INDEPENDENT PRODUCERS ?850:: $0 fee! CALIFORNIA . BIOMASS ENERGY ALLIANCE May 7, 2018 The Honorable Edmund G. Brown, Jr. Governor, State of California State Capitol, First Floor Sacramento, CA 95814 The Honorable Toni G. Atkins President pro Tempore, California State Senate State Capitol, Room 205 Sacramento, CA 95814 The Honorable Patricia Bates Republican Leader California State Senate State Capitol, Room 305 Sacramento, CA 95814 LSA LARGE-SCALE SOLAR A AT I AMERICAN WIND ENERGY ASSOCIATION AWEAI CALIFORNIA CAUCUS SoIor Energy Industries Association? The Honorable Anthony Rendon Speaker, California State Assembly State Capitol, Room 219 Sacramento, CA 95814 The Honorable Brian Dahle Republican Leader California State Assembly State Capitol, Room 3104 Sacramento, CA 95814 Dear Governor Brown, Pro Tem Atkins, Speaker Rendon, Republican Leaders Bates and Dahle: Our organizations collectively represent the developers and owners of over 28,000 MW of utility~scale renewable energy projects that are largely responsible for the achievement of California?s renewable and low carbon energy goals over the past decade goals that have been met affordably while preserving electric system reliability. We write to you today with some urgency to ensure that the Legislature recognizes the importance of a ?nancially stable electric system that furthers ongoing investment in clean technologies in the face of climate change. California is experiencing effects of climate change more rapidly than predicted as evidenced by increasing temperatures, weather extremes, and severe wild?res. California has been at the forefront of pursuing aggressive climate mitigation, and now we must also develop adaptation strategies and policies to protect our infrastructure including the electric generation and transmission system. This necessitates ?nancially solvent and stable utilities, which provide the backbone of the state?s electric grid, and sustained momentum in renewable energy procurement by load-serving entities (LSEs). Renewable energy generation and ?nancially healthy LSEs are wholly interdependent, and your immediate attention is required to ensure the sustainability of both. Late last year, outside of the traditional ??re season,? California experienced two large catastrophic ?res that had devastating impacts on local communities. These tragic events were unprecedented in scale and scope and are a frightening harbinger of the future. It will take time and great effort to heal and rebuild these impacted communities. The actual causes of the ?res have yet to be determined by the ?re investigators at Cal Fire; however, the wild?res and their impact on our electricity system have showcased an acute ?nancial vulnerability that may have long-term rami?cations and consequently deserve a thoughtful and expedient legislative response. At issue is the court?s interpretation of a state constitutional provision on ?inverse condemnation" which holds that utilities are legally responsible for damages from wild?res caused by their equipment, regardless of fault. There is need to clarify how and whether the utilities can pass along those costs to their ratepayers and, going forward, how the state can adapt its policies to prepare for future events. Last November, the Public Utilities Commission rejected a proposal by San Diego Gas and Electric to pass along $379 million in uninsured 2007 wild?re costs to their ratepayers. has ?led for rehearing of the decision, and and SCE have joined in that request.) While the Commission was careful to clarify that it did not intend for the decision to be precedential, citing the need for additional clarity from the courts and legislature, its action has raised new ?nancial uncertainty for utilities that is impacting rating agencies? assessment of the risk of investing in utility stocks. The presence or even the appearance of ?nancially vulnerable utilities has, and will continue to, destabilize energy markets in California. A case in point: in March of this year, one of the state?s operating solar projects Topaz, a 550-MW PV facility owned by Berkshire Hathaway Energy was targeted for a potential credit rating downgrade due to the perceived fragility of its only off- taker, whose ratings were downgraded late last year. Last month, Moody?s Investor Services changed the credit outlook of both and SCE from stable to negative, basing its action on ?regulatory uncertainty.? These alarming events put California?s 28,000 MW of renewable energy contracts representing more than $50 billion in investment on notice that they could be at risk if their utility off-takers? ?nancial positions weaken. This situation has the attention of energy utility leaders and investors worldwide. Beyond the immediate threat to existing renewable energy investment, the ability of California to meet its long-term greenhouse gas goals is directly dependent upon robust new investment in clean technologies. These investments are stymied with the addition of ?nancial instability into the already complex California electricity market. California needs more renewable energy and cannot afford to wait. Under current state renewable requirements, LSEs need approximately 10,000 MW of new long?term contracts online by 2025. Regardless of the type of load?serving entity (Investor Owned Utility, Publicly Owned Utility, Community Choice Aggregators or Electric Service Providers) procuring to meet this need, procurement will require solvent and stable utilities. California must both ?nd solutions to sustain viable investor owned utilities and continue sustained renewable energy procurement. Failure to act on either front imperils our markets and progress toward our climate goals. As the Governor and Legislature address the multiple signi?cant issues brought forward by these ?res, decisions recognizing the need for solvent utilities will be important in addressing long term solutions. Collectively, we are committed to working with you to address these immediate challenges and to develop the longer term solutions required to adapt to the effects of climate change. By way of this letter, we are requesting to meet with you to discuss the urgency of the situation, and the steps necessary to ensure forward progress. Sincerely, Jan Smutny-J ones Chief Executive Of?cer Independent Energy Producers Association 916-448?9499 wa/MM Julee Malinowski?Ball Executive Director California Biomass Energy Alliance 916?441-0702 . Mask L. John White Executive Director Center for Energy Ef?ciency and Renewable Technologies 916?442-7785 Rick Umoff Regulatory Counsel and California Director Solar Energy Industries Association Shannon Eddy Executive Director Large-scale Solar Association 415?819-4285 Danielle Osborn Mills American Wind Energy Association California Caucus 916-320?7584 MM Nancy Rader Executive Director California Wind Energy Association 510-845-5077 Jonathan M. Weis gall Policy Committee Geothermal Resources Council 202-828?1378 Cc: Members of the California State Senate Members of the California State Assembly Saul Gomez, Deputy Cabinet Secretary, Of?ce of the Governor Alice Reynolds, Senior Advisor, Of?ce of the Governor Alice Stebbins, Executive Director, California Public Utilities Commission Arocles Aguilar, General Counsel, California Public Utilities Commission Robert B. Weisenmiller, Chair, California Energy Commission