Went to the Press Club lunch with Loretta Lynch today.  I don't think there
was anything remarkable said; in fact, it was difficult to understand
exactly what she was saying due to an extreme case of laryngitis that kept
her voice to a whisper.

She opened with a speech (copies may be distributed later if possible)
saying that there are parallels between today and the 1920s, when California
first started to regulate the "unfettered markets."  Like then, she said, it
is unfair for a few sellers to have power over the supply of electricity in
California.

She called it a myth that the PUC opposed letting the utilities sign
long-term contracts.  When the utilities asked, she said, PUC gave them that
ability and that they indeed entered into contracts last fall.  In some
cases, they made a business decision not to.

She also said it is untrue to contend that the rate freeze is in opposition
to FERC's positions.  The rate freeze was an integral part of deregulation,
she said, and FERC approved the federal elements.

Part of the AB 1890 problem, she said, was that private generators would
have had to come into the state and somehow luckily find the right mix to
meet the state's needs, compared to a system in which a body such as the PUC
takes a role in planning.  She believes the PUC must take a greater role in
planning -- although she emphasized it only has jurisdiction over utilities
and their retained generation -- to maintain the state's economic stability
and prevent having to buy electricity at skyrocketing rates.  She
characterized AB 1890 as flawed theory and unfulfilled promise.

She said FERC has not used its authority to protect California from unjust
rates.

She is in favor of cost-based rates and wants to regulate the utilities'
retained generation.

I managed to ask her if, as legislative and administrative efforts progress
and California possibly buys the grid and more, whether she believes
California will "wall itself off" in the name of self-sufficiency or use an
open-access approach.  I followed her answer by asking if she has detected
any fear from other western states about the affect California's decisions
will have on them.

Her reply:  We need to look out for California but there is no way you can
isolate yourself because of the nature of power sharing arrangements and the
way power moves.  We need to include the interests of neighboring states.
Other states have often had better systems for meeting power needs and we
need to learn from those.  We need to fix lax market rules.

She indicated that there is a willingness to work with the other states, and
that there is something of a sense that we're all in this together.


Other stuff:  When asked if the state could lock into long term contracts
without a rate increase, she said it depends on how you do it.  It depends
on the type of long term contract and QF reform that doesn't put QFs out of
business.

About 30% of California's power is still generated by utilities and
therefore can be regulated by the PUC.  She thinks we should re-look at the
baselines to reflect the 21st century, possibly by nature of use or other
factors instead of the climate zones California uses now.

A serious problem in California, she said, is that the accountability and
responsibility for power needs is fractured.  One entity's only purpose may
be to make sure power is available, but they won't necessarily consider what
it will cost.  California "must repair the link between responsibility and
reliability," she said, adding as a good soldier that the Davis
Administration has taken steps in that direction.

Finally, she was asked about this summer and if blackouts will occur.  Her
prediction:  If we save 10%, we'll be OK (there was a low grumble in the
room, obviously implying people thought that was unlikely).  If it's a 1 in
2 year, we're OK.  If it's a 1 in 20 year, serious problems are ahead.