X-Sender: rich@mail2.quiknet.com
X-Mailer: QUALCOMM Windows Eudora Pro Version 4.2.0.58
Date: Fri, 03 Nov 2000 16:52:32 -0800
To: <mflorio@turn.org>,"Bill Marcus" <bill@jbsenergy.com>,
?"Sara Myers"<ssmyers@hooked.net> <mshames@ucan.org>,
?<Dan_Kirshner@environmentaldefense.org >,
?"Jim Caldwell" <tgaljhc@aol.com>,
From: Rich Ferguson <Rich@Cleanpower.org>
Subject: Wohin gehen wir?
Cc: <vjw@cleanpower.org>,"Julian, Bill" <bill.julian@gov.ca.gov>

Folks,
I am growing increasingly worried about future public policy oversight of 
utility power purchases, given the current conventional wisdom that more long 
term purchases should be made. I have been promoting the notion that the 
default power portfolio should be maintained by a new non-profit quasi-public 
entity with revenues guaranteed by the PUC, rather than by three separate 
IOUs subject (or not) to reasonableness reviews. Your comments on this notion 
are eagerly sought.

Purchasing power for default customers
The recently proposed FERC decision essentially puts California back where it 
was in 1990. There appears to be near universal agreement that the IOUs 
should enter into long term power purchase agreements and limit exposure to 
the spot market. As you recall, the BRPU reached the same conclusion, decided 
how much should be purchased, held the auction, etc.. And then FERC blew it 
up after deciding that the state's avoided cost estimates were wrong. FERC 
appears now to agree it made a mistake, and essentially orders us to start 
the process all over again.

However, the proposed order makes no mention of state oversight of utility 
purchases. But at the briefing held last Wednesday for Bowen and legislative 
staff, FERC staff made it clear that they were not mandating any alternative 
to replace the must sell/buy requirement that they were eliminating. 
Presumably the state could still mandate the IOUs buy 90% in the PX (or 
whatever) and still comply with the FERC order. As long as the utilities 
remain regulated by the PUC, the state can control their power purchases.

The problem is that after screwing around for ten years, there is now 
enormous pressure to let the utilities do what they will, a result that I 
fear would be bad for consumers and bad for the environment. On the other 
hand, there no time nor stomach for repeating the BRPU process.

My preferred solution is the establishment of a new, not for profit 
"utility", that would make power portfolio decisions for default customers - 
let's call it CalPower.? The three existing regulated utilities would no 
longer sell energy at retail. CalPower decisions would be subject to whatever 
public policy conditions the legislature and/or the PUC chose to impose. 
However, some kind expedited review process would allow CalPower to be very 
nimble in the power market and recovery of their revenue requirement would be 
guaranteed. Direction of CalPower could be by political appointees, elected 
representatives, or some combination. My fantasy is a governance structure 
similar to CalPERS, in which broad legislative guidelines are interpreted by 
a board of directors and implemented by experienced traders.

Compared to the present structure in which default portfolios are designed by 
three different for-profit utilities, CalPower appears to have the following 
advantages:
The non-profit structure eliminates all financial conflicts of interest in 
portfolio design and ensures optimum implementation of public policy goals;
It ensures equitable treatment of all customers state-wide, with price 
differences reflecting market realities rather than differing purchase 
criteria by each utility;
It allows CalPower to be as nimble in the market as any other commercial 
trader by allowing the PUC or other state agencies to participate in 
portfolio design issues up-front, rather than requiring lengthy after the 
fact review.

CalPower's disadvantage appears to be that it requires yet another new 
state-chartered non-profit organization. Politicians appear intent on blaming 
the two they have already and returning to the old utility-centric system, 
rather than risk their necks by proposing solutions that they then would be 
responsible for.

Obviously, there are many questions and details to be worked out. 
Which customers would be default customers? [My option would be to declare 
all customers under 50 KW permanent default customers - green or other 
marketers could participate through contracts for differences, but physical 
power would be acquired for all these customers by CalPower. Customers > 50KW 
would be on their own.]
What is the relationship with the PUC? With the legislature?
Could the role of CalPower be better filled by an existing for-profit 
company? [eg Enron?]
How are the benefits/costs of existing utility generation assets and PP 
contracts shared?
Etc

Is this concept attractive enough to be worth pursuing? The next step would 
be to get a group of interested parties together to put some meat on these 
bones and float the idea seriously - perhaps even get some draft legislation 
on paper to shop around. Interested? Let me know.

Regards,
Rich