The California Power Authority is up and running amid widespread criticism not just from the right, which has always opposed it, but from the left.
Questions abound about three of Governor Gray Davis‘ insider and business choices for the five-member board and whether they’ll dilute the effectiveness of his other appointee, David Freeman, who was privately assured the job when he left his post as chief of the Los Angeles Department of Water and Power, and State Treasurer Phil Angelides, who proposed the idea for the authority and serves on its board by virtue of the legislation which created it.
And what exactly will the board do? Will it manage the state’s massive portfolio of long-term power contracts or leave them in the hands of the secretive Department of Water Resources (which has no publicly accountable board)? Will it, as the Legislature intended, enable the state to keep a prudent reserve of “at cost” power to keep the private generators honest or has that role been rendered irrelevant by the long-term power contracts, which some experts say commit the state to an oversupply of power at prices well above production costs? Will it play the lead role in conservation, also as intended by the Legislature, or has a little-noticed Davis executive order passed that responsibility on to other parts of the bureaucracy? And what will it do to reverse the Green Blackout of renewable energy perpetrated by the state during its secret dealings on the long-term power contracts?
The Power Authority is unprecedented in state history, an agency with potentially extraordinary power to reshape California’s energy picture. It has $5 billion in bonding authority and a vast charge to take on private power generators, build power plants, promote conservation, and foster renewable energy from wind, solar, biomass and geothermal sources.
The generous folks at Southern California Edison have offered to take one job that might fall to the Power Authority — buying electric power — in exchange for a state bailout of the troubled company. But that bailout is in doubt.
The right-wing attacks on the Power Authority were well-coordinated. State Republican leaders engineered a letter from the Federal Energy Regulatory Commission, controlled by George W. Bush appointees, questioning the legality of the state Power Authority’s building new generating capacity and entering into power contracts. Holdover Republican members of the state Energy Commission leaked an incomplete staff report to the Los Angeles Times — which is at best lukewarm about the Power Authority — suggesting that the state now has all the power it needs and there is no need for the new agency. Energy Commission leaders and other state officials later disowned the report, saying the draft relied on faulty assumptions. None of this criticism, from conservative and pro-corporate circles, is surprising. But concern from the left is striking.
Many progressives doubt Davis’ professed commitment to the Power Authority. “He never really wanted it,” says Doug Heller of consumer advocate Harvey Rosenfield’s group, the Foundation for Taxpayer & Consumer Rights. Davis was slow to endorse it. In meetings with Wall Street and power-company executives, Davis touts market solutions and his support for making deregulation work, though, of course, he publicly notes that he never endorsed the state’s deregulation plan. The legislation that created the Power Authority was authored by his liberal bete noire, Senate President John Burton (D–San Francisco), and languished for a long time in the Assembly under the influence of Davis’ ally Speaker Bob Hertzberg (D–Sherman Oaks).
Some are especially skeptical about three of his appointees to the Power Authority board — former Davis staff director John Stevens; Sunne McPeak, president of the Bay Area Council, a business organization that studies how economic growth affects quality of life; and Don Vial, head of the industry-dominated California Foundation on the Environment and Economy. Says one high-ranking Democrat: “These are people who have been in Gray’s Rolodex for a long time.” They join Freeman and Angelides, whose seat on the board was ensured by the Burton legislation.
Medea Benjamin, whose Global Exchange group has joined forces with Greenpeace and Public Citizen to promote public power and renewable energy, is aghast at Davis’ picks. “When you think of all the talent that could be called on,” exclaims the Green Party’s one-time U.S. Senate candidate, “of people who have shown commitment and expertise on renewable energy and conservation and public power, who are not in bed with the corporations . . . The best are the ones who were already set, Angelides and Freeman. McPeak is in bed with corporate California and has shown no commitment to public power. The labor guy Vial is closer now to utilities and energy companies than to workers. Stevens will do what he’s told by Davis.” Stevens served two days on the Public Utilities Commission, barely long enough to vote for the first rate hike sought by the governor.
Benjamin and other activists expect a struggle between those who see the Power Authority as the beginning of a vast new socialized power system for California, those who see it as a serious social-democratic brake on private power and a major catalyst for renewable energy and conservation, and those who want only to put a green cherry atop the existing private market of fossil-fuel energy. Top environmentalists, who lobbied for other picks, wonder if Freeman and Angelides, who favor the second option, will dominate the agency or if the other, more conservative appointees will block them.
McPeak’s public-affairs group is composed entirely of corporate executives, and she also serves on the board of Vial’s group. It, in turn, is the foundation arm of the Council on Environmental and Economic Balance, a lobbying group formed in the 1970s to promote nuclear power. Utilities and power companies provide much of its funding. Indeed, it sponsored a now notorious 1994 fact-finding junket of utility executives and state a regulators to England, where participants, inspired by the doctrines of conservative icon Margaret Thatcher, hatched many of the ideas later enacted in California’s deregulation debacle.
Vial is a former Public Utilities Commission appointee of Jerry Brown and an organized-labor official. But labor has a mixed record on energy issues. Influenced in part by evanescent promises that its power-plant contracts would be kept safe, labor backed the disastrous deregulation scheme. And, though labor backed the creation of the Power Authority, more recently it also has backed Davis’ proposed state bailout of Edison.
Angelides said he is looking forward to working with Freeman, whom he first got to know when the Sacramento Municipal Utility District brought him to California as its general manager after a public referendum shut down SMUD’s Rancho Seco nuclear plant. In recent months, Freeman worked closely with Angelides and Burton in developing the state Power Authority proposal before leaving the Los Angeles DWP to become Davis’ chief energy adviser.
“The number-one priority of the Power Authority,” says Angelides, “should be to play a very aggressive role in developing renewable energy. Our current risk is that the new capacity fostered by the state’s long-term power contracts is almost all natural-gas-fired. We need a much more diverse resource base, for economic and environmental reasons. Second, the Power Authority should be very active in energy conservation, taking the lead in financing. And we must build and own enough of our own generating plants so that California will never again be prostrate before private industry. All our actions must be premised on providing the state with protection against private dominance. If anyone thinks we have seen the last of energy-price squeezes, they are delusional.”
Angelides sees the new agency as one with a lean staff structure, “entrepreneurial, activist, muscular, not top-heavy.” Should it take over management of the state’s nearly $44 billion portfolio of long-term power contracts? Angelides doesn’t think so. New contracts are another matter. “I see the authority as an activist agency rather than as a central administrative depository.”
Independent experts note that new wind-power contracts would be well-advised, and Angelides says that he is interested. Which brings up the question, do the existing contracts, negotiated in panic mode earlier this year, give the state not just a reserve capacity but a serious oversupply? Angelides doesn’t think so. Some contracts, he notes, are still just agreements in principle.
McPeak won’t talk about her energy views yet, saying, “I’m just trying to learn right now.” McPeak did say that she did not apply for the appointment and had no idea she would get it until a few weeks ago.
Vial, who has been out of state government for over a decade, is also cautious in private conversation, but does talk about an intriguing and expansive role for the Power Authority, that of “taking the lead for the state in resource planning. That’s something the PUC used to do,” he notes, “before deregulation knocked it out. California needs an energy-investment plan, and the Power Authority should put it together.”
The other appointee under fire, John Stevens, expressed more defined views in an interview before his first board meeting. In this term-limits era, he is a key figure in the permanent state government. Until a few months ago, he was the governor’s staff director and, prior to the advent of David Freeman, served also as Davis’ chief energy adviser. Before that he was chief of staff to then–Assembly Speaker Antonio Villaraigosa (D–Los Angeles). Now he is “chief of staff in waiting to Assembly Speaker in waiting” Herb Wesson (D–Los Angeles), who is expected to take over the Assembly when current speaker Hertzberg, now term-limited, steps aside early next year.
“I don’t want the state to remake the market or create an enormous bureaucracy,” Stevens says. He doesn’t want the state to compete with the private energy companies and discourage investment in new privately owned power plants. “We have a lot of new private plants in the works,” he notes.
However, the state competing with private energy companies to keep them honest is part of the legislative intent underlying the creation of the Power Authority. Stevens acknowledges that it is very difficult to say when state investments in power generation would discourage existing private investments. And he agrees that the private generators opposed the creation of the Power Authority because they want to continue their control of the market.
Stevens defends himself against charges that he won’t be independent of the governor who appointed him and for whom he served as a top aide. “I don’t work for Gray anymore. My paycheck comes from the Legislature. I don’t expect or want calls from the governor on how to vote.”
At the Power Authority’s first board meeting last month, I asked Stevens if he’d had any instructions from the governor. He smiled and said no.
The meeting was quite a show — standing-room-only in a big Capitol auditorium for the morning — and may allay some of the left’s concerns.
Chairman Freeman encouraged dozens of speakers, many of them decrying the Green Blackout in the state’s $43 billion of long-term power contracts and urging an openness lacking in the state’s old energy agencies. When a series of Greenpeace advocates urged the authority to put $2 billion into renewable energy, conventional-industry lobbyists muttered angrily, only to turn silent when Freeman remarked, “Be careful what you wish for, you may get it from this group.”
The press departed by early afternoon, before the most interesting part of the meeting, proposals from dozens of energy developers. There was a stunning profusion of proposals, including nearly 4,000 megawatts of green power on offer.
To put this in perspective, the state bought nearly 10,000 megawatts during the secret negotiations that resulted in the long-term contracts. Only 120 megawatts of the power purchased through these contracts are renewable energy. Though state officials say they bought all or most of the renewables offered then, renewable-energy producers bitterly deny this, saying the true figure on offer to the state was more like 1,500 megawatts.
The Power Authority has an opportunity to help roll back the Green Blackout, and, by day’s end, the directors were weary but enthusiastic about what they’d heard. “If even a quarter of this is viable,” said Stevens, sounding much more expansive than before the meeting, “we can do an enormous amount to push renewables.”
“Why have we been working through this energy nightmare if we don’t come out on the other side with new energy technologies?” asked Freeman. He and the others will get the chance to put their enthusiasm into action soon enough. They intend to start approving energy projects this month.