California’s governor virtually bypassed energy issues in his state of the state message last week and information on energy plans is expected to emerge slowly, along with indications from the state legislature on whether separate new comprehensive energy bills will be pushed separately by the Democratic majority and Republicans.

While the state’s budget crisis is getting most of the attention, speculation in the energy sector is high as to the direction and speed of the California Public Utilities Commission (CPUC) since Gov. Arnold Schwarzenegger named two new members late last month.

The two new CPUC members, Dian Grueneich and Steve Poizner, face confirmation hearings in the state Senate, which are yet to be scheduled. Other legislative contacts have indicated that both the Assembly Speaker and Republican leaders are contemplating submitting new energy bill proposals, but they likely will not do much before the confirmation hearings are held. Under California law, the newly appointed commissioners can carry out their duties for up to a year without Senate confirmation.

An energy company lobbyist in Sacramento said both the governor’s office and state legislature have been somewhat circumspect about what they plan to propose for the energy sector, although both agreed that the current CPUC majority — all three appointees of former Gov. Gray Davis — has worked well with the governor and other state and federal agencies, and this source did not think Schwarzenegger was thinking of making one of his two new appointees the president of the CPUC, as he can do.

Most stakeholders are happy to see the two new CPUC members and the expiration of the terms for Loretta Lynch and Carl Wood, noting that the constant 3-2 voting splits on issues were fractious. Consumer groups, however, lauded Lynch and Wood for their efforts, and are fearful of what the new CPUC will do.

In an interview in the Contra Costa Times over the recent New Year’s holiday weekend, the governor’s primary energy adviser, Joseph Desmond, was quoted as saying “to a large degree, (Schwarzenegger) inherited an electricity crisis, and we’re working to correct that,” adding that the governor’s administration is now most focused on “ensuring that summer 2005 does not represent a problem.”

Desmond and many of the stakeholders have indicated that the state has “turned the corner” on energy in that it is seeking consensus and taking a broad, regional view. “California is not an island,” Desmond told the Contra Costa Times. “We are an integral part of the western electric grid. And so as we think about energy policy, it’s not just about California, but how we affect our neighbors and how do our neighbors’ decisions affect us.”

In his message to California citizens Wednesday night, Schwarzenegger said that besides conservation and renewable energy, “California also needs power plants and transmission lines. We need more of them and we need them as soon as possible. We’re already increasing our reserves and encouraging long-term contracts. And I am pleased to report that we’re beginning to see investments that will put steel in the ground and power on the lines.”

In the legislature, Assembly Speaker Fabian Nunez, whose highly amended attempt to reform the state’s electricity industry last year (AB 2006) was vetoed by Schwarzenegger, has indicated to Sacramento news media that he will be proposing another comprehensive energy bill, but he was still unsure of the content and the timing. On the Republican side, the expectation is that another attempt will be made to restore direct access power buying for the state’s largest commercial/industrial customers.

In his interview, Desmond indicated something could get accomplished on the direct access issue because of a new “spirit of cooperation,” and because there is a commitment to moving cautiously and “thinking through the rules around switching, making sure that if a utility incurs an obligation on the part of a customer and they later decide on a different supplier, that there’s a way of allocating those costs to those customers. It’s a complicated discussion, but the benefit is there.”

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