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The San Diego Union-Tribune
Aug 11, 2004 - 01:00 AM

by Craig D. Rose, STAFF WRITER

Governor's office airs criticism of energy bill;

Secretary says consumers wouldn't be able to choose
The gloves came off yesterday in the battle over California's electricity future when Gov. Arnold Schwarzenegger's administration signaled opposition to a bill that would re-regulate the industry.

Secretary of Resources Mike Chrisman criticized the bill for failing to allow consumer choice in picking power providers -- an option restricted largely to the biggest power users -- and for not tapping market forces as a cost-tempering mechanism.

But the Schwarzenegger administration opposition came after the bill -- AB 2006, introduced by Assembly Speaker Fabian Nunez, D-Los Angeles -- gained support from consumer advocates, bolstering the backing it had from Southern California Edison, a prime mover behind the measure.

The bill moves to a vote today in the state Senate Appropriations Committee and could reach the Senate floor by next week. It would then face a similar vote in the Assembly before it could proceed to the governor for veto or approval.

AB 2006 won increased support from consumer advocates when legislators late last week stripped provisions from the measure that would have allowed large power users to cut cheaper private power deals.

Consumer advocates opposed these measures -- known in industry lingo as core/non-core market divisions -- as a form of electric deregulation, saying they invariably allow big power users to escape power system costs that are borne by smaller consumers, who don't have access to cheaper power deals.

They also fear that deregulation would leave the state vulnerable to regulation by the Federal Energy Regulatory Commission, which has been criticized for its oversight during the electricity crisis of 2000 and 2001.

The Schwarzenegger administration had been noncommittal on the measure as it moved through the Legislature. But deletion of the core/non-core and other changes prompted a letter from Chrisman to Nunez yesterday declaring differences with the measure.

"The administration supports the concept of `consumer choice,' " Chrisman wrote to Nunez, "which allows consumers to choose their energy suppliers."

Chrisman also criticized the measure for failing to ensure the role of a "transparent competitive procurement process" in securing new power supplies. He also said many of the bill's provisions were duplicative or unnecessary.

Calpine Corp., which owns 39 power plants in California and wants to build more, says AB 2006 fails to require utilities to seek competitive bids for new plants. The competitive bidding, Calpine argues, could save money for consumers.

"This bill would reduce the ability to keep utility cost overruns in check," said Kent Robertson, a Calpine spokesman. "It would result in utilities being the sole sources for all the new generation in California. There is no incentive for them to competitively shop."

While the bill includes no requirement for competitive bids on plant building, it says utilities may engage in bidding for projects after regulatory approval. It would also subject all plant proposals to reasonableness reviews by the California Public Utilities Commission.

Robert Foster, president of Southern California Edison, said AB 2006 would result in a mix of new utility-owned and privately owned power plants under contract to the utilities.

The mixture, Foster said, would provide a stopgap in the event private developers failed to build enough electric generating plants and generate sufficient competitive market pressure to temper utility power project costs.

But Foster said AB 2006 is necessary to create the legal footing needed by utilities to sign long-term power contracts.

"The job right now is to make sure we have adequate electric generating resources," Foster said. "And most of that will be done through contracts with unregulated generators who need 10- to 15-year contracts (to finance their projects)."

Douglas Heller, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica, said the revised version of AB2006 is a step in the right direction.

"We're not ready to say this is the energy system we have been waiting for, but it is headed in the direction we ought to be headed in," Heller said.

But he criticized the governor's proposal to allow larger power users to sign private power deals, which he characterized as deregulation.

"The governor's plan is a prescription for instability because it relies on unregulated energy suppliers and the same federal regulators who failed to protect us during the electricity crisis," Heller said.

Mindy Spatt, a spokeswoman for The Utility Reform Network, a supporter of the bill, added: "What the governor proposes is faith-based deregulation. Everything that has happened has shown it won't work, and it won't lower rates."
Contact Craig Rose: (619) 293-1814 or

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