Citing deep philosophical differences with two increasingly entrenched colleagues, the newest California utility regulator, Susan Kennedy, indicated this week the current 3-2 split will continue among the five members of the California Public Utilities Commission. “And that is not necessarily bad if we’re consistent,” Kennedy said during a wide-ranging interview in her San Francisco office.

Generally, however, Kennedy is concerned that the CPUC’s perceived “anti-business behavior” hurt the business climate in the nation’s most populous state and hurt “real people,” the utility consumers.

“A 3-2 vote is just as good as a 5-0” in getting things done, she said, with the one exception — Wall Street. “They think we are a bunch of wacko’s.

“We’ve (the CPUC) always had a reputation of being arbitrary on some issues, but it has gotten really bad in the last few years, with the commission on numerous issues changing the rules after-the-fact,” said Kennedy, a former cabinet secretary to Gov. Gray Davis and once the executive director of the state Democratic Party organization. “We’ve also developed a reputation of being very anti-business to the extent that anything with an “i-n-c” after its name is automatically viewed with suspicion.

“I think we have lost a lot of credibility in the last few years,” she said, noting that the main challenges for the CPUC now are: “first and foremost” to restore the private sector utilities’ financial health and to re-inject some “regulatory certainty” in the state. “We have to restore the credibility and respect of this commission.”

While Kennedy thinks on most fronts the CPUC simply has to continue to “slog through” a long list of unresolved issues, the legislature controls one question that needs to be settled: the future of direct access. That is a key to what types of procurement programs the regulators ultimately approve for the utilities, she said.

Kennedy admits that she and her fellow majority commissioners — President Michael Peevey and Commissioner Geoffrey Brown — did not want any “sweeping changes” from state lawmakers this year. Nevertheless, she thinks the legislature has to bite the bullet on direct access so other reforms can fit in place.

“They (legislators) can’t make a decision, but they also don’t want us (the CPUC) to make a decision that they wouldn’t make,” she said. “We have to restore faith in the CPUC that I believe has been lost, and we need to restore the credibility of the commission.”

The depth and nature of the CPUC split is exemplified in the state’s three-agency-backed “energy action plan,” in which the CPUC only okayed the document by a 3-2 vote because the former head of the CPUC Loretta Lynch and Commissioner Carl Wood, a staunch liberal former statewide utility union leader, felt the plan’s endorsement of new electric transmission projects pre-judged cases still to come before the regulatory panel.

“That’s old thinking in our (majority) view,” said Kennedy, admitting Lynch and Wood may be right in a narrow legal sense, however. “In a larger sense, the fact that we’re talking with the Energy Commission about streamlining our processes is important. Sometimes the most important thing we can do is get out of the way.”

Generally, Kennedy sees the CPUC as continuing to wield “awesome power,” and the commissioners still need to make up for what she considers critical mistakes made two or three years ago.

In hindsight, a combination of CPUC-allowed long-term contracts and quicker federal wholesale power price caps would have prevented the disaster from ever becoming a crisis, she said.

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