As California’s electricity supply tightens with summer weather ahead,
Governor Arnold Schwarzenegger will send a state-energy-agency reorganization
plan to the Legislature next week that critics say favors big energy companies
at public expense.

The administration maintains it is not out to compromise the public interest, but only to streamline the state’s complicated, multiagency energy bureaucracy and encourage construction of the new electric transmission lines and gas pipelines that energy firms say are needed to keep the lights on in California. “This reorganization improves accountability, focuses the development of energy policy, reduces fragmentation and duplication, and improves communications,” said Joe Desmond, chairman of the California Energy Commission.

But consumer advocates and some Democratic members of the Legislature charge that Schwarzenegger’s plan will concentrate power and limit consumer advocacy in determining whether utilities can pass on billions of dollars of project costs to California households and businesses. They also say the plan will do little to address the squeeze on California’s energy supply. “It’s really fiddling while Rome burns,” said state Senator Joe Dunn (D–Garden Grove).

Schwarzenegger’s plan would create a new state department of energy under a Cabinet-level secretary appointed by and reporting to the governor. It would shift licensing authority for new electric transmission lines and gas pipelines from the California Public Utilities Commission (PUC) — which state law established to protect utility ratepayers from monopoly power companies — to the Energy Commission, where that duty is less clearly mandated. As head of the new department, the governor’s secretary of energy would chair the Energy Commission, and its decisions would be subject to judicial review only by the state Supreme Court.

“Concentrating power in an appointee serving at the governor’s pleasure will exacerbate conflict-of-interest issues inherent in the governor’s acceptance of political donations from energy companies,” said Bob Finkelstein, executive director of the Utility Reform Network.

“The question is how much authority you give this person,” said James Mayer, executive director of the Little Hoover Commission, which held a 10-hour hearing on the plan late last month at the outset of an unusual procedure based in the California Constitution known as the governor’s reorganization process.

Under that process, the plan will take effect within 60 days unless a majority of either the state Assembly or the state Senate votes to block it. Committees in each chamber must hold a hearing on the plan, although lawmakers cannot amend it.

“The point of the governor’s reorganization process is to do it quickly and without scrutiny,” said an aide to a key committee in the state Senate. “It has less public input than a bill.”

However, the Legislature is not likely to consider the plan until the Little Hoover Commission takes a position on the reorganization. The commission cannot amend the plan, but Mayer noted that it can recommend improvements that lawmakers could adopt through separate legislation.

Dunn said the administration is seeking to “craft the best plan to protect consumers” and believes that if the Little Hoover Commission recommends changes, “It would give them full consideration.”

Lawmakers will grapple with the plan during the summer, which has the greatest potential for power shortages than at any time since the California energy crisis of 2000-01. “If we get an extended heat wave, the pool of megawatts will dry up very swiftly, and we’ll be looking at shortages,” said Gregg Fishman, spokesperson for the California Independent System Operator, which manages much of the state’s electricity grid.

The National Weather Service is forecasting a hotter-than-normal summer across much of California and other Western states, which share an interconnected electricity grid. Behind the tightening supply situation is growth in electricity demand, which only threatens to worsen over the next couple of years, Fishman added.

Under the plan, the Energy Commission would take over from the PUC the job of determining whether or not new transmission lines and gas pipelines should be built and their cost passed on to consumers through utility-bill increases. The Energy Commission already makes this determination for power plants through an open process that aims to hold costs down, said Dunn.

However, his counterpart at the PUC differs. “We look at it from the ratepayer’s point of view,” said Steven Larson, executive director of the utilities commission.

Currently the utilities commission determines both what electric transmission lines and pipelines utilities can build and how to divide their costs among ratepayers of various classes, such as homeowners versus apartment dwellers and affluent versus low-income groups. Under the plan, the Energy Commission would decide what utilities can build and at what cost. The PUC, however, would still have to decide how to charge utility ratepayers.

Assemblyman Lloyd Levine (D–Van Nuys) said the plan will not adequately protect the public interest, noting that consumer groups would lose their right to intervener fees now covered by the utilities commission. Levine claimed too that the plan would undermine the stability needed to successfully finance major energy projects to head off electricity shortages.

State Senator Barbara Bowen (D–Redondo Beach) said that placing a Cabinet-level
official over the Energy Commission would open energy policy to political influence.
The PUC and the Energy Commission currently have some insulation from elected
officials, who need to raise campaign cash, she said.

Numerous large energy firms support the governor, such as Sempra Energy. Its subsidiary, San Diego Gas & Electric, has complained that the PUC has not acted swiftly enough to approve new power lines into its growing service territory. “The benefits associated with transmission are significant,” said Thomas Brill, assistant general counsel for regulatory policy for the company. “The failure to reap those benefits is an unfair cost.”

Most agree, however, that the Little Hoover Commission may hold the key to whether Schwarzenegger’s plan ultimately goes forward.

“The appeal for the status quo is difficult for me because I don’t like the position
the state of California is in right now on energy,” said Welton Mansfield, a member
of the Little Hoover Commission. “It’s a question of what kind of change we make.”

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