California Software Executive to Head Initiative to Stabilize Energy Market

Contra Costa Times, Walnut Creek, Calif. - April 17, 2004

Gov. Arnold Schwarzenegger has tapped East Bay software executive Joe Desmond to oversee a broad new initiative to stabilize California's energy market and reorganize the agencies that govern it.

Schwarzenegger will announce the appointment of Desmond as his top energy adviser next week as the governor shifts his focus from worker's compensation to energy and budget issues, according to sources familiar with the move.

Energy experts said the choice signals the governor's commitment to pursue free-market solutions to rising electricity prices and tightening supplies. And it's another sign Schwarzenegger views pleasing business executives as one of his chief objectives.

The choice drew praise from many, including business leaders, but troubled one consumer advocate, who said he worried Desmond would cater to big businesses and pay little attention to residential electricity users.

Bob Finkelstein, the executive director of the consumer group The Utility Reform Network, said, "Certainly we've had indications the new governor would have more interest in what the large industrial users have to say than the small residential customers. So it's not a surprise that he's picked someone from their ranks."

Desmond is president and chief executive officer of Infotility Inc., a San Ramon-based energy software and consulting firm. He has worked closely with the Silicon Valley Manufacturing Group, serving most recently as the co-chairman of its energy committee.

He is an advocate of loosening regulation and providing big energy users, such as manufacturing plants and other large businesses, the option to buy electricity directly from wholesalers. Lawmakers froze so-called "direct access" when the energy crisis hit California in 2001, and ever since, the debate has raged about whether to increase regulation or decrease it.

"He has very much a large customer viewpoint of the world," said Severin Borenstein, the director of the University of California Energy Institute. Borenstein worked with Desmond on Schwarzenegger's transition team. "This is one more force that will be pushing toward some sort of choice for large retail customers."

Desmond did not return phone calls Friday afternoon, and Margita Thompson, the governor's press secretary would only say: "We don't have anything to announce on energy yet."

However, officials at the Silicon Valley Manufacturing Group and within the administration confirmed that Desmond had been offered the position and accepted it. He will be the governor's top adviser on energy, but it's unclear exactly what his responsibilities will entail.

Administration officials said they are still putting together their energy team and strategy. In recent weeks, Schwarzenegger said energy would be his next major challenge after sealing a workers' compensation deal.

"Affordable and abundant energy is necessary to keep the business environment healthy in California, which is why it is a priority for the governor," said Ashley Snee, a spokeswoman for Schwarzenegger.

A recent report by the California Independent System Operator, which manages the state power grid, predicted a new all-time high peak demand for electricity this summer. While Borenstein and other experts say the chances of rolling blackouts occurring this summer remain slim, concern is growing about keeping up with the state's increasing energy needs.

Jim Sweeney, a Stanford professor who wrote a book about the state's energy crisis and advised the Schwarzenegger transition team, said the governor is keenly aware of the dangers of a potential electricity crunch.

"There is high degrees of uncertainty with (electricity) loads and rain, and so nobody knows exactly how quickly you would be in a shortage situation," Sweeney said. "We need to cut through some of the problems that are blocking development of new power plants so we don't come to a new crisis situation.

"I think he's looking ahead and saying 'Let's avoid a problem.'"

In addition, legislators are pushing bills to reshape the energy market, with measures ranging from a complete return to regulation to providing customers options to choose from different suppliers.

"The key issue is to get more investment for new generation of electricity for California," said Assemblyman Keith Richman, R-Northridge, who is the author of one of the bills. "We are not yet out of the energy crisis."

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(c) 2004, Contra Costa Times, Calif. Distributed by Knight Ridder/Tribune Business News.