United States

United States

Governor proposes opening grid in deregulation of energy market

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The Governor of California, Pete Wilson, is recommending axing the California Energy Commission (CEC) -- which oversees energy including wind policy -- and merging it with another agency to create a Department of Energy and Conservation with fewer employees. The shake-up is to reduce and change the state's involvement in energy policy and increase the power of the private sector and market place. California has more wind capacity than anywhere else in the world.

Importantly for independent power producers, Wilson also recommends opening the electricity transmission grid to all users, including wind. He further proposes that all non-forecasting functions of the CEC should be merged with the Dept of Conservation; the energy and power plant siting programmes of the Public Utilities Commission (PUC) and CEC should be eliminated and an Energy Facilities Siting Board created; PUC should be streamlined and it should have a "referee type" role in resolving issues between utilities and independent producers.

Wilson's recommendation, released December 1, is to reduce government activity in state energy policy, an area that is increasingly dominated by market forces and competition, according to the Governor's office. Wilson had initially proposed eliminating the CEC in his 1993-94 budget, primarily to cut costs but also to improve accountability.

The five energy commissioners would also be replaced with a single department director; and a review will also be requested of all CEC programmes to eliminate waste by transferring functions to other agencies or to the private sector. "I have concluded that the market can be trusted to engage in the planning, development and deployment of electric generation capacity in California," says Wilson. "The nature of electricity generation has changed, and a much more open system with easier access to the electricity grid is needed." The Governor's office adds that the "command and control" function of the PUC and its planning and siting responsibilities are both outmoded -- suited to an era of monopoly utilities -- and too expensive.

"It's a good idea -- it's been something that's been needed to be done," says Jan Hamrin of Hansen, McOuat, Hamrin &

Rohde, formerly of the Independent Energy Producers. But she cautions that a competitive market place responds best to short-term forces and that she is concerned that longer-term issues such as the environment or equity for generations of rate-payers over time will be adequately addressed. She is also concerned over changing the PUC adjudicatory functions, leading to a system that could be dominated by the strength of an industry's lobbying.

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