New nominees, big choices will shape California utility board in 2005
The San Diego Union-Tribune --Dec. 26
For the past two years, the complex world of gas and electric utility regulation in this state has boiled down to a simple combination of numbers: 3-2.
Despite the divergent votes, California traveled a long way from the
disastrous deregulation experiment that led to the state's power crisis of
2000-01. There are plans in place to quickly ensure reserve electricity supply,
plans for building new power plants and plans for conservation and renewable
energy.
Now all those decisions need to be implemented, which means deciding how much
they will cost and who will pay for them. And with the departure of Lynch and
Wood, who were generally applauded by consumer groups but criticized by business
groups, a very different commission will be making the decisions.
The difference could be significant in several important matters, most
prominently the contentious matter of shifting some $730 million in power-crisis
costs onto the bills of large San Diego Gas & Electric customers.
In the decision to shift the crisis costs here, Lynch and Wood joined with
Brown in voting in favor. The departing commissioners and Brown argued it was a
fair allocation of costs among the state's utilities.
Now, SDG&E is appealing the decision. Peevey and Kennedy -- who supported
a smaller shift of about $400 million -- could find a new ally for overturning
the larger shift in Steve Poizner or Dian Grueneich, the gubernatorial nominees
to fill the seats that will be vacated by Lynch and Wood when their terms
conclude at week's end.
Most observers expect Poizner, a Silicon Valley entrepreneur, to tilt toward
Gov. Arnold Schwarzenegger's preference for less utility regulation and for
allowing large electric customers to buy power from companies other than local
utilities. Consumer groups oppose that idea for fear that too much of the cost
of ensuring electric reliability will fall to residential customers.
Grueneich, a lawyer with a record of representing environmental groups as
well as large electricity customers before the PUC, is expected to advocate for
renewable energy and conservation projects, as well as be generally sympathetic
to small-consumer concerns.
Peevey, who often clashed with Lynch, predicts Grueneich, will "hit the
ground running."
"I think she and I will work very closely," said Peevey, who added
that he wants the commission to increasingly tackle global-warming issues.
Grueneich is a registered Democrat and past president of the California
League of Conservation Voters. She did not return a call for this story.
Peevey said he knows less about Poizner, who co-founded and sold
high-technology companies before turning to public service. But Peevey said he
and Poizner would meet soon.
For his part, Poizner said he's launched into a crash course in utility
matters.
"Once I get my feet wet, I would be happy to comment," Poizner
said.
The nominee, who must still be confirmed by the Senate, noted that he
developed a San Diego connection when Qualcomm purchased his last startup
company, SnapTrack, for $1 billion in 2000. The company developed technology
that allows cell phones to be located for emergency purposes.
"The technology is now in over 50 million phones and has saved dozens of
lives," he said.
More recently, he ran an unsuccessful race as a Republican candidate for the
state Assembly from Silicon Valley and taught without salary in a public school.
"I spent most of my career starting and running high-tech companies and
made a career shift into public sector service," Poizner said.
Peevey said the top priority for the PUC is likely to be implementing its
mid-December blueprint for new power projects. That plan envisions a competition
for the new projects between local utilities and their unregulated affiliates
with independent power plant builders such as Calpine Corp.
The plan includes a provision for an outside evaluator to ensure the
competitive process is fair. Peevey said the bidding process should be much like
the one SDG&E used earlier this year. That resulted in the utility winning
PUC approval for a plan to buy a power plant in Escondido being built by a
sister company and also to contract for electricity from a new power plant in
Otay Mesa being built by Calpine Corp.
Peevey hailed the process as a breakthrough for the region, which he says
badly needs additional electricity generating resources after decades without
constructing a new plant.
But The Utility Reform Network and other consumer groups continue to
challenge the bidding process as unfair and say it will result in excessive
costs to local ratepayers. They also allege that Peevey inappropriately
intervened in the bidding process.
The PUC president, meanwhile, said next year's priorities should also include
resolving a host of issues surrounding Sempra Energy -- the parent company of
SDG&E.
Those include the company's controversial power supply contract with the
state, which officials say is too expensive, as well as an ongoing investigation
into the role played by Sempra companies in the natural gas price spikes that
accompanied the power crisis four years ago.
The PUC also will hear SDG&E's appeal of the decision to shift $730
million in crisis-related costs to this region.
"I would like to see some way in which all these issues can be resolved,
Peevey said.
Michael Florio, an attorney with TURN, said resolving the host of Sempra-related
issues would be a step forward, under certain conditions.
"We don't want to be taken to the cleaners," said Florio, who noted
that TURN plans a court challenge if its effort to overturn the SDG&E power
plant plan fails at the PUC.
SDG&E priorities also include further implementation of the PUC decision
to allow liquefied natural gas into the state from a terminal the utility's
sister company is planning near Ensenada in Baja California.
Denise King, a spokeswoman for the utility, said company executives want the
commission to expedite transmission line upgrades around the state that would
otherwise threaten power reliability as early as this summer. Lynch, the
departing commissioner, said the fundamental issues before the PUC will involve
money.
"The PUC has created this big cost pie, and what is coming up in the
next three to six months is who has to eat this pie," Lynch said.
Among those costs, Lynch said, is up to $2 billion needed to upgrade
California's two nuclear power plants, including the one partly owned by SDG&E
in San Onofre.
Lynch said she also anticipates an effort to reduce rates for large
electricity consumers.
"They want to shift costs to other customer classes so when the big
bills come due for nuclear upgrades, natural gas purchases and all the
electricity projects, the big guys will pay less," she said.
But Peevey, often at odds with Lynch over policy matters, said some
adjustments are needed to allow more large customers to buy power from suppliers
other than local utilities. New agreements of this type are barred by state law.
Peevey said he also hopes to smooth the way for communities to organize
customers and seek their own such arrangements, known as community aggregation.
From the perspective of power plant builders, the new PUC is expected to
quickly clear the way for a surge of new investment. Jan Smutny-Jones, executive
director of the Independent Energy Producers Association, said the state's push
to ensure adequate power reserves plus its aggressive effort to build renewable
energy projects should lead to solicitations for many new projects before this
summer.
Industry is ready to respond enthusiastically, he said. "We have
definitely turned a corner," said Smutny-Jones, who took issue with
positions of Wood and Lynch in the past. "There is definitely interest in
investing in California."
But where industry sees opportunity, consumer advocates see a threat to
smaller gas and electricity customers.
Doug Heller of the Foundation for Taxpayer and Consumer Rights, an advocacy
group in Santa Monica, said Grueneich, at least, might play a positive role on
the commission. He fears consumers could find themselves without a consistent
vote on the five-member commission, which was established to guard against
corporate abuse but which he said is the focus of more and more business
lobbying.
"I am hoping Grueneich will be a voice of reason," Heller said.
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