New CEC Chair Says Unleash Market Forces for Efficiency

By Published On: July 14, 2006

Hyper energy efficiency and solar rooftops should be key requirements for the next generation of California home buyers, according to the new top bureaucrat for the state’s “primary energy policy and planning agency,” Jackie Pfannenstiel. Peak pricing, demand response, energy efficiency, and solar power are the California Energy Commission’s new chair’s “personal passions.” Pfannenstiel acknowledges, however, that the commission’s top concern is ensuring an adequate energy supply via new power plants and transmission lines, she told Circuit in an exclusive interview. She considers peak pricing the foundation for creating what she considers a new and essential energy consciousness. It is the sole tool for providing people with market signals and information that they lack today to reduce energy use, pollution, and the need for new power plants. And she knows what she is talking about. Pfannenstiel, an economist, began her career in the midst of the 1970s energy crisis. The Connecticut Public Utilities Commission hired her to run an economic policy experiment while she was pursuing a master’s degree in Hartford. Her job was to test how people changed their electricity consumption in response to time-of-use pricing. “Thirty years later, it’s still in the discussion stage,” Pfannenstiel lamented. It was a wholly novel idea in the world of public utility regulation at a time when economists were rare in the power industry and engineers and accountants dominated the field. As a young economist, she made inroads in energy industry regulation. Initially hired under Ella Grasso, the first woman to be elected governor of Connecticut, she also has helped open the door to women in a field that was largely male-dominated. Decades later, she continues to believe that having consumers pay the real cost of power will change the way the juice is used. Appointed last month to replace Joe Desmond, Pfannenstiel hopes to see the state implement critical peak pricing to fundamentally change consumer consciousness and energy-use behavior. “I’m hoping within the next couple of years we can move our thinking in a market direction,” she said. “We need to think of [energy] as something precious.” Her challenge, however, will be to help accomplish that as the head of an agency whose authority is largely in the planning arena. Only the California Public Utilities Commission holds the power to link consumer behavior with the true and ever-changing market price of energy, the goal being to increase energy efficiency and environmental protection and prevent overinvestment in a vast grid that many contend is raising the price of power again in California. The CPUC, however, has moved slowly on critical peak pricing. Concerns on the part of energy consumers that it would be too complicated and could increase the price of power for many manufacturers have fended off regulatory action (Circuit, May 27, 2006). Yet Pfannenstiel – who is businesslike but quiet in public demeanor – remains hopeful that by working closely with the CPUC, planners and regulators can achieve a meeting of the minds. She points out that CPUC member John Bohn participated earlier this month in a joint workshop on the future of the state’s renewables portfolio standard and hopes to work more closely with the CPUC during her tenure. Bohn, for instance, took part in a workshop last month that examined how utility credit policies may be stymieing development of new power plants, particularly renewable energy facilities. Pfannenstiel’s strategy to cooperate rather than bash the CPUC sharply contrasts with that of her predecessor Desmond, who was known for his energetic stump speeches up and down the state for the governor’s energy program. Desmond actively worked to get more authority for the CEC and take some away from the CPUC via reorganizing the state’s energy agencies and putting the CEC under the executive branch. Likewise, Pfannenstiel is often overshadowed by more outspoken commission members, such as John Geesman, who is quick to openly criticize the shortcomings of the CEC’s sister agency. Yet Pfannenstiel thinks her timing is right. Unlike in the 1970s, she senses that people in California, and across the U.S., are ready to make energy efficiency a core value. That change will be helped by new technologies – including advanced meters and new energy-efficient devices and energy-management systems, she noted. At the same time, she admits that while people increasingly understand the value of energy efficiency, most fail to act on the knowledge. The chair and her fellow commissioners have taken the CPUC to task for its complex and laborious renewables portfolio programs. But, she noted, “we don’t have an easy solution to that.” Another problem is what she sees as “a lack of commitment” to the program on the part of the state’s utilities. Pfannenstiel hopes that by examining the problems – in conjunction with the CPUC – through the CEC’s 2007 Integrated Energy Policy Report process, utilities and green energy producers will come forward with needed solutions. “By later this year, we’re hoping to put together a road map for the renewables portfolio standard.” One of the major hurdles, she notes, is the ability of green energy producers to access needed transmission facilities. The CEC had sought to gain control over licensing new transmission lines in California from the CPUC under former chair Desmond but was turned down by the Legislature (Circuit, June 24, 2005). Pfannenstiel believes that the best prospect for spurring new transmission facilities is transmission corridor legislation. SB 1059 would give the CEC authority to designate transmission corridors, though not to preempt local land-use authority (Circuit, June 30, 2006). The commission also has criticized the CPUC for failing to require utilities to sign enough long-term procurement contracts to ensure reliability of the state’s electricity supply and for limiting public access to a host of information regarding the power-procurement process. “We believe more information needs to get out there,” said Pfannenstiel. For instance, she said that the CPUC’s expansive confidentiality policy makes it hard for the CEC to know how much to offer in supplemental energy payments for renewables projects. “It’s hard to make these long-lasting decisions,” she said, without more information. The payments are intended to help make renewables projects financially feasible. A rise in peak power demand is driving the need for increased long-term power procurement and transmission capacity. Pfannenstiel said that her commission intends to dampen the demand by requiring new homes, particularly those built in hot inland areas of the state, to be highly energy efficient and equipped with solar rooftops. Ultimately, she said, the CEC hopes to outline guidance in its 2007 IEPR on land use that will allow the state Office of Planning and Research and local agencies to develop land-use plans that minimize future energy demand. “I’m incredibly fortunate to be where I am,” said Pfannenstiel of her opportunity to advance such policies. “I look at this as an enormous opportunity.”

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