Riding the coattails of state budget legislation facing a June30 deadline, California lawmakers are making an end-run around thestate’s constitutionally quasi-independent energy regulatory panelwith an amendment to block regulators’ latest move to expandwholesale electricity competition in the state. It is a similarpattern to what the elected officials have done the past two yearsregarding natural gas industry issues.

As part of a budget bill approved late Thursday night,California’s state Senate began the process of turning back a June8 decision by state energy regulators to allow the majorinvestor-owned utilities to purchase electricity through exchangesother than the state-chartered nonprofit California Power Exchange(Cal-PX). Legislative action on the budget now turns to the stateAssembly, which is expected to debate various issues beforepassage, but it is not likely that the obscure electricitypurchasing amendment will gain anyone’s attention.

A Republican state senator in a Democrat-dominated statelegislature pushed through the amendment in the budget bill afterit passed out of committee unanimously earlier this week withsupport from the two most recent appointees to the CaliforniaPublic Utilities Commission (both Democratic appointees) and theCal-PX. The state Senate’s Budget Committee chairman, Steve Peace(D-San Diego), is considered the prime author of California’selectric restructuring law and a frequent critique of CPUC actions.

“What you have here is a bipartisan effort to make sure thelegislative intent of AB 1890 (California’s 1996 electric industryrestructuring law) is secured-if not through the full transitionperiod, at least through June 2001,” said a Pasadena, CA-basedCal-PX spokesperson, noting that the legislative budget languagewould prohibit the CPUC from fostering utility buying outside ofthe Cal-PX before June next year at the earliest. In the meantime,the Cal-PX is continuing to prepare a request to the CPUC forrehearing of its June 8, 3-2 decision.

The Cal-PX, however, thinks the proposed legislative remedy is”a more logical approach” to ending the transition than the CPUCaction, reiterating that the whole process for developingCalifornia’s ’96 electricity law was “a legislative one, lastingover a year.” The spokesperson said “to undo it (the law) in acouple of weeks with virtually no discussion and debate seemedflawed.”

The rationale for a legislative stay of the CPUC’s action withindays of it taking place is that the issue needs more open debateand discussion, something the Cal-PX and CPUC president LorettaLynch are both advocating.

A competing exchange based in California, the Automated PowerExchange (APX), was resigned to the fact that the measure likelywill block the CPUC’s latest electricity decision, but itsCEO/founder Ed Cazalet said he hoped the legislature and theregulators would work out a compromise so the decision can beimplemented before June of next year.

Supporters of the CPUC action, such as Cazalet, argue that theCal-PX was never intended to hold monopoly status regarding theinvestor-owned utilities power purchases. They think the CPUC hasthe authority to permit utility purchasing options.

Under the state electricity law, large customers or retailenergy service providers can buy their power directly fromgenerators, but the investor-owned utilities providing power to anarray of small and medium-sized retail customers must buy and sellall of their supplies through the Cal-PX at least through March2002 when the so-called “transition period” is ended or when theutility stranded costs have been paid off and their rates unfrozen.

San Diego Gas and Electric Co. reached that point last July andhas since allowed its retail rates to vary with the market,prompting the utility to reach a settlement with the Cal-PX andstate consumer advocates for buying up to 20 percent of itssupplies outside the state exchange. The CPUC administrative lawjudge rejected the settlement, saying that until the transition iscompleted for all three major utilities, there should not be anybuying outside the Cal-PX.

“Our viability will maintain us beyond the transition period,but we want to make sure that we will have every advantage thatevery other exchange that comes into California has during thistransition period,” said the Cal-PX spokesperson, noting that thestate entity adheres to a lot more rules, regulations and reportingrequirements than its potential competitors, such as the private,for-profit Automated Power Exchange (APX), Santa Clara, CA.

On the other side of the debate, advocates for opening up theenergy market to competition as soon as possible are trying toconvince legislative leaders than the state’s mass consumers (alsothe voters) will be better off sooner by allowing utilities to shoparound more for their power supplies.

The latest proposed legislative remedy to counter a CPUC actionregarding opening of energy markets has become a familiar scenarioin the state legislature. The past two years, CPUC moves toaccelerate the unbundling of the natural gas industry have beenrolled back by state laws being passed with the support of theinvestor-owned gas utilities and their unions.

Richard Nemec, Los Angeles

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