Tag Archives: regulatory reform

Thinking outside the box on the CPUC’s future

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Assemblymember Mike Gato (D-LA) is proposing a constitutional amendment to dissolve the CPUC–blowing up the box! The CPUC currently regulates energy utilities, telcom, transportation and water. That’s a tall order to ask five people to competently understand all of those arenas. And on the flip side, many have recognized that the state has too many “cooks in the kitchen” regulating energy, and it’s only gotten worse with increased climate change regulation. The CPUC hasn’t done much to burnish its reputation with the scandal of Mike Peevey’s “rulings for sale” and the inadequate responses to the San Bruno and Porter Ranch disasters. Closing up shop and starting over may be the best solution.

Getting to the harder question about stranded assets

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John Farrell at the Institute for Self-Reliance argues that existing utility fossil-fuel plants should not be given “stranded assets” status. While his argument about “stranded assets” makes sense from a society wide economic sense, it doesn’t conform with the utility regulation world in which “stranded assets” is actually relevant. Having gone through California’s restructuring and competitive transition charge (CTC) (I’m the only person outside of the utilities to conduct a complete accounting of the CTC collection through 2001), it’s all about what’s on the utility’s books and what the regulatory commission agrees is an acceptable transfer of risk. And based on what happened with Diablo Canyon in 1996 (the correct treatment would have recognized that PG&E had collected its entire investment at the regulated rate of return by 1998—I did that calculation too), it’s not promising.

So I suggest focusing on the shareholder/ratepayer risk sharing arrangement and how that should be changed in the face of the oncoming utility 2.0 transformation as a more fruitful path. We have to change the underlying paradigm first. That there are benefits from retiring generation assets is not a hard argument to win—that was the case in 1996 in California. The harder one is that the past regulatory compact should be changed and that it won’t somehow impact future investment in the distribution utility.

Overwhelmed by “opportunities” at the CPUC

The opening of yet another rulemaking at the CPUC and the revelations of more contacts between PG&E and CPUC Commissioners are two sides of a larger conundrum in state electricity policy development and implementation. The OECD recently issued a wish list for how regulatory agencies should be structured and behave. (Thanks to Mark Pearson for posting this.) Yes, some are “pie in the sky” but they provide a useful means of evaluating how a regulatory agency is performing.

Looking at the first principle, the CPUC has been set adrift in part by the lack of role clarity in the state. At one point at least 8 statewide agencies had significant roles in electricity planning and ratemaking. (Along with the CPUC, there’s been the CEC, CAISO, CARB, CDWR, SWRCB, Electricity Oversight Board, and California Power Authority, the last 2 now defunct.) And there are additional local agencies (e.g., SCAQMD). This has blurred the lines of authority and allowed forum shopping.

And perhaps most importantly the number of proceedings at the CPUC have proliferated to a point where it is impossible for intervenors to devote enough resources to follow what’s happening everywhere. At least 14 different rulemakings are looking at interdependent elements of planning for increased renewables and the transformation of the electricity market. These include the long term power procurement, renewables portfolio standard, energy efficiency, water-energy nexus, demand side response, utility shareholder incentives, storage, distributed generation and self generationsolar initiative, net energy metering, alternative fueled and electric vehiclesresidential rate design, CCA rules, and recently, distribution resources planning.  And these don’t count the many utility applications such as the green tariff and community solar garden proposals. Some of these proceedings have been open over a decade with only partial resolution, and the CPUC has opened direct successors up to 4 times. While looking to develop a consistent regulatory framework for evaluating integrated demand side resources is an admirable goal, it could be overwhelmed by the divided attention demanded from all of these other proceedings. That undermines another OECD principle–transparency–even if appearances look differently.

Finally funding for both intervenors and skilled CPUC staff has become untenable and effective participation in declining, further eroding yet another OECD principle. This allows the well-funded utilities to influence outcomes while no one is looking. The documentation of the meetings and emails are only a reflection of the underlying problems.

The answers would seem to include:

  • to consolidate proceedings rather than opening new ones,
  • not adding yet more ratesetting proceedings for specific add ons, and
  • funding intervenors on a more equitable basis with utilities and paying those groups sooner than two years after the relevant decision.

Some of these will require legislative action; others might be implemented after the current CPUC president has left. But it will only happen if intervenors collectively demand reform.