After more than a decade of lobbying, efforts to stem the rising tide of fees on California businesses is starting to gain traction. The Newsom administration and the Legislature have opened their doors to conversations on running the government more efficiently and shifting costs away from regulated entities, with the goal of avoiding further hikes to consumer prices and utility rates.
In the wake of the Great Recession, the State Water Resources Control Board transitioned to a fee-based agency, and, for more than a dozen years, the fees have steadily increased far beyond the rate of inflation. The polluter-pays principle is also the driving force behind a sweeping proposal from the California Air Resources Board to expand its authority to enact new fees without direct legislative approval. While environmentalists and progressive lawmakers applauded the move, others warned of unchecked regulatory power.
By contrast, the water board has taken a more collaborative approach, welcoming an open-ended discussion on the fee issue last week. Board staff set aside time in a standing stakeholder workshop for industry representatives to brainstorm ideas for easing compliance requirements and saving farmers money down the line.
“The real issue is not fees, but what causes the fees,” said Bob Gore, who represented several local water districts as a senior advisor at the Gualco Group and moderated the discussion. “If we can all work together and share operational information, there's going to be efficiencies. Let's be creative.”
While the conversation mostly served as the initial ice breaker in a longer endeavor, a few longstanding issues resurfaced. Gore and others pressed for the need to consolidate multiple reporting requirements into a single portal.
“This isn't just a water board issue. This is (CalEPA)-wide,” said Noelle Cremers, who directs regulatory and environmental affairs at the Wine Institute. “Often it's very similar information but may be asked for in a slightly different way. It is costly for users to have to repackage that and re-report it multiple times — but it seems to me, it also is less efficient.”
Asm. Chris Rogers, D-Santa RosaAfter hearing those concerns for years, the California Department of Food and Agriculture has partnered with the water board and its regional branches on a streamlining project. CDFA has commissioned Crowe LLC to examine the issue further and identify policy opportunities, and Secretary Karen Ross anticipates the consulting firm will finalize its report later this year.
Sarah Lopez, executive director of Central Coast Water Quality Preservation Inc., a third-party organization helping growers with compliance, emphasized the need for more adaptive regulatory approaches.
“It's frustrating that we run into water board policies that prevent us from automating things, for example,” said Lopez. “It feels like sometimes the regional boards have their hands tied by their own orders, which they can't just open back up.”
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She pointed out that Christmas tree growers do not apply fertilizer but still face an annual reporting requirement for nitrogen applied. The ends do not justify the means, she suggested, encouraging the board to focus more on the ultimate needs and less on implementing a standardized reporting process.
Gore has been shopping around an idea with water board members to develop innovation grants to fund more efficient technologies, modeled on CARB’s Carl Moyer program promoting clean engines and equipment.
While no decisions were made, the board committed to continuing the dialogue and promised to review any proposed cost-reduction strategies. The next stakeholder meeting is scheduled for June 11, when staff will have a more accurate portrait of the next round of fee increases for the coming fiscal year.
While the staff workshop was far removed from the state politics two blocks away at the Capitol, the governor and legislative leaders have talked of charting a new course for regulatory agencies to prioritize affordability. Customer pleas to lower utility costs have led lawmakers to push back on CARB’s proposal to levy new fees on businesses with less legislative oversight.
“I'd have a hard time going back to my constituents and explaining to them exactly what this budget change means for them on the ground,” said Assemblymember Chris Rogers, D-Santa Rosa, during a Budget subcommittee hearing last week. “Who's going to be taxed? What's the fee going to be? How much is it going to cost them?”
Asm. Cottie Petrie-Norris, D-Irvine, echoed the concerns and called the request overly broad, feeling as if CARB were asking the Legislature for a blank check. Buoying the arguments, the nonpartisan Legislative Analyst’s Office urged the legislators to reject the proposal, citing its unprecedented breadth.
“CARB already has very broad authority to establish regulations to meet our very ambitious climate goals and our standards for air pollution,” explained LAO analyst Helen Kerstein. “When paired with this fee authority, they could create new regulations and then impose fees to carry out those programs.”
Kerstein reasoned that setting fees is like levying new taxes, a core responsibility and role of the Legislature under its “power of the purse.”
CARB contends it would hold a public process to consider stakeholder concerns before approving any new fees.
But Kerstein argued that would exclude elected representatives from the process, bringing them in only after passing the regulations and fees, when the Legislature could only consider the new positions proposed for implementing the program. The California Chamber of Commerce, along with several agricultural groups, agreed that the regulatory process is a poor substitute for the Legislature’s role with maintaining checks and balances.
Petrie-Norris expressed more criticism for a separate CARB request for $3.5 million to implement and enforce its zero-emission forklift rules. She pointed out that California has yet to seek a federal waiver for the regulation and is unlikely to gain one during the next four years of the Trump administration.
The cost concerns spread to yet another Budget subcommittee hearing last week to examine spending proposals at the California Public Utilities Commission. Senators demanded solutions to curb the trend of rising electricity costs, sharing frustration that shareholders at investor-owned utilities have drawn unprecedented revenues.
“How do you guys square the big profits that have been reported, the ever-increasing rates that are really breaking people and this guaranteed rate of return that you uphold as part of your mission?” asked Senator Ben Allen, D-Santa Monica.
CPUC Executive Director Rachel Peterson responded that the returns demonstrate to Wall Street investors that the IOUs can repay their debts and remain worthy investments. Yet the commission has acknowledged the concerns in a new report finding the societal costs for climate-proofing the grid and hardening it against wildfires should come from nonratepayer sources.
The California State Auditor added more pressure on the agency Tuesday. The office reported the CPUC is failing to ensure the largest utilities are spending ratepayer dollars in cost-effective ways.
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