Governor Backs Core-Noncore Market Split

The governor proclaimed his energy policy this week, calling on the California Public Utilities Commission to quickly nail down rules for utility procurement and accelerate the time line for increased reserve requirements. Governor Arnold Schwarzenegger?s policy objectives, announced April 28, also include a revival of direct access for large energy consumers. Generators were delighted. Consumer groups were appalled. Utilities were in between. The policy was expressed in a letter to CPUC president Michael Peevey, in which Schwarzenegger urged immediate action on AB 57 procurement rules so long-term utility deals can go forward. ?Long-term contracts, procured by utilities, are the means by which California will attract necessary private investment and build the resource portfolios needed to ensure reliability and keep prices low in the future,? the governor stated. He also urged the commission to change the start date for requiring utilities to line up 15 percent operating reserves (power beyond expected demand) from 2008 to 2006, and to expand investments in efficiency and demand-response programs. Schwarzenegger also backed the joint energy agencies? Energy Action Plan released months ago, which would give priority to renewable supplies, efficiency, conservation, and demand response over fossil-fuel power when setting procurement policies. ?The governor addresses the presumption that the state doesn?t have an energy policy and is putting action into the Energy Action Plan,? said Jan Smutny-Jones, Independent Energy Producers executive director. He heartily approved the governor?s push to have the CPUC implement AB 57, which he called ?an important first step? and one that would lead to additional resources feeding the grid. ?Having open, transparent procurement on the utility side will benefit California customers, providing hard value at the best possible price,? Smutny-Jones said. Dynegy and Calpine also applauded the plan. Assemblymember Keith Richman (R-Northridge), who has worked the last year and a half to reestablish customer choice for large energy consumers via legislation, was also delighted by Schwarzenegger?s framework. ?The governor?s plan is right on point,? he said. Richman added that the draft stresses the importance of new generation that is competitive and transparent and that it notes the risks of inadequate supply and the importance of efficiency, conservation, and renewables. Joe Desmond, the state?s new energy czar, added that he was ?very supportive of the governor?s vision.? To the dismay of consumer advocates, Schwarzenegger?s deal is a return to deregulation. ?It is all window dressing except for the quiet scream at the end of the letter,? said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights. ?The problem is that some people have no sense of history,? he said, pointing to the perils of a deregulated marketplace and federal regulators? failure to protect Californians. At the end of the letter, the governor lent his muscle to Peevey?s proposed move toward a core-noncore market that would allow large customers to pursue deals with nonutility providers (see Circuit , March 19, 2004). ?The push [for direct access for large customers] never comes from the majority of customers, who are small businesses and residences,? said Mindy Spatt, The Utility Reform Network spokesperson. She and Heller warned that allowing direct access would raise costs for small ratepayers. Richman refuted those assertions. ?Throughout the process, we all have been committed to ensuring there will be no cost shifting,? he said. He added that legislators? role is limited to rekindling direct access and the CPUC will decide how rates are allocated. The state chief?s plan is a major blow to Southern California Edison?s bill, AB 2006, which would create a restricted direct-access market (see Circuit , April 23, 2004). The utility, along with Sempra Energy, was less than thrilled with the governor?s announcement. The two entities did not object to any part of the governor?s plan but focused on many unresolved issues, including the lack of authority for utilities to build their own generation and cost recovery for those investments.

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Governor Backs Core-Noncore Market Split

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