Governor-Elect Energy Adviser Rooted in Direct Access

By Published On: October 18, 2003

Getting governor-elect Arnold Schwarzenegger?s ear on energy policy may be sweet revenge for former California Public Utilities Commission member Jessie Knight, a deregulation advocate. His original plan for deregulation featured ?retail wheeling,? but that lost to a ?pool? concept that included the California Independent System Operator and the now-failed California Power Exchange, which eventually became deregulation as we know it. At the time?1995?he warned the legislature, ?It?s economic dynamite if we don?t pull [deregulation] off.? This week, Knight said that ?opening up markets is the right answer compared to government control.? While remaining steadfast in regard to his old policies, he pointed to the state?s deregulation legislation as a bad example of government meddling getting in the way of retail wheeling of power. ?He was a big fan of the core-noncore split,? said his former adviser at the commission, Jody London, now with Grueneich Resource Advocates. That issue has been heavily debated since the energy crisis in the legislature and the CPUC regarding direct access and utility procurement. The supporting argument, in general, is as follows: Core consumers?that is, residential and small business?need to be protected from the vagaries of the market. If large consumers, on the other hand, want to risk the setbacks as well as the surges of the market, that should be their business. The tricky part is structuring the process to keep smaller consumers from being saddled with the heavy costs of noncore energy consumers who exit the existing system. ?I?m sure the core-noncore issue would surface regardless of this governor thing,? said Lawrence Lingbloom, Senate Energy, Utilities & Communications Committee consultant. ?There?s lots of hoopla surrounding it.? There were provisions in Senator Joe Dunn?s (D-Santa Ana) reregulation bill, SB 888, that would have allowed industry and other large energy customers to have direct access as long as there was no cost shifting to smaller customers and investments in electrical infrastructure were supported. That language was removed from the bill prior to the final vote. Despite the deletion of that section and others from the bill, it was voted down. Another issue familiar to Knight that is also back in the news is utility-affiliate transactions. Setting the proper distance between affiliates and their utility parents was part and parcel of the final deregulation package. Consumer advocates argued for the creation of an impermeable wall between the two related entities, which included prohibiting even the use of the names of utilities for any new affiliates. That affiliate structure lost. The final law did, however, forbid utility affiliates that own generation from competing in their parent utility?s territory. But now there are two utilities?Southern California Edison and San Diego Gas & Electric?that want to have affiliate-owned power plants in their territories. Edison wants to buy the Mountainview power plant and own it under a special deal with a new subsidiary. SDG&E is proposing to buy the Palomar plant from its subsidiary and use it as a utility generating plant. The controversial Mountainview deal is currently being debated in hearings that began this week at the CPUC. SDG&E officially proposed the Palomar deal only last week. Knight said his advice to Schwarzenegger on affiliate transactions would be rooted in his past work at the CPUC. Knight is one of only two members of the governor-elect?s 68-person transition team with a background tilted toward energy. The other, state Senator Jim Brulte (R-Rancho Cucamonga), did not return calls on the matter.

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