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CPUC Aims to Block Legislation Hindering Gas Restructuring

CPUC Aims to Block Legislation Hindering Gas Restructuring

California energy regulators, all appointees of outgoing Gov. Pete Wilson, last week requested a meeting after Labor Day with the governor in an attempt to head off new state legislation that could further hinder ongoing attempts to streamline regulation and inject more competition into the natural gas industry. The president of the California Public Utilities Commission calls one of the bills "truly anti competitive."

Two eleventh-hour pieces of legislation passed by the state legislature in its last day of this year's session (Aug. 31) have caused concern among the five-member, governor-appointed CPUC because one bill further hurts its attempt to gain "competitive parity" between the state's ongoing efforts to open up the electricity and natural gas industries and a second new piece of legislation threatens to create what one CPUC senior adviser called "regulatory gridlock."

CPUC President Richard Bilas and P. Gregory Conlon, a former CPUC president, want to personally brief Gov. Wilson before he considers signing the two pieces of legislation. The governor has until the end of this month to decide whether to veto, sign or let the bills become law without his signature. Earlier in the waning days of the state legislative session, a third bill was passed and quickly signed by the governor (1602), preventing the CPUC from proceeding with any new retail natural gas unbundling before 2000. It was requested by utility labor unions with either active support or "neutrality" from the state's major natural gas utilities. The law ostensibly is to allow more time to work out safety and consumer protection concerns related to opening up parts of natural gas service to competition, although the pipeline network would remain a monopoly function of the utilities.

Political and regulatory observers view this as another example of the state political leaders reining in energy regulators before they go too far on natural gas restructuring, similar to what happened two years ago when they created AB 1890, the state's electricity reform law.

Bilas said Friday the regulators are working closely with legislative leaders to clarify the extent of the new law's limits on the commission. For example, he and his colleagues think the CPUC can proceed with removing all limits from the gas aggregation program for residential and small commercial customers, as well as instituting additional consumer protection measures for natural gas consumers, Bilas said.

"We would hope that we will be able to talk to the governor and point out where we think there are weaknesses in both bills and point out the consequences of those significant weaknesses," Bilas said.

One bill that troubles Bilas attempts to add to the natural gas restructuring slowdown (SB 1757) by prohibiting Southern California Gas Co. from offering metering services to Southern California Edison Co. electric customers until Edison is allowed to offer the same services to gas utility customers. Bilas sees this as "anti-competitive" because it restrains competition in the electric business which has already unbundled metering and billing services.

The bill further mandates that the CPUC and the statewide oversight board for the electric industry's state chartered independent system operator (ISO) and power exchange (PX) establish a "memorandum of understanding" specifying which body represents the state at the Federal Energy Regulatory Commission regarding specific electricity issues.

Bilas said this law is "totally unnecessary" since his agency, the oversight board and the state energy commission are already working out a formal understanding and have an interim process currently in place.

"In fact, we are meeting Thursday Sept. 10 to establish a set of principles among the CPUC, oversight board and energy commission," he said. The other bill before the governor concerns opening up the CPUC to full judicial review. Historically, the state constitutionally-based commission's decisions are only appealable to the California Supreme Court, so effectively very few utility decisions are subject to court review.

Last year, Gov. Wilson vetoed a similar bill that would have opened the CPUC to state appellate court reviews, noting that when there was more energy industry competition such legislation might make sense. At the same time, a narrower bill to open compliance and enforcement decisions to judicial review was signed by the governor.

The current bill (SB 779) is flawed, according to Bilas, because it does not specify one of the state's six appellate court circuits for the review, opening up the possibility of "forum shopping" among utilities and consumer groups over the same decision, which Bilas thinks could bring "chaos" to the regulatory process. Bilas is not against opening up CPUC decisions to wider court review if a specific circuit is named. Commissioner Conlon, however, is against it in total because he thinks its will further delay and complicate what is already a slow, complicated process.

"Perhaps with more competition it is appropriate to have full judicial review," Bilas said. "I'm certainly not opposed to people getting more due process. But there are some serious questions also among the legal community as to whether the courts have the expertise to handle these cases on appeal," Bilas said. "I think they will find some of these cases are extremely complex. "But if you could designate a particular circuit-say the one in San Francisco, the way the FERC designates the DC Circuit in Washington-that court over time could generate the expertise. But that takes resources to do that, and right now, I don't think the courts have the resources."

Richard Nemec, Los Angeles

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