New Bills Target CPA; Agency Spots Chance to Highlight Role

Despite the recent introduction of two bills that would abolish the California Power Authority, the agency sees the legislative maneuvers as an opportunity to prove its worth. The bills, SB 1716 by Senator Denise Moreno Ducheny (D-San Diego) and AB 2967 by Assemblymember Doug La Malfa (R-Richvale), support Governor Arnold Schwarzenegger?s plan to ax the Power Authority. The governor would erase the agency from the upcoming 2004-05 budget, which would go into effect July 1. The identical bills would shift all Power Authority (CPA) assets and liabilities to the California Energy Commission. Neither measure, however, makes provision for transferring the agency?s actual functions?including bonding authority of up to $5 billion and a demand reserve program that sliced 250 MW off summertime peak load in 2003. Last month, the Legislative Analyst?s Office (LAO) recommended that the state consider hanging on to these services (see Circuit , Feb. 20, 2004). Regarding the agency?s undertakings, the most important is the access it provides to the municipal bond market, according to CPA executive director Laura Doll. ?The question is, does the state want to maintain access to this market so we can say we?ve done everything possible to get more energy projects on line,? she said. Muni bonds tend to have lower interest rates than private capital issuances. In addition, the Power Authority is covering its annual operating costs, projected at $1.8 million for 2004-05, according to a letter that Doll sent to Department of Finance director Donna Arduin earlier this year. Of the $8.9 million general fund loan that helped spawn the CPA?which in turn came out of the CEC?s public-goods renewables funding pot?the agency paid back $1 million this year. But eliminating the agency is about more than money, says David Reade, chief of staff for Assemblymember La Malfa. ?We have several energy agencies with differing, conflicting responsibilities,? he said. ?This is an effort on the part of the governor to streamline those functions.? Whether certain of the Power Authority?s charges will be parceled to other state offices is still under consideration, Reade added. La Malfa?s staff is awaiting further details from Governor Schwarzenegger, likely to be delivered next week, on how the agency is to be dismantled. As mentioned in the LAO?s budget analysis last month, Doll noted that the CPA?s bonding authority could be handed over to the California Infrastructure Bank, which is already empowered to finance new transmission lines. Reade declined to comment on the subject pending further word from the governor?s office. Doll also pointed out the risk of endowing the California Public Utilities Commission or the CEC with the ability to issue bonds. ?It?s not good for a regulating authority to also have financing authority,? she said. ?That?s a little too close.? Some Capitol sources this week said that though the CPA has not had success engendering large power plants, its efforts in demand reduction and solar power, as well as its work in determining adequate state energy reserves, deserve credit. Some market stakeholders believe that other forces are contributing to the dwindling number of private generator projects. The possibility that investor-owned utilities may take a greater role in building power plants could have a chilling effect. Steven Kelly, policy director for the Independent Energy Producers, cited Southern California Edison?s Mountainview project as evidence. ?It?s like red meat being thrown into a pool of piranhas,? he said. ?Now that they?ve tasted it, why would they even want to entertain offers from competitive generators if they can convince regulators to allow them to build with 30-year contracts?? Also complicating investment in new plants is the lack of available long-term contracts, affected in part by the drawn-out procurement proceeding at the CPUC. Kelly added that IEP is conducting talks with the Power Authority to figure out how the agency might be able to assist merchant generators, such as having the CPA buy down the cost of new transmission facilities. He added that helping expand the grid could further the interconnection of new green power resources and thus aid the state in fulfilling its renewables portfolio standard. Doll said that it would take only two or three sizable power projects to spark renewed interest in the CPA?s financing abilities. For example, the agency is interested in providing partial financing?perhaps up to $300 million?for San Diego Gas & Electric?s Otay Mesa proposal, which is pending at the CPUC. Treasurer Phil Angelides?s pitch to put the agency in charge of building new transmission lines appears no longer to be in play (see Circuit , Nov. 7, 2003). Doll said the proposal has not been in circulation much this year, and no related bills have been introduced. Calls to the treasurer?s office regarding the CPA?s potential role in transmission were not returned before press time.

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New Bills Target CPA; Agency Spots Chance to Highlight Role

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