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CA Governor Proposes Modified Energy Department Consolidation

Backing off earlier proposals to include the California Public Utilities Commission, Gov. Arnold Schwarzenegger Thursday submitted a modified proposal for creating a state energy department with a cabinet-level energy secretary. The department will be centered on a revised state energy commission consolidated with several other energy units -- the Electricity Oversight Board and the basically inactive state Consumer Conservation Financing and Power Authority.

Schwarzenegger stressed that a cabinet-level energy department "entrusted with managing energy issues in California and throughout the region" is the best way to fulfill his primary goal "to ensure that California has adequate, reliable and affordable energy supplies." The plan he submitted to the state review board for reorganizations does that, the governor said.

When previewed earlier in the week, the announcement immediately drew criticism from some consumer groups, whose leaders characterized the proposal as a "power grab" for the governor, according to a news report in last Tuesday's Los Angeles Times. The head of the independent power producers in the state, Jan Smutny-Jones, however, praised the idea, saying it would help the state develop what he called "a coherent, focused energy policy," according to the LA Times report.

Schwarzenegger's advisers emphasized that the proposed reorganization will improve "continuity and accountability" among several state energy organizations by consolidating them in a single department. The intend is to "make government more accountable to the people," a constant theme of the governor who took office 19 months ago as a recall election winner over incumbent Gray Davis. The new organization should "make energy policy more cohesive, reduce duplication and improve communications with the legislature, stakeholders and the people," said a governor's spokesperson.

"We are a modern society and a modern society must have abundant and affordable power," Gov. Schwarzenegger said. "But we must also work together to promote renewable energy and advanced technologies that will help improve California's economy and environment."

The formal reorganization proposal was submitted to the state's Little Hoover Commission, an independent board established to review reorganization plans and make a recommendations to the state legislature. The Little Hoover unit has 60 days after receiving the commission's recommendation to report the reorganization to the legislature, and the governor can submit it directly to the lawmakers 30 days after giving it to the review commission, according to the governor's press office. If neither house of the legislature rejects the plan within 60 days of its submission, it automatically becomes effective.

Gov. Schwarzenegger's chief energy adviser, Joe Desmond, who was named by the governor last week to chair the state energy commission (CEC), supported the need for a statewide energy agency, and he would be in line to head it conceivably. Under the proposal, the current independent CEC would remain semi-independent by keeping four of the five governor-appointed commissioners independent of the newly created energy secretary.

The fifth commission appointment -- presumably Desmond -- would be named by the governor as Secretary, heading the agency and the five-member commission that would issue power plant building certificates as it does today, along with electricity transmission and natural gas infrastructure siting cases. The rest of the agency would include the Electricity Oversight Board, the state power authority and the part of the Department of Water Resources (DWR) that administers power and natural gas contracts for the state.

"Transmission and natural gas pipeline/storage licensing responsibilities within the CPUC will be consolidated with electricity, transmission and natural gas assessment programs from the energy commission," a governor's spokesperson said. "The consolidation will increase analytical expertise and capability."

Schwarzenegger's backers emphasized that in the last year the governor's administration has taken what they call "several steps to unify California's energy policy and support competitive wholesale markets that are properly monitored by regulators." Among those steps have been accelerating the electricity resource adequacy requirements, beefing up procurement rules, and establishing a "loading order" for new power supplies that puts energy efficiency and renewable energy as the top two choices, respectively.

Schwarzenegger's ongoing California Performance Review of state government overall had recommended last year also including the energy industry regulation of the CPUC, but in the proposal that will be reviewed by the Hoover panel the CPUC has been left alone, although its role in electric transmission line siting would be transferred to the new energy agency. The CPUC is a body established under the state Constitution, so it holds greater fiscal and political autonomy than other state agencies.

The head of the consumer group TURN (The Utility Reform Network) based in San Francisco, Robert Finkelstein, said he did not think the governor needed to reorganize in order for him to articulate what he called a "clear energy policy" for California, according to the Times. He said that Schwarzenegger needs to go beyond what he characterized as a statement of broad support for conservation and building new power plants into a more detailed policy on energy.

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