Energy Agencies Escape State Budget Woes

By Published On: August 8, 2008

California’s energy and resource agencies so far have escaped any fallout from the state budget impasse and Governor Arnold Schwarzenegger’s executive order to slash state employees’ salaries because they are not funded through the state’s disputed General Fund. Officials at both agencies said the California Public Utilities Commission and the California Energy Commission have been operating as usual. They have other funding sources and the California Legislature has already approved their proposed budgets. The CEC’s programs are funded primarily by a surcharge on utility gas and electricity bills dispensed by the Energy Resource Program Account, augmented by specific funds allocated by the Legislature for targeted programs, said Susanne Garfield, CEC assistant executive director. The commission’s power plant siting proceedings are funded by developers’ fees. “At this point it’s not impacting the programs we’re dealing with at the Energy Commission,” she said. However, she added, “We’re a state agency and we’re a part of the Resources Agency, so it’s never cut and dry one way or another.” Neither the CPUC nor CEC have been forced to lay off temporary employees, institute a hiring freeze, or slash employees’ salaries to the federal minimum wage of $6.55 an hour as the Governor ordered last week. State Comptroller John Chiang refused to carry out Schwarzenegger’s executive order, contending that it violates federal law and could cost the state three times as much in legal damages as the salary cuts. The CPUC has been doing its part to cut back on costs by limiting travel for hearings and equipment expenditures as the Governor ordered state agencies to do in February. “Our investigations and proceedings have not been otherwise impacted,” said CPUC spokesperson Terrie Prosper. As a revenue collecting agency, the California Energy Resource Scheduling energy division of the Department of Water Resources is exempt from the Governor’s hiring freeze, layoffs, and wage cuts, said resources scheduling spokesperson Richard Grix. Resources scheduling administers the power supply contracts the DWR entered into with generators to procure power for the cash-strapped investor-owned utilities during California’s energy crisis in 2000-01. “We recover our costs through utility ratepayers, not from taxpayers,” Grix said. “We pay generators and utilities, collect money from ratepayers, and dispatch power to them.” CERES recovers $4 billion to $5 billion a year in power supply revenues from ratepayers. The California Air Resources Board is funded primarily through the Motor Vehicle Account and likewise has not been impacted by the impasse over the General Fund budget said Karen Finn, the Department of Finance’s budget manager for resources, energy, and environment programs. ARB also gets funding from the Air Pollution Control Fund, fees on stationary sources of pollution, such as power plants, and a small amount of federal trust monies, she said. While the General Fund programs are in the most upheaval it’s uncertain if the final budget will impact state energy and climate change programs, Finn conceded. A State Senate and Assembly conference committee is at work on a compromise budget bill, she said. Looking ahead, a carbon tax on polluters or fee for carbon allowances under a cap-and-trade system could help balance the state’s budget and avoid the annual budget battle in Sacramento, said Jean Ross, director of the California Budget Project. Industry and other polluters should fund state agencies and programs to reduce greenhouse gas emissions rather than forcing taxpayers and ratepayers to shoulder the burden, she said. The California Budget Project argued in written comments to the Western Climate Initiative that allowances in a carbon cap-and-trade program should be sold rather than dispensed freely to power plant generators and other emitters, she said. “We believe as the state moves forward to reduce carbon pollution there ought to be a benefit that could go for budget balancing and the impact on lower income people of higher energy costs,” Ross said. “Certainly in the broader scheme energy policy has an impact on the economy as a whole.”

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