FERGUSON: ENERGY MATTERS Making Public Policy Work

A series of meetings at the California Public Utilities Commission this week left me wondering anew whether the current system of utilities and regulators can effectively implement public energy policies. I have many friends and colleagues at the commission who are doing their best to reach the policy objectives established by the Legislature. Despite our arguments and bursts of anger, we're all trying to reach the same goals. Perhaps it simply cannot be done in the current system. When utilities come to the commission with a proposal, it is a straightforward process for the regulators to say yes or no, or to modify the proposal before approval. Should a proposed rate increase be granted or not? How much? Should a proposed power line be built or not? But can regulators get utilities to do something they don't want to do in the first place? That's much more difficult, perhaps impossible. I've been trying to help the CPUC implement the state's goal of increasing reliance on renewable sources of energy for electric generation. The state has adopted every energy policy known to man (and woman) to make this happen. Progress has been glacial, however, largely because the details are highly technical and the system still depends on utility proposals. The so-called renewables portfolio standard requires utilities to increase the percentage of renewable energy they use for generation by 1 percent each year until they reach 20 percent. The renewables legislation set the 20 percent target date as 2017, which, in a burst of fervor, the CPUC accelerated to 2010. But reaching the goal depends entirely on utility proposals. Utilities have been soliciting offers of renewable power from developers. But which offers are accepted is up to the utilities, with only perfunctory oversight from "procurement review groups." Regulators have devised a complicated set of rules that supposedly guide the selection process, but these are highly technical. Arguments are almost always won by the utilities simply because the CPUC doesn't have the technical expertise to effectively make an informed decision. So far, all the renewables contracts proposed by utilities have been approved by the commission, but only a few megawatts have come on line. Utilities now argue that merely having a signed and approved contract should count toward compliance, regardless of whether energy is generated or not. Regulators have agreed to this "flexible compliance" scheme, at least for the time being. Transmission lines also must be built to access renewable energy areas, and again, the system is dependent on proposals from utilities. In the case of the Tehachapi wind energy project, Southern California Edison recently released a schedule for transmission lines not to be completed until 2013. Since the CPUC is entirely dependent on Edison for completing studies, acquiring rights of way, and building the poles and wires, the regulators have little control over what gets done and when. The CPUC actively seeks advice on what it can do to speed up the process. But in fact, regulators' complete dependence on the utilities to make things happen severely limits their options. My advice to the commission is to begin thinking less like regulators and more like project managers. To build the Tehachapi project in time to meet the renewables portfolio standard goals, for example, the commission has to determine what has to be built, establish the schedule, assign the tasks, and see that the schedule is met. It must accept responsibility for making things happen. The CPUC will not achieve the state's energy policy goals if it continues to rely on utility proposals. But does the current regulatory process give them a choice? I don't know.

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FERGUSON: ENERGY MATTERS Making Public Policy Work

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