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

Two eleventh-hour pieces of legislation passed by the statelegislature in its last day of this year’s session (Aug. 31) havecaused concern among the five-member, governor-appointed CPUCbecause one bill further hurts its attempt to gain “competitiveparity” between the state’s ongoing efforts to open up theelectricity and natural gas industries and a second new piece oflegislation threatens to create what one CPUC senior adviser called”regulatory gridlock.”

CPUC President Richard Bilas and P. Gregory Conlon, a formerCPUC president, want to personally brief Gov. Wilson before heconsiders signing the two pieces of legislation. The governor hasuntil the end of this month to decide whether to veto, sign or letthe bills become law without his signature. Earlier in the waningdays of the state legislative session, a third bill was passed andquickly signed by the governor (1602), preventing the CPUC fromproceeding with any new retail natural gas unbundling before 2000.It was requested by utility labor unions with either active supportor “neutrality” from the state’s major natural gas utilities. Thelaw ostensibly is to allow more time to work out safety andconsumer protection concerns related to opening up parts of naturalgas service to competition, although the pipeline network wouldremain a monopoly function of the utilities.

Political and regulatory observers view this as another exampleof the state political leaders reining in energy regulators beforethey go too far on natural gas restructuring, similar to whathappened two years ago when they created AB 1890, the state’selectricity reform law.

Bilas said Friday the regulators are working closely withlegislative leaders to clarify the extent of the new law’s limitson the commission. For example, he and his colleagues think theCPUC can proceed with removing all limits from the gas aggregationprogram for residential and small commercial customers, as well asinstituting additional consumer protection measures for natural gasconsumers, Bilas said.

“We would hope that we will be able to talk to the governor andpoint out where we think there are weaknesses in both bills andpoint out the consequences of those significant weaknesses,” Bilassaid.

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

The bill further mandates that the CPUC and the statewideoversight board for the electric industry’s state charteredindependent system operator (ISO) and power exchange (PX) establisha “memorandum of understanding” specifying which body representsthe state at the Federal Energy Regulatory Commission regardingspecific electricity issues.

Bilas said this law is “totally unnecessary” since his agency,the oversight board and the state energy commission are alreadyworking out a formal understanding and have an interim processcurrently in place.

“In fact, we are meeting Thursday Sept. 10 to establish a set ofprinciples among the CPUC, oversight board and energy commission,”he said. The other bill before the governor concerns opening upthe CPUC to full judicial review. Historically, the stateconstitutionally-based commission’s decisions are only appealableto the California Supreme Court, so effectively very few utilitydecisions are subject to court review.

Last year, Gov. Wilson vetoed a similar bill that would haveopened the CPUC to state appellate court reviews, noting that whenthere was more energy industry competition such legislation mightmake sense. At the same time, a narrower bill to open complianceand enforcement decisions to judicial review was signed by thegovernor.

The current bill (SB 779) is flawed, according to Bilas, becauseit does not specify one of the state’s six appellate court circuitsfor the review, opening up the possibility of “forum shopping”among utilities and consumer groups over the same decision, whichBilas thinks could bring “chaos” to the regulatory process. Bilasis not against opening up CPUC decisions to wider court review if aspecific circuit is named. Commissioner Conlon, however, is againstit in total because he thinks its will further delay and complicatewhat is already a slow, complicated process.

“Perhaps with more competition it is appropriate to have fulljudicial review,” Bilas said. “I’m certainly not opposed to peoplegetting more due process. But there are some serious questions alsoamong the legal community as to whether the courts have theexpertise to handle these cases on appeal,” Bilas said. “I thinkthey will find some of these cases are extremely complex. “But ifyou could designate a particular circuit-say the one in SanFrancisco, the way the FERC designates the DC Circuit inWashington-that court over time could generate the expertise. Butthat takes resources to do that, and right now, I don’t think thecourts have the resources.”

Richard Nemec, Los Angeles

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