California’s Gov. Gray Davis re-appointed Michael Peevey, 64, to the California Public Utilities Commission and appointed his current cabinet secretary, Susan Kennedy, 42, to another spot on the five-member CPUC. Both are appointed to six-year terms and their new positions are subject to state Senate confirmation. Davis also re-appointed John Geesman to the California Energy Resources and Development Commission, which serves as the state’s primary energy policy/planning agency. Geesman, 51, the newest member of the commission was appointed to a full five-year term.

Peevey was also named president of the CPUC, replacing Loretta Lynch, who will remain on the regulatory panel. Lynch was appointed by Davis and named president three years ago.

Calling it a “privilege and challenge” heading the regulatory body, Lynch said she would continue “to fight for consumers and for California’s families and businesses as a commissioner.”

The Kennedy appointment promises to be closely watched by industry stakeholders and observers because the CPUC’s four incumbent commissioners, including Peevey, comprise a 2-2 split between liberal and moderate approaches to regulating the state’s energy industry in the wake of the 2000-2001 electricity crisis and subsequent meltdown in the merchant energy sector, particularly the fall of Enron, which has been vilified by state officials.

Peevey’s term and that of a second CPUC commissioner, Henry Duque, expired at midnight Dec. 31. Both had formed a conservative majority with a third commissioner, Geoffrey Brown, on several key energy issues over the past six months, effectively negating votes of Lynch.

In making the appointment announcement, Davis’ press office emphasized Kennedy’s involvement with the governor and with liberal causes and elected officials. Kennedy was executive director of the California Abortion Rights Action League prior to serving as executive director of the state Democratic Party (1991-94) and as communications director for California’s senior U.S. Sen. Dianne Feinstein (1995-98). Davis named Kennedy as his cabinet secretary when he first took office in 1999.

In contrast, Peevey’s background — at least for the past 20 years — has been in the energy sector where he was president and a director of Edison International, the holding company for one of the major utilities regulated by the CPUC, Southern California Edison Co. He also later was the founder and CEO (1995-2000) of the nation’s largest energy service provider, New Energy Ventures, which was subsequently acquired by Virginia-based AES Corp. and then sold recently to Constellation Energy for $240 million.

Peevey outlined his “vision” for the CPUC in a statement on Friday. He said the visions differs somewhat from the regulatory body’s recent past. It “moves beyond the crisis management of the past three years and into an era of reinvigoration of our work on behalf of the citizens of California.” He said that because California is the largest state (by population) in the nation, the CPUC should return to a position of “leadership” among regulatory commissions nationally.

“I define public interest broadly to include ratepayer and consumer needs, healthy utilities providing quality services, a viable economy in which businesses thrive, and a commitment to environmental enhancement,” Peevey said in his statement, adding that it is the CPUC’s job to “take a balanced approach to serving these component parts of the public interest in an integrated way.”

Causing some concerns among consumer activists, Peevey was appointed last March to the CPUC when a long-time Republican appointee, Richard Bilas, suddenly resigned. Bilas’ six-year term expired at the end of 2002 as did the term of Duque, a fellow-Republican appointee who has served eight years on the CPUC. Both had been appointed by former Gov. Pete Wilson.

Perhaps more than Peevey’s re-appointment, the Kennedy selection will determine the tenor of energy regulation in the state for a number of years to come. Lynch, and a fellow Davis appointee, Carl Wood, are strong advocates for a return to more traditional cost-based, command-and-control regulation. The other Davis appointee, Brown, is more moderate.

An issue at last Monday’s CPUC meeting that was postponed until next year regarding the unbundling of the Southern California Gas Co. system (see related story) is a clear example of how Brown, Peevey and Duque have formed a more moderate majority on key issues that have been decided by split 3-2 votes.

Lynch and Wood are committed to no additional “deregulation” of the energy utilities and have made a commitment to the state legislative leadership to consult with the lawmakers on any further proposals, so they have an order pending that effectively rolls back the Dec. 11, 2001 decision the CPUC made to approve SoCalGas’ settlement on its further transmission and storage unbundling. They noted that a number of protest letters have come in from Southern California Edison Co. and others concerning the settlement.

Brown came up with an alternative to salvage the earlier unbundling decision and move forward, and he earlier had Peevey’s and Duque’s support, but the pressure from elected officials and Edison caused Peevey to waver, although he said Monday that he still is “inclined” to support Brown (assuming Peevey is re-appointed to the CPUC), but wants added time to review the letters from stakeholders.

The SoCalGas unbundling issue is just one of several major energy issues pending that will be strongly influenced by whom Davis appoints to the two CPUC positions.

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