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Re-regulating utilities puts Californians in charge of energy destiny

WITH significant energy shortages forecast as early as 2006, California is dangerously close to experiencing a repeat of the energy crisis that nearly crippled our economy and threatened our environment a few years ago.

The most striking memories of the energy crisis were blackouts, price spikes and high- priced energy contracts. A less visible, but equally damaging result, however, was the need to bring on line some of the most-polluting, least- efficient power just to keep the lights on.

There is an irony in that fact because California has been a leader in energy efficiency and the use of renewable power. Certainly, the vast majority of Californians would like to see more energy efficiency, more use of renewable energy technology, and more certainty in our energy future.

If the state Legislature and the governor do not step in now and establish a clear energy policy, we will lose control over our state's energy future. Losing control means being forced, as we were in 2001, to buy energy when supplies are extremely tight, and having no choice but to buy any kind of power available at any price.

It wasn't supposed to be like this.

During the height of the energy crisis and immediately thereafter, dozens of new power plants were approved and licensed by the California Energy Commission. And, while the CEC and the project owners had every intention of seeing those plants come on line the financing has simply dried up.

Today, less than half of the power plants that have been approved are still moving forward and on schedule. Additionally, those plants were, in part, to replace the oldest, dirtiest generation plants in the system. The proposed and approved new plants are not only more efficient, more powerful, and cleaner, they are also part of an overall energy strategy that reduces California's dependence on out-of-state energy merchants.

Even though greater use of renewable sources of energy is now mandated by state law, energy experts, regulators and elected officials know we need more power for a state that is growing at a rate of 500,000 more people each year. Regulated utilities know we need more power. Unregulated power producers know we need more power.

But building a power plant requires financial investment, and the current uncertainty of the regulatory environment is preventing utilities and unregulated power generators from securing capital. The regulatory uncertainty is the combined by- product of a failed energy policy and subsequent regulatory inactions to fix that failed policy. Clear direction from the Legislature and the governor is the only way to eliminate the cloud and stimulate much-needed investment.

AB 2006 authored by Assemblyman Fabian Nunez, D-Los Angeles, which passed out of the Assembly last week, will help establish regulatory certainty in California. Under AB 2006, utilities will be required to forecast their power needs several years in advance and demonstrate how those needs will be met in a manner that will provide the best value to ratepayers.

This bill builds on California's long-standing commitment to energy efficiency by requiring utilities to look first to cost- effective energy efficiency programs when planning to meet their forecasted needs.

Requiring utilities to forecast their customers' needs and plan how they will be met in the most efficient, cost-effective manner is an important piece of the public policy puzzle. To revive investment in power plants, however, AB 2006 also reaffirms that utilities will be reimbursed for the investments they make on behalf of their customers, but only if such investments are approved by regulators.

This clarity is not only needed for utilities and the companies they purchase power from, but also for California's electricity consumers and businesses who depend on reliable, reasonably priced power. This is one aspect of re-regulation that must be achieved.

Simply put, this bill will put California back in charge of our energy destiny and reduces the likelihood we will be forced to pay for less efficient, more costly and more polluting power options.

Combined with the significant advancements that have been made in the use of renewable sources of energy, AB 2006 is good for electricity consumers, our economy and our environment.

-- Fred Keeley is Executive Director of the Planning & Conservation League, and the PCL Foundation and former Speaker pro Tempore of the state Assembly, having represented the Monterey Bay area from 1996 through 2002. He can be reached at fkeeley@pcl.org .

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