Bipartisan Fight Pulls AB 2006 from Committee

By Published On: August 14, 2004

Legislation endorsing a partially deregulated energy market was yanked from an August 12 Senate Appropriations Committee hearing and could head directly to the Assembly floor to boost chances of getting it to the governor?s desk. AB 2006 by speaker Fabian N??ez (D-Los Angeles), sponsored by Southern California Edison, underwent another round of heavy amendments this week. It was formally opposed by Governor Arnold Schwarzenegger?s administration but embraced by ratepayer advocates, numerous cities, and small businesses. The dispute between the governor and N??ez over the controversial bill, which no longer includes direct access, led Senator John Burton (D-San Francisco) to divert the measure to the Rules Committee, which he chairs, according to an insider. ?Let the kid have his bill if he wants to get it vetoed by the governor,? said the source, claiming to be quoting Burton. A call to the Senate president pro tem?s office seeking comment was not returned. The speaker and the governor will meet tomorrow, and the outcome is expected to determine whether the bill will go back to Appropriations, which will require a rule waiver, or straight to the floor. Prior to the escalating battle, the bill?s opponents expressed delight at the governor?s rejection. ?By opposing AB 2006 as currently written, Governor Schwarzenegger is taking a major step towards restoring Wall Street?s faith that California is a safe place to invest the billions of dollars the state needs to get new power plants built and sustain the economy,? said Calpine president Peter Cartwright in a statement. Cartwright and other bill opponents met with the governor last week. Joe Desmond, the deputy secretary of energy, said the legislation ?increases regulatory uncertainty? and is ?duplicative? of the regulatory process. He also told the Senate Energy, Utilities and Communications Committee at an August 10 informational hearing that the bill fails to create an open or transparent procurement process and is deficient on resource adequacy. The August 9 version of the legislation would make way for discounts to large energy users while eliminating the revival of direct access. It also does away with the late-July amendment that would allow the California Public Utilities Commission to require the state?s three investor-owned utilities to be responsible for ensuring the adequacy of power resources for all energy suppliers in their territories (<i>Circuit</i>, August 6, 2004). Senator Tom McClintock (R-Thousand Oaks) warned supporters of the bill, ?You are proposing restoring utility monopolies.? He also objected to the new provision that would allow the CPUC to give big energy users discounts because their rates soared after the energy crisis. ?Here, the politically powerful get a discount at the expense of the weak,? he fumed. The administration?s proposed amendments were criticized on grounds that restoring direct access would cause utilities to back away from long-term contracts because of uncertainty about the customer base. They also have come under attack for lacking a definition of ?open and competitive? procurement, pushed by Calpine and other generators, and a road map for how to get there, in spite of ongoing opposition to the CPUC?s closed-door procurement deal-making. Desmond dismissed the importance of the utilities having a solid rate base, noting that other businesses do not have guaranteed customers. The measure continues to be opposed by the California Manufacturers and Technology Association, independent power producers, the California Large Energy Consumers Association, the California Cogeneration Council, and municipal power agencies. The administration wants to terminate the bill unless amended to allow large energy consumers to work out their own deals, as well as requiring investor-owned utilities to enter into competitively bid long-term power contracts. In addition to direct access accompanied by rules that ?prevent cost shifting and do not allow the creation of stranded assets,? the governor?s proposals would require all energy providers to meet resource-adequacy requirements. The legislation?s newest advocates, notably The Utility Reform Network, said the latest rewrite, allowing a mix of utility-owned generation with competitively bid power from independent generators, offers ratepayers the best deal. It creates a ?more level playing field,? said Lenny Goldberg, TURN lobbyist. He insisted direct access would not open the door to new plant financing, adding that the energy crisis revealed that there are only two energy scenarios that avoid price gouging and allow new plants to get built: long-term power contracts and cost-of-service utility-owned generation regulated by the CPUC. One critic at the Capitol said the governor should pursue his own bill, given that his energy agenda differs greatly from that of N??ez. A bill, or a even a comprehensive energy policy, by Schwarzenegger is unlikely in the near future, however, given his preference for working with state regulators?and the fact that he will get to appoint two CPUC members at the end of the year, allowing him to avoid dealing with state lawmakers.

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