DIVISION OF RATEPAYER ADVOCATES ANNUAL PRESENTATION

1. DIVISION OF RATEPAYER ADVOCATESANNUAL PRESENTATION SENATE ENERGY, UTILITIES & COMMUNICATIONS COMMITTEE February 13, 2007

2. OVERVIEW OF THE DIVISION OF RATEPAYER ADVOCATES (DRA) Director – Dana Appling Appointed by Gov. Schwarzenegger in the fall of 2004, confirmed by Senate Serves at the pleasure of the Governor DRA is an independent division of the CPUC; funded by a separate line item in the Governor's budget DRA is mandated by Sec. 309.5 of the Public Utilities Code to represent and advocate on behalf of the interests of public utility customers (electric, gas, water, and telecommunications, and most recently, pursuant to Sec. 5900 as mandated by AB2987 (Nunez, 2006), video franchise customers) Primarily, DRA performs it duties by participating in the administrative law proceedings on utility issues at the CPUC, analyzing utility filings and assessing policy initiatives DRA’s statutory goal is to obtain the lowest possible rate for service consistent with safe and reliable service levels

3. FACTS ABOUT DRA ACTIVITIES & STAFF • DIRECTOR: The only CPUC division director who is a governor appointee and serves at the pleasure of the governor • STAFF SIZE: 133 authorized positions, mostly professionals, including economists, engineers, policy analysts, auditors and accountants (and too few support staff) • RECENT ADDITIONS: 11 of the 133 positions were added in the 2006-07 budget and were assigned to Water and Energy Branches; DRA has only one proposed staff addition in the Governor’s 2007-08 budget, to meet its obligations under AB 2987 (Nunez, 2006), the video franchise legislation • ACTIVITIES: DRA participates in CPUC electricity, gas, telecommunications, and water industry issues with a staff of industry and regulatory experts, performing: • Investigation & discovery • Analysis & expert witness testimony • Evidentiary hearings • Law & motion • Legal briefing • Oral argument • Negotiation & settlement

4. FACTS ABOUT DRA BUDGET& LEGISLATIVE REPORTING • Independent from the CPUC for policy, budget, and resources, but physically housed within the same building in San Francisco • Part of the CPUC for administrative functions, but reimburses the CPUC for services it provides, e.g. Legal, HR, IT • Current budget is $24 million and is a separate line item in the Governor’s budget, to be used exclusively by DRA in the performance of its duties • DRA annually reports to the Legislature on staffing, budget allocations, and workload standards and measures for DRA; latest report was filed on January 10, 2007

5. DRA’S EXECUTIVE MANAGEMENT TEAM CYNTHIA WALKER, Deputy Director, oversees the Telecommunications Branch, which includes newly added video services, and the Water Branch AARON JOHNSON, Deputy Director, oversees DRA’s two energy branches; one dedicated to energy utility costs and ratemaking issues (electricity and natural gas); the other devoted to electricity policy and new initiatives, e.g. resource procurement, solar initiative, energy efficiency, etc. ROBERT KINOSIAN, Acting Policy Advisor & Strategic Planner, facilitates strategic initiatives and outreach to industry and customer groups, other consumer advocates, and government entities; and coordination and lobbying efforts with the commissioners and their advisors MATTHEW MARCUS, Legislative Director, based in Sacramento, ensures that legislators know that DRA is a resource on utility issues; Matthew, in coordination with Robert, ensures that DRA staff is responsive and timely in handling legislative requests and provides information to DRA staff and management needed to weigh in on bills that affect utility consumers.

6. RECENT LEGISLATIVE ENHANCEMENTS In 2005, DRA was fortunate to have the support of this Committee, the Legislature, and the Governor in the passing and signing into law of SB 608, authored by former Committee Chair Senator Martha Escutia, which strengthened DRA’s ability to advocate on behalf of consumers. SB 608 (Escutia, 2005) did the following: • Clarified that the DRA Director has authority to direct the expenditure of the DRA budget • Authorized the Director to appoint a Chief Counsel (in process) • Added language that expressly requires the CPUC to ensure that DRA has other legal support adequate for effective representation of consumers in all significant proceedings (these attorneys will report to and be directed by the DRA Chief Counsel)

7. WITH LEGISLATIVE STRENGTHENING IN PLACE, MANAGEMENT WORKING TO REVITALIZE DRA • DRA suffered morale and effectiveness problems after significant staff reductions in the mid 1990s and a several year period either without a director or a locally-based director in the late 1990s and early 2000s • Recently assembled executive management team undertaking overhaul of DRA management and operations through strategic planning effort • Management goals include: • Realign staff resources with the issues that most affect consumers • Initiate more communications with stakeholders, including community organizations and industry and industry trade groups, to provide a more comprehensive view of ratepayer concerns • Improve the quality of analysis provided in written and oral testimony before CPUC Administrative Law Judges to provide a more full and accurate evidentiary record of the consumer position to better inform CPUC decision making. • Create a work environment that will attract and retain quality staff

8. CYNTHIA WALKER, DEPUTY DIRECTORTELECOMMUNICATION & WATER BRANCHES WATER • Monterey Regional Water Solutions Initiative • Changes to the Rate Case Plan • Designing Rates for Conservation TELECOMMUNICATIONS • Video Franchise Framework • Universal Service • Uniform Regulatory Framework

9. AARON JOHNSON, DEPUTY DIRECTORENERGY BRANCHES Key Energy Issues in 2007 include: • Rates, rate, rates! • Investor-owned utilities long-term procurement plans for future power purchases • PG&E and SDG&E general rate cases • Assessing need for new transmission lines • Proposed utility roll-out of advanced metering infrastructure • Greenhouse gas emissions legislation implementation • Energy efficiency incentives for utilities, demand response programs reassessment, and ongoing review of renewable portfolio standard (RPS)

10. ROBERT KINOSIANPOLICY ADVISOR & STRATEGIC PLANNER • Improving DRA’s lobbying efforts • Reaching out to other parties to build consensus on issues • Providing broad oversight on DRA’s activities to ensure consistency and quality in DRA’s work • Initiating settlements to obtain better results for consumers and more efficiently use DRA resources • Working with DRA’s Legislative Director to provide timely input on bills and responses to Legislators’ concerns and questions

11. MATTHEW MARCUSLEGISLATIVE DIRECTOR Provides a full-time presence for DRA in Sacramento to respond to the needs of Assembly & Senate offices • Legislative and constituent inquiries • Provide technical assistance on legislation • Participate in Committee Hearings, Roundtables and other meetings • Deliver DRA’s position on bills • Update offices on Commission proceedings and meetings