Gov?s Energy ?Policy? Met with Silence

By Published On: May 8, 2004

Following Governor Arnold Schwarzenegger?s prodding of the California Public Utilities Commission to accelerate rules mandating that power providers retain a certain level of operating reserves last week, CPUC president Michael Peevey signaled that the agency would pick up the pace. Other than that, what weight the governor?s April 28 missive?considered the first pass at the administration?s energy policy?will have with the independent agency was not immediately apparent. In an April 28 letter, Peevey wrote the governor that he agreed that the reserve margin deadline should be accelerated. Peevey did not specify a time frame, however. He added that the commission will ?continue to improve our resource adequacy policies in the next few months,? without offering details. The commission?s January adoption of a framework for resource adequacy in operating reserves left many details unresolved. Among other things, various forecasts for energy needs, treatment of QF resources, and deliverability requirements for resources are being investigated. Long-term procurement plans for private utilities are due next month. Although it is the closest thing to a formal energy policy from the Schwarzenegger administration, other parts of the governor?s policy letter received only a tepid response. The commission is an independent body, but from a historical perspective it?s likely that the governor?s urgings will carry weight, said Jan Smutny-Jones, executive director of the Independent Energy Producers. ?I think the governor is simply telling the CPUC that he is aware of what they need to do. And he is promoting what?s already in place along with a vague endorsement of core-noncore split markets,? said Arthur O?Donnell, energy consultant. The core-noncore split refers to a move back to allowing direct access. It is pending in the Legislature in two versions: AB 2006 and AB 428. O?Donnell also referred to the governor?s lukewarm endorsement of renewables. An early draft of Schwarzenegger?s letter to Peevey, in which the governor?s energy policy is outlined, gave such support, but the final, public version did not, according to administration sources. The final version left it up to implementation of AB 57 to give priority to renewables. In the governor?s letter, Schwarzenegger requested the CPUC to rapidly implement provisions of AB 57 in order for new power plants to get built. The vague wording of the legislation, however, leaves almost all the policy making to the commission. The legislation does not require utilities to build their own plants, nor does it mandate that they contract with private producers for power. ?Nothing in this act is intended to imply that procurement of electricity from third parties in a wholesale transaction is the preferred method of fulfilling [a utility?s] obligation to serve its customers,? reads AB 57. The bill gives the CPUC the option of requiring either competitive bids, an incentive to meet a procurement benchmark, or up-front standards for rate-recovery eligibility. <i>J.A. Savage also contributed to this report.</i>

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