On the morning after Labor Day, back from one last beach fling, Wall Street Journal assistant features editor Max Boot published an editorial castigating California Gov. Pete Wilson for his alleged failure to "take a stand" on electric deregulation in the Golden State ("California's Governor isn't Plugged into Deregulation Debate," Sept. 5, 1995, p. A15). "There's a leadership vacuum here," writes Boot. "Governor Wilson is partly responsible for the problem ... he appointed Mr. Fessler and the other PUC members. But he hasn't taken a stand on PoolCo or a direct hand in the negotiations."Well, good. But let's not stop there. Why not ask Bill Clinton when he last lunched with Elizabeth Moler to chew the fat on interstate electric markets? Have the two even met? Now I can't say for sure if Pete Wilson can tell a purchased-power contract from a Contract for Differences. But I'm willing to bet that Bill Clinton can't distinguish between point-to-point and network transmission. And yet, the changes that lie buried between the lines in the Notice of Proposed Rulemaking (NOPR) on stranded investment and electric transmission, issued last Spring by the Federal Energy Regulatory Commission (FERC), certainly appear much more drastic than those found in the Energy Policy Act of 1992, which required an act of Congress.

With Chair Moler at the helm, and Bill Clinton far in the background, the FERC treads cautiously but unfettered as it remakes the largest single industry in the country. Whose idea was it?

Nosy Governors

In my time I can remember at least three instances when state governors have played a leading role in the policy of electric regulation.

Back in 1978 in New Hampshire, Democratic gubernatorial candidate Hugh J. Gallen ousted incumbent Republican Meldrum Thomson when he (Gallen) promised to sign pending legislation that would bar any rate-base allowance for construction work in progress (CWIP) (em a concern prompted by a case that year that hiked rates for Public Service Co. of New Hampshire to reflect CWIP on the Seabrook nuclear plant. Gallen won the election and signed the anti-CWIP bill in May 1979. By August, the state commission had retroactively removed all Seabrook CWIP from PSNH rate base, setting the stage for a famous bankruptcy case a dozen years later.

During the next decade, Arkansas Gov. Bill Clinton immersed himself in l'Affaire Grand Gulf. That case involved unwanted costs and output from the Grand Gulf nuclear unit 1, allocated by the FERC among the four operating subsidiaries of Middle South Utilities, Inc. (now Entergy). Clinton wanted to deflect high rates away from Arkansas (em and toward Middle South customers in Mississippi and Louisiana. The U.S. Supreme Court eventually got involved.

And in the 1990s, spurred on perhaps by Raytheon and other large customers demanding lower rates, we have seen Massachusetts Gov. William Weld and Lt. Gov. Paul Cellucci file a proposal with state regulators to force electric utilities to develop deregulation plans by the end of the year. The commission obliged in a recent order (D.P.U. 95-30, Aug. 16, 1995).

Inquisitive Lawmakers

If the executive branch won't curb the regulators, there's always the legislature.

In California, the Utilities and Commerce Committee of the state Assembly has approved at least five bills to manage the electric utility restructuring activities of the California Public Utilities Commission. (For more information, see EnergyOnline(r), at http://www.energyonline.com.) Nevertheless, Dr. Rajat K. Deb, president of LCG Consulting, Los Altos, CA, predicts that we won't see much action in Sacramento until the CPUC resolves its PoolCo-Access dispute.

Dr. Deb says that not much happened at the CPUC's August 14 meeting on PoolCo and market structure. Participants were left asking, "Why are we here?" Meanwhile, Oakland journalist J.A. Savage reports more action at the August 21 meeting on transition costs and direct access: "They talked about market power. Where the money actually resides, or could reside. Tempers were a little closer to the edge."

For its part, the CPUC has gone on the offensive, issuing its Vision 2000 report to the legislature. According to Dr. Deb and LCG Consulting, the CPUC has declared: "This is not an effort by a government agency trying to find a reason to exist. It is the reinventing of an agency with a vital role to play in governing the fundamental industries upon which the economic and social structure of the state rests."

Secret Deals

By early September, a supposedly secret "memorandum of understanding" (MOU) was circulating (em a work in progress detailing elements of a compromise between Southern California Edison Co., the California Manufacturers Association, and some independent generators and energy producers.

According to the "secret" memo, the compromise would recommend a five-year phase-in of direct access beginning when the PoolCo (the Western Power Exchange) kicks in, no later than January 1, 1998. The CPUC would initiate an pilot aggregation plan (during the first year, "as soon as practical") for agricultural, educational, small commercial, and residential load. The coalition and others would continue to develop more MOU specifics.

"They have the Governor's tentative backing," reports Savage.

But we'd like to know whether Chair Moler and the FERC enjoy the backing of Congress and the Clinton Administration. Tentative or wholehearted?

Editor

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