Assemblymember Henry Perea Speaks on AB 8 and AB 327

Assemblymember Perea, one can’t begin an interview with you regarding legislation you have introduced or shepherded through the legislature without noting that 60 percent of your bills last session have been signed into law by the governor—quite a record. One of your successes this past session was AB 327, which dealt with net metering. Please share that bill’s goals and objectives, and how political support from the California State Legislature and the governor was garnered.

Assemblymember Henry Perea: My interest in electricity rates stems from my time living in the Central Valley. The community oftentimes pays higher electricity rates because we’re always in the higher tiers. I support equity within the system, and I support trying to find a compromise among stakeholders in the energy world to reduce bills for places like the Central Valley while looking for ways to continue a move on progressive energy and renewable energy in California.

We were able to bring together a large group of stakeholders, including solar advocates, consumer groups, utilities, and others, to try to find a compromise in which everybody could move forward.

One of the key components was addressing uncertainty around the net energy metering program. We knew that we were probably a year or two away from reaching the five percent cap. We knew that we needed to come up with what we’re now calling NEM 2.0. The legislature had a hard time addressing that issue in years past, and I believe the only reason we were able to get to a place that allowed the CPUC to come up with NEM 2.0 is because it was part of a comprehensive solution that addressed many concerns across the board.

What are the implications for other states now that California has reached a consensus on net metering and electricity rate restructuring? Why is the tension between electric utilities and solar roof companies an important issue across the entire Southwest? VerdeXchange hosted a conference in Arizona this past month and net metering was the most contentious panel offered. Moreover, Arizona leaders thought their legislation would be the first reforms enacted until learning that California Governor Brown had just signed AB 327.

It’s important because California is committed to finding alternative sources of power. AB 327 and NEM 2.0 allow California to remain at the forefront of that issue. The CPUC will be developing what the new NEM looks like. I think the regulators who have the experience and expertise in the issues should be responsible for developing the new generation of NEM. I think we have it in the right form.

NEM is so contentious because oftentimes it is viewed as a cross-subsidization for solar. For example, if my neighbor has solar, he or she is not paying the same amount of the fixed costs that are required to deliver the energy as I am as a non-solar customer. I will end up subsidizing my neighbor, who has solar. That is why it’s so contentious—we have this cross-subsidization that is throwing rates out of whack. That’s why, when we looked at addressing the rate structure, issues like fixed charges—which the utilities wanted—and the collapsing of tiers would have been opposed by the solar advocates and consumer groups. However, coupling the utilities’ interest in wanting to lower bills for their costumers and solar’s interest in wanting to ensure that net energy metering is there so that more people will be encouraged to go solar, created the perfect the opportunity for us to marry the two interests together. That didn’t let the perfect be the enemy of the good and allowed for a compromise to occur.

I think that if California were to move alone on NEM, or any of the issues that the utilities wanted, the support would not have been there in the legislature. I think the bill would have died.

What do you and AB 327 stakeholders believe will result from the upcoming CPUC regulatory process to implement your legislation? 

I think we’re going to create certainty for everybody. There’s certainty for consumer groups in that the discounts for low-income customers are much larger. There’s certainty for utilities in that they’ll have the opportunity to go before the CPUC and request a fixed charge and also request the collapsing of tiers. There’s certainty for the solar customers where there will be NEM 2.0.

The other piece that we haven’t talked about is that, in the bill, we clarified that the 33 percent RPS is not a ceiling, but a floor, which provides greater certainty for those doing large scale solar projects like schools. The first thing I expect is that everybody’s going to calm down. There’s going to be certainty, and there’s now a process at the CPUC for the details of these issues to be vetted. I’m very optimistic that the CPUC is going to get this right and that they’re going to put a lot of time and effort into it. They will make sure that all the interests involved in making 327 a success are also successful in the implementation.

You were the lead author, along with Assemblymember Skinner and Senator Pavley, of a second bill just signed by the governor—AB 8. This legislation extends California’s clean air and clean fuel incentive programs. Please elaborate on the legislation’s goals and the challenges of attaining consensus.

AB 8 was the extension of some very important programs, like Carl Moyer and AB 118, which have been critical to leading our efforts cleaning up the air. I sat on the San Joaquin Valley Air District Board for a few years, when I was a member of the Fresno City Council, and I can tell you that Fresno is one of the first, if not the second, worst regions—not only in the state, but in the country—when it comes to air quality. For me, it was important to make sure that the programs were extended.

The controversial piece in the bill was that we dedicated funding from AB 118 programs to pay for the hydrogen freeway infrastructure. The controversy came from many of the environmental groups. While they ended up coming on board—only one remained opposed, and that was the Sierra Club—their main opposition to it was that they wanted oil companies to pay, rather than motorists, for the AB 118 program. While I appreciate their concern, timing was a very big issue for us. There was an opportunity for the oil industry to sue and delay the implementation of the Clean Fuel Outlets programs set forth by Governor Schwarzenegger. At the same time, we had auto manufacturers that are ready in the next year or two to put hydrogen-fueled cars on the road. If we were tied up in lawsuits for years, then you’d have automakers that would withdraw the time, effort, and money to produce a car that nobody can buy because there’s no infrastructure for it.

We used AB 8 as a vehicle to set a compromise on that issue. It was very controversial, and we had to battle a lot of opposition through it, but it was the right move. AB 8, much like 327, was a comprehensive view that brought virtually every stakeholder into the mix to try to create a piece of policy that was balanced and progressive.

AB 8 includes funding the development of up to 100 hydrogen stations from the fee revenue generated. Please comment on the latter provision, which was obviously also controversial.

That was the piece that was the most controversial. Again, it was controversial because some people felt like we were picking a winner in terms of the technology. Others, like the Sierra Club, felt it was the oil companies who should have paid, and not motorists. The state has been committed to hydrogen fuel cell cars for quite some time—since Schwarzenegger was governor. We put requirements and put pressure on the auto industry to make these cars. Now, they’re making them and they’re ready to roll them out, but we still haven’t built the infrastructure necessary to make them a viable technology in the state. Providing the funding from AB 118 for that infrastructure will be a huge step forward in fulfilling the promise we made to make alternative fuel vehicles available to every Californian across the state. We’ve got to have the infrastructure in place, and the compromise we’ve reached on using funding from AB 118 to build a hydrogen freeway was a good thing for us to do.

You also authored legislation related to the governance of clean drinking water. Could you address your objectives, as well as the reasons your legislation, which was passed by the Assembly, died in the State Senate?

You’re right—AB 145 was held in the Senate Appropriations Committee. I was disappointed. AB 145 would have transferred the clean drinking water program from the Department of Public Health to the State Water Board. I wanted to do that for a couple of reasons. One, the State Water Board has a tremendous record in moving money from their agency to the communities that need them in order to build wastewater projects. 

It was just my experience over the last three years that we had a very hard time getting regulators and administrators in DPH to get the money out to the communities that needed it so badly. There was always a reason why they couldn’t do it. I felt like it was time for us to move that program to a department that had a better record of working with communities and getting the money out.

Then the US EPA sent a letter to the California Department of Public Health on this very issue, which provided a lot of wind in our sail. They threatened that if the DPH didn’t get their act together, the US EPA would pull the $455 million that the federal government sends to the state for clean drinking water projects, because of their inability to manage the money. I felt like we had the right argument and the right intent. The purpose of AB 145 was to make the bureaucracy both efficient and accountable to the public so that this funding could get out in an efficient, timely manner. The Senate disagreed, so they killed our bill. Having said that, we’ve recently gotten word that the governor’s office is looking into making this move in next year’s budget.

The Planning Report recently published a piece on the US Water Alliance’s One Water Conference in Los Angeles—specifically, the Conference’s opening remarks by LA Mayor Eric Garcetti. “One Water” is the notion that storm water, wastewater, and potable water are all one system and ought to be treated as such administratively. Is the latter the intention of your clean drinking water bill? 

Absolutely. The bill took a holistic perspective on the whole ecosystem of our water. To me, it made a whole lot of sense that we move in that direction. I still believe that we should, and I’m pleased that the governor is still looking to move in that direction and is likely to propose what we were proposing in AB 145 in next year’s budget.

Let’s wrap this up by focusing on your evolving role in the State Legislature. Traditionally, Central Valley elected officials worked to meld together all the factions in the Legislature to reach consensus on important bills. Are you comfortable assuming that role in the California Assembly? 

I am very pleased. I have a hell of a team, both in the capital and in the district, that was critical in making our successes real. I think what makes Valley legislators different from many places in the state is that our partisans aren’t as hard here in the Central Valley, because we represent communities that are very poor. They’re struggling every day. They don’t care if you’re a Democrat or a Republican—they just want to know you’re going to work for them and that you’re not going to be afraid to reach across party lines to find solutions. That’s been the legacy of the Valley. I’m going to proudly carry on that legacy in my tenure in the legislature and work with anybody who’s willing to work with me to solve problems. 

As a final follow up, your colleagues suggest you are one of the leaders of the Assembly’s moderate caucus, which some argue has had diminishing influence over the years. 

No, we’ve actually grown. I think the moderates in Congress have shrunk, but the moderates in California have grown, and I think that’s not only because of redistricting, but also because of the open primary. Because of those changes, we’ve been successful in supporting moderate candidates that are less interested in party politics and more interested in finding solutions.