California’s newly created state power authority began this week to shape the state’s legislatively mandated return to “integrated resource planning,” the process — pre-dating energy restructuring — of central state planning of the needed mix among fuels for electricity generation, renewables and demand-side management and responsiveness programs. The process sets aside the notion that markets will sort out the right mixture, giving that role to state government.

As initially articulated in a working draft outline and discussion paper, the power authority board sees a future “hybrid” energy world in California in which market-based generation is supplemented by state power authority investments in reserves, conservation and renewables. The draft this week lists nine areas needing future “investments,” five of which would require power authority investment (conservation/load management, gas-fired generation, renewable energy, natural gas storage and natural gas production).

With a working title of “Clean Growth: The 10-year Plan,” the draft envisions a strong role for natural gas, including evaluations of natural gas supply, transportation, distribution and storage adequacy, the role of conservation of gas, incentives for more gas exploration in the state and an assessment of liquefied natural gas’s (LNG’s) importance in an integrated resource planning context.

Under the state law that created the California Consumer Power and Conservation Financing Authority, a definitive “Energy Resource Investment Plan” is due to the governor and state legislature by Feb. 15 next year, and the power authority board, headed by S. David Freeman, the governor’s chief energy adviser, met last week to hammer out a skeleton for the plan, which the board agreed should anticipate the state’s “energy service needs for both electricity and natural gas for the next decade.”

The state power authority’s board agreed on a draft now circulating that sets three objectives for the “investment plan”:

As part of a description of the “future energy world” for California, the draft outline notes the need for the document to help define private and public sector roles.

It suggests that the ultimate plan “define the role of private enterprise operating on new ‘public policy pillars’, defining the appropriate role of government. We will provide an opportunity for free enterprise to participate in ‘clean growth’, but on terms that make competition work to achieve objectives of security, reliability and low price(s).” The document goes on to note that eventually the proposal needs to differentiate between a “forecast and an insurance policy.”

Reliability, which became a buzz word in the midst of last winter’s supply-price crunch, and security, which has grown in concern since Sept. 11, are the focus of this effort to bring more control and predictability into California’s energy markets after the chaos it experienced from mid-2000 to mid-year 2001.

Part of this attempt in more central planning is also an effort to define the power authority’s role, recognizing that by law it is supposed to cease operations in 2007. Beyond investments in conservation and renewable energy resources, the power authority has no clear role to which to apply its public financing authority of up to $5 billion that the legislature bestowed in creating the state entity.

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