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California Budget Woes Spark Energy Consolidation Talk

In the midst of a $42 billion budget deficit, California Gov. Arnold Schwarzenegger has revived a proposal to consolidate the state's major energy agencies into one energy department as an efficiency measure. A similar proposal was kicked around four years ago only to be shot down by lawmakers.

Schwarzenegger has so far skipped giving a traditional state-of-the-state address but last Thursday gave a modified one, saying because of the budget crisis California is in a "state of emergency," and he said after the legislature finally delivers a new budget that was due last July 1, he will be sending some "reform" proposals to lawmakers.

In a presentation Jan. 16, Schwarzenegger said reform proposals would deal with government efficiency. In the meantime he warned that California, the world's eighth largest economy, faces insolvency in a few weeks unless the budget impasse is broken.

As part of an announcement on consolidating the state's information technology needs under one department, Schwarzenegger also proposed "strengthening and streamlining energy functions." It was part of a larger proposal to eliminate seven state units and reorganize or consolidate nine others. Schwarzenegger proposes to create a statewide energy department headed by a cabinet-level secretary (as he did in 2005) to help the state "focus on energy stability and ensure coordination across agencies that deal with the state's energy needs."

He proposed combining the California Energy Commission (CEC), Electricity Oversight Board, California Energy Resources Scheduling Division (holder of the long-term power contracts by the Department of Water Resources) and the California Independent System Operator (CAISO), along with the energy-related parts of the California Public Utilities Commission (CPUC), General Services Department, Office of Planning and Research and Office of the State Architect.

CEC authority to site large (50 MW or greater) electric generation projects and the CPUC authority to site large renewable generation and transmission infrastructure would be transferred to the new energy department.

The CPUC would be the least impacted as only its renewable generation and power transmission siting would move; the agency's overall regulation of the state' major private-sector energy utilities would stay independent. The new energy secretary would be the chairman of the CEC, which would keep its five-member, governor-appointed commission, and CAISO would keep its separate governing board.

The CPUC president and CAISO CEO would become ex officio members of the CEC under the energy department creation. A spokesperson for the governor said the overall change is not driven so much by cost savings as it is to create a "streamlined, more efficient" energy process in the state.

"The energy-related responsibilities of nine entities would be consolidated into one, consolidating fragmented energy functions, reducing overlap, cutting waste and holding government more accountable," Schwarzenegger said. "Greater coordination and focus of the state's energy actions should produce ratepayer benefits over time."

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