With much self-congratulation and a unanimous vote, the five-member California Public Utilities Commission Thursday agreed to fully restore the state’s three major private-sector electric utilities to their previous role of buying the day-to-day “net-short” wholesale electricity supplies for their respective customer bases. The resumption of the bulk power-buying role will begin Jan. 1, 2003 — including assuming some of the long-term contracts negotiated by the state’s Department of Water Resources (DWR).

The CPUC decision requires that the private sector utilities (IOUs) will resume temporarily the buying role in conjunction with DWR to take advantage of the state agency’s full investment-grade credit status, which is still not in place for California’s two largest utilities.

With the allocation of DWR’s long-term contracts proportionally to the three major IOUs, each utility should be able to determine “how much additional resources they will need to acquire on their own to meet their customers’ remaining needs,” said Loretta Lynch, the CPUC president, who noted that Thursday’s action was “the final step” needed for the utilities to again be able to fully serve their customers in 2003.

Almost as significant as the state regulators’ approval to get DWR out of the power-buying role and the utilities back into it was the fact that the five commissioners agreed unanimously on the process for doing it, something the newest and most vocal critic of the regulatory body, Michael Peevey, called a “most critical matter” as he handed out kudos to CPUC President Lynch for spearheading the effort. Among various checks and balances on the utilities in their resumed roles after a two-year hiatus is adherence to buying more power from renewable sources such as solar, wind, biomass, and geothermal and to various provisions of two new laws passed last summer (AB 57 and SB 1078).

In withdrawing a previous alternative decision he was set to sponsor, Peevey said his staff has worked “very closely and carefully” with Lynch and her staff at the regulatory commission. “[This decision] may not be perfect in anyone’s eyes, but we think this is a considerable achievement,” said Peevey, noting that it was an example of “reasoning triumphing over rancor.” Another commissioner, Carl Wood, who frequently sides with Lynch against Peevey and his other colleagues called the decision a “model” that the often fragmented commission should apply to other issues in the future.

One significant new requirement will have the utilities start a 20-year planning process to assure adequate supply sources and reserve levels so the state never again faces the crisis in which it found itself in 2000-2001. “We are taking the further step to institute a long-term planning process to ensure that in the future adequate resources are available in California to maintain a reliable electricity system at reasonable prices,” Lynch said.

To implement this requirement in AB 57, the regulators will establish a “procurement review group,” which will spearhead the effort to make sure that any increased retail charges to customers “are just and reasonable,” Lynch said. “These groups will work with the utilities in advance of procurements to make sure these purchases are in the best interest of ratepayers.”

Lynch said she only saw the need for this group for an “interim period.” She said that she “fully expects” that the review group won’t be needed by the end of next year, if not sooner, when the CPUC can be fully staffed and trained, under the provisions of AB 57, to handle the reviews of utility procurement.

In citing that the regulatory action supports California’s new laws (AB 57 particularly), Lynch noted that the regulatory panel will establish a means for the utilities to recover their wholesale power costs in a timely manner to further ensure that a repeat of the 2000-2001 crisis is not experienced.

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