California PUC chief criticized;

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Some say shake-up favors power firms

The Houston Chronicle

The California regulatory commission that blamed the state’s energy crisis on Enron Corp. and other power companies can be expected to chart a course more favorable to the state’s utilities after two new appointments, according to consumer and industry groups.

The appointment by Gov. Gray Davis of a former energy executive as president of the California Public Utilities Commission and of a member of his staff to fill a vacancy could signal less aggressive investigations and a more favorable view of deregulation, they say.

Davis’ decision not to reappoint Loretta Lynch as chairman, although she will remain on the commission, was interpreted as an indication she may have been too independent in pursuing investigations of state utilities and their role in the 2000-01 power crisis. The governor’s office disputed those assessments, saying the appointments were unlikely to cause significant changes in policy.

On New Year’s Eve, the governor reappointed Michael Peevey to the PUC, elevating him to president, and appointed Susan Kennedy.

Peevey, 64, first appointed to the commission in March, was president of New Energy, the nation’s largest energy service provider, from 1995 to 2000. He was president of Edison International and Southern California Edison Co. from 1990 to 1993.

He also worked as an unpaid consultant to Davis during the energy crisis. He led negotiations for some $10 billion in long-term contracts that left state ratepayers paying higher prices after energy prices fell.

Kennedy, Davis’ cabinet secretary, who has a pro-consumer reputation, replaces sole Republican Henry Duque.

Peevey and Commissioner Geoffrey Brown tended to side with Duque against Lynch and Commissioner Carl Wood.

Under Lynch, the PUC aggressively investigated utilities and was one of the first state agencies to raise the issue of market manipulation.

Consumer groups believe the elevation of Peevey shows that Davis, who has spoken scathingly of Enron and other power-trading companies, favors utilities over consumers.

“One of the biggest misconceptions around the country is that Gov. Davis is standing up to the power industry,” said Doug Heller, spokesman for the Foundation for Taxpayer and Consumer Rights.

“Everybody in California knows Gov. Davis has failed to take on the power industry. Making Michael Peevey president of the Public Utilities Commission is the clearest indication to date.”

Michael Aguirre, a San Diego attorney who has filed a taxpayer lawsuit against energy companies, said: “The governor is putting in a person who represents the utilities. Polices favorable to utilities will be revived.”

Mindy Spatt, spokeswoman for the Utility Reform Network, said it is widely believed that Lynch and the governor had a falling out, although it was not clear whether it was because she was too independent. Others said the two parted ways before summer after disagreeing on issues over time.

Davis spokesman Steve Maviglio dismissed the idea.

“You’ll have to search long and hard to find anything negative the governor said about Commissioner Lynch,” he said.

Spatt said, “Certainly, Commissioner Peevey is more pro-business and more pro-deregulation.”

As president of New Energy, which provided billing services for power companies in deregulated states, Peevey was a strong promoter of deregulation.

Consumer groups, who opposed Peevey’s appointment to the commission in March, fiercely oppose continuing deregulation in California.

The energy industry, which saw Lynch as hostile to their interests, views Peevey’s promotion with relief.

“This is a good way to start the New Year,” said Jan Smutny-Jones, executive director of the Independent Energy Producers. “There was a tremendous amount of focus on blaming others and finding conspiracies.”

Smutny-Jones said Lynch believed the deregulation of California’s energy markets caused the crisis, but Peevey understands that the problem was incomplete deregulation.

He said he expects the PUC under Peevey, who has the power to replace key positions in the agency and set the agenda, to be more favorable to utilities and energy companies.

Consumer Watchdog
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