California’s state legislature, which unanimously launchedelectric industry restructuring four years ago, went back to thedrawing board Thursday in Sacramento, examining a series ofmid-course corrections or a spate of re-regulation depending on theviews of different industry sources.

Even before the marathon joint legislative session got under way,the state senate quickly passed a bill to rollback and freeze SanDiego electric rates, and sent the measure on to the Assembly. In themeantime, Gov. Gray Davis has directed the California Public UtilitiesCommission to cut the rates in half, and the CPUC has set a specialmeeting Aug. 21 to consider that and other electricity proposals (seeDaily GPI, Aug. 4).

At the outset of the legislative hearings, the chairman of thestate energy commission (CEC) William Keese said his agency expectsin the next few days to send the governor a proposal to establishan emergency six-month power plant siting process that does notcompromise environmental requirements. Davis had ordered anemergency speed-up earlier this month.

In another context, state Sen. Steve Peace, the San Diegolawmaker who helped craft the 1996 electricity restructuring law,said the legislature should also pass legislation to make theElectricity Oversight Board (EOB) the direct overseer of both theCalifornia Independent System Operator (Cal-ISO) and CaliforniaPower Exchange (Cal-PX) “much like you would have an audit teamtake over a bankrupt company.”

In response to calls from the CEC chairman for a “balanced”approach of new generation, market reform and increased demand-sidemanagement, Sen. Peace erupted to say “for five years I have heard[from] this Harvard grad school cockamamie that market-basedsolutions will work along with demand-side management. There is noway we are going to crawl out of this predicament with demand-sidemanagement.”

The CEC’s Keese said 3,000 MW in five power plants are now underconstruction, and another 7,000 MW and 11 plants are in the sitingapproval process.

CPUC President Loretta Lynch and EOB Chairman Michael Kahnportrayed the problem as being a combination of the market beingnoncompetitive and the means of correcting that resting with theFederal Energy Regulatory Commission. Therefore, Kahn repeated thatCalifornia does not have problems with “deregulation,” but ratherwhat he calls “federalization.” FERC’s chief counsel, Doug Smith,was in attendance but had not had a chance to speak in the firstthree hours of the session, which were marked by repeated questionsand speeches from San Diego lawmakers, such as Sen. Peace.

Peace at one point indicated that he thinks the newly passedstate Senate legislation to freeze San Diego rates will “curb” thewholesale market to a certain extent, and that eliminating thestakeholder oversight boards for the Cal-ISO and PX will solve theother part of the state’s problem.

“There is now clear statistical proof that the ISO pricescreated a target and drove up prices (in the wholesale market),”Peace said.

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