State Overhaul Plan Would Shift Major Energy Powers to Sacramento

By Published On: August 7, 2004

Citing defective analyses on the part of state regulators in areas such as transmission siting, a long-awaited state review released this week would transfer oversight of new high-voltage lines?as well as liquefied natural gas (LNG), conservation, and energy efficiency?to the California Energy Commission. The CEC would be subsumed by a newly created Energy Division within the state Infrastructure Department, which would also become home to functions now performed by the Department of Water Resources and other state bodies. The anticipated California Performance Review (CPR), created by Governor Arnold Schwarzenegger in January and tasked with assessing state operations and costs, would erase 117 boards and commissions out of a total of 339 reviewed. The proposal would leave no place for the Energy Commission?s appointed members, but member John Geesman has other concerns. ?I?m less focused on that side of it than I am on some of the more substantive aspects,? such as assigning authority for siting new transmission, he said. ?I think there?s a lot of good embedded in the [report], and I hope that specific points?some of which have needed addressing for years?won?t be lost in the storm of debate over big-picture ideas like ?commissions? versus ?departments.?? The reorganization would leave intact the California Public Utilities Commission and all its ratesetting functions. All ?nonconstitutional? powers, however?including transmission siting?would be transferred to the state?s new Energy Division. CPUC executive director Steve Larson said the vagueness of the ?nonconstitutional? language leads him to believe that the authors of the report are still sorting out the issue. Giving some of the commission?s powers to an agency directly reporting to the governor makes for ?hard politics,? he added, explaining that these decisions could bring grief to the administration instead of being carried out in an agency removed from Sacramento. The issue of power line siting ?hasn?t been sorted out yet? either, noted Larson. ?There should be a clear definition,? he said. According to the assessment, the CPUC?s transmission siting proceedings haven?t kept up with demand in the market. The CPUC ?routinely underestimates benefits? of line additions or upgrades, states the report. The review?s authors added that attempts by Pacific Gas & Electric to undertake a Path 15 project failed on several occasions because of ?faulty analysis? by the commission. The report also advocates that the state revise the way in which it collects application fees from prospective power plant owners. By employing siting cost studies and charging fees that ?reflect actual costs? of working on the applications, California could save an average of $440,000 per project proposal in the future, report authors predict. The new energy body would establish statewide goals for using less electricity, as well as efficiency initiatives and financing of associated projects. A portion of public-goods-charge funding?a recommended total of $200 million over five years?would be put toward Green Bank energy loan programs. Regarding LNG, the assessment indicates that there could be some room for state oversight despite repeated assertions of jurisdiction by federal regulators (<i>Circuit</i>, July 2, 2004). ?Presumably, parts of the [LNG] facility would be outside the FERC jurisdiction,? according to the document. The California Power Authority received the answer it?s been waiting for since Governor Schwarzenegger announced his intent to wipe it from the state budget. The report would eliminate the agency and transfer its $5 billion bond authority to the Infrastructure Authority (under the new Infrastructure Department). ?It?s generally what we?ve heard? over the past several months, said agency executive director Laura Doll. She added that absent final details, the report at this point appears very reasonable in its goal of consolidating overlapping functions among state energy agencies. ?I doubt that many people who work on energy in state government could disagree with those principles,? she said. But the exercise of juggling government structures could eat away the resources intended to feed the very operations under review. ?One of the things that happens with all these boxes,? said The Utility Reform Network lobbyist Lenny Goldberg, ?is you can spend an awful lot of money reorganizing all of them and not doing the actual job.? Western Power Trading Forum executive director Gary Ackerman welcomed the ?critical look? the state is taking in the report and said that a potentially larger, more inclusive bureaucracy would not necessarily slow the pace of activity on energy issues. ?Certainly, small organizations have taken their time on issues such as transmission expansion,? he said. ?We?ve proved that even a two-person commission can slow things down quite a bit if they put their mind to it.? Other state bodies marked for rearrangement or outright dissolution include:<ul><li><b>Air Resources Board:</b> The agency would be scrapped in favor of a new Division of Air Quality within the Department of Environmental Protection.</li> <li><b>State Lands Commission:</b> Functions would be split among several new departments of government. The area of ?maritime facilities? would move to environmental protection, and mineral leasing activities regarding energy production would move to the Energy Division.</li> <li><b>Electricity Oversight Board:</b> The new state Infrastructure Department would take over this agency?s duties?including the state?s role in energy litigation?as the board ?has been made nearly obsolete by the energy crisis and rarely calls meetings,? according to the report.</li> <li><b>California Coastal Commission:</b> The agency, one that has recently carved out a role in power plant siting along the coast, would be ?transferred intact? from Resources to the new Department of Natural Resources.</li> <li><b>Department of Water Resources:</b> Energy contracting functions, as well as oversight and management of the State Water Project, would pass to the Infrastructure Department. DWR spokesperson Ted Thomas said the agency has no reaction to the proposal nor any plan to form one.</li> <li><b>Low Income Oversight Board:</b> The body, which advises state regulators on energy assistance initiatives for utility ratepayers of modest means, would be dissolved. Rather, the CPUC should be directly responsible, since ?it is inappropriate to utilize a separate body for issues related to serving low-income residents; this diminishes accountability,? according to the report.</li></ul> Though the findings are likely to be scrutinized and argued over for months, action on the recommendations will take even longer. The assessment has been turned over to the California Performance Review Commission, which will hold public hearings on the matter. Any planned agency reorganizations would require approval of the state?s Little Hoover Commission. Schwarzenegger plans to submit his recommendations to lawmakers separately from the 2005-06 budget he will propose in January, he said. Further, as the governor mentioned during his official receipt of the report August 3, any issue not resolved by lawmakers or via executive order might end up as a ballot initiative. Schwarzenegger said he would prefer to ?get as much done through legislators as possible,? despite recent public comments made by Senate president pro tem John Burton (D-San Francisco) flatly doubting that the entire report stands a chance of adoption. ?I am always impressed by Senator Burton?s enthusiasm,? the governor deadpanned. The proposed recommendations could save California up to $32 billion over five years, according to report figures. Of that total, energy agency?related savings, grouped with other functions related to state infrastructure, would be part of a $3.36 billion subtotal. The first public hearing on the report will take place in Riverside on August 13. To download the report, visit <i>www.report.cpr.ca.gov.</i> <b>Reporter’s Journal</b> CPR co-executive directors Chon Gutierrez and Billy Hamilton handed off the 2,500-page document to the governor at the State Surplus Property Warehouse, a few miles outside the Capitol. The steel racks spread throughout the building store everything from computer monitors to the flashing lights that mount on police cars?ostensibly, all the things that California won?t need as much of once CPR reforms are enacted. Schwarzenegger even said the state will host a ?yard sale? at the same building on August 27 to liquidate the excess… The speaker?s platform rigged for the event featured a slim, miniature podium, barely wide enough for a reduced version of the state seal?another target of the CPR pare-down? While a mixture of media, CPR and Department of General Services employees milled about, the public address system blared theme music: ?Taking Care of Business,? ?Bang the Drum all Day (?I Don?t Want to Work . . .), and ?We?re Not Going to Take It??this last number by the most assuredly ?girlie-men? of Twisted Sister… The governor dismissed likely objections to the CPR, saying that ?special interests will be screaming and squawking about the recommendations.? No mention, however, of how other special interests?who reports say gave him $17 million in cash during his first six months as governor?might react. According to the ?ArnoldWatch? Web site maintained by the Foundation for Taxpayer and Consumer Rights, PG&E Corp. has given the governor $200,000, with Sempra and Edison International each throwing in $50,000… The CPR report makes some 1,000 overtures about cutting state fat, including a plan that would see Medi-Cal recipients issued ?smart cards? including fingerprint data, health information and other details. There are savings to be had from those who would perpetrate fraud by seeking medical coverage not rightfully theirs. But a review of the report thus far indicates less reformist fervor in more deserving areas, such as closing corporate tax loopholes?though a ?tax amnesty? program for delinquent payers is recommended?or addressing the thousands of contract workers the state now pays… The ?statewide? hearings to be held on the report are slated for Riverside, San Diego, San Jose, and Long Beach?only one session in Northern California and not very far north at that. The first meeting will take place on Friday the 13th.

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