LINES TO SERVE NEW BUILDINGS, WHICH ENDED A PREVIOUSLY SANCTIONED FINANCIAL INCENTIVE FOR GAS LINE EXPANSIONS.
HOWEVER, THERE ARE STILL INTER INSTANCES WHERE NATURAL GAS MAY BE A MORE VIABLE ALTERNATIVE TO ELECTRIFICATION VERSUS FORCING CUSTOMERS TO RESORT TO ONSITE PROPANE OR OTHER OFF-GRID FUEL SUPPLIES THAT HAVE A WORSE OVERALL IMPACT ON THE ENVIRONMENT.
AND GAS FIRED ELECTRIC GENERATION IS ALSO RELEVANT TODAY THE STATE RELIES ON NAS NATURAL GAS FIRED GENERATION TO MEET NEARLY HALF OF ITS NON-RENEWABLE IN-STATE ELECTRICITY PRODUCTION.
SO PHASING OUT THIS WILL USE WILL SIGNIFICANTLY REDUCE THE STATE'S RELIANCE ON NATURAL GAS.
THIS TAKES US TO OUR NEXT DISCUSSION TOPIC.
YOU MAY BE ASKING YOURSELF WHY FOR GAS UTILITY DO WE HAVE A SLIDE TITLED ELECTRICITY AND LBU? IT IS BECAUSE WHILE MANY STATE EFFORTS HAVE PRIMARILY BEEN FOCUSED AND DIRECTED ON ELECTRIC UTILITIES THROUGH THINGS LIKE RENEWABLE ENERGY PURCHASE MANDATES AND EMISSIONS PERFORMANCE STANDARDS FOR NATURAL GAS, FIRE GENERATION, NATURAL GAS UTILITIES ARE ALSO AFFECTED BECAUSE NATURAL GAS AND ELECTRICITY ARE EXCHANGEABLE AS WE'VE DISCUSSED POLICIES AND MANDATES AND IMPLICATE ONE ALSO IMPLICATE THE OTHER.
EARLIER I MENTIONED SENATE BILL 100, WHICH REQUIRED, UH, A HUNDRED PERCENT OF ELECTRICITY BE SERVED BY ZERO CARBON RESOURCES BY 2045.
WHAT SB 100 ALSO DID WAS DIRECTED THE C-P-U-C-C-E-C AND CARB TO WORK COLLECTIVELY TO PUBLISH A REPORT EVERY FOUR YEARS THAT ASSESSES THE VARIOUS PATHWAYS THE STATE CAN TAKE TO ACHIEVE THAT GOAL AND ALSO PROVIDE AN ASSESSMENT OF THE COSTS AND BENEFITS.
THE SB 100 REPORT IS FOCUSED ON CLEAN ELECTRICITY, HOWEVER, DECARBONIZATION AND CARBON NEUTRALITY AS THE UNDERPINNINGS TO ELECTRIFICATION ALSO IMPACT NATURAL GAS AND NATURAL GAS.
FIRE GENERATION IS CONSIDERED ESSENTIAL TO PROVIDING RELIABLE ELECTRICITY AND IS ALSO A RELATIVELY AFFORDABLE ENERGY RESOURCE.
SO EFFORTS TO ELIMINATE OR REDUCE GAS FIRE GENERATION WILL IMPLICATE ELECTRICITY PRODUCTION AND HENCE THE COST OF ELECTRICITY, WHICH AS WE'LL DISCUSS ALSO IMPACTS NATURAL GAS USAGE.
CONSIDERING THIS IN THE CONTEXT OF THE PREVIOUS SLIDE, REMOVING THE D DEMAND FOR NATURAL GAS ELECTRIC GENERATION WOULD INFLUENCE LONG-TERM DECISIONS ABOUT GAS LINE DECOMMISSIONING AND COULD ALSO IMPACT THE FUTURE OF NATURAL GAS STORAGE.
THE TENSION BETWEEN AGGRESSIVE GHG REDUCING ACTIVITIES AND ENERGY AFFORDABILITY HAS BEEN ESCALATING AND GOVERNOR NEWSOM ISSUED AN EXECUTIVE ORDER LAST FALL DEALING WITH RISING ELECTRICITY COSTS.
YES, I SAID ELECTRICITY COSTS, BUT I NOTE THAT HERE BECAUSE THE RISING ELECTRICITY COSTS THWART THE STATE'S ELECTRIFICATION GOALS AND WILL LIKELY RESULT IN MORE PEOPLE RETAINING THEIR NATURAL GAS FIRED APPLIANCES AND VEHICLES OR AT LEAST WAITING A WHILE LONGER BEFORE SWITCHING.
WHAT THIS MEANS IS THAT ELECTRICITY AFFORDABILITY WILL HAVE A DIRECT IMPACT ON REDUCTIONS IN NATURAL GAS USAGE, WHICH IN TURNS HAS A DIRECT IMPACT ON L'S PLANNING AND INCLUDING PLANNING FOR DECOMMISSIONING POTENTIAL UH, LINES.
AGENCY ACTIONS RELATED TO ELECTRICITY ENERGY EFFICIENCY ARE ALSO RELEVANT.
THE CPUC HAD PREVIOUSLY AUTHORIZED THE INVESTOR OWNED UTILITIES TO ISSUE REBATES AND INCENTIVES FOR NEW MORE ENERGY EFFICIENT APPLIANCES.
AND THOSE INCENTIVES WERE FOR BOTH NATURAL GAS AND ELECTRIC APPLIANCES.
BUT THE CPUC RECENTLY STOPPED PROVIDING INCENTIVES OF ANY KIND FOR NATURAL GAS APPLIANCES, FURTHER ENCOURAGING THE TRANSITION TO ELECTRIC.
WHY DOES THIS MATTER? BECAUSE FEWER GAS INCENTIVES MEAN FEWER OPPORTUNITIES FOR CUSTOMERS TO INVEST IN NEW GAS APPLIANCES.
AND EVEN IF THE INCENTIVES WERE ONLY AVAILABLE TO INVESTOR OWNED UTILITY
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CUSTOMERS, THESE KINDS OF ACTIONS SEND MARKET SIGNALS WITH STATEWIDE REPERCUSSIONS BY WAY OF FEWER OFFERINGS OR HIGHER COSTS OR AND HIGHER COSTS.THE USE OF HYDROGEN, WHICH WE'LL DISCUSS A LITTLE MORE LATER TO TRANSITION COMMERCIAL CUSTOMERS AND MORE ENERGY INTENSIVE INDUSTRIES IS ALSO RELEVANT HERE.
SINCE SOME ENERGY INTENSIVE INDUSTRIAL PROCESSES ARE VERY DIFFICULT TO ELECTRIFY, THERE IS A CONCERTED EFFORT TO EXPAND THE USE OF HYDROGEN, WHICH IN SOME INSTANCES CAN BE PRODUCED BY CARBON FREE.
MEANS THIS COULD POTENTIALLY HAVE A TWOFOLD IMPACT ON LBU FIRST.
IT OFFERS A MEANS BY WHICH TO FACILITATE DECARBONIZING L'S INDUSTRIAL CUSTOMERS AS THE CITY MOVES TOWARDS MEETING ITS OWN CLEAN CLIMATE GOALS AND RESILIENCY AS SET FORTH IN ITS CLIMATE ACTION PLAN.
AND SECOND, IT PROVIDES POTENTIAL OPTIONS FOR REPURPOSING PART OF THE EXISTING GAS INFRASTRUCTURE, WHICH COULD HELP WITH THE FIXED COST ISSUE THAT WE SPOKE TO EARLIER.
CALIFORNIA'S CAP AND TRADE PROGRAM, CALIFORNIA.
THE CALIFORNIA AIR RESOURCES BOARD HAS ALWAYS HAD RESPONSIBILITY FOR REGULATING MOBILE AND STATIONARY SOURCES OF GREENHOUSE GASES AND OTHER POLLUTANTS.
THROUGHOUT THE STATE, CARB HAS IMPLEMENTED REGULAT REGULATIONS THAT IMPOSE FUEL STANDARDS, EMISSIONS REDUCTIONS, AND THE LIKE.
IN 2006, CAR'S ROLE TOOK ON GREATER PROMINENCE WITH THE PASSAGE OF ASSEMBLY BILL 32, THE GLOBAL WARMING SOLUTIONS ACT.
AMONG OTHER THINGS, AB 32 DIRECTED CAR TO CARB TO CREATE THE CLIMATE CHANGE SCOPING PLAN, WHICH IS UPDATED EVERY FIVE YEARS, CREATE RULES FOR REPORTING GHG EMISSIONS, THE MANDATORY REPORTING REGULATIONS THAT HE SPOKE TO EARLIER AND AUTHORIZED THE CREATION OF A FEE SCHEDULE TO FUND VARIOUS AGENCY PROGRAMS DEVELOPED UNDER AB 32.
COLLECTION OF THESE FEES IS INCLUDED IN THE LBU UTILITY BILLS THAT LISA WENT OVER AB 32.
ALSO, IMPORTANTLY, AUTHORIZED CARB TO CREATE A MARKET-BASED EMISSIONS PROGRAM THAT IS THE CAP AND TRADE PROGRAM WHERE ENTITIES ARE RESPONSIBLE FOR SURRENDERING COMPLIANCE INSTRUMENTS TO COVER THE GREENHOUSE GAS EMISSIONS ASSOCIATED WITH THEIR OPERATIONS IN STATE.
AND THE CAP AND TRADE PROGRAM IS A KEY ELEMENT OF CALIFORNIA STRATEGY TO REDUCE GREENHOUSE GAS EMISSIONS.
THE CAP AND TRADE PROGRAM DEALS IN ALLOWANCES.
THOSE ARE THE COMPLIANCE INSTRUMENTS THAT MUST BE PURCHASED AND SURRENDERED.
AND THOSE COMPLIANCE INSTRUMENTS ARE SOLD AT AN AUCTION.
THE CAP AND TRADE AUCTION, THE PROCEED OF THE STATE'S ALLOWANCES ARE PLACED INTO THE GREENHOUSE GAS REDUCTION FUND, THE GGRF, WHICH ARE APPROPRIATED BY THE LEGISLATURE FOR A MULTITUDE OF ENVIRONMENTAL PROGRAMS, INCLUDING EXPENDITURE OF AT LEAST 25% OF THE PROCEEDS PER PRIORITY COMMUNITIES.
AS WE'LL DISCUSS IN A MOMENT, THERE ARE ALSO PROCEEDS THAT GO TO THE CITY OF LONG BEACH ACCORDING TO CARB.
THE CAP AND TRADE PROGRAM CONTEMPLATE COMPLIMENTS OTHER MEASURES TO ENSURE CALIFORNIA COST EFFECTIVELY MEETS ITS GREENHOUSE GAS REDUCTION GOALS.
I DON'T THINK THAT THE LEGISLATURE AND I SHARE A COMMON DEFINITION OF COST EFFECTIVE, BUT THAT'S A, THAT'S A DIFFERENT POINT.
SO YOU MAY BE ASKING YOURSELF WHY DO YOU CARE SPECIFICALLY ABOUT THE COP CAP AND TRADE PROGRAM? AND THERE ARE A COUPLE OF REASONS.
FIRST, THE GAS UTILITY IS A COVERED ENTITY, UH, REQUIRED TO COMPLY WITH THE PROGRAM.
IT'S THE BAD NEWS, BUT THE PROGRAM DOES ALLOW LBU TO RECEIVE FREE ALLOWANCES THAT CAN BE PUT INTO THE AUCTION.
SO YOU HAVE TO SURRENDER COMPLIANCE INSTRUMENTS FOR EACH TON OF CO2 EMITTED.
BUT IN PROMULGATING THE REG REGULATION, IT WAS DETERMINED THAT IT'S NOT FAIR FOR THE GAS CUSTOMERS TO HAVE TO PAY FOR THESE ALLOWANCES OUTRIGHT.
SO A PORTION OF THE TOTAL NUMBER OF ALLOWANCES AVAILABLE IN THE PROGRAM ARE FREELY ALLOCATED TO LBU AS A NATURAL GAS UTILITY.
THE PURPOSE OF THOSE FREELY ALLOCATED ALLOWANCES IS TO OFFSET THE COMPLIANCE COSTS ASSOCIATED WITH THE PURCHASE OF ALLOWANCE.
WITHOUT THE FREE ALLOCATION, THE FULL COST OF COMPLYING WOULD BE BORN BY THE UTILITIES CUSTOMERS.
A NOTE QUICKLY THAT THE REVENUES ASSOCIATED WITH THE CAP AND TRADE PROGRAM AND THE FREELY ALLOCATED ALLOWANCES ARE TOTALLY SEPARATE FROM THE CAR ADMINISTRATIVE FEE THAT IS COLLECTED ON THE BILL ON THE UTILITIES BILLS.
THESE ALLOWANCES THOUGH FREELY ALLOCATED ARE NOT WITHOUT STRINGS.
AND LBU IS REQUIRED TO CONSIGN A SPECIFIC NUMBER OF THEIR ALLOWANCES TO THE CAP AND TRADE AUCTION.
EVENTUALLY IT'LL BE A HUNDRED PERCENT REQUIRED
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CONSIGNMENT, BUT THEN LBU USES THE ALLOWANCE VALUE AS DETERMINED BY THE AUCTION PRICE.THE UTILITIES ARE RI REQUIRED TO FILE A FORM ANNUALLY WITH CARB OUTLINING THE WAY IN WHICH THOSE ALLOWANCES WERE EXPENDED.
AND CURRENTLY THERE ARE DISCUSSIONS AT THE LEGISLATURE ABOUT WHETHER TO REAUTHORIZE THE CAP AND TRADE PROGRAM POST 2030.
WHILE WE STILL HAVE FIVE YEARS UNTIL THIS HAPPENS, THAT PUSHED A FORMALIZED CONTINUATION OF THE PROGRAM AS SOON AS POSSIBLE IS IN ORDER TO GET GREATER MARKET CERTAINTY, WHICH LEADS TO HIGHER ALLOWANCE PRICES AND HIGHER ALLOWANCE PRICES LEAD TO HIGHER REVENUES.
THIS IS TRUE FOR THE STATEWIDE REVENUES THAT GO INTO THE GGRF AS WELL AS REVENUES THAT LBU GETS FROM THE AUCTION.
MORE REVENUES THAT COME INTO THE UTILITY MEAN MORE MONEY THE UTILITY HAS TO SPEND ON PROGRAMS AND PROJECTS THAT DIRECTLY BENEFIT THE NATURAL GAS CUSTOMERS.
AND MORE REVENUES THAT GO TO THE STATE MEANS GREATER FUNDING FOR STATEWIDE PROGRAMS, SOME OF WHICH CAN COMPLEMENT L'S OBJECTIVES AND POTENTIALLY OFFSET SOME OF THE PROGRAMS THAT LBU WOULD WANT TO FUND.
THIS SLIDE MAY LOOK FAMILIAR 'CAUSE IT'S PART OF A PRESENTATION THAT YOU HAD RECEIVED BEFORE, BUT IT DEPICTS THE ALLOWANCE REVENUES THE GAS UTILITY RECEIVED FROM CARB SINCE THE INCEPTION OF THE PROGRAM THROUGH APRIL OF 2024.
IT ALSO LISTS SOME OF THE PROGRAMS AND MEASURES THAT HAVE BEEN FUNDED BY THE CAP AND TRADE ALLOWANCE VALUE TO DATE.
AND YOU'LL NOTICE THIS INCLUDES REBATES FOR ENERGY EFFICIENCY, DIRECT INSTALLS, AND LED TRANSITIONS, ALL THINGS THAT ARE REDUCING ENERGY.
THE UTILITY HAS ALSO OUR ALREADY RECEIVED AUTHORIZATION FOR FUTURE PROJECTS THAT INCLUDE BUT ARE NOT LIMITED TO RESIDENTIAL CUSTOMER REBATES, REBATES FOR NATURAL GAS APPLIANCES FOR MULTIFAMILY HOMES, INCENTIVES FOR SINGLE FAMILY APPLIANCE AND DEVICE RETROFITS, AND RETROFITTING OLDER DEVICES IN MULTIFAMILY HOMES.
THE CLIMATE CHANGE SCOPING PLAN IT.
IT IS THE STATE'S ROADMAP FOR HOW TO REACH STATEWIDE DECARBONIZATION BY 2040 AND WAS REQUIRED BY ASSEMBLY BILL 32 IN 2006.
THE SCOPING PLAN SETS OUT THE GREENHOUSE GAS REDUCTION TARGET FOR EACH SECTOR OF THE ECONOMY.
AND BECAUSE THIS DOCUMENT IS JUST A PLAN, IT DOES NOT ACTUALLY IMPLEMENT ANY OF THE PROGRAMS OR MANDATES IF IT'S JUST A PLAN WITH NO SPECIFIC REGULATORY MANDATES.
WHY HAVE THE UTILITIES BOTH PUBLIC AND PRIVATE AS WELL AS DOZENS OF OTHER STAKEHOLDERS INVESTED SO MUCH TIME AND EFFORT INTO THIS DOCUMENT? BECAUSE THIS DOCUMENT GUIDES AND INFORMS STATEWIDE REGULATORY POLICIES AND MANDATES MOVING FORWARD, IT SETS THE AGGRESSIVE TARGETS FOR DECARBONIZATION AND CARBON NEUTRALITY DRIVING ALL OF THE AGENCY RULEMAKINGS AND PROCEEDINGS IMPLEMENTING DECARBONIZATION POLICIES THAT ARE SET FORTH IN THE PLAN.
THE SCOPING PLAN WAS FIRST ADOPTED IN 2009, LAYING THE FRAMEWORK FOR ALL OF THE DIFFERENT PROGRAMS THAT THE STATE WOULD UTILIZE TO MEET THE LEGISLATORS LEGISLATURE'S GHG REDUCTION GOALS.
AT THAT TIME, THE 20% BELOW 1990 LEVELS SEEMED AGGRESSIVE.
SINCE THAT TIME, THE STATE TARGET HAS INCREASED 40% BELOW 1990 LEVELS AND 2030 AND 80% BELOW 1990 LEVELS BY 2050.
AND EACH TIME THE GOVERNOR DECLARES A NEW EMISSIONS REDUCTION TARGET AND THE LEGISLATURE CODIFIES THOSE TARGETS INTO LAW.
THE CLIMATE CHANGE SCOPING PLAN IS UPDATED TO REFLECT THOSE INCREASINGLY STRINGENT REQUIREMENTS.
THE CURRENT SCOPING PLAN ASSESSES THE PROGRESS TOWARDS THE 2020 TARGET AND ALSO INCLUDES FOR THE FIRST TIME A PATH TO ACHIEVING CARBON NEUTRALITY BY NO LATER THAN 2045 LIKE THE PREVIOUS DRAFTS.
THE CLAIM, THE LATEST CLIMATE CHANGE UPDATE INCLUDES A SUITE OF POLICIES AIMED AT ACHIEVING THESE REDI REDUCTION TARGETS AND BUILDS UPON EXISTING PROGRAMS. ONE OF THE BIGGEST DIFFERENCES, IT ALSO ADDRESSES WAYS IN WHICH CALIFORNIA'S LANDS CAN BE USED TO AS A CARBON SINK, WHICH BASICALLY MEANS A STORAGE FOR CARBON.
[01:45:01]
OF THE SCENARIOS DEMONSTRATED THAT THERE'S NO WAY TO REACH OUR GOALS, STATE'S GOALS WITHOUT CARBON CAPTURE STORAGE AND SEQUESTRATION THE ENVIRONMENTAL JUSTICE COMMUNITY AS OPPOSED TO MANY OF THE GHG REDUCING PROPOSALS IN THE SCOPING PLAN, INCLUDING THE CAP AND TRADE PROGRAM, WHICH THEY BELIEVE BENEFITS INDUSTRY AND UTILIZATION OF CARBON CAPTURE TECHNOLOGIES.THE LATTER HAS BEEN HIGHLY CONTR CON, CONTROVERSIAL AND STRONGLY OPPOSED BY MANY INCLUDING CARBS ENVIRONMENTAL JUSTICE ADVISORY COMMITTEE, WHICH WAS CREATED UNDER AB 32.
INSTEAD, THESE GROUPS WOULD PREFER TO SEE EXPANDED USE OF COMMAND AND CONTROL MEASURES, WHICH ARE TARGETED RULES THAT REQUIRE SPECIFIC ACTIONS FOR COMPLIANCE AS WELL AS THE COMPLETE PHASE OUT OF ALL NATURAL GAS USE IN THE STATE.
SO WHAT'S NEXT?
WHAT'S NEXT? WE'VE GONE OVER A LOT, BOTH IN TERMS OF THE TECHNICAL NUTS AND BOLTS OF OPERATING LBU GAS UTILITY AND THE EXTERNAL FACTOR FACTORS THAT IMPACT THE ONGOING OPERATIONS.
AND AS YOU PREPARE FOR YOUR STRATEGIC PLANNING RETREAT, HERE ARE SOME OF THE THINGS YOU MAY WANNA GIVE FURTHER THOUGHT TO WHEN DEVELOPING YOUR ONGOING ACTION PLANS.
AS EACH OF THESE ITEMS IMPACTS NOT JUST LBU, BUT THE STATE AS A WHOLE DECREASED CARBONIZATION, THE STATE SHIFT TO GREATER ELECTRIFICATION AND THE PHASE OUT OF NATURAL GAS ELECTRIC GENERATION
OH,
AND AS A NATURAL GAS UTILITY, L B'S SHARE OF THE COST WILL INCREASE AS THERE ARE FEWER CUSTOMERS TO SPREAD THOSE COSTS AROUND.
UNFORTUNATELY, IT'S A ONE-TWO PUNCH FOR LONG BEACH.
FIRST, THERE WILL BE INCREASED FIXED COST SINCE THERE ARE FEWER CUSTOMERS USING THE SYSTEM.
AND SECOND, WITH LESS USE, THERE WILL BE FEWER REVENUES FOR WHICH TO PAY FOR THOSE COSTS.
THE NATURAL GAS TRANSMISSION INFRASTRUCTURE IS A COM COMPLEX NETWORK OF FACILITIES THAT CROSS THE STATE.
AS LISA SPOKE TO EARLIER, THE NATURAL GAS THAT COMES INTO THE CITY DOES NOT ORIGINATE HERE.
AND THEREFORE LBU IS IMPACTED BY THE AMOUNT OF GAS OTHER UTILITIES REQUIRE AND USE, INCLUDING INTERNATIONAL PRESSURES THAT MAY COME FROM RECENT FEDERAL ACTIONS.
THE CITY IS ALSO IMPACTED BY THINGS THAT OCCUR MORE LOCALLY.
FOR EXAMPLE, YOU ARE LIKELY TO FEEL THE IMPACTS OF THE REBUILD OF PACIFIC PALISADES AND OTHER AREAS THAT HAVE WERE RECENTLY HIT BY THIS DEVASTATING WILDFIRES.
THAT IS BECAUSE AS ENTIRE COMMUNITIES NEED TO REBUILD THEIR ENERGY INFRASTRUCTURE, THERE MAY BE DECISIONS MADE NOT TO REBUILD NATURAL GAS INFRASTRUCTURE.
THERE CALLS FOR BUILDING ALL ELECTRIC HOMES AND INVESTING SOLELY IN ELECTRIFYING NEW AND REBUILT NEIGHBORHOODS.
ANY, AGAIN, ANY DECREASE IN STATEWIDE CONSUMPTION IMPACTS THE OVERALL COST OF THE REMAINING TO THE REMAINING CUSTOMERS, UTILIZING THE SYSTEM AND EQUITABLE TRANSITION.
DESPITE BEST INTENTIONS, NOT EVERYONE CAN ELECTRIFY THEIR HOMES OR THEIR TRANSPORTATION OPTIONS, NOR CAN EVERY SEGMENT OF THE ECONOMY MOVE EASILY AWAY FROM FOSSIL FUELS.
PLANNING FOR THE FUTURE INCLUDES CONSIDERING HOW TO ADDRESS HARD TO ELECTRIFY CUSTOMERS.
THESE INCLUDE LOW INCOME CUSTOMERS THAT CANNOT AFFORD TO REPLACE THEIR GLASS APPLIANCES WITH NEW ELECTRIC ONES OR INCUR THE ADDITIONAL COST OF PURCHASING ALL NEW COOKWARE TO ACCOMMODATE THEIR NEW INDUCTION COOKTOPS.
THESE ARE ALSO RENTERS AND MULTI-TENANT BUILDINGS THAT HAVE NO CONTROL OVER THE APPLIANCES IN THEIR BUILDINGS OR THE ABILITY TO MOVE.
THE CITY OF LONG BEACH CLIMATE ACTION PLAN ADOPTED IN AUGUST, 2022 LAYS A FUNDAMENTAL FRAMEWORK THAT WILL FACILITATE THE CITY'S TRANSITION.
IN ADDITION TO WHAT HAS BEEN LAID OUT IN THE CLIMATE ACTION PLAN, LBU WILL WANNA TAKE STEPS TO ENSURE THAT THE BENEFITS OF DECARBONIZATION ARE REALIZED BY ALL CUSTOMER CLASSES REGARDLESS OF INCOME, THUS ENSURING AN EQUITABLE TRANSITION.
ENVIRONMENTAL JUSTICE AND EQUITY ACTION PLANS ARE INTENDED TO ENSURE THAT THOSE TWO ELEMENTS ARE INCLUDED IN DECISION-MAKING PROCESSES OF ALL THE AGENCIES.
SO WHAT EXACTLY IS ENVIRONMENTAL JUSTICE? THE CALIFORNIA GOVERNMENT CODE DEFINES IT AS THE FAIR TREATMENT AND MEANINGFUL INVOLVEMENT OF PEOPLE OF ALL RACES, CULTURES, INCOMES, AND NATIONAL ORIGINS WITH RESPECT TO THE DEVELOPMENT, ADOPTION, IMPLEMENTATION AND ENFORCEMENT OF ENVIRONMENTAL LAWS, REGULATIONS, AND POLICIES.
SO BASICALLY EVERYTHING GROUPS LIKE THE JOINT
[01:50:01]
C-P-U-C-C-E-C, DISADVANTAGED COMMUNITY ADVISORY GROUP AND CARBS AB 32 ENVIRONMENTAL JUSTICE ADVISORY COMMITTEE ARE DESIGNED TO PROVIDE SPECIFIC INPUT TO REGULATORS ABOUT THE TRANSITION, ABOUT HOW THE TRANSITION WILL IMPACT DISADVANTAGED AND PRIORITY COMMUNITIES AND ALSO WAYS TO MITIGATE IMPACTS.AND JUST LAST WEEK, THE CALIFORNIA ENERGY COMMISSION HOSTED A WORKSHOP ON A NEW INFORMATIONAL PROCEEDING TO DETERMINE HOW TO QUANTIFY AND INCORPORATE NON-ENERGY IMPACTS INTO ALL DECISION MAKING PROCESSES ACROSS THE AGENCY'S VARIOUS PROCEEDINGS.
THIS PROCEEDING IS VERY DEAR TO AND CLOSE TO VICE CHAIR GUNDA AT THE CEC AND SOMETHING THAT HE SEES AS A LONG TIME COMING.
BUT THIS IS NO MEAN FEAT AS IT REQUIRES CONSIDERATION AND WEIGHTING OF MYRIAD FACTORS THAT ARE NOT ALWAYS EASILY QUANTIFIED OR COMPARED.
SIMPLY PUT, CONSIDERATION OF ENVIRONMENTAL JUSTICE IS INTERTWINED WITH ENERGY, AFFORDABILITY AND EQUITABLE TREATMENT OF LOW INCOME AND TRADITIONALLY MARGINALIZED COMMUNITIES.
TO BE CLEAR, THIS IS A HIGHLY CHARGED ISSUE AND ONE THAT DOES NOT LEND ITSELF TO SIMPLE SOLUTIONS FOR SEVERAL REASONS.
FIRST, DECARBONIZATION IS USUALLY HARDEST ON THE LOWEST INCOME CUSTOMERS.
FOR EXAMPLE, WE CAN GIVE EVERYONE THE SAME ACCESS TO ELECTRIC APPLIANCES, BUT THAT DOESN'T MEAN THAT EVERYONE HAS THE SAME ABILITY TO PURCHASE THOSE ELECTRIC APPLIANCES.
THERE ARE ALSO CUSTOMERS THAT ARE TRADITIONALLY MORE ADVERSELY IMPACTED BY POLLUTANTS, BY WAY OF THEIR PROXIMITY TO INDUSTRIAL FACILITIES AND FREEWAYS, AS WELL AS THEIR EXPOSURE TO INDOOR EMISSIONS FROM NATURAL GAS APPLIANCES.
CUSTOMERS THAT REMAIN ON THE NATURAL GAS SYSTEM THAT ARE HARDER TO ELECTRIFY WILL ALSO BE BEARING HIGHER PROPORTION OF THE FIXED COSTS OF THE ELECT OF THE NATURAL GAS SYSTEM AS THEIR NEIGHBORS ARE ABLE TO GET OFF OF NATURAL GAS.
SO WHAT THIS MEANS IS, AS THIS TRANSITION MOVES FORWARD, SO TOO WILL THE CHALLENGES OF ENSURING THAT THE TRANSITION TO CLEAN ENERGY BENEFITS ALL THE CUSTOMERS OF THE CITY.
AND I'LL NOTE THAT WHEN WE SPOKE ON ABOUT THE CLIMATE, UH, THE ALLOWANCE VALUE, THAT THERE ARE MEASURES IN THERE THAT TO ADDRESS THESE CONCERNS WITHIN TARGETED INVESTMENTS OF THE CAP AND TRADE PROGRAM PROCEEDS INTO NEW INCENTIVES AND RETROFITS FOR MULTIFAMILY HOMES.
FOR AN EXAMPLE, WHICH SETS A GOOD START BANS ON NATURAL GAS.
SO ONE WAY TO REDUCE NATURAL GAS CONSUMPTION IS TO BAN THE USE OF NATURAL GAS APPLIANCES.
IN 2022, CARB VOTED TO BAN THE GAS, THE SALE OF GAS FURNACES AND WATER HEATERS AFTER 2030.
AND IN 2023, THE CALIFORNIA PUBLIC UTILITIES COMMISSION STOPPED RATE PAYER FUNDED INCENTIVES FOR NATURAL GAS APPLIANCES.
AND THE CPUC HAS ALSO STOPPED ALLOWING U UTILITIES TO OFFER INCENTIVES FOR INSTALLATION OF NEW GAS INFRASTRUCTURE, WHICH IS A DEFACTO BAN ON NATURAL GAS APPLIANCES.
AT THIS TIME, OVER 65 CALIFORNIA JURISDICTIONS HAVE ADOPTED POLICIES TO PROMOTE OR REQUIRE BUILDING ELECTRIFICATION, MEANING THAT ONLY ELECTRIC APPLIANCES COULD BE USED AT THE SAME TIME.
HOWEVER, A RECENT POLL AND MY RECENT, I MEAN JUST THIS MONDAY COMMISSIONED BY GAS APPLIANCE MANUFACTURERS AND THE CALIFORNIA MANUFACTURER AND TECHNOLOGY ASSOCIATION INDICATED THAT CUSTOMERS WOULD SUPPORT A MEASURE AIMED AT PROTECTING CALIFORNIAN'S RIGHT TO HAVE NATURAL GAS FOR HEATING HOT WATER AND COOKING.
PUBLIC SENTIMENT EVOLVES NOT JUST CONCERNS ABOUT PERSONAL CHOICE OVER APPLIANCE OPTIONS, BUT ALSO IMPLICATES THE BROADER ISSUE OF ENERGY, AFFORDABILITY AND COST OF LIVING.
WITH SOME EXPRESSING CONCERNS THAT BANS ON NATURAL GAS ARE GOING TO BE TOO EXPENSIVE, NOT ALL OF THE EFFORTS OF CITIES TO BAN NATURAL GAS HAVE BEEN SUCCESSFUL.
THE CITY OF BERKELEY ADOPTED AN ORDINANCE TO BAN GAS HOOKUPS AND NEW BUILDINGS.
THE BAND WAS CHALLENGED BY THE RESTAURANT ASSOCIATION AND WAS STRUCK DOWN IN RESPONSE TO THE FAILED ORDINANCE.
THE CITY PURSUED A BALLOT MEASURE THAT WOULD'VE TAXED LARGE BUILDINGS BASED ON THE AMOUNT OF NATURAL GAS THEY USE, BUT THAT MEASURE WAS DEFEATED.
HOWEVER, DESPITE THESE SETBACKS, A GAS BAN ORDINANCE IS LIKELY TO OCCUR, ESPECIALLY IN BERKELEY, AS THE PROVI PROVISIONS AND ORDINANCE ARE REVISED TO ADDRESS THE SHORTCOMINGS THAT WERE IDENTIFIED BY THE COURTS AND HEARKENING BACK TO THE LAST SITE.
I ALSO WANNA TALK ABOUT THE FACT THAT BANS ON NATURAL GAS APPLIANCES, ALTHOUGH TIED TO LAUDABLE GOALS, AL ALSO ARE TIED TO LAUDABLE
[01:55:01]
GOALS THAT HAVE HEALTH INEQUITY.ISSUES ON BOTH SIDES OF EFFORTS TO BAN HAVE COME FROM CONCERNS ABOUT HEALTH IMPACTS ON INDOOR USE.
LEAKS AND APPLIANCES MAY ALSO RELEASE GASES THAT CAUSE RESPIRATORY PROBLEMS OR ARE LINKED TO ASTHMA AND OTHER LUNG DISEASES.
CUSTOMERS IN LOWER INCOME BUILDINGS TEND TO HAVE THE HIGHEST EXPOSURE TO THEIR APPLI AS THEIR APPLIANCES ARE USUALLY OLDER OR NOT FUNCTIONING PROPERLY, OR SIMPLY BECAUSE THESE EMISSIONS ARE CONFINED TO SMALLER SPACES, RETROFITTING OLDER HOMES AND OLDER APPLIANCES ALSO COMES WITH A HIGHER PRICE TAG THAN NEWER BUILDINGS.
AND MANY RENTERS THAT ARE ON FIXED INCOMES WITHOUT THE RESOURCES TO PURCHASE COSTLY NEW APPLIANCES HAVE NO OPTION TO CHANGE, EVEN WITH THE PROS PROMISE OF REDUCED ELECTRICITY BILLS.
SO WHY DOES IT MATTER TO LBU? IT MATTERS BECAUSE FEWER GAS INCENTIVES MEANS FEWER OPPORTUNITIES FOR CUSTOMERS TO INVEST IN NEW GAS APPLIANCES AND FEWER CUSTOMERS AND MEANS AND FEWER CUSTOMERS TO ENTICE MANUFACTURERS TO PROVIDE OPTIONS AT REASONABLE PRICES.
AND SO EVEN AGAIN, IF THESE INCENTIVES WERE LIMITED TO THE INVESTOR OWNED UTILITY, THEY SEND MARKET SIGNALS WITH STATEWIDE REPERCUSSIONS.
THEY IMPACT THE PRICE AND AVAILABILITY OF THESE PRODUCTS FOR EVERYONE, NOT JUST THE IOU CUSTOMERS.
SO ALSO, AGAIN, COMES BACK TO COUPLED WITH RESTRICTIONS ON THE PRODUCTION OF NEW NATURAL GAS WATER HEATERS AND HEAT PUMPS.
THERE'S AN ESCALATING IMPACT ON THE TOTAL GAS USAGE FOR THE CITY OF LONG BEACH THROWING ONE IN HERE THAT'S NOT EXACTLY RELATED TO LONG BEACH'S GAS UTILITY, BUT IT IS SOMETHING THAT A NUMBER OF MUNICIPALITIES ARE LOOKING AT.
SO WE WANNA TALK ABOUT IT A LITTLE BIT.
FORMING OR JOINING A CO COMMUNITY CHOICE AGGREGATOR ALLOWS THE CITY WITHOUT A MUNICIPAL ELECTRIC UTILITY TO AGGREGATE THE ELECTRICITY NEEDS OF THE RESIDENTS AND BUSINESSES AND THEN GO OUT TO THE MARKET AND PROCURE ELECTRICITY ON THEIR BEHALF.
SO THE MUNICIPALITIES, RESIDENTS AND BUSINESSES WOULD GET THEIR ELECTRICITY FROM THE CCA AND WOULD ONLY PAY THE LOCAL ELECTRIC UTILITY.
THE INVESTOR OWNED UTILITY FOR THE TRANSMISSION AND DISTRIBUTION OF THE ELECTRICITY CUSTOMERS RECEIVE A BILL THAT HAS GENERATION AND TRANSMISSION SEPARATELY WITH THE FORMER PAID TO THE CCA.
SO WHY ARE SOME LOCAL GOVERNMENTS CONSIDERING CCAS? WELL, THERE ARE SEVERAL REASONS.
MANY ARE FORMED TO PROVIDE GREATER CONTROL OVER THE GENERATION RESOURCES USED TO PRO TO PRODUCE THE ELECTRICITY THAT THEIR CUSTOMERS RECEIVE.
IF A LOCAL GOVERNMENT WAS TO BECOME A CCA OR EVEN JOIN WITH AN EXISTING ONE, THEY WOULD HAVE THE OPPORTUNITY TO EXCEED STATE MANDATES FOR RENEWABLE ENERGY PROCUREMENT.
AND IT PROVIDES AN OPPORTUNITY FOR EVEN GREATER GREENHOUSE GAS EMISSIONS IN THE ENERGY USED TO SOTHE CUSTOMERS THAN WHAT IS MANDATED.
IT OFFERS CITIES AND LOCAL GOVERNMENTS THE POTENTIAL FOR AN ALTERNATIVE SOURCE OF REVENUE IN LIGHT OF INCREASED IN ELECTRIFICATION.
THERE ARE ALSO SEVERAL REASONS WHY CUSTOMERS PREFER TO TAKE SERVICE FROM A CCA, AND THAT IS BECAUSE THEY LIKE THE IDEA OF LOCAL CONTROL.
THEY HAVE AN INTEREST IN GREENER ELECTRICITY AND THEY'RE WILLING TO PAY A PREMIUM FOR PRODUCTS LIKE A HUNDRED PERCENT CARBON FREE OPTIONS, WHICH CCAS ARE ABLE TO TAILOR FOR THEIR, UH, CUSTOMERS TO BE SUCCESSFUL.
HOWEVER, IT IS IMPORTANT TO CONSIDER THE PURPOSE AND OBJECTIVES THAT A LOCAL GOVERNMENT WOULD HAVE IN MOVING IN THAT DIRECTION.
FOR EXAMPLE, IF IT'S JUST GREENER PRODUCTS, YOU NEED TO KEEP IN MIND THAT A CITY MAY NOT BE ABLE TO OFFER GREENER PRODUCTS TO CUSTOMERS AS THE STATEWIDE MANDATES FOR CLEAN ENERGY INCREASE.
AND THE IOUS ARE ALSO HELD TO A HIGHER STANDARD.
HOWEVER, BY BECOMING A CCA OR JOINING AN EXISTING CCA, A LOCAL GOVERNMENT WOULD HAVE MORE CONTROL OVER THE RESOURCES USED TO PROVIDE ELECTRICITY AND MAY BE ABLE TO PROVIDE MORE TARGETED PROGRAMS AND SERVICES THAT ALIGN WITH THE CITY'S CLIMATE PLANS AND OBJECTIVES.
AS THE 2019 FEASIBILITY STUDY PREPARED FOR THE CITY OF LONG BEACH NODES, A CCA MAY BE A FEASIBLE OPTION FOR LBU IF IT ALIGNS WITH THE AND THE UTILITIES OBJECTIVES.
LAST POINT ABOUT WHAT'S IN THE FUTURE,
AS THE STATE MOVES AWAY FROM THE USE OF NATURAL GAS, THERE HAVE BEEN DISCUSSIONS ABOUT DECARBONIZATION OF THE NATURAL GAS SYSTEM THROUGH REPURPOSING AND CONSTRUCTION OF HYDROGEN INFRASTRUCTURE.
[02:00:01]
ALSO AN IMPORTANT ALTERNATIVE BECAUSE IT CAN BE USED FOR HARD TO ELECTRIFY IN ENERGY INTENSIVE INDUSTRIES.ONE SUCH EFFORT IN CALIFORNIA IS ARCHES, THE ALLIANCE FOR RENEWABLE CLEAN HYDROGEN ENERGY SYSTEMS. IT IS AN INITIATIVE IN THE STATE TO ACCELERATE RENEWABLE CLEAN HYDROGEN PROJECTS AND THE NECESSARY INFRASTRUCTURE TO SUPPORT THEM.
ARCHES AIMS TO ARCHES AIMS TO FACILITATE THE TRANSITION TO HYDROGEN AS A FUEL SUBSTITUTE FOR NATURAL GAS THROUGH WHAT THEY'RE CALLING THE HYDROGEN HUB INITIATIVE.
THE STATE RECEIVED FUNDS FROM THE FEDERAL GOVERNMENT TO HELP LAUNCH THE HYDROGEN HUB INITIATIVE.
SO THERE ARE CONCERNS ABOUT THE EXTENT TO WHICH THOSE FUNDS MAY HAVE ALREADY BEEN MADE AVAILABLE.
ANOTHER SUCH EFFORT IS THE SOCAL GAS ANGEL ANGELS LINK PROJECT.
THE PURPOSE OF THE ANGELS LINK PROJECT IS TO DEVELOP A CLEAN, RENEWABLE HYDROGEN ENERGY TRANSPORT SYSTEM TO SERVE THE LOS ANGELES BASIN, INCLUDING THE PORT OF LONG BEACH IN APPROVING THE FIRST SOCAL GAS REQUEST FOR A DEDICATED ACCOUNT TO PURSUE THIS PROJECT.
THE CPUC NOTED THAT CLEAN RENEWABLE HYDROGEN HOLDS PROMISE AS A POTENTIAL SOLUTION TO DECARBONIZE CALIFORNIA'S ENERGY FUTURE AND BRING ECONOMIC OPPORTUNITIES AND NEW JOBS TO THE REGION.
BECAUSE CLEAN RENEWABLE HYDROGEN IS ONE OF THE ONLY FEW VIABLE CARBON FREE ALTERNATIVES FOR THE HARD TO ELECTRIFY INDUSTRIES AND THE HEAVY DUTY TRANSPORTATION SECTOR.
SOCALGAS FILED THEIR APPLICATION WITH THE CALIFORNIA PUBLIC UTILITIES COMMISSION LAST DECEMBER TO MOVE FORWARD WITH THE PROJECT, WHICH WAS SUPPORTED BY THEIR COMPREHENSIVE PHASE ONE STUDY THAT CONCLUDED THE FINDINGS IN THE STUDY HOLISTICALLY DEMONSTRATE THAT ANGELS LINK IS VIABLE, TECHNICALLY FEASIBLE, AND HAS THE POTENTIAL TO BE A COST EFFECTIVE SOLUTION FOR DELIVERING CLEAN RENEWABLE HYDROGEN AT SCALE.
HOWEVER, THERE IS CONSIDERABLE DEBATE.
THERE'S ALWAYS A HOWEVER RIGHT, IT'S TOO GOOD TO BE TRUE.
THERE'S CONSIDERABLE DEBATE SURROUNDING HYDROGEN AND WHETHER IN FACT IT IS A CLEAN OR RENEWABLE RESOURCE, THE CLEANNESS OF HYDROGEN IS DEFINED BY ITS TYPE.
YOU MIGHT HAVE HEARD OF THE COLOR WHEEL OF HYDROGEN WHERE WE HAVE GREEN HYDROGEN THAT IS MADE COMPLETELY FROM RENEWABLE RESOURCES, BLUE HYDROGEN THAT IS MADE FROM NATURAL GAS, BUT FROM WHICH THE CARBON EMISSIONS ARE CAPTURED AND STORED OR SEQUESTERED.
AND GRAY HYDROGEN ALSO MADE FROM ANY OTHER FOSSIL FUEL, BUT THERE'S NO CARBON CAPTURE ON THE EMISSIONS GENERATED.
AND THE TYPE OF HYDROGEN WHERE IT FALLS ON THE COLOR WHEEL IS VERY IMPORTANT TO HOW SUCCESSFUL IT CAN BE INCORPORATED INTO CLEAN CLIMATE POLICIES.
ENVIRONMENTAL JUSTICE COMMUNITIES OPPOSE MANY HYDROGEN PROJECTS DUE TO THE PERPETUATION OF THE NATURAL GAS INFRASTRUCTURE.
SO THEY SAY EVEN IF YOU'RE USING A HUNDRED PERCENT GREEN HYDROGEN, YOU'RE STILL KEEPING THE GAS GOING THROUGH THE LINES.
AND THEY'RE ALSO OPPOSED TO THE ELECTRICITY NEEDED TO GENERATE THE FUEL AS WELL AS WIDESPREAD CONCERNS ABOUT THE LOCATION OF HYDROGEN GENERATION FACILITIES THAT THEY BELIEVE WILL CONTINUE TO ADD ADVERSELY IMPACT PRIORITY COMMUNITIES AND DISADVANTAGED COMMUNITIES.
OKAY, WE'RE FINALLY AT OUR LAST SLIDE AND WHAT I, THE REASON I CAME BACK UP HERE, WAKE IT UP, UM,
THE TRANSITION TO ELECT ELECTRIFICATION MEANS THAT, YOU KNOW, MANY OF YOUR CUSTOMERS WILL BEGIN USING LESS NATURAL GAS AS THEY PHASE OUT THEIR GAS APPLIANCES.
HOWEVER, THE FIXED COST FOR THE GAS UTILITY SYSTEM AND THE INFRASTRUCTURE AREN'T GONNA DECREASE WITH THIS DECREASED USAGE.
IN FACT, THE INCREASE IN ELECTRIC USAGE IS GONNA COME WITH DECREASED GAS USAGE, WHICH MEANS LOWER OVERALL REVENUES FOR THE GAS UTILITY AND HIGHER COSTS FOR THE REMAINING CUSTOMERS ON THE GAS SYSTEM.
AS THE UTILITIES FIXED COSTS ARE BEING BORNE BY FEWER OVERALL CUSTOMERS.
KNOWING ALL THIS PLANNING FOR YOUR CONTINUED TRANSITION IS ESSENTIAL.
AND HERE ARE SOME OF THE WAYS THAT THIS BOARD CAN CONSIDER DOING.
FIRST, PROACTIVELY ENGAGE IN LEGISLATIVE AND REGULATORY DISCUSSIONS ON THE ENERGY TRANSITION AND DECARBONIZATION DEVELOP PROGRAMS AND OPTIONS FOR LOW INCOME AND HARD TO ELECTRIFY CUSTOMERS
[02:05:01]
TO ENSURE AN EQUITABLE TRANSITION TO A CLEANER ENERGY FOR ALL LONG BEACH RESIDENTS, AND WORK WITH INDUSTRY ON ALTERNATIVE DECARBONIZATION OPTIONS, INCLUDING THE POTENTIAL DEVELOPMENT OF HYDROGEN ALTERNATIVES THAT COULD BE LOCATED IN OR NEAR YOUR SERVICE TERRITORY.I WANNA THANK YOU FOR ALL FOR YOUR TIME TODAY, AND WE'VE GOT I THINK A FEW MINUTES FOR QUESTIONS IF ANYBODY HAS ANY.
I'D LOVE TO HEAR MORE ABOUT HYDROGEN.
WE GOT A LOT OF LEARNING TO DO THERE.
ANY QUESTIONS? UM, COMMENTS AND QUESTIONS? UM, I COULD COMMISSIONERS, OR LET ME ASK FOR THE PUBLIC FIRST.
IS THERE ANYONE IN THE AUDIENCE WITH A QUESTION OR CONCERN? QUESTION.
DO YOU ALL BE REALLY IMPRESSED?
THAT WAS QUITE A BIT, BUT IT WAS ACTUALLY VERY INTERESTING, UH, TO SEE THE TREND.
UM, SINCE ALL POLITICS ARE LOCAL, I'M GONNA GO TO MY OWN HOME.
I WOULD ASSUME THAT, UM, PEOPLE THAT ALREADY HAVE MAYBE EVEN HIGH END GAS STOVES OR WHATEVER, UM, WOULD PROBABLY BE WILLING TO PAY A HIGHER AMOUNT JUST TO KEEP IT, BECAUSE THE TRANSITION TO ALL ELECTRIC IS NOT SOMETHING THAT THEY'D EVEN WANNA CONSIDER.
AND THEN WHAT DOES THAT MEAN FOR MANUFACTURERS THAT, THAT, THAT DO PRODUCE THOSE? WELL, TO THE EXTENT THAT THAT'S, THIS IS WHERE WE SAID PERSONAL CHOICE COMES IN, RIGHT? RIGHT.
SO YOU CAN BAN NEW APPLIANCES, BUT IF YOU ALREADY HAVE THEM, THEY'RE NOT SO FAR
AND, UH, BUT THAT'S WHERE THE DECARBONIZATION IN GENERAL COMES IN, WHERE THE STATE WANTS TO PHASE OUT ALL NATURAL GAS BECAUSE BY, BY ALLOWING THE EXISTING FACILITIES TO STAY THERE, IT'S ADVERSELY IMPACTING LOWER INCOME COMMUNITIES DISPROPORTIONATELY BECAUSE THEY DON'T HAVE THE RANGES.
THEY DON'T HAVE THAT TAKE THE AIR OUT THERE TRADITIONALLY IN SMALLER COMMUNITIES.
SO THE WAY IT IMPACTS MANUFACTURERS BANS ON NATURAL GAS, BOTH AT THE LOCAL AND STATEWIDE LEVEL, AND BANS ON NATURAL GAS APPLIANCES IMPACTS MANUFACTURERS BECAUSE THEY LOOK AT CALIFORNIA AND SAY, WELL, THERE'S GONNA BE FEWER AND FEWER NATURAL GAS PER APPLIANCE PURCHASES.
SO I DON'T NEED TO BE MARKETING OUT THERE.
I DON'T NEED TO BE OFFERING AS MANY PRODUCTS.
THAT'S, THAT'S WHERE IT WOULD IMPACT.
AND JUST IN CALIFORNIA ACTUALLY RIGHT NOW, I MEAN, WELL, CALIFORNIA'S NOT THE ONLY STATE, BUT IT IS, YEAH.
AND THEN SO THE, THE MOVE TO ALL ELECTRIC HOMES, I FEEL LIKE IT'S GOING WAY BACK TO YEARS AGO WHEN EDISON HAD A WHOLE CAMPAIGN.
UH, WHEN WE MOVED IN OUR HOME, WE HAD A LITTLE THING THERE, A LITTLE GOLD MEDALLION THAT SAID ALL ELECTRIC HOMES.
SO NOW WE'RE MOVING BACK TO THAT.
UM, IT, IT, IT'S ACTUALLY HEAD SPINNING I THINK.
BUT, UM, AND THEN THE COMMUNITY CHOICE AGGREGATE, THAT'S ALSO ANOTHER THING THAT CAME OUT OF QUITE A WHILE AGO.
UM, AND EVEN THOUGH I THINK YOU SAID IF THERE ARE COMMUNITIES ARE LOOKING TOWARD THAT, AND THERE ARE SOME ADVANTAGES.
I THINK WHEN WE TRIED IT IN LONG BEACH YEARS AGO, IT, THE ISSUE OF TRUST CAME IN AND AT THAT TIME THE COMMUNITY SEEMED TO TRUST EDISON MORE THAN THEY WOULD THE CITY TAKING IT OVER ON A LOCAL BASIS.
IS THAT TRUE, DO YOU THINK? SOMETHING LIKE THAT? YES.
AND, AND I'LL STATE THAT'S WHERE THE, SO COMMUNITY CHOICE AGGREGATION HAD ITS GENESIS IN A HUGE DISTRUST AMONGST THE CONSUMERS AND THE INVESTOR OWNED UTILITIES, PG AND E AND UM, UH, EDISON IN PARTICULAR, AND A LOT OF COMMUNITIES, A LOT OF CITIES WERE TRYING TO MUNICIPALIZE THEIR ELECTRIC SERVICE.
AND THAT'S A VERY, VERY BIG ENDEAVOR, CONDEMNING ELECTRIC LINES.
AND THE UTILITIES WERE, YOU'RE FIGHTING IT.
AND PG E HAS BEEN FIGHTING SOUTH SAN JOAQUIN IRRIGATION DISTRICT, FOR EXAMPLE, TRYING TO DO THAT FOR MORE THAN 20 YEARS.
UM, BUT SO THE LEGISLATURE CAME UP WITH MUNICIPALIZATION LIGHT
THAT'S WHAT I, AND THAT'S A CCA WHERE A GOVERNMENT ENTITY CAN GET TOGETHER THE, THE SUCCESS OF A CCA DEPENDS, LIKE YOU SAID, SOLELY ON THE, THE EXTENT TO WHICH THE COMMUNITY SUPPORTS HAVING THEIR LOCAL GOVERNMENT VERSUS THEIR LOCAL INVESTOR OWNED UTILITY PROVIDING SERVICE.
AND, UH, IT IS VERY DEPENDENT ON WHAT THE GOALS AND OBJECTIVES OF THE LOCAL GOVERNMENT THAT PUTS TOGETHER THE CCA.
MARIN WAS ONE OF THE FIRST ONES,
[02:10:01]
AND THEY HAD, IT'S NO LONGER CALLED MARIN CLEAN ENERGY, AND THEY'VE EXPANDED BROADLY, BUT THEIR, THEIR COMMUNITY, GOD BLESS YOU, WHICH WAS VERY ABLE TO AFFORD THE HIGHER ELECTRICITY, WANTED THEIR TO HAVE A CCA WITH THE PURPOSE OF HAVING THE CCA GET ENERGY THAT WAS ABOVE AND BEYOND THE STATE MANDATE.THEY WANTED AN ALL GREEN PORTFOLIO AND THEY WERE WILLING TO PAY A PREMIUM FOR IT.
THAT'S NOT GONNA HAPPEN EVERYWHERE.
BECAUSE I, I KNOW LIKE COMMUNITIES LIKE SANTA MONICA, WHERE I THINK THEY LOOKED SANTA MONICA, THEY WERE LOOKING AT SOMETHING LIKE THAT AND PAYING FOR GREEN ENERGY, AND SO YOU'RE GONNA HAVE KIND OF A, A, A, YOU KNOW, A MIXTURE WITHIN THE STATE.
DO I, ANY OTHER COMMISSIONER QUESTIONS? COMMISSIONER SHANNON? I THINK, UH, I THINK THE BOTTOM LINE WITH REGARD TO LONG BEACH IS THAT, UH, PG AND E HAD A MUCH BETTER PR DEPARTMENT THAN THE CITY OF LONG BEACH.
UH, HOW MANY STATES, UH, ARE MOVING IN THIS DIRECTION? IN THE DECARBONIZATION? YES.
UH, WEST COAST IS, THERE'S QUITE A BIT, UH, OREGON, WASHINGTON.
UH, I DON'T HAVE A, A SAMPLING.
THERE'S THERE, I'D SAY THAT IT'S ON THE COASTS.
I SAID PG EI MEANT SOUTHERN CALIFORNIA.
UM, YOU'LL BE SHOCKED TO HEAR THAT.
IT'S MOSTLY IN THE BLUE STATES AND LESS SO IN THE RED STATES.
AND I, I, I WONDER IF IT MIGHT BE HELPFUL FOR, IF, IF THERE'S A MEMBER OF STAFF THAT MIGHT WANNA ASK A QUESTION THAT YOU THINK MIGHT BE HELPFUL TO US TO GIVE US SOME INSIGHT.
UM, DID IT OCCUR TO ANYBODY SOFTBALL? OH, THERE SHE IS.
UH, WELL, I, I'M CURIOUS BECAUSE ONE OF, UM, ONE OF THE EFFORTS THAT OUR GAS UTILITY WAS UNDERTAKING PRE COVID AND, AND NOW WE'RE DOING IT FURTHER THAN A DIFFERENT ITERATION, IS WORKING WITH THE CEC AND CPUC TO ASSESS THE VIABILITY OF DECOMMISSIONING NATURAL GAS PIPELINES IN OUR OWN CITIES.
AND, AND THAT IS SO SIMPLY BECAUSE THE QUESTION IS ASKED, UM, DOES NOT MEAN THAT WE'RE ACTUALLY GOING TO DO IT.
UM, BUT GIVEN THAT THE CONVERSATION IS, IS BEING HAD, UM, CERTAINLY IN ENVIRONMENTAL JUSTICE GROUP CIRCLES, UM, IN THIS CALIFORNIA STATE LEGISLATURE, UM, AS A NATURAL GAS PROVIDER OURSELVES, WE FELT THAT IT WOULD BEHOOVE US TO AT LEAST UNDERSTAND THE FACTS, THE FIGURES AROUND, UM, WHAT, UH, AROUND THE CONCEPTS THAT WERE BEING DISCUSSED IN SOME HIGHER CIRCLES.
AND SO, UM, AS, AS SUSIE AND, UM, AND, AND LISA MENTIONED RELIABILITY AND AFFORDABILITY IS, IS KEY CRITICAL IN A LOT OF THESE ANALYSIS.
UM, AND AS, AS WE'VE ALL EXPERIENCED, UM, POWER OUTAGES, UM, ELECTRIC POWER OUTAGES, AND I THINK THIS, THIS AREA ITSELF HAD ONE, MAYBE TWO WEEKS AGO.
UM, I, I'M CURIOUS HOW THIS BOARD FEELS ABOUT THE RELIABILITY ASPECT OF, I'M CURIOUS HOW THIS BOARD FEELS ABOUT THE RELIABILITY ASPECT OF NATURAL GAS DECOMMISSIONING, BECAUSE CERTAINLY THERE IS A DIFFERENCE, UM, BETWEEN NATURAL GAS AND AND ELECTRICITY AS IT'S PROVIDED TODAY.
UM, THAT WOULD IMPACT THAT DECISION.
UM, AND THEN OF COURSE THE AFFORDABILITY FACTOR, UM, WILL COME INTO PLAY AS WELL.
AND, AND THAT IS RELATIVELY EASIER TO CALCULATE.
UM, AFFORDABILITY IS JUST A DOLLAR AND YOU CAN BASE THAT ON HISTORICAL USAGE, UM, AND THE CONVERSION OF, UM, ANTICIPATED NEED FOR ELECTRICITY IN LIEU OF NATURAL GAS, IF THE NATURAL GAS WOULD BE DECOMMISSIONED.
BUT THE RELIABILITY PIECE, I AM, I AM VERY INTERESTED IN WHAT YOU THINK AS THE BOARD, THE, THE PUBLIC WOULD TOLERATE.
AND CAN I INTERJECT REAL QUICK? WHEN YOU'RE RESPONDING TO THAT QUESTION, IT'S, UH, A LITTLE EVEN MORE DIFFICULT TO ASCERTAIN BECAUSE IF THE CITY OF LONG BEACH TAKES AN ENTIRE COMMUNITY AND DECIDES WE ARE GOING TO SHUT OFF GAS TO THAT COMMUNITY AND GO ALL ELECTRIC, IT MEANS THAT THOSE AREN'T YOUR CUSTOMERS AT ALL ANYMORE.
AND YOU'RE BASICALLY THROWING THEM A HUNDRED PERCENT TO EDISON.
COMMISSIONER RESPONSE ON THAT, OR ANNA TOLD THAT YOU NO, I WAS WAITING FOR, I JUST HAVE A COMMENT AT THE END.
Y YEAH, THANK YOU FOR BRINGING THAT RELIABILITY AND AFFORDABILITY UP.
'CAUSE THE AFFORDABILITY IS WHAT STRUCK ME.
UM, I MEAN, WE'RE GONNA, WE'RE DEALING WITH THAT EVEN ON THE WATER SIDE AND TRYING TO GET A LOW INCOME RATE ASSISTANCE PROGRAM.
AND I CAN SEE MAYBE IN THIS SAME THING IN THIS VEIN HERE, UM,
[02:15:01]
IN TERMS OF, UM, NOW I MIGHT, I LOST MY TRAIN OF THOUGHT.DOES THAT, THAT LANGUAGE SCARES ME NOW BECAUSE OF WHAT'S HAPPENED AT THE FEDERAL LEVEL.
IS THERE ANY CROSSOVER ON THAT THAT WE HAVE TO BE CONCERNED ABOUT? OH, CALIFORNIA HAS A COUPLE OF DIFFERENT INDICES THAT THEY USE.
THERE'S THE CALEN VIRO SCREEN, WHICH DESIGNATES DISADVANTAGED COMMUNITIES.
NOT EVERYBODY BELIEVES THAT THOSE ACTUALLY APPROPRIATELY CAPTURE, UH, THE, THE COMMUNITIES THAT ARE MOST IMPACTED.
FOR EXAMPLE, THERE ARE RURAL COMMUNITIES THAT ARE, UH, NOT CONSIDERED DISADVANTAGED COMMUNITIES BECAUSE ONE OF THE CRITERIA IS, UH, UH, A PER CAPITA THING, AND THERE'S JUST NOT ENOUGH PEOPLE IN THAT AREA THERE.
WE ARE NOT USING FEDERAL INDICIA FOR DETERMINING FOR THE STATE, FOR THE MOST PART, IN DETERMINING WHAT, UH, DISADVANTAGED COMMUNITIES ARE.
THERE IS, HOWEVER, A FEDERAL CARBON, CARBON COST FEDERAL COST TO CARBON.
AND THAT COMES INTO PLAY BECAUSE WHEN YOU'RE ASSESSING NON-ENERGY IMPACTS, AND WHEN YOU'RE SAYING, YOU KNOW, WHAT, WHAT ARE, WHAT'S THE BUSINESS AS USUAL VERSUS MAKING A TRANSITION? THERE IS A, A COST OF CARBON THAT IS IMPUTED THERE AND, UH, COST OF NON-ACTION AND THE LIKE.
AND THERE HAVE BEEN VERY RECENT RUMBLINGS, AND I AM GETTING A LITTLE AHEAD OF MY LEGISLATIVE SKIS HERE, BUT THERE WAS A PROPOSAL TO CHANGE A, UH, UM, TO CHANGE THE, THE BENCHMARK DATE AND TIME TO A SET TIME ON THE COST OF CARBON, BECAUSE WE HAVE HEARD THAT THE FEDERAL GOVERNMENT WANTS TO CHANGE THE COST THAT WAS SET BY, UM, UH, PRESIDENT OBAMA.
SO, AND THOSE ARE THE KINDS OF THINGS THAT ARE USED IN WIDESPREAD CALCULATIONS WHEN THERE IS MAYBE FEDERAL FUNDING AT STAKE.
BUT FOR THE MOST PART, I BELIEVE THAT WHEN THE CITY IS DOING THEIR OWN, UH, YOU KNOW, PUTTING TOGETHER YOUR OWN CLIMATE ACTION PLAN AND YOUR OWN RESPONSES, YOU HAVE THE ABILITY TO DEFINE YOUR COMMUNITIES, YOU KNOW, WHAT'S IMPACTED, YOU KNOW, YOU KNOW HOW TO ADDRESS IT, AND JUST BEING, BEING AWARE OF IT.
UM, HAVING YOUR, NOT POINTING TO THE RIGHT SLIDE HERE, BUT HAVING TARGETED INVESTMENTS IN MULTI-FAMILY BUILDINGS, THAT'S, THAT'S A BIG ONE.
UM, FROM AN EQUITY AND AFFORDABILITY ASPECT.
DID THAT ANSWER YOUR QUESTION? YES.
THE OTHER ONE I'M JUST STRUCK BY, UM, UH, INITIALLY I WAS ON THE WATER DEPARTMENT AND NOW IT'S THE UTILITIES DEPARTMENT.
AND JUST, I'M STRUCK BY THE FACT THAT CALIFORNIA SEEMS TO BE SO DARN OVERREGULATED, UH, THESE AGENCIES ARE FALLING ALL OVER THEMSELVES.
UH, IS THERE ANY OTHER STATE THAT COMPARES TO CALIFORNIA IN THAT REGARD? I DEFER TO THE DC ATTORNEY HERE BECAUSE I, UM, I, I, YOU KNOW, THERE ARE A LOT OF STATES THAT AREN'T, UM,
UH, CAL YOU KNOW, OUT OF THE, ALL THE STATES THAT I WORK IN, OR I HAVE CLIENTS IN, I, CALIFORNIA IS DEFINITELY THE MOST HEAVILY REGULATED.
UH, CALIFORNIA'S DEFINITELY REALLY UP THERE.
THAT MEANS YOU GOTTA GET OUT TO HAWAII FAIRLY OFTEN.
NO, UNFORTUNATELY, YOU KNOW, PHONE CALLS, ZOOM MEETINGS KIND OF RUINED ALL THAT
I'M LOOKING AT, YOU KNOW, OUR GOAL AS A UTILITIES DEPARTMENT IS, IS SAFE, AFFORDABLE, RELIABLE,
IT'S JUST KIND OF DAUNTING TO, UM, ABSORB EVEN.
SO IT'S NOTHING, I, I DON'T THINK WE'RE REACTIONARY HERE,
WELL, AND, AND ONE OF THE THINGS THAT, YOU KNOW, THAT WE'RE IMPARTING TODAY, WHICH I MEAN, IT'S LIKE DOOM AND GLOOM, IS YOU'VE GOT YOUR TRIANGLE, RIGHT, AFFORDABILITY, RELIABILITY, SAFETY, BUT THEN ON TOP OF THAT, PARTICULARLY WITH THE GAS DEPARTMENT, IT'S REGULATION, KIND OF SQUISHING ALL OF THAT AND, AND CREATING BOUNDARIES THAT, YOU KNOW, MAYBE YOU DON'T HAVE, YOU DON'T HAVE NEARLY AS MUCH ON THE WATER SIDE.
SO THAT'S ONE OF, YOU KNOW, ALL THE MYRIAD REGULATIONS THAT SUSIE WENT THROUGH, ONE AFTER THE OTHER.
[02:20:01]
IT'S, THAT'S WHAT WE'RE TRYING TO GET ACROSS, UNFORTUNATELY.AND, BUT, YOU KNOW, FULL EMPLOYMENT FOR LAWYERS,
OH, TONY, DID YOU HAVE A CUT? IT WAS EXACTLY THAT.
I MEAN, WE KNOW THIS WAS VERY INFORMATION DENSE, BUT THE KEY TAKEAWAY IS ON TOP OF THE THANK YOU, ON TOP OF THE SERVICES THAT WE PROVIDE DAY IN AND DAY OUT, UH, THE LANDSCAPE IS EVER CONSTRAINED, UH, PRESSURE PUSHED, PULLED BY THIS MYRIAD OF REGULATION THAT SEEMS TO
SO THAT, THAT'S, THAT'S THE, YOU KNOW, YOU'RE NOT TO REMEMBER ANY OF THIS STUFF AND WE CAN DELVE MORE IN FULLY DURING THE RETREAT, BUT THAT'S THE KEY TAKEAWAY THAT WE, WE, WE OPERATE WITHIN VERY TIGHT BOUNDARIES.
AND IT LOOKS LIKE NO MORE COMMENTS OR QUESTIONS FROM STAFF OR THE COMMISSION ANATOL.
YEAH, I JUST WANTED TO, WANTED JUST PAUSE FOR A MOMENT BECAUSE, UH, I WANTED TO ACKNOWLEDGE DWGP AND THE SERVICES THEY PROVIDE.
UM, I WOULD SAY THAT IF YOU LOOKED AT THE SCOPE OF SERVICES WHEN YOU TOOK ACTION AS A BOARD AND RETAINED THEIR SERVICES, UM, I DON'T BELIEVE NATURAL GAS 1 0 1 WAS IN THE SCOPE OF WORK,
UM, AND, AND I JUST WANT TO EXTEND MY THANKS TO LISA AND SUSIE FOR COMING FORWARD AND PUTTING TOGETHER THIS INFORMATION SESSION, UH, BECAUSE I REALIZED THAT IT WAS A BIG DEAL FOR THEM TO COME FORWARD AND DO THIS.
AND, AND IT'S INCREDIBLY IMPORTANT.
I THINK THE INFORMATION THAT YOU SHARED TODAY IS INCREDIBLY VALUABLE.
UH, SPEAKING FOR MYSELF AND FOR STAFF.
I THINK IT WAS A GREAT PACKAGE OF INFORMATION.
AND IT'S SERVED THE PURPOSE WHERE WE WANTED TO DO, WHICH IS A BACKGROUND TO GUIDE THE BOARD.
AND ANY TIME THEY DELIBERATE IN FUTURE DECISIONS, THEY HAVE THIS CONTEXT NOW.
AND, AND IT WAS INCREDIBLY IMPORTANT.
SO THANK YOU SO MUCH FOR, FOR DOING THAT.
I'M, I'M VERY GRATEFUL TO THAT.
AND PRESIDENT MCGUIRE ALSO, IN TERMS OF AGENDA MANAGEMENT, BEING MINDFUL OF YOUR TIME, THERE ARE TWO PRESENTATIONS LEFT.
I HAD SOME, UH, COMMENTS TO MAKE IN THE PRESENTATION.
AND THEN WE HAD JENNIFER AS WELL.
SO I'M ANTICIPATING ABOUT 20 MINUTES OF YOUR TIME.
UH, IF YOU'RE WILLING TO DO THAT, UH, THEN WE CAN GO FORWARD.
IS THAT ACCEPTABLE? YEAH, OF COURSE.
SO, WE'LL, WE'LL KEEP THE FORMAT OF THE ROOM THE WAY IT IS.
UH, WE WILL JUST MOVE ON NOW TO THE ITEM THAT WE HAD BEFORE WITH, UH, JENNIFER AND THE BUSINESS PLAN.
IF ANYONE NEEDS TO STRETCH, PLEASE, UM, STAND AND STRETCH FOR A SEC.
IT'S, DO YOU WANT A BREAK FOR JUST A, UM, IT'S UP TO YOU.
WE NEED TO VOTE ON THE RECEIVE AND FILE ON WHAT? OH, I'M SORRY.
ITEM NUMBER EIGHT REQUIRES A RECEIVE AND FILE.
NO COMMISSIONER COMMENTS ARE COMPLETED.
DO I HAVE A MOTION TO RECEIVE AND FILE MOTION FAVOR? I THINK WE COURT AND GET YOU A NEW CELL.
ANY OPPOSED? NO, THE MOTION CARRIES.
I, MY, MY, WE HAVE TO DO EVERYTHING
[02:29:39]
LIKE WE DO.THANK YOU FOR YOUR PATIENCE FOR THAT LITTLE BREAK.
WE NEEDED A SHOT OF ENERGY
[7. 25-54723 Recommendation to receive and file the Long Beach Utilities Department Business Plan Update – Part 2. Suggested Action: Approve recommendation. ]
ITEM NUMBER SEVEN ON OUR AGENDA IS TO RECEIVE AND FILE THE LONG BEACH UTILITIES DEPARTMENT[02:30:01]
BUSINESS PLAN UPDATE PART TWO.AND, UH, MEMBERS OF THE BOARD FOR AGENDA ITEM NUMBER SEVEN, I WILL BE PRESENTING PART TWO OF THE INTRODUCTION TO THE FY 25 BUSINESS PLAN
SO AS YOU MAY REMEMBER FROM LAST TIME, AT OUR LAST BOARD MEETING, I DEFINED THE DIFFERENT KEY COMPONENTS THAT MAKE UP THE BUSINESS PLAN.
AND I ALSO EXPLAINED THE FRAMEWORK THAT WE'LL BE USING AS A VEHICLE TO SHOW HOW THE DIFFERENT COMPONENTS ARE ORGANIZED.
AND WE CALL THAT FRAMEWORK THE BALANCED SCORECARD.
AND REMEMBER, THE, THE BALANCED SCORECARD STARTS WITH THE MORE BROAD AREAS AT THE LEFT, AND THOSE ARE THE OBJECTIVES.
AND THEN IT MOVES INTO INITIATIVES, WHICH IS HOW WE DRIVE THOSE OBJECTIVES.
AND THEN IT BRANCHES OFF INTO MORE AND MORE DETAIL WITH THE MEASURES AND ACTIONS AND THE TARGETS AND GOALS.
AND LAST TIME WE SPENT THE MAJORITY OF OUR TIME TALKING ABOUT THE OBJECTIVES AND THE INITIATIVES.
UM, I WON'T GO THROUGH ALL, UH, EVERYTHING WE TALKED ABOUT LAST TIME, BUT, UM, JUST A GOOD WAY TO KIND OF THINK ABOUT HOW THE INITIATIVES RELATE TO THE OBJECTIVES IS IF WE ASK OURSELVES, HOW ARE WE GOING TO SERVE THE CUSTOMER? WELL, THE ANSWER IS THROUGH THE INITIATIVES.
WE'RE GONNA PROVIDE AFFORDABLE RATES, WE'RE GONNA PROVIDE SAFE WATER AND GAS, AND SO ON AND SO FORTH.
AND YOU CAN DO THAT FOR EACH OF THE OBJECTIVES.
BUT LET'S MOVE ON TO THE REST OF THE BALANCE SCORECARD.
SO THE RIGHT SIDE OF THE BALANCE SCORECARD.
UM, AFTER THE INITIATIVES, WE HAVE THE MEASURES AND ACTIONS.
THE MEASURES AND ACTIONS ARE SPECIFIC ACTIVITIES OR TASKS THAT WE WILL UNDERTAKE TO A ACHIEVE THE INITIATIVES.
NOW IN YOUR PACKETS, YOU SHOULD HAVE THE COMPLETE BALANCED SCORECARD.
AND, UH, JUST FOR THE PURPOSES OF THIS PRESENTATION, I'M ONLY GOING TO, UH, HIGHLIGHT JUST A, A SAMPLE OF, OF THE MEASURES AND ACTIONS JUST FOR ILLUSTRATIVE PURPOSES.
SO, IF WE WERE TO, UH, THINK ABOUT THE PRIMARY OBJECTIVE OF SERVING THE CUSTOMER, AND, UH, WE, HOW ARE WE GONNA SERVE THE CUSTOMER? WE'RE GONNA PROVIDE AFFORDABLE RATES.
AND THE MEASURES OR ACTIONS THAT WE'RE GONNA TAKE TO PROVIDE AFFORDABLE RATES WOULD BE SOMETHING LIKE PROCESSING BILL PAYMENT, UH, ASSISTANCE APPLICATIONS TO MAKE SURE THAT OUR CUSTOMERS HAVE ACCESS TO, UH, PAYMENT PLANS SO THAT THEY CAN HAVE AFFORDABLE RATES.
UM, ANOTHER INITIATIVE WE MIGHT TAKE TO SERVE OUR CUSTOMER IS PROVIDING, UH, SAFE WATER AND GAS SERVICE.
AND FOR THAT INITIATIVE, WE HAVE TWO MEASURES AND ACTIONS, ONE OF WHICH IS TO ENSURE THAT ALL OF OUR INFRASTRUCTURE CONFORMS TO STANDARDS.
AND THEN WE DO THAT THROUGH, UM, PROACTIVE MANAGEMENT, UH, ONGOING MAINTENANCE AND JUST RESPONSE, RESPONSIVE TO BEING RESPONSIVE TO CUSTOMER NEEDS.
ANOTHER, UH, MEASURE AND ACTION THAT WE MIGHT TAKE IS TO MAKE SURE THAT WE HAVE ROBUST SUPPORT SYSTEMS AND THAT WE HAVE CLEAR COMMUNICATION CHANNELS SO THAT WE HAVE RESPONSIVE CUSTOMER SERVICE.
SO YOU KINDA GET THE IDEA OF MEASURES AND ACTIONS ARE JUST MORE SPECIFIC WAYS AND, AND SPECIFIC ACTIONS AND ACTIVITIES THAT WE TAKE TO ACHIEVE THOSE INITIATIVES.
SO MOVING ON TO THE EXTREME RIGHT OF THE BALANCED SCORECARD, WE GET TO THE TARGETS AND THE GOALS.
AND REMEMBER, THE TARGETS AND GOALS ARE THE QUANTIFIABLE BENCHMARKS THAT WE'RE GONNA USE TO TRACK OUR PROGRESS AND TO REALLY SEE HOW, HOW ARE WE DOING ON ACHIEVING THESE SPECIFIC TASKS THAT WE LAID OUT.
AND I'VE PROVIDED JUST ONE EXAMPLE OF, UM, A A, A SET OF TARGETS AND GOALS THAT WE MIGHT HAVE FOR, UH, THE MEASURE OF ENSURING THAT WE HAVE INFRASTRUCTURE THAT CONFORMS TO STANDARDS.
SO, FOR EXAMPLE, OUR GAS ENGINEERING, UH, DIVISION, UH, THEY WOULD MAKE SURE THAT THEY ACHIEVE ZERO FEMSA REPORTABLE INCIDENTS.
AND THAT'S GONNA BE THEIR MEASURE FOR THIS PART, THEIR TASK FOR THIS SPECIFIC MEASURE, OUR GAS CONSTRUCTION GROUP WOULD, UH, MAKE SURE THAT THEY REDUCE CUSTOMER COMPLAINTS THAT ARE DUE TO GAS OUTAGES OR LEAKAGES RESOURCES.
THEY'RE GONNA ENSURE THAT WE HAVE LONG-TERM RELIABILITY AND RESILIENCY REGARDING WATER AND GAS RESOURCES.
SO THAT'S JUST ONE SET OF TARGETS FOR, UH, ONE MEASURE FOR OUR 15 INITIATIVES.
SO AS YOU CAN SEE, THAT IS WHY YOU HAVE, UH, MULTIPLE PAGES FOR THE ENTIRE BALANCE SCORECARD.
BUT HOPEFULLY THAT GIVES YOU A CLEARER IDEA OF HOW THESE DIFFERENT COMPONENTS WORK AND HOW YOU'RE GONNA BE SEEING, UH, THESE DIFFERENT ITEMS IN YOUR, UH, BALANCE SCORECARD.
NOW, AS PROUD AS WE ARE, AS OF THE FY 25,
[02:35:01]
UH, UH, BALANCE SCORECARD, IT WAS OUR, AND IS OUR FIRST ATTEMPT AT THIS NEW FORMAT.SO WE RECOGNIZE THAT, UH, THERE'S ROOM FOR IMPROVEMENT AND ROOM TO, UH, TO, TO MAKE IT EVEN BIGGER AND BETTER FOR NEXT, UH, FOR THE COMING YEAR.
SO IN ORDER TO ACHIEVE THAT, WE'RE GONNA MAKE SURE THAT WE, UH, GET OUT AHEAD OF THE NEXT YEAR AND HAVE PLENTY OF TIME TO, UM, REVISE AND GET FEEDBACK.
AND JUST SO THAT FOR THE FY 26 BUSINESS PLAN, WE PLAN ON BRINGING THAT TO YOU IN JUNE OF THIS YEAR.
AND THAT'S GONNA GIVE US PLENTY OF TIME TO, UH, TO DISCUSS INTERNALLY TO GET FEEDBACK FROM, UH, FROM, FROM, FROM YOURSELVES AND TO REALLY REFINE IT AND WORK AT IT SO THAT BY THE TIME OCTOBER COMES AROUND AND WE'RE READY TO START FY 26, THAT WE'RE GONNA HAVE A SOLID, ROBUST, UH, FY 26 BUSINESS PLAN.
AND THAT BUSINESS PLAN IS GONNA ACTUALLY COM BE COMPRISED OF TWO COMPONENTS.
YOU ARE FAMILIAR ALREADY WITH THE BALANCE SCORECARD.
YOU ALREADY KNOW WHAT THAT LOOKS LIKE AND HOW THAT WORKS.
THE SECOND COMPONENT IS GONNA BE A BUSINESS PLAN DOCUMENT.
THAT IS GONNA BE THE NARRATIVE WRITTEN COMPONENT THAT EXPLAINS THE SAME, UH, COMPONENTS OF THE BUSINESS PLAN SCORECARD, BUT IT'S IN A WRITTEN FORMAT.
IT'LL BE THE VERBAL COMPANION TO THE VISUAL SCORECARD.
BUT AS WELL, WE ARE, WE'RE STILL GONNA BE UPDATING YOU ON THE STATUS OF OUR PROGRESS TOWARDS THE FY 25 GOALS, AND WE'LL PROVIDING YOU THAT IN JUNE AS WELL AS IN SEPTEMBER, WHICH WILL BE THE CLOSE TO THE END OF THE YEAR.
SO THAT WE'LL PUT A NICE BOW ON THE FY 25 SCORECARD, BUT YET BE READY TO PRESENT THE, UH, FY 26, UH, UH, DRAFT, UH, EXCUSE ME, THE COMPLETE BALANCE SCORECARD.
AND SO THAT WHEN THE YEAR STARTS IN FY 26, WE'RE READY TO GO.
AND THEN THROUGHOUT, THROUGHOUT, UH, THE YEAR, WE ARE ALWAYS GONNA BE COMMUNICATING, UH, WHEN, WHEN THERE'S A RELEVANT PROJECT OR A PURCHASE THAT ALIGNS WITH THE GOALS THAT WE SET OUT IN THE, UH, FY 25, UH, BUSINESS PLAN.
SO WHERE DO WE GO FROM HERE? UM, ON AN ONGOING BASIS, WE ARE GONNA BE CONTINUOUSLY COLLABORATING WITH THE EXECUTIVE TEAM AND WITH OUR DIVISION MANAGERS AND MAKE SURE THAT WE ARE, UM, REFINING AND IMPROVING OUR EXISTING PLAN.
AND THAT WE, UM, ARE, ARE, IT'S A LIVING DOCUMENT, RIGHT? IT'S, IT'S SOMETHING THAT IS NEVER JUST DONE AND PUT AWAY.
IT'S SOMETHING THAT WE'RE ALWAYS LOOKING AT AND ALL THE, ALL THE DECISIONS AND THE BIG INITIATIVES THAT WE MAKE, IT'S GONNA ALWAYS BE SOMETHING THAT WE CONSIDER AS A FRAMEWORK FOR EVERYTHING ELSE.
WE DO AN IMPORTANT STEP AND ACTION THAT, UM, WILL MAKE SURE THAT THIS PLAN IS NOT JUST A PLAN, BUT ACTUALLY SOMETHING THAT IS IMPLEMENTED DAY TO DAY IS THAT WE'RE GONNA WORK ON A COMPREHENSIVE COMMUNICATION STRATEGY SO THAT EVERY EMPLOYEE IN THE UTILITIES IS AWARE THAT THEIR INDIVIDUAL JOB CONTRIBUTES TO OUR OVERALL, UH, BIG BUSINESS PLAN.
AND IT'S A UNIFIED, A UNIFIED EFFORT.
UM, I THINK THAT THAT'S VERY GONNA BE KEY FOR MAKING SURE THAT THIS BUSINESS PLAN REALLY GETS IMPLEMENTED AT ALL LEVELS OF THE ORGANIZATION.
AND, UH, SO WE'RE GONNA BE VERY DELIBERATE IN OUR, THE WAY THAT WE APPROACH THIS WITH, UM, WITH ALL THE EMPLOYEES IN, IN THE ORGANIZATION.
UM, OF COURSE, WE'RE GONNA HAVE TO CONSIDER IT LIKE INDIVIDUAL SITUATIONS AND WHAT MIGHT, WHAT MIGHT BE MORE APPEALING OR WHAT MIGHT REGISTER MORE WITH, UH, WITH EVERY INDIVIDUAL GROUP.
SO, UH, WE'RE GOING TO, WE'RE GOING TO MAKE SURE WE DO THAT.
AND OF COURSE, AS I SAID EARLIER, IT'S A LIVING DOCUMENT THAT, UM, IS GONNA BE CONSTANTLY REFINED AND, UH, AND IMPROVED.
SO THAT CONCLUDES, UH, MY PRESENTATION AS LAST TIME.
UH, I MENTIONED LAST TIME, I ALSO WANNA, AGAIN, HERE, RECOGNIZE THE INDIVIDUAL MEMBERS OF THE WORK GROUP.
UM, SOME OF THEM ARE STILL HERE, BUT THEIR LIST, THEIR NAMES ARE LISTED, UH, HERE AND, AND THIS, UH, COULD NEVER, UH, HAVE BEEN DONE WITHOUT THEIR EFFORTS AND THEIR HARD WORK.
THEY HAVE, UH, REGULAR JOBS, BUT THEY DEDICATED A LOT OF THEIR TIME AND ENERGY TO MAKING SURE THAT THIS, UH, THIS, UH, FRAMEWORK WAS ACCOMPLISHED AND THEY WILL CONTINUE TO DO SO.
SO I WANT TO PERSONALLY THANK ALL OF THEM FOR, FOR ALL OF THEIR EFFORTS.
UH, BUT WITH THAT, I'M NOW READY FOR ANY QUESTIONS OR COMMENTS.
WELL, YOU'RE GIVING US WHAT WE ASKED FOR, SO THANK YOU SO MUCH.
UM, IT'S A REALLY AMBITIOUS PROJECT AND SOUNDS LIKE YOU'RE ON TRACK WITH EVERY, WITH OUR GOALS AND WHAT THAT WHICH IS MEASURED, IMPROVES,
[02:40:01]
YOU KNOW, AND BY DOING THAT, YOU KNOW, WE CAN, WE CAN SEE IT IN A MORE TANGIBLE WAY IN TERMS OF RESPONDING TO THE PUBLIC.UH, OTHER IS ANY PUBLIC COMMENT ON THIS? ANY COMMISSIONER COMMENT? GREAT JOB, JENNIFER.
UM, I, I WANNA, I MENTIONED THIS WHOLE PROCESS PROBABLY SEVERAL DIFFERENT TIMES HERE LOCALLY AND ALSO AT METROPOLITAN.
'CAUSE I THINK IT'S, IT'S, I THINK IT'S GREAT.
IT'S JUST VERY, VERY GOOD, UM, IN COMBINATION WITH WHAT WE HEARD THIS MORNING AND ALSO WHEN WE HEARD FROM ED.
I THINK PUTTING ALL OF THAT TOGETHER, IT JUST, IT'S JUST GONNA MAKE FOR A REALLY GOOD RETREAT.
SO I THANK YOU FOR THE HARD WORK THAT WAS DONE.
UH, I APPRECIATE THAT YOU'RE DOING THE, UH, COMMUNICATION TO ALL EMPLOYEES AND JUST KIND OF CLOSING THAT LOOP THERE.
UH, FOR POLICY WONKS AND, AND ACCOUNTING NERDS LIKE MYSELF, THIS IS REALLY FUN AND COOL, BUT I KNOW FOR THE REST OF THE WORLD, IT'S REALLY HARD TO CONNECT THE DOTS AND SEE WHERE THEY FIT IN AND WHERE THEIR JOB FITS INTO WHAT THE OBJECTIVES ARE.
AND OVERALL, UH, SO I'M GLAD YOU'RE, YOU'RE DOING THAT.
UM, IT JUST OCCURRED TO ME WHILE WE WERE SITTING HERE, IS THERE, IS THERE A PLAN TO EVALUATE AT THE END OF EACH YEAR, HOW, HOW WE DID WITH, WITH OUR OBJECTIVES AND INITIATIVES AND, AND GOALS, UH, IS IS THERE LIKE A, LIKE A FOLLOW UP PART TO THAT? YES.
SO WE ACTUALLY WILL BE, INTERNALLY, WE'RE GONNA BE MORE FREQUENT ON A CONTINUOUS BASIS EVALUATING HOW WE'RE DOING, UH, WITH ACHIEVING THE OBJECT, WITH ACHIEVING THE GOALS AND THE SPECIFIC ACTIONS.
AND AS YOU CAN TELL, WE, WE DELINEATED WHAT DIVISION THAT EACH OF THOSE TARGETS CORRESPOND TO.
SO INTERNALLY, WE'LL BE HAVING THOSE CONVERSATIONS ON A ONGOING BASIS.
NOW, AS FAR AS THE FREQUENCY WITH WHICH WE UPDATE YOURSELVES AND THE REST OF THE, THE, THE EMPLOYEES THAT IS YET TO BE DETERMINED, AND, YOU KNOW, WE, THAT'S SOMETHING THAT'S NOT FINALIZED, BUT THERE WILL BE DEFINITELY, UH, REGULAR COMMUNICATION, UH, AND IT'S, WE'LL JUST WORK WITH ANTO AND THE REST OF THE EXECUTIVE TEAM TO DETERMINE WHAT THAT FREQUENCY IS IDEALLY.
BUT ABSOLUTELY, WE, IT'S IMPORTANT THAT AFTER WE CREATE THIS DOCUMENT THAT WE REGULARLY CHECK IN AND MAKE SURE TO SEE HOW ARE WE, HOW ARE WE DOING ON ALL THESE TARGETS IN THESE DIFFERENT CATEGORIES? YEAH.
I, EXCUSE ME, I NEED, UM, THIS IS A MOTION TO RECEIVE AND FILE.
UM, THE LONG BEACH UTILITIES DEPARTMENT BUSINESS PLAN UPDATE PART TWO.
DO I HAVE A MOTION TO RECEIVE AND FILE MOTION? SECOND.
[9. 25-54727 Recommendation to receive and file additional background information for the Board Retreat. Suggested Action: Approve recommendation. ]
ITEM NUMBER NINE, WHICH IS TO RECEIVE AND FILE ADDITIONAL BACKGROUND INFORMATION FOR THE BOARD RETREAT.ANNA TOGAN WILL PRESENT I, AND NOW THEY CAN HEAR IT.
CAN YOU HEAR ME LIKE THIS? YES.
I DON'T LIKE SITTING BEHIND THE DA AND DOING PRESENTATIONS.
I'M MUCH BETTER DOING THEM HERE.
SO I, I KNOW THAT YOU'VE INDULGED US AND STAYED WITH US THIS WHOLE TIME, AND I KNOW THAT'S A LOT.
AND IT'S A LOT OF INFORMATION TOO.
THAT'S A LITTLE TOO CLOSE THERE.
SO JUST A LITTLE BIT MORE TIME.
WHAT I WANTED TO DO WAS PRECISELY, NOW THAT WE'VE GONE THROUGH THE TWO INFORMATION SESSIONS, AND YOU'VE HEARD A LOT EVEN IN THE BUSINESS PLAN, YOU'VE HEARD A LOT.
THE RETREAT IS COMING UP ON MARCH 31ST, AND I WANTED TO TAKE A MOMENT TO KIND OF TAKE MY APPROACH TO DISTILL ALL OF THIS FOR YOU, UH, AND HOPEFULLY GROUND US IN WHAT WE'RE GONNA TALK ABOUT AT THE RETREAT.
SO I'M GOING TO BRING IN SOME SLIDES THAT I JUST CONVENIENTLY WERE ABLE TO TAKE FROM EDIN SLIDE, BUT I'M ALSO GONNA BUILD ON WHAT YOU HEARD TODAY AND THEN RELATE IT TO A COUPLE OF KEY CONCEPTS THAT I KNOW THAT I HAVE EXCHANGED WITH YOU IN EXCHANGE IN OTHER FORMS AS WELL.
[02:45:01]
THINK IT CONTRIBUTES TO WHERE WE'RE GOING TO BE AT THE RETREAT.NOW, IN ED'S PRESENTATION, HE TALKED A LITTLE BIT ABOUT AGING INFRASTRUCTURE, TECHNOLOGY, SUSTAINABILITY, WORKFORCE REGULATIONS.
AND THAT'S, THAT'S ALL INCREDIBLY IMPORTANT.
BUT OVERP PINNING THAT AND THEN REINFORCING WHAT YOU HEARD TODAY IS SOMETHING THAT I CONTINUE TO STRESS IN ALL FORUMS THAT I'M ENGAGED IN.
AND THAT IS THAT CLIMATE CHANGE CHANGES EVERYTHING.
SO ALL ASPECTS OF A UTILITIES EXISTENCE TODAY ARE DEFINED BY CLIMATE CHANGE.
EVERYTHING IS CHANGING, RIGHT? AND THAT IS INCREDIBLY IMPORTANT BECAUSE AS YOU GO INTO THESE ELEMENTS OF DECISIONS AS A BOARD PLANNING AND DIRECTING, YOU'RE GONNA FIND YOURSELF CONFRONTING THAT WHATEVER HAPPENED IN THE PAST, WHATEVER THE STATUS WAS THAT HAS CHANGED NOW AND GOING FORWARD, IT HAS TO TAKE THESE THINGS INTO ACCOUNT.
SO YOU'VE HEARD BOTH TODAY AND YOU HEARD IN WATER THAT INFRASTRUCTURE IS CORE.
AND THAT'S REALLY IMPORTANT WHEN YOU THINK ABOUT WATER, GAS, AND SEWER SERVICE.
AND THAT'S BECAUSE YOU CAN THINK OF THEM THESE THREE AS A RESOURCE.
NOW, HUMAN BEINGS, ESPECIALLY HERE, OUR RESIDENTS IN THE CITY, THEY HAVE THIS APPROACH TO THE RESOURCE THEY NEED IT, IT'S ESSENTIAL TO THEM.
WATER, IN FACT, IS ENSHRINED IN THE STATE CONSTITUTION AS A HUMAN RIGHT TO WATER.
NATURAL GAS PROVIDES ELEMENTS OF SAFETY, SECURITY, HEAT HEALTH, JUST LIKE WATER AND SEWER SERVICE IS SANITATION.
SO HUMANS INSTINCTIVELY SAY, THIS IS MINE.
I NEED TO HAVE THIS PROVIDED TO ME.
BUT THE THING ABOUT IT IS, IS THAT INFRASTRUCTURE IS WHAT MAKES THAT HAPPEN.
WITHOUT INFRASTRUCTURE, YOU CANNOT REALIZE THESE SERVICES, YOU CANNOT PROVIDE THEM.
NOW THAT'S ALL WELL AND GOOD, BUT IN THE WATER INFORMATION SESSION ESPECIALLY, AND IN THE GAS INFORMATION SESSION COMES THE CONCEPT OF AGING INFRASTRUCTURE.
AND YOU HEARD IN THE PRESENTATION FROM ED THAT CONSTRUCTION COSTS ARE RISING, INFRASTRUCTURE IS GETTING OLDER, REPAIR AND REPLACEMENT.
CAPITAL SPENDING IS GENERALLY RISING.
AND THIS CONVEYS A CERTAIN IMAGE AND A CERTAIN PERCEPTION.
THERE WAS A DISCUSSION OF TECHNOLOGY THAT TECHNOLOGY IS ADVANCING RAPIDLY, WHICH MEANS THAT SOME OF YOUR SYSTEMS THAT YOU HAVE TODAY COULD RAPIDLY AGE AND BECOME OUT OF, OUT OF FUNCTION.
YOU NEED TO REPLACE TECHNOLOGY AS WELL.
SO THAT'S KEY, BECAUSE IN THE ANALOGY THAT I GAVE YOU THAT INFRASTRUCTURE IS WHAT ALLOWS US AS HUMANS TO ACCESS THESE RESOURCES.
INFRASTRUCTURE IS IMPORTANT TO HAVE A MUCH BROADER CONTEXT.
THAT INFRASTRUCTURE IS NOT JUST THE PHYSICAL WELLS, PIPES, TREATMENT TANKS, METERS, IT'S ALSO THE PHYSICAL PLANT AND EQUIPMENT THAT THE EMPLOYEES WORK IN.
THAT'S ALSO PART OF THE INFRASTRUCTURE.
IN THE END, THAT'S HOW THE SERVICE IS PROVIDED, RIGHT? TECHNOLOGY, THE SYSTEMS, THE SOFTWARE AND THE DATA THAT'S USED BY THE EMPLOYEES TO USE THE EQUIPMENT AND PROVIDE THAT SERVICE, THAT'S ALSO INFRASTRUCTURE.
AND THE WORKFORCE ITSELF IS PART OF THE INFRASTRUCTURE.
SO WHEN WE HEAR AND THINK ABOUT THESE ELEMENTS THAT INFRASTRUCTURE IS AGING, IT'S IMPORTANT TO NOTE THAT IT'S ALL OF THAT.
AND AS WE CONFRONT THAT CHALLENGE, THAT IS WHAT WE NEED TO BE MINDFUL OF.
SO IN THE NEXT DECADE, AS A BOARD, AS STAFF, WE'RE GONNA FIND OURSELVES PLANNING AND ACTING IN A WAY THAT THESE RESOURCES WILL BE CENTRAL TO THE DECISIONS THAT WE MAKE.
DATA IS GONNA INFORM THOSE DECISIONS.
AND AS WE CONFRONT THOSE CHALLENGES AS WE GO FORWARD, IN MANY CASES WE'LL HAVE THE QUESTION OF AFFORDABILITY DRIVING THOSE DECISIONS.
AND YOU SAW SOME OF THAT IN ED'S PRESENTATIONS.
I'M JUST, I'M GONNA FOCUS ON WATER HERE, BUT YOU HEARD IT IN THE INFORMATION SESSION TODAY, RIGHT? THERE'S VOLATILITY, CLIMATE CHANGE IS CHANGING EVERYTHING.
SO IN THE WATER PICTURE, THIS VOLATILITY IS A FUNCTION OF THAT.
PRECIPITATION MAY REMAIN THE SAME, BUT DROUGHT SEVERITY IS GONNA GO UP, PRECIPITATION GOING TO GO UP DRIER, SEASONAL CONDITIONS RIGHT? NOW, YOU'VE SEEN THIS GRAPH BEFORE IN SOME OF THE PRESENTATIONS OF US WHERE WE'RE SAYING THAT OUR FUTURE WATER RESOURCES PLAN IS ONE OF LOWER CONSUMPTION, BUT EVEN WITHIN THE CONSUMPTION, WE'RE DIVERSIFYING AND WE'RE TRYING TO ACCESS OUR LOWER COST GROUNDWATER, WHICH IS A CHALLENGE.
[02:50:01]
IT'S NOT EASY TO DO.BUT IN DOING THAT, WE'LL MITIGATE THE IMPORTED WATER THAT TEAL COLOR BECAUSE THE TEAL COLOR WATER IS BECOMING LESS RELIABLE, MORE VOLATILE IN ITS RISKS, AGAIN, BECAUSE OF CLIMATE CHANGE.
SO IN THE PRESENTATION ON WATER, AND YOU HEARD A LITTLE BIT ABOUT IT TODAY, RIGHT? THAT BEING ABLE TO BE SUSTAINABLE EMBEDS WITHIN ITSELF, THIS ASPECT OF ADAPTING, ADAPTING AND ADAPTATION IS REQUIRED.
PLANNING TO BE FLEXIBLE IS REQUIRED.
ALONG WITH THAT, YOU HEARD IN BOTH SESSIONS THAT THERE ARE PRESSURES BROUGHT TO BEAR IN THE UTILITY INDUSTRY AND INFLATION, AND CIP COSTS GOING UP.
COST OF WATER IN THIS CASE P COST OF THE SERVICES BECAUSE SEWER IS A FUNCTION OF WATER.
AND IN FACT, WE BILL SEWER SERVICE ON THE CONSUMPTION OF WATER IN THE WINTERTIME.
SO WHEN WE TALK ABOUT WATER, WATER IN ESSENCE IS A PROXY FOR SEWER SERVICE.
SO THE COST OF WATER'S GOING UP AND WITH THOSE COSTS GOING UP AND DEMAND BEING FLAT, OR PRESSURES ON DEMAND TO GO DOWN, AFFORDABILITY IS GOING DOWN.
AND IN THE QUESTION OF AFFORDABILITY, IN BOTH WATER AND IN GAS, YOU HEARD THAT MANY OF THE COSTS AND MANY OF THE ISSUES ARE NOT WITHIN THE SPAN OF CONTROL OF THE UTILITY ITSELF.
THIS ASPECT OF BEING SUBJECT TO EXTERNAL PRESSURES THAT YOU DON'T CONTROL IS INCREDIBLY DIFFICULT AS A CHALLENGE.
AND AFFORDABILITY GETS STRETCHED AS A RESULT OF REACTING THOUGH TO THOSE PRESSURES, RIGHT? AND REACTING TO THOSE PRESSURES IS AN IMPORTANT, IMPORTANT CONCEPT.
SO YOU HEARD ADAPTABILITY IS INCREDIBLY IMPORTANT.
YOU TALKED ABOUT THE BUSINESS PLAN AND IN THE BUSINESS PLAN YOU WERE TALKING ABOUT.
SO DO WE HEAR ABOUT OUR GOALS? AND THEN DEPENDING ON HOW WE'RE DOING ON OUR GOALS, DO WE ADAPT? AND THE ANSWER IS YES, BECAUSE KEY TO A UTILITIES EXISTENCE GOING FORWARD IN THIS ENVIRONMENT IS THIS ASPECT OF PLANNING AND PUTTING THINGS IN MOTION, IMPLEMENTING, BUT KNOWING THAT IT DOESN'T ALWAYS GO THE WAY THAT YOU PLAN.
SO CONSEQUENTLY, YOU HAVE TO BE IN A CYCLE WHERE YOU'RE ADAPTING AND PUTTING YOURSELF INTO THE NEXT PLANNING CYCLE.
AND THE WAY THAT YOU DO THAT IS BECAUSE YOU'RE MONITORING, AGAIN, RESOURCE DATA AND AFFORDABILITY, YOU'RE TAKING THE DATA THAT'S COMING IN, USING IT TO ADAPT, BE BACK INTO THE PLANNING CYCLE.
AND THAT'S KEY TO THE SUSTAINABILITY AND YOUR ABILITY TO BE FLEXIBLE GOING INTO THE FUTURE.
SO BEING ACADEMIC FOR A MOMENT, THERE'S A CONCEPT IN BUSINESS ANALYSIS CALLED THE FORCES MODEL.
AND THE BUSINESS CONCEPT IS TO TAKE THE INDUSTRY THAT A BUSINESS IS OPERATING IN TO IDENTIFY THE STRESSORS THAT THAT INDUSTRY IS FACING.
AND YOU CAN SEE JUST HOW DIFFICULT THAT THAT BUSINESS IS IN ITS INDUSTRY, RIGHT? LET'S SAY FOR EXAMPLE, THE ORANGE JUICE INDUSTRY IS ONE CLASSIC ANALYSIS, RIGHT? BUT WHEN YOU IDENTIFY THE FORCES AFFECTING THAT, THOSE FORCES POSE CHALLENGES.
AND IN OVERCOMING THOSE CHALLENGES, IT REQUIRES STRATEGY.
WHETHER THAT'S POLICIES, WHETHER IT'S PROGRAMS, PROJECTS OR OUTCOMES, IT'S HOW YOU OVERCOME THOSE CHALLENGES.
SO A VARIATION OF THAT, BECAUSE LIKE YOU HEARD TODAY, WE'RE NOT A FOR-PROFIT ENTITY.
THE UTILITIES A MUNICIPAL UTILITY.
THERE'S A MODIFICATION THAT I'VE MADE TO THE FORCES MODEL, AND THAT IS FOR THE LONG BEACH UTILITIES AND FOR ITS RESOURCES, WATER, GAS, AND SEWER SERVICE, YOU HAVE FOUR FUNDAMENTAL FORCES.
YOU HAVE SUPPLIERS, YOU HAVE SUBSTITUTES, YOU HAVE CUSTOMERS, AND YOU HAVE THE REGULATORY ENVIRONMENT.
AND FOR SEWER SERVICE, WATER IS THE PROXY FOR SEWER.
SO LET'S TALK ABOUT SUPPLIERS FOR A SECOND.
THERE'S CHALLENGES IN THIS SECTOR FOR THE UTILITY INDUSTRY.
METROPOLITAN IS PROVIDING IMPORTED SUPPLIES ON WATER.
THE VOLATILITY OF THAT GROUNDWATER AS A LOCAL SUPPLY HAS CHALLENGES WITH ANYTHING RELATED TO AUGMENTING IT.
IT'S VERY EASY TO SAY THAT YOU WANNA GROW YOUR LOCAL GROUNDWATER.
IT'S NOT SO EASY TO ACTUALLY STEP THROUGH AND DO IT.
NATURAL GAS, YOU HEARD TODAY, CLIMATE CHANGE AND MARKET PRICES.
THERE'S INCREASING UNCERTAINTY AND VOLATILITY IN
[02:55:01]
THE FUTURE THAT MAY COME AS A RESULT OF EFFECTS OF CLIMATE CHANGE AND POLICY REACTIONS TO CLIMATE CHANGE.IF WE LOOK AT SUBSTITUTES NOW IN TYPICAL BUSINESS ANALYSIS, YOU TAKE THE ORANGE JUICE INDUSTRY AND YOU SAY, WHAT ARE THE SUBSTITUTES? WELL, I DON'T HAVE TO DRINK ORANGE JUICE.
I CAN DRINK APPLE JUICE INSTEAD.
SO WHAT ARE SUBSTITUTES IN A RESOURCE UTILITY? WELL, SUBSTITUTES IS THE CUSTOMER DOESN'T HAVE TO CONSUME YOUR PRODUCT.
THEY COULD CHOOSE NOT TO, AND THEY COULD CHOOSE NOT TO THROUGH DEMAND MANAGEMENT, THROUGH CONSERVATION.
SO CONSERVATION IS IN EFFECT, A SUBSTITUTE IN THIS CASE.
AND IN THIS CASE, THE STRESSORS ARE PRETTY HIGH.
THE CHALLENGES ARE PRETTY BIG.
DEMAND MANAGEMENT CONSERVATION IS HAPPENING BOTH INDOOR AND OUTDOOR, BOTH WATER AND GAS.
WHETHER IT'S DEVICES, WHETHER IT'S APPLIANCES OR YOU HEARD TODAY, HABITS PREFERENCE IS HAPPENING, RIGHT? AND NATURAL GAS IS A UTILITY YOU HEARD TODAY CONTAINS AN ADDED DIFFERENTIATOR, WHICH IS INDEED LIKE THE ORANGE JUICE, APPLE JUICE EXAMPLE THAT I GAVE YOU.
THERE IS ELECTRICITY AS A SUBSTITUTE FOR NATURAL GAS, HIGH STRESS, HIGH CHALLENGES BECAUSE IN ESSENCE, THE CUS THE CUSTOMER OR THE CONSUMER HAS THE ABILITY TO NOT CONSUME YOUR PRODUCT WITH CONSEQUENCES FOR THE UTILITY CUSTOMERS REPRESENTS ANOTHER ELEMENT.
AND IN THIS CASE, THE CUSTOMERS ARE DEMANDING ACCESS TO SUBSTITUTES.
AND AT THE SAME TIME THAT THEY'RE DEMANDING ACCESS TO SUBSTITUTES, WE HAVE THE ASPECT OF EQUITABLE ACCESS, RIGHT? ACCESS TO THESE SUBSTITUTES VARIES BY SECTOR, VARIES BY COMMUNITY WITHIN OUR OWN CITY, WITHIN THE NEIGHBORHOODS.
CLIMATE CHANGE INFLUENCES DEMANDS.
I TOLD YOU, CLIMATE CHANGE CHANGES EVERYTHING.
AND IN THIS CASE, IF YOU THINK ABOUT HOW YOU GET EXTREMELY, EXTREMELY WET WINTERS, THE CONSEQUENCE OF THAT IS THAT OUTDOOR WATERING PLUMMETS.
AND SO THEREFORE OUR DEMAND DROPS INCREDIBLY, INCREDIBLY COLD WINTERS, INCREDIBLY, INCREDIBLY WARM WINTERS HAVE THE ABILITY TO AFFECT IN TEMPERATURE THE CONSUMPTION OF NATURAL GAS, RIGHT? CUSTOMERS HAVE A HIGH, HIGH AMOUNT OF RELATIVE PRICE SENSITIVITY, HIGH AMOUNT.
SO THAT MEANS THAT NOT ONLY IS THE SIZE OF THE BILL IMPORTANT, BUT THEY'RE SENSITIVE TO CHANGES IN THAT BILL, THE RELATIVE CHANGES IN THAT BILL.
THAT MEANS THAT THEY EXERT A LOT OF PRESSURE ON THE UTILITY FROM ALL OF THESE THINGS.
AND THEN YOU HEARD FROM THE REGULATORY ENVIRONMENT AND YOU HEARD ABOUT IT IN THE WATER SIDE, YOU DEFINITELY HEARD IT TODAY, RIGHT? CLIMATE CHANGE IS EXERCISING, DEMAND MODIFICATION, ENFORCEABLE TARGETS ARE COMING THROUGH THE REGULATORY ENVIRONMENT ON THE UTILITIES.
AND YOU HEARD A LOT ABOUT THE GAS TODAY, BUT IT'S ALSO HAPPENING ON WATER AND IT CAN EVEN HAPPEN ON SEWER.
YOU'RE ALSO SEEING CHANGES IN DEVICE AND APPLIANCE STANDARDS.
WATER CONTINUES TO RETAIN THIS ELEMENT THAT IS A RESOURCE THAT HAS A QUALITY ASPECT TO IT.
AND THERE IS A WHOLE HOST OF EMERGING CONTAMINANTS THAT HAVE THE OPPORTUNITY TO TURN INTO ACTUAL ENFORCEABLE REGULATORY STANDARDS THAT CAN REQUIRE CHANGES IN TREATMENT, WHICH WOULD INCREASE TREATMENT COSTS.
SO ALL SAID, THEN THESE FORCES ON THE UTILITY CREATE CHALLENGES.
AND AS A BOARD AND AS STAFF, WE'RE GONNA FIND OURSELVES ENGAGING IN THESE CHALLENGES.
AND THE RESULT OF THAT IS THE BUDGET AND RATES THAT WE SET, RIGHT? AND REMEMBER, SEWER IS MEASURED AS WATER CONSUMPTION.
SO CONSEQUENTLY THE CHALLENGES CASCADE THERE INTO THAT SECTOR.
ALSO, DECISIONS ON BUDGET AND RATES COME IN THE FORM OF AFFORDABILITY QUESTIONS AND AFFORDABILITY CHALLENGES.
SO THE FORCES MODEL AND FOUR FORCES.
AND ANOTHER ONE WHICH IS AFFORDABILITY.
SO I WAS THINKING ABOUT THAT AS HOW THIS ALL COMES TOGETHER NOW IN THE INFORMATION SESSIONS THAT YOU'VE HAD AND THESE FORCES.
AND SO THE ONLY THING THAT I CAN THINK OF THAT WOULD DEMONSTRATE THAT IS THIS ANALOGY.
SO THIS IS LONG BEACH UTILITIES, PLEASE STAY UP CONSERVATIVE.
SO THIS IS THE UTILITIES AND THIS IS ALL WELL GOOD.
AND I'VE TOLD YOU ABOUT FOUR FORCES, RIGHT? WE TALKED ABOUT SUPPLIERS, WE TALKED ABOUT SUBSTITUTES, WE TALKED ABOUT CUSTOMERS, WE TALKED ABOUT REGULATORY ENVIRONMENT, RIGHT? SO IF YOU PUT THAT TOGETHER
[03:00:02]
AND YOU BRING IT FORWARD, AND I TRIED THIS YESTERDAY, SO I HOPE IT WORKS.NOW I, IT LOOKS LIKE A BOX, RIGHT? IN FACT, IT CAN BECOME A PRETTY STURDY BOX.
THESE FORCES LEFT TO THEMSELVES AND TAKEN FOR GRANTED PLACE.
HUGE, HUGE PRESSURES ON THE UTILITY SECTOR.
IN FACT, IF YOU'RE NOT CAREFUL, THAT'S HOW YOU'RE GONNA FEEL, RIGHT? AS STAFF, THIS IS HOW WE'RE GONNA FEEL.
ALL OF THESE CHALLENGES ARE GONNA CONSTRAIN US AND WE'RE GONNA FEEL THAT WE'RE POWERLESS, RIGHT? AND IF YOU TAKE ALL THAT AND PUT IT ON BUDGET AND RATES, YOU WILL HAVE SEALED THE DEAL.
SO I FIRMLY BELIEVE WITH STAFF AND WITH YOU, OUR JOB TOGETHER IS TO KNOW ALL THIS AND TO DO THIS, WE'RE NOT IN THE BOX.
THERE'S WAYS TO NOT BE IN THE BOX.
THERE'S WAYS THROUGH BUDGET, THERE'S WAYS THROUGH LEGISLATIVE ACTION, THERE'S WAYS THROUGH WORKING ON THE REGULATORY ENVIRONMENT, THERE'S WAYS THROUGH WORKING WITH CUSTOMERS, RIGHT? THERE'S WAYS THROUGH PROACTIVE PLANNING ON RESOURCES.
THERE'S WAYS TO ADDRESS THESE CHALLENGES IF WE WORK TOGETHER AND GO FORWARD ON IT.
BUT EVERY UTILITY IS FACING THAT CHALLENGE.
AND SO WHAT I HOPE IN THE INFORMATION SESSIONS THAT YOU GOT ON WATER AND SEWER AND WATER AND GAS, RIGHT? AND TO WHERE WE'RE GONNA BE ON MARCH 31ST, IT'S A CONTINUING CONVERSATION.
THERE IS NO ACTUAL OUTCOME FROM THESE SESSIONS THAT GUARANTEES ANYTHING.
BUT RATHER IT'S GROUNDING US TOGETHER, BOARD AND STAFF, IN CHOOSING TO GO FORWARD KNOWING THAT THIS IS WHAT WE'RE TRYING TO ACCOMPLISH.
SO THANK YOU FOR ALLOWING ME TO DO THIS LITTLE BIT.
I KNOW THAT THAT WAS REALLY LONG FOR ALL OF YOU, BUT I HOPE THAT FOR ALL OF THE OVERWHELMING AMOUNT OF INFORMATION THAT YOU GOT, 'CAUSE I KNOW IT WAS OVERWHELMING FOR ME, I HOPE THAT THIS ANALOGY GIVES YOU SOME GROUNDING AS TO WHERE WE INTEND TO GO IN THE RETREAT.
OH, THAT THIS IS REALLY THOUGHT PROVOKING.
I SAW YOUR SLIDES BEFORE, BUT I DIDN'T SEE THE LITTLE GUY IN THE BOX.
UM, ANY COMMISSIONER COMMENTS? I
I WAS REALLY HOPING YOU WERE GONNA PULL A RABBIT OUT OF THE BOX
I JUST GOT A LITTLE CLAUSTROPHOBIC WHEN YOU PUT 'EM IN THE BOX.
THAT WAS A REALLY GOOD RECAP OF WHAT WE'VE BEEN HEARING AND REALLY CHEATED US UP, I THINK FOR MARCH 31ST.
UM, SO ANY PUBLIC COMMENT? ONE MORE TIME.
I BELIEVE WE'RE FINISHED HERE.
UH, DO I HAVE A MOTION TO RECEIVE AND FILE.
AND NOW THIS IS A PUBLIC COMMENT
[PUBLIC COMMENT Opportunity to address the Utilities Commission on non-agenda items. Each speaker is limited to three minutes to make their comments unless extended by the Board.]
PERIOD.IF THERE'S ANYONE WISHING TO SPEAK ON A NON AGENDA ITEM, NOW'S THE TIME.
AND SEEING NONE, UH, THE PUBLIC COMMENT PERIOD IS NOW CLOSED.
[ANNOUNCEMENTS]
ANNOUNCEMENTS, I BRIEFLY CALL ON COMMISSIONER SCOTT, UH, FOR HIS REPORT ON THE INFRASTRUCTURE AND FINANCE COMMITTEE MEETINGS, WHICH WERE HELD THURSDAY, MARCH 13TH.I FORGOT I WAS SUPPOSED TO GIVE A REPORT ON THAT.
UH, SO BRIEFLY, UH, FINANCE COMMITTEE AND INFRASTRUCTURE COMMITTEE MET, UH, LAST THURSDAY THE 13TH, UH, FINANCE COMMITTEE.
WE COVERED, UH, FISCAL YEAR 25 BUDGET REVIEW AND IMPLICATIONS FOR FY 26, UH, GAS FUND REVENUE SOURCES, AS WELL AS FISCAL YEAR 26, BUDGET PROCESS AND BOARD CALENDAR, UH, INFRASTRUCTURE COMMITTEE.
WE COVERED, UH, CAMPUS, UH, AN UPDATE ON, UH, CAMPUS CONSOLIDATION AS WELL AS, UH, UH, INFORMATIVE DISCUSSION ON FIRE HYDRANTS.
AND THAT'S CONCLUDES MY REPORT.
AND ANNA, TO, DID YOU HAVE A FEW MORE THINGS TO SAY? YOU'RE,
[03:05:01]
NO, IT'S ALL, NO ANNOUNCEMENTS.[ADJOURNMENT]
WE HAVE A SIDE CONVERSATION GOING ONUM, SEEING NO MORE REPORTS OR ANNOUNCEMENTS, THE MEETING'S ADJOURNED.
THANK YOU EVERYONE FOR YOUR PATIENCE.