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By Jennifer Coleman, Associated Press
Thursday, April 29, 2004 - SACRAMENTO -- Gov. Arnold Schwarzenegger asked state energy regulators Wednesday to step up the pace in helping utilities enter long-term electricity contracts and buy more renewable energy, saying he feared shortages could occur as soon as 2006. In a letter to Public Utilities Commission President Michael Peevey, Schwarzenegger said he'd like to see utilities getting 20 percent of their power from green sources, such as solar and wind, by 2010 instead of 2017.
He also urged the PUC to move up by two years a requirement that utilities keep a 15 percent electricity reserve by 2008 and to finish writing regulations that let utilities sign long-term contracts for electricity -- suggesting that these two steps could encourage companies to build much-needed power plants.
The Legislature passed a bill in 2002 directing the PUC to establish the renewable standards, reserve levels and utility contract procedures, but the commission hasn't finished writing the regulations that implement all of those provisions.
Sen. Debra Bowen, chairwoman of the Senate Energy Committee, said Schwarzenegger's support for conservation and real-time metering were encouraging.
And while the brief glimpse at Schwarzenegger's energy vision was "a start," she said, it lacked many details. Of particular interest, Bowen said, was Schwarzenegger's commitment to "direct access," a cornerstone of the 1996 deregulation law that let customers leave their utilities and shop around for lower-priced electricity.
But during the energy crisis of 2000 and 2001, direct-access providers passed on rising wholesale costs to their customers, who then fled back to utilities.
The Legislature halted direct access later in 2001, when wholesale prices dropped again and customers tried to leave the utilities that had been buying high-priced power but selling it at capped prices, running up massive debts.
Lawmakers have been hesitant to reinstate direct access until rules can be drafted that protect utilities and their ratepayers, said Bowen, D-Marina del Rey. But Schwarzenegger said companies that opt out of utility service "should bear full responsibility for their management of electricity price and availability risks."
That may not be what those commercial and industrial customers want, Bowen said, because that means if the electricity price on the open market goes up, or if the electricity provider goes under, the customer can't jump back to the utility for regulated and reliable service.
"If you have customers go out there and make deals, and they're crummy deals, that they'll be here and they're going to be at the PUC asking to be relieved of the consequences," Bowen said.
Bowen, along with several consumer advocates, are concerned that rules that are too lax will leave utilities with "stranded costs" from contracts for too much power that will leave residential and small business customers paying higher prices.
"The only way I know how to do that ... is to have a system where the big customers are just out, they don't get to come back to the utility," she said.
Assembly Speaker Fabian Nunez, who has his own bill on electricity regulation, said the governor's initial proposal "trusts the so-called invisible hand' of the marketplace that in the past has picked the pockets of California consumers and businesses alike. I think he has been ill-advised."
Nunez's plan for direct access would let large customers leave utility service, but once they leave they can't return for five years. That would give utilities a more stable customer base, he said. It also sets out rules for which companies could leave.
Reprinted with permission
