Energy policies present challenge;

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Governor-elect must carefully chart direction

San Mateo County Times (San Mateo, CA)

In his campaign, governor-elect Arnold Schwarzenegger accused Gov. Gray Davis of botching his response to the state’s energy crisis more than two years ago. Now he will have the chance to set his own course.

While other priorities will likely come before energy, Tuesday’s election of the actor-turned-politician has energy industry officials anticipating that Schwarzenegger will take a more market-oriented approach than the deposed Davis.

But consumer groups warn that the new governor could herald a return to the deregulated markets that, they say, failed the state during the energy crisis.

Schwarzenegger’s campaign Web site includes a detailed outline of the candidate’s platform on energy. It blames “government mismanagement” for the high cost of energy in California and argues that the state should “learn from other successful restructurings” of electricity markets put in place in Texas and in some Eastern states.

The Schwarzenegger campaign didn’t return calls for comment by press time Thursday.

State Sen. Joseph Dunn, D-Garden Grove, said that “the energy material that he has put out is clearly written by the folks who brought us deregulation in the first place. It is their attempt to salvage what they can out of what amounted to be the greatest disaster in California history.”

Mindy Spatt, spokeswoman for the San Francisco-based consumer group The Utility Reform Network, said Schwarzenegger’s energy platform “reads like vintage [former Gov.] Pete Wilson with a little [former Enron chairman] Ken Lay thrown in.”

State Public Utilities Commissioner Loretta Lynch said, “once again he’s going to rely on the market, the same market that gouged [us].”

Lynch’s six-year term expires in January 2005, along with commissioner Carl Wood. Those two vacancies could give Schwarzenegger a chance to make his mark at the state’s leading regulatory arm.

There is broad agreement that the state has not chosen a clear direction on energy policy since the 2000-01 energy crisis. But lawmakers have not, so far, figured out which direction they want to go. Schwarzenegger and others say that this lack of a policy direction has led to a lack of investment in new California power plants.

Gary Ackerman, executive director of the Western Power Trading Forum, an industry group, said that Schwarzenegger’s election means that the industry won’t have to worry about “crazy legislation” such as a return to the kind of regulated environment that Dunn proposed earlier this year.

Jan Smutny-Jones, executive director of the Sacramento-based Independent Energy Producers Association, praised Schwarzenegger for recognizing that there are successful electricity markets in other parts of the country and not “wallowing in self pity and blaming everyone else.”

While critical of the state’s alphabet soup of agencies involved in energy policy, Schwarzenegger does endorse one state initiative that requires increasing use of renewable energy. Existing state law requires utilities to get 20 percent of their power from renewable sources by 2017. Schwarzenegger would like to accomplish that by 2010.

Another pressing issue is whether Schwarzenegger will aggressively pursue refunds from power companies that the state accuses of manipulating energy markets during the crisis. During the campaign, Schwarzenegger did not highlight the issue and consumer groups have attacked the governor-elect for meeting with Enron‘s Lay at the height of the energy crisis.

Doug Heller, senior consumer advocate with the Foundation for Taxpayer and Consumer Rights, said, “He hasn’t said that he wants to take these companies on and get our money back.”

The new governor-elect also calls for eliminating the California Power Authority, which was created at the height of the energy crisis. The agency’s “mission to build and operate publicly owned power plants is in direct competition with private industry,” his platform says.

The authority’s director, Laura Doll, saying her agency doesn’t seek to replace the market, but to provide financing for much-needed power plants that private financiers won’t support. “If you are a private sector developer, the difficulty of financing projects has essentially shut down the market,” she said.
Alan Zibel may be reached at [510] 208-6414 or [email protected]

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