Some of the state’s biggest stakeholders wasted no time in voicing support for Gov. Arnold Schwarzenegger’s initial outline of his electricity priorities, including support for a core/noncore market structure, more renewable energy use, and long-term contracts for the state’s three private-sector utilities.
A letter from the governor to Michael Peevey, president of the California Public Utilities Commission (CPUC), prompted a supportive letter back to Schwarzenegger the same day last Wednesday. The governor had said he was “encouraged” by the CPUC president’s stated commitment to work toward creating an electric market structure in the state “that encourages healthy wholesale and retail competition” that in turn will create more grid reliability and lower retail electric utility bills.
Peevey wrote that he appreciated the governor’s support and agreement for the state’s major electricity policy issues, and particularly was “gratified” that the governor supported the basic tenets of the state’s Energy Action Plan that was hammered out by the CPUC and two other leading state energy agencies last year.
Agreeing that the CPUC should “refine” its approach to implementing the 2002 state law (AB 57) requiring a competitive power-buying process for the major utilities, Peevey told the governor he agreed the state needs to accelerate the timeline on which the utilities will build their reserve margins to 15%, and that he looked forward “to working with” Schwarzenegger and his newly named “energy team” of advisers, three of which will be stationed at the CPUC. Last week’s action on the power front followed on the governor’s naming the week before of a five-member energy advisory team (see NGI, April 26).
One of the major utilities, Southern California Edison, and Dynegy, a leading merchant generator in the state, also issued supportive statements for the governor’s program.
“Dynegy supports Gov. Schwarzenegger’s proposal to improve the state’s electricity market structure by addressing the issue of energy resource adequacy sooner rather than later, as well as his encouragement of utilities to competitively bid and enter into long-term power supply contracts,” said Bruce Williamson, Dynegy’s CEO, in a prepared statement released Thursday from Houston.
Noting that the governor’s action is an “important first step in creating a positive investment climate,” Williamson said that the action by Schwarzenegger should provide more certainty and reliability by helping prevent “a repeat of the power shortages of 2000-2001.”
SoCal Edison in a similar prepared statement said it was pleased that the governor “recognizes the importance of resolving the current uncertainty about the framework for providing electricity in California.” Edison said the state needs “a prompt and durable solution.”
The “durability” for the large utility will come from a structure that protects its core customer base, and encourages new investments in California, which, of course, the utility feels is embodied in a proposed new law (AB 2006), sponsored by the new Speaker of the lower house Assembly, Fabian Nunez, who Edison helped write the proposed bill earlier this year.
Nevertheless, it was earlier legislation already on the books in California law (AB 57) that got the governor’s attention. An adviser to Schwarzenegger said he felt its was “important to send a signal to the CPUC” that it should not wait for new laws when it can more fully implement ones that are already on the books, specifically the AB 57 dealing with utility procurement and assurance the utilities will be able to recover their wholesale supply costs in future retail rates.
“As he has done in other areas, the governor wants to seek all existing administrative remedies while carrying on an ongoing dialogue with the legislature about additional solutions,” the governor’s aide said.
Noting that AB 57 corrected “key flaws” in the state’s earlier electric industry restructuring efforts, Schwarzenegger urged the CPUC “to expeditiously” implement the law, which it has been in the process of doing with only partial success. The governor’s preference is for a market structure that encourages the utilities to sign long-term supply deals and to do it through a competitive process to assure consumers the lowest possible costs.
In his letter, Schwarzenegger said the “importance of these two provisions cannot be understated,” noting that a “transparent, competitive procurement process is necessary to ensure that the utilities obtain the least-cost alternatives to meet their demand.” He said the deals should be built on “sound economic principles” that avoid creating future stranded costs.
The governor wants to encourage new investment of power plants, and he noted that the current time is very good when wholesale electric prices are relatively low for the utilities to lock-in long-term prices in supply contracts. He said the state now relies on several older power generation sources that should be retired, so he want to avoid any further delay in the building of new plants.
“Full implementation of AB 57 is needed to remove the regulatory uncertainties that have paralyzed crucial investment in California’s electricity infrastructure,” Schwarzenegger said in his letter. “I urge the CPUC to complete this task as quickly as possible.”
In his quick response to the governor, Peevey wrote that the CPUC currently is “in the process of holding a series of detailed workshops on resource adequacy and expects to continue to improve (its) resource adequacy policies in the next few months.”
Â©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1266 |