Fortnightly
1996 Regulators' Forum
November 15, 1996
NARUC is restructuring. What must it maintain, what must it change, and what qualities must its director have to keep it ahead of industry issues?
"I think their main goal is to make sure that we're focused in Washington, particularly on the Hill and at the two regulatory agencies that we're going through fundamental restructurings with \(em the FCC on the Telecommunications Act and the FERC on electric restructuring.
"I think NARUC needs to take a leadership position in both of those efforts, and I think they have."
How active is your state legislature in electric deregulation? When is this participation helpful? When is it intrusive?
"We just went through legislation that passed both houses unanimously. And that was the most comprehensive piece of legislation that has gone through the California legislature, I think, in the last 20 or 30 years. ... [There were] somewhere between 200 and 300 hours of hearings.
"During that process, I personally and some of my fellow commissioners were there to explain to them our policy decision. ... And when the legislation was over with, they made some changes, but the basic principles weren't touched.
"Certainly the legislation did two things we could not do. Well, we could do it, but it fortified our ability to collect stranded assets by putting it in statute \(em a surcharge. And it also enabled the municipal utilities to become members of the ISO, which we could never have forced because we have no jurisdiction. So I think those were the two principle things that were done that were very positive.
"They took a lot of decisions that were before us and made a decision for us that we would have normally done through our own process, so whether you call that intrusive. ... We had a rate proceeding on Pacific Gas & Electric (PG&E) that was before us, and they decided it for us. They granted PG&E a 5-percent increase for the next two years. ... It was a quid pro quo, for, in this case, PG&E not opposing the legislation. I mean there were over 100 parties involved in this process. So everybody got something; everybody gave something up."
Did industrial and residential consumers pressure you to deregulate? How do the grassroots politics in your state differ from elsewhere; what defines your political climate?
"What defines our whole exercise, our whole restructuring, is our high rates and the strong cry by the large users for customer choice. Those are the two driving forces.
"[Residential consumers] fit in in that they will get the benefit along with the large customers of the reduction in rates that we hope to accomplish through deregulation and opening the market. But they weren't crying for it because their bills generally were not that much out of line."
What are the pluses and minuses of U.S. Rep. Dan Schaefer's restructuring bill?
"I really haven't had a chance to analyze it. . . . As long as the states are left with the retail function and the intrastate regulation, some overall federal policy would not be objectionable."
It appears from reading the California restructuring legislation that, like in Rhode Island, the utilities got everything they wanted. Would this have happened had the interested parties worked solely with the CPUC and not with legislators?
"There were 100 people in that room for ... 200 hours, and I was there for each hour myself, personally. So there were no deals done in the dark in the booth behind the back. They were done in public. I was there. Our voice was heard. In some cases, it was rejected, and [legislators] did something differently. In some cases we hadn't acted, so it was hard to say. It was intrusive maybe, but whether they decided differently than we would have decided, we'll never know.
"I think, though, that the pressures are great. If the 100 largest industrial customers in every state want to have some kind of restructuring, there's going to be tremendous pressure put on the commission. And I think if the commission doesn't respond in some form, there will be pressure put on the legislature and I'm sure the governor's office in every state. ... Those are the realities. I don't think it's the utilities, it's the large industrial customers driving this. ... The utilities are probably just trying to get
protection on the stranded assets as best they can.
"The legislature adopted our position on the stranded assets, which is to give [utilities] 100 percent of those assets that are above market, but reduce their return by 20 percent. The legislature did not touch that decision.
"[The legislature and the governor] have the authority in most states to enact legislation that can override virtually any decision. So if you don't make them a player, they may get vindictive." t
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