For industry sources hoping for a winding down, if not conclusion, of California’s ongoing energy investigations, a state lawmaker told an industry meeting in San Francisco last Thursday that the beat will go on and on, but how soon any conclusions are drawn is anyone’s guess.

State Sen. Bill Morrow, a Republican from north San Diego County and vice chairman of the legislative investigative effort, said he thinks the effort so far has inspired the state attorney general and regulatory commission to actively pursue separate probes, and he hopes a report can be released “early next year.”

Although a self-described free market advocate, Morrow said he has seen enough evidence to warrant continuation of the Senate Select Committee to Investigate Price Manipulation in the Wholesale Energy Market. But he said in response to a question, he did not know when a report and accounting of the committee’s work will be forthcoming. At the same time, following an earlier luncheon speech by Patrick Wood, chairman of the Federal Energy Regulatory Commission, he said he was pleased to learn that FERC will have a report out in February on its own investigation of the alleged abuses in the California energy markets in 2000-2001.

He said eventually he has “no doubt that there will be a report from the committee; we’ve discussed that at length, but we are still in the course of investigating. I don’t have any doubt that we are going to have hearings dealing with some CAISO issues and natural gas issues that have now come to light. I believe in thoroughness and we need to look under every rock, and I believe the select committee has done that and been able to light a fire under many other investigative agencies. We have had other revelations directly because of the select committee.

“I won’t say that there has not been some grandstanding and that from time to time it can be frustrating. But by and large, I think the work has been good. There will be a final report, but we have so many things going on and limited staff to get it done. We will have a report, but it won’t be this year; I think it will be early next year.

The investigative committee is known more popularly as the “Dunn Committee” (Sen. Joe Dunn, the chairman), Morrow said, “and let me say this the Dunn Committee ain’t a done committee; it will be back next year. I don’t know what to tell you about what will happen. The only thing I can say with any certainty at all is that it won’t be known as the ‘Peace Committee’ (in reference to Sen. Steve Peace, the main author of the state’s 1996 electric restructuring law who has been forced to retire by term limits).”

In terms of the FERC ALJ’s ruling on El Paso’s alleged manipulation of pipeline capacity in order to affect natural gas prices at the California-Arizona border, Morrow said the revelations “frankly didn’t surprise me, but the truth probably lies somewhere in between” the accusations and the company’s cries of innocence. “That is usually the way it is,” he said. “To the extent that shortages were manufactured or exacerbated and markets manipulated — and I believe that it was to some extent — I don’t believe it could have occurred to the magnitude that it did, but for the fact that California was marginal in its supply (reserves) to begin with.

“So I know that if we won’t build power plants, California’s load growth is going to create a supply/demand imbalance that is real nasty again,” he said, noting it could happen in as short as the next three years. “We need to start plants now; build now.”

Aside from the legislative probe, Morrow predicted that there is likely to be a “major clash” between California’s lawmakers and FERC next year over the issue of the independence of the state’s transmission grid operator, CAISO. “I don’t know how long it will last, but it is likely to be a mess before it is all over with, but I think all three branches of government at both the state and federal level will get involved.”

The lower Assembly portion of the state legislature this year passed a state constitutional amendment to restrict CAISO’s oversight to state jurisdiction, but it failed to pass the state senate, and thus, will not be on the November ballot. The legislative counsel reviewed it and thought that federal law would clearly preempt it under the interstate commerce clause, Morrow said.

He also thinks the Democratic majority in the state legislature, and presumably in the governor’s office, will concentrate on “legal and political challenges to FERC’s proposal to implement a standard market design, and I think they will challenge FERC’s attempt to get rid of the nation’s only politically appointed ISO board; I believe that there will litigation and it will be long and nasty. I don’t know what the outcome will be.”

Morrow said he supports FERC’s effor to create a standard market design, “with one caveat — we not replicate the problems we had before.”

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