The New Energy Governor

Gray Davis had a very appropriate story to tell. The former governor was in Sacramento last month to be feted by the state’s environmental groups for having signed into law an impressive array of environmental bills. He recalled an incident during his days with former Governor Jerry Brown as his chief of staff.

“Jerry and I had gotten a law passed we thought was very important. We got a lot of press for it. A year later I called the head of the agency to see how its implementation was going. ‘What bill?’ he said. Nothing was happening. We thought we’d made change,” said Davis, to the nervous laughter of the assembled greens. “Remember,” said Davis, “there are no final victories.”

This is an example and an admonition that, as it happens, applies to one of Davis’ accomplishments that had some of the more exuberant environmental leaders lauding him as the best environmental governor in California history. In 2002, Davis helped lobby through and signed into law the most expansive renewable-energy requirement in America. But today, that law lags alarmingly, even as new Governor Arnold Schwarzenegger calls for an even greater commitment to renewable power and even as discord on energy and environmental policy within his own administration becomes apparent.

California’s landmark renewable portfolio standard requires a near doubling of the state’s use of renewable

energy resources such as wind, solar, geothermal and biomass to 20 percent of the electric-power mix by 2017. Echoing Schwarzenegger’s call, which the governor discussed with me last summer before he announced his candidacy, the state’s Public Utilities Commission, the lead agency on the

renewable portfolio standard, has agreed to accelerate that doubling to 2010.

But nearly two years after its passage, little progress has been made in enacting the law that began as SB 1078, authored by Senator Byron Sher (D–Palo Alto). And time is getting shorter. The Public Utilities Commission, headed by former Southern California Edison president Michael Peevey, who is also the lead commissioner on the renewable requirement, is not ready for a first round of utility solicitations for renewable power in June. Peevey did not return calls for comment on the issue.

Energy is coming back big-time as a major issue. We see it at the gas pump, we saw it with a Stage 1 power alert last week. Indeed, “Energy will be the next big thing,” says Schwarzenegger, after workers’-compensation reform and, of course, the budget crisis.

 

Energy was never solved in California; the media and politicians lost interest after the electric-power crisis of 2001 passed. But supply problems were not solved, with many of the new power plants touted by Davis falling by the wayside. We had piecemeal solutions that left the overall shape of the electric-power market unsettled, that enshrined good intentions as state policy without actually fulfilling them. Meanwhile, there is a looming crisis of price and supply with natural gas, the principal fuel of California’s electric-power market, and a looming controversy over the potential importation of liquefied natural gas, which the city of Vallejo just rejected. If the California energy market is flooded with imported gas, which the PUC is considering, that could destroy incentives for renewable energy.

The Legislature is rudderless on energy, with new Assembly Speaker Fabian Nunez carrying a bill on the shape of electric-power markets written for him by Edison. Schwarzenegger’s team is still making its way, with internal discord over a free-market approach with state mandates (in accordance with the action superstar’s insistence on a big commitment to renewable energy) and a hybrid approach with regulation.

According to environmental sources, Edison has been the prime mover in putting up roadblocks to the renewable portfolio standard. Edison environmental-policy director Michael Hertel did not respond to calls or e-mail seeking comment on the issue. Edison was the worst of the big utilities in the fight to pass the renewable requirement and was notorious with renewable-power generators as a frequently slow and reluctant payer for their power. The author of the renewable portfolio standard, Senator Sher, has been concerned about the slow pace of progress. Such issues as pricing, utility power projections, the language of renewable-power contracts, and transmission remain unresolved.

One telling internal struggle in the Schwarzenegger administration may end up doing good for the renewable requirement. A seat on the state Energy Commission is up, and the conventional Republicans around Schwarzenegger, notably chief of staff Pat Clarey, pushed hard for a moderate, while others, notably senior adviser Bonnie Reiss, pushed hard for an environmentalist. The conventional Republicans appear to have won this one. But as a compromise, the environmentalist is likely to be named the liaison from the Governor’s Office to the PUC to oversee the renewable-power mandate, which could be a much more important post.

Although Schwarzenegger has not focused on energy politics yet, though he says it’s his next big thing, that may turn out to be a harbinger for his approach on the overall shape of the market: soothe and service the center and business community while inserting elements of regulation and environmentalism into the mix.