Did You Know

California Wrestles with Its Electricity Future

In the wake of its 2000-2001 energy crisis, California is still struggling to provide regulatory stability to its electricity markets. All parties recognize the need for new infrastructure investment to help ease congestion and the shortfall in supply that contribute to some of the highest energy costs in the country. Although California Assembly Speaker Fabian Nunez has offered a bill that he states will address these problems, it is strongly opposed by electric consumer groups such as the Chamber of Commerce, the California Manufacturers & Technology Association and the California Large Energy Consumers Association, as well as the Gov. Schwarzenegger and two of the state’s three largest investor-owned utilities (IOUs).

The proposed legislation, Assembly Bill 2006, will “increase regulatory uncertainty and market instability,” according to California Resources Secretary Mike Chrisman in a letter to Speaker Nunez on Aug. 10, 2004. Secretary Chrisman, reiterating a position originally stated in Gov. Schwarzenegger’s April 28, 2004, letter to California Public Utilities Commission (CPUC) President Michael Peevey, noted that “most of the provisions in AB 2006 are unnecessary or duplicative” to existing law and regulation.

Despite support from Southern California Edison, the state’s other large IOU, labor organizations and groups such as The Utility Reform Network and Utility Consumers’ Action Network, and despite being amended four times, the bill has failed to pass out of the Senate. Secretary Chrisman restated the governor’s position that no further legislation is necessary. Specifically, Chrisman’s Aug. 10 letter noted that:

•Resource adequacy was addressed by the CPUC decision on supply procurement, which stated that the CPUC would enforce resource adequacy requirements for load-serving entities.

•Existing law provides IOUs with the ability to develop diversified resource portfolios and to enter into long-term contracts without after-the-fact reasonableness reviews by the CPUC.

•While AB 2006 would restate an IOU’s obligation to serve, this obligation already exists in California law and, thus, is unnecessary.

Gov. Schwarzenegger has said he would support the bill if it were amended to include a requirement for a transparent, competitive procurement process, as well as inclusion of a “customer choice” concept. However, on Aug. 17, Speaker Nunez sent a letter to Gov. Schwarzenegger rejecting the administration’s amendments and criticizing the administration’s policy, saying that it would create more, not less, market uncertainty.

The outcome of this legislative contretemps is critical for every citizen, business and electric utility, generator and supplier in California. Stay tuned.

For more information, contact EPSA’s Jack Hawks at jhawks@epsa.org.