California Governor Outlines Plan to Research Energy Solutions

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San Jose Mercury News

SACRAMENTO, Calif.–Gov. Gray Davis‘ administration plans to spend at least $ 10 million over the next two years on outside energy consultants, including current and former executives of the nearly bankrupt Southern California Edison Co.

The estimate — based on a draft document obtained by the Mercury News and interviews with state officials — is the first indication of just how much the administration is spending for expert advice to help resolve the state’s energy shortage.

In addition to the consulting fees, Davis also plans to spend up to $ 40 million for a television campaign to urge Californians to go easy on their electricity use this summer.

While the sum now being shelled out for advice is small compared to the billions of dollars the state is paying to buy electricity, critics are troubled by the consultants’ ties to utilities that are asking the state to bail them out of debt.

“The kind of people Gov. Davis has surrounded himself with just don’t pass the smell test. It’s not the way to get independent advice,” said Douglas Heller of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

Three state departments have contracted with at least seven consultants or firms for services, including legal counsel, preparing energy contracts and setting up a system to buy large amounts of electricity.

Davis spokesman Steve Maviglio said the governor has made no secret that among his consultants are several connected to Edison. “We’re dealing with generators who have staffs with extremely high paid negotiators, and we’re getting the best talent we can,” he said.

Maviglio said that one unpaid adviser, former Southern California Edison President Michael R. Peevey, no longer has any energy stocks. He was unsure whether two other paid consultants with ties to Edison have any financial stake in the company, but he said neither is working on issues directly related to Edison.

“I think everybody made it clear that there needs to be a very high wall between their work for the state and any work they may do for Edison,” Maviglio said.

It was unclear Thursday night whether the consultants are required to file economic disclosure statements, as required of many state employees.

The state also has spent $ 10 million on a TV advertising blitz urging Californians to conserve energy. The contract was awarded to Grey Worldwide, which already had a competitively bid advertising agreement with the state lottery. The price tag for the conservation advertising effort could reach $ 40 million, according to the state Department of Consumer Affairs, which is coordinating the campaign.

More than almost any other issue in recent years, California’s electricity crisis has prompted the administration and lawmakers to solicit expert help from outside state government. Employing outside advice, especially for legal counsel, is not uncommon in the capital.

The Assembly, for example, is spending up to $ 300,000 for energy consultants, including David Wiggs, who guided El Paso Electric Co. through bankruptcy. The lower house also received unpaid financial help from Credit Suisse First Boston Corp.

Assembly Speaker Robert Hertzberg, D-Van Nuys, said he recruited his team of experts, in part, to send a signal to Wall Street that the state is serious about fixing the problem.

“The magnitude of what’s at stake here in California and the region is extraordinary,” he said. “What I’m trying to accomplish is not just the normal run-of-the-mill government thinking.”

Sen. Debra Bowen, chairwoman of the Senate Energy Committee, said she wishes the Davis administration had retained expert advice sooner because the state is grappling with momentous decisions on electricity.

“I’m not concerned about the money being spent,” Bowen said.

Bowen had just finished presiding at a committee hearing at which one of the administration’s consultants, Vikram S. Budhraja, testified at length. His firm, Electric Power Group, has a contract worth between $ 1.9 million and $ 6.2 million with the state Department of Water Resources, which is now buying electricity for the state’s cash-poor utilities.

Under questioning from Bowen, Budhraja, a former senior vice president with Southern California Edison, defended the administration’s just-announced plan to reward Californians who slash their summer electricity use by one-fifth.

In an interview, Budhraja, who helped the state negotiate long-term contracts with power generators, scoffed at the suggestion that he might have a conflict of interest.

“I have not been involved in anything that directly involves Edison,” said Budhraja, whose firm has nine consultants helping out the state.

One of them is Larry Hamlin, an Edison vice president who has taken a two-month leave to serve as the state’s construction czar to help bring new power plants on line.

“The last time Vikram did anything for Edison was six months ago, as an expert witness in a trial against Mobil Oil for something that happened in 1996,” Maviglio said.

Peevey, another consultant with strong ties to Edison, could not be reached for comment.

In January, Davis appointed Peevey as one of his special advisers on energy. Peevey has spent much of his time behind closed doors negotiating plans to rescue the state’s three financially ailing utilities.

Consumer activist Heller asserted that Edison stands to benefit from any decision made by consultants with ties to the utility. “You don’t still have to be with the company to have a bias in its favor.”

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