GUEST JUICE: Parting Observations

By Published On: January 23, 2014

By Mark Ferron Editor’s note: California Public Utilities Commission member Mark Ferron announced he was leaving his post Jan. 15 due to health issues. He was appointed March 22, 2011. The following is his “final report” to his regulatory colleagues, utilities, consumer advocates and ratepayers. I’ll leave you with six parting observations: First, there is no better place to be than California when it comes to energy and climate policy. We all know that there is no real federal energy or climate policy, thanks in large part to the obstructionists in the Republican Tea Party and their allies in the fossil fuel industry. But in California, we have a clear commitment to greenhouse gas reductions and are taking bold and exciting steps in advancing renewables, energy storage and electric vehicles. (Parenthetically, I do believe that California has lost pace with the best in terms of energy efficiency and demand-response.) We are at an inflection point where the convergence of new technologies, changing economics and, I hope, an added urgency to address our deteriorating climate, will combine to create exciting new business and policy opportunities. We are fortunate to have utilities in California that are orders of magnitude more enlightened than their brethren in the coal-loving states, although I suspect that they would still dearly like to strangle rooftop solar if they could. Modern utilities are subject to a rapidly evolving business environment, and I wonder whether some top managers at our utilities have the ability or the will to understand and control the far flung and complex organizations they oversee. And I am very worried about our utilities’ commitment to their side of the regulatory compact. We at the commission need to watch our utilities’ management and their legal and compliance advisors very, very carefully: it is clear to me that the legalistic, confrontational approach to regulation is alive and well. Their strategy is often: “we will give the Commission only what they explicitly order us to give them.” This is cat-and-mouse, not partnership, so we have to be one smart and aggressive cat. We also have a Legislature that by many measures is very inexperienced, and yet considers itself expert in energy policy matters. Many of the more influential members and veteran staffers seem to display an open, almost knee-jerk hostility toward the commission—it’s as if some Legislators (or their staff) think that their reputations will be enhanced by slapping down this Commission’s policy initiatives, rather than working on writing and passing legislation that we can quickly and effectively implement. (Exhibit A is the killing of our energy efficiency financing pilots by the Legislative Analyst’s Office for “budgetary oversight” reasons.) The commission needs to do a better job of convincing the Legislature that we are not their rivals nor their enemies—but rather their partners—in the design and implementation of policies that are vital to the economy and the people of this state. Fortunately, or maybe unfortunately, with the passage of AB 327, the thorny issue of net energy metering and rate design has been given over to the commission. Recognize that this is a poisoned chalice: the commission will come under intense pressure to use this authority to protect the interest of the utilities over those of consumers and potential self-generators, all in the name of addressing exaggerated concerns about grid stability, cost and fairness. You—my fellow Commissioners—all must be bold and forthright in defending and strengthening our state’s commitment to clean and distributed energy generation. The commission itself has many challenges: it has reacted too slowly to the changing landscape and, although we have tried to learn from past failures, we still have a very long way to go. I believe that our desire to create a stronger safety culture is real but, sadly, we have not had the right caliber of management to implement this effectively. We are hopelessly out-gunned in terms of the resources necessary for our mission—in particular, our audit and finance functions have been woefully inadequate. And, we face a demographic time bomb, with our younger talent leaving for private industry and our most experienced staff on the verge of retirement. I hope that the zero-based budgeting exercise ordered by the Legislature will create transparency into just how chronically underfunded the commission is, but I fear that this exercise will be used against us to tighten the screws even further. Finally, we also have a serious governance problem at the heart of the commission: we commissioners rightly are held responsible for what happens in this building and yet we do not have any effective means to provide guidance and oversight to permanent management and staff. My colleagues and I have discussed arranging ourselves similarly to the way that a board of directors is organized in Corporate America. We could create subcommittees dedicated to overseeing important internal issues like audit, budget, personnel, external relations, and safety. These subcommittees would meet regularly with senior directors and staff to provide strategic direction and would report on progress and seek policy direction from all five Commissioners on a regular basis. This arrangement could help give commissioners more effective senior-level oversight without violating Bagley-Keene and I believe would create a stronger agency. I do hope that my fellow commissioners will act on my suggestion after I am gone. I really care about this state, this institution and all of you. It has been a very great honor to be associated with you, and I wish you all the best for the future.

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