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CPUC Head Sees Positive Regulatory, Economic Landscape

Unlike before, during and after the wholesale energy market implosion in the West when California energy stakeholders were out of sync with state policymakers, the state's chief regulator this year sees a consensus forming through increased collaboration among all of the key players at both the federal and state levels.

The major exception is the fight with FERC over liquefied natural gas (LNG) jurisdiction, said Michael Peevey, president of the California Public Utilities Commission, during a wide-ranging interview last week with NGI.

Peevey laughed loudly and a lot during a half-hour interview in which he claimed good relationships at the five-member CPUC still operating one member short (the fifth one is awaiting conflict-of-interest clearances with the governor's office), at the Federal Energy Regulatory Commission, at the state legislature, and ultimately with Gov. Arnold Schwarzenegger, who did not appoint him, nor is he in the same political party. ("I serve at his will," said Peevey, who could be replaced anytime by the governor, but is not expecting to be.)

Peevey characterized his relationship with the governor as "very positive," using a strong, unequivocal tone as the former utility and energy sector senior executive often does. "He (Schwarzenegger) has taken a great interest in the areas we work in. He has taken a strong interest in environmental protection, which I find very gratifying. He endorsed the state 'Energy Action Plan' very enthusiastically, and we're now coming up with a second-phase action plan.

"The relationship has been very positive since Day One. Shortly after he became governor, he invited me up there [to Sacramento], and we sat down and chatted and it's been very positive."

So would Peevey categorize himself as "being on the same page" as Schwarzenegger in terms of future energy policy for the state?

"I think that is basically true. He has a 10-point electricity plan (resource adequacy, competitive procurement, transmission, rate relief, natural gas, renewable energy, dynamic pricing, advanced metering, core/noncore markets, and R&D), and there is nothing in there with which I would disagree, and in fact some of it reflects our give-and-take from the past."

While the CPUC, with its newest member, Dian Greuneich, being closely aligned with him, and the state lawmakers being more positive than in the past, Peevey said he is hopeful the regulatory commission will successfully complete what could be a challenging agenda for the year, starting with implementing the new directions the regulators approved -- mostly on 3-2 split votes -- last year.

"The implementation has to be at the top of the list, and it isn't just this year," said Peevey. "But long-term coming up with a program on greenhouse gas emissions is very important. Adoption of a second version of the energy action plan is also important."

And most immediately, an assessment of early spring data around the end of this month will allow California to make more definitive plans for averting any major power outages -- particularly in the southern half of the state -- late in the summer. Peevey sees a return to stepped up demand-side management, efficiency and energy-saving programs, including more voluntary curtailments during peak demand, as part of the solution.

"Coming up with a plan for this summer is important, but I think if we do all the other things right, we'll do all right in Southern California this summer," Peevey said. "It is not a guarantee, but I feel positive."

While testifying before the state Senate Energy, Utilities and Telecommunications Committee earlier this month, Peevey was asked about the CPUC's ultimate jurisdiction, or lack thereof, over energy service companies providing power in direct access and core-noncore markets, and also about the seemingly restored financial health of the state's major investor-owned utilities (IOU).

While the lawmakers seemed adamant about passing a new state law on the service provider jurisdictional question, Peevey was noncommittal, although he said during the interview that some form of legislation on the core-noncore markets "at the end of the day would be wise to have." In response to lawmakers being concerned about still high retail electric rates while the IOUs are bringing in record levels of cash, Peevey added that he advocated a balanced approach that recognized the benefit to the state's economy overall from healthy major energy utilities.

"I hope it continues," he said. "The utilities used to do well [in the '70s, '80s and most of the '90s]; they all did well. We went through a helluva period, but I think we're out of it now."

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