Electric Utilities Week/Power Markets Week

California Gov. Gray Davis‘ Dec. 31 replacement of state Public Utilities Commission President Loretta Lynch with Commissioner Michael Peevey has launched an era in which business and utility interests will take precedence over the rights of ratepayers, consumer groups fear.

Their alarm stems from Peevey’s history as a president of Southern California Edison from 1990 to 1993. He left that post to become president of energy-service provider NewEnergy from 1995 until 2000 and before being appointed to the PUC in March 2002, was chief executive officer of TruePricing Inc., a technology company that helps companies and government agencies manage their power costs.

When Peevey took his position on the Commission, many suspected he would replace Lynch, who had clashed publicly with Davis in the past few years over how to resolve the state’s power crisis. In one instance, Davis had said there would be no rate hikes as a result of the crisis but just two months after his statement Lynch pushed through a steep increase. Lynch also did not stand behind Davis’ efforts to sign $ 43-billion worth of long-term power contracts, stating that they were too high-priced and ultimately, had PUC staff seek to overturn them at the Federal Energy Regulatory Commission.

In a statement, Lynch did not offer her resignation but said that, ”It has been a challenge to guide the agency through such turbulent times and I am proud of the Commission’s dedicated employees and of their accomplishments. I am proud of my record as President of the Commission in defending consumers and the public interest.”

Lynch’s demotion will mean more pro-business and utility orders out of the PUC since a former utility executive now heads the agency, according to Doug Heller, senior consumer advocate for the Foundation for Taxpayer and Consumer Rights. ”Making Mike Peevey the head of the PUC is like asking Kenneth Lay to run the SEC,” he said in a statement. ”After what the energy industry did to California it is shocking that Davis would give an energy company executive such a prominent position. Not only has Davis failed to place an independent consumer voice on the Commission, he is letting the energy industry run the agency.”

Another consumer advocate said Peevey now has the power to steer the PUC toward the more pro-deregulation view he has supported, enabling businesses and producers to benefit from the wholesale market. This move would come at a time when many contend the state’s deregulation effort was a disaster, the source said.

Also on Dec. 31, Davis nominated his Cabinet Secretary Susan Kennedy to replace departing Commissioner Henry Duque. Kennedy, 42, had been Davis’ Cabinet Secretary since January 1999. Previous to that appointment, she served as communications director to U.S. Sen. Dianne Feinstein from 1995 to 1998 and as executive director for the California Democratic Party from 1991 to 1994.

The governor selected her because of her hard work as a member of the administration, including her efforts as head of Davis’ blue ribbon task force to help resolve the state’s power crisis, a spokesman for Davis said on Tuesday. She also worked closely with various state agencies in her role as cabinet secretary, so is versed in coordinating parties to reach a resolution, he said.

A source at a state agency involved in handling the power crisis said she is known for her ability to cut right to the issue and work with people from differing viewpoints to come to a resolution. The source expected that Kennedy will try to reduce Lynch’s strength and create some unity among the commissioners, who have publicly criticized each other during their business meetings.

Heller, however, said Kennedy will be little more than a voice for Davis, who has steered toward a pro-business PUC by naming Peevey as president. ”Governor Davis is cloning himself at the PUC to make sure he can get whatever he wants out of that agency,” he said. ”The Governor tries to keep his distance whenever the PUC raises rates, yet he continues to appoint people from his inner circle. There is no distance between the Governor and the PUC.”

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