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Legislative Proposal Would Block CPUC Opening PX Competition

Legislative Proposal Would Block CPUC Opening PX Competition

Riding the coattails of state budget legislation facing a June 30 deadline, California lawmakers are making an end-run around the state's constitutionally quasi-independent energy regulatory panel with an amendment to block regulators' latest move to expand wholesale electricity competition in the state. It is a similar pattern to what the elected officials have done the past two years regarding natural gas industry issues.

As part of a budget bill approved late Thursday night, California's state Senate began the process of turning back a June 8 decision by state energy regulators to allow the major investor-owned utilities to purchase electricity through exchanges other than the state-chartered nonprofit California Power Exchange (Cal-PX). Legislative action on the budget now turns to the state Assembly, which is expected to debate various issues before passage, but it is not likely that the obscure electricity purchasing amendment will gain anyone's attention.

A Republican state senator in a Democrat-dominated state legislature pushed through the amendment in the budget bill after it passed out of committee unanimously earlier this week with support from the two most recent appointees to the California Public Utilities Commission (both Democratic appointees) and the Cal-PX. The state Senate's Budget Committee chairman, Steve Peace (D-San Diego), is considered the prime author of California's electric restructuring law and a frequent critique of CPUC actions.

"What you have here is a bipartisan effort to make sure the legislative intent of AB 1890 (California's 1996 electric industry restructuring law) is secured-if not through the full transition period, at least through June 2001," said a Pasadena, CA-based Cal-PX spokesperson, noting that the legislative budget language would prohibit the CPUC from fostering utility buying outside of the Cal-PX before June next year at the earliest. In the meantime, the Cal-PX is continuing to prepare a request to the CPUC for rehearing of its June 8, 3-2 decision.

The Cal-PX, however, thinks the proposed legislative remedy is "a more logical approach" to ending the transition than the CPUC action, reiterating that the whole process for developing California's '96 electricity law was "a legislative one, lasting over a year." The spokesperson said "to undo it (the law) in a couple of weeks with virtually no discussion and debate seemed flawed."

The rationale for a legislative stay of the CPUC's action within days of it taking place is that the issue needs more open debate and discussion, something the Cal-PX and CPUC president Loretta Lynch are both advocating.

A competing exchange based in California, the Automated Power Exchange (APX), was resigned to the fact that the measure likely will block the CPUC's latest electricity decision, but its CEO/founder Ed Cazalet said he hoped the legislature and the regulators would work out a compromise so the decision can be implemented before June of next year.

Supporters of the CPUC action, such as Cazalet, argue that the Cal-PX was never intended to hold monopoly status regarding the investor-owned utilities power purchases. They think the CPUC has the authority to permit utility purchasing options.

Under the state electricity law, large customers or retail energy service providers can buy their power directly from generators, but the investor-owned utilities providing power to an array of small and medium-sized retail customers must buy and sell all of their supplies through the Cal-PX at least through March 2002 when the so-called "transition period" is ended or when the utility stranded costs have been paid off and their rates unfrozen.

San Diego Gas and Electric Co. reached that point last July and has since allowed its retail rates to vary with the market, prompting the utility to reach a settlement with the Cal-PX and state consumer advocates for buying up to 20 percent of its supplies outside the state exchange. The CPUC administrative law judge rejected the settlement, saying that until the transition is completed for all three major utilities, there should not be any buying outside the Cal-PX.

"Our viability will maintain us beyond the transition period, but we want to make sure that we will have every advantage that every other exchange that comes into California has during this transition period," said the Cal-PX spokesperson, noting that the state entity adheres to a lot more rules, regulations and reporting requirements than its potential competitors, such as the private, for-profit Automated Power Exchange (APX), Santa Clara, CA.

On the other side of the debate, advocates for opening up the energy market to competition as soon as possible are trying to convince legislative leaders than the state's mass consumers (also the voters) will be better off sooner by allowing utilities to shop around more for their power supplies.

The latest proposed legislative remedy to counter a CPUC action regarding opening of energy markets has become a familiar scenario in the state legislature. The past two years, CPUC moves to accelerate the unbundling of the natural gas industry have been rolled back by state laws being passed with the support of the investor-owned gas utilities and their unions.

Richard Nemec, Los Angeles

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