MidAmerican Energy CEO Sees Liquidity As Key Issue In CA
It's liquidity for energy markets, not ownership of transmission assets, that California should be focusing its efforts on as the state grapples with its ongoing energy crisis, according to David Sokol, chairman and chief executive officer of MidAmerican Energy Holdings Co.
Sokol, appearing last Wednesday before a group of reporters at a Washington, DC, presentation sponsored by The Energy Daily and the United States Energy Association, also offered up several reasons as to why the Public Utility Holding Company Act of 1935 (PUHCA) should be repealed, including that such a move could clear a path for a much-needed capital infusion for the electric utility industry.
During the presentation, Sokol was asked to comment on California's efforts to take over the state's transmission system. "Who owns it isn't the problem," Sokol responded. "I think the state is complicating the issue," he went on to say.
In Sokol's view, California should be focusing its energies on how best to re-liquify its energy markets. He said the state should have the California Public Utilities Commission (CPUC) set rates at a level that will put liquidity back into the system. Sokol floated the idea of the state offering a 2% return on equity for utilities in the state over the short term.
As far as rate increases already approved by the CPUC, Sokol argued that the agency has "dictated" where the money raised from those rate increases ultimately winds up. The CPUC last month raised electric rates on a permanent basis by up to 40% (see NGI, April 2). But Sokol argued that the CPUC's emergency rate increase was done to serve the state's needs, and not to re-liquify California's energy markets.
Staying on the subject of California, Sokol was also asked if he had any comments related to allegations that energy suppliers have been gaming the system. Sokol said that if the allegations are true and "if there's substance to them," the relevant parties should be punished.
Meanwhile, Sokol asserted that PUHCA's repeal could help alleviate the lack of capital currently plaguing the electric utility industry. The electric utility sector is "screaming for investment," Sokol said. But a "severe lack of capital" will continue to exist for the electric utility industry as long as PUHCA is still around, he added.
Sokol said he was "quite optimistic" that action will be taken by Congress this year on PUHCA repeal. In particular, the MidAmerican Energy executive cited recent statements by Sen. Phil Gramm (R-TX) in which Gramm indicated that he wants to see forward movement on this matter during 2001. In the House of Representatives, there is "very significant" support for PUHCA repeal, Sokol added. The White House "very much believes this is a top priority" as well, Sokol noted.
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