FERC, California Spar Over New Power Authority
California’s newest attempt to fix its ongoing energy crisis already has drawn fire from federal regulators.
The Federal Energy Regulatory Commission is looking into the legality of the newly formed California Consumer Power and Conservation Financing Authority. FERC issued a statement Aug. 22 saying the power authority might be illegal.
The FERC’s comments came in a response to an Aug. 17 letter from California Rep. Doug Ose, R-Woodland, chairman of the House Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs. Ose had passed along concerns from California Secretary of State Bill Jones.
Jones earlier stated that the agency’s authority to issue up to $5 billion in bonds to buy, lease and build power plants and transmission lines might violate federal law. FERC’s Aug. 22 letter says the proposed authority would fall under the Federal Power Act. “These provisions in (the power authority legisation) are unclear but could be construed in certain circumstances as violating FERC’s jurisdiction under the FPA,” said Kevin Madden, FERC general counsel.
“To the extent that the projects are owned or operated by a public utility, the Authority’s regulation of the utility’s rates, terms and conditions for jurisdictional services could conflict with FERC’s exclusive jurisdiction,” Madden said.
The problem is that the state agency might use its state-owned power plants and transmission lines to deliver electricity out of state. This would violate FERC’s jurisdiction, Madden argued.
S. David Freeman, the chairman of the power authority, downplayed the importance of the letter.
“This correspondence is a big to-do about nothing,” Freeman said. “The secretary of state,who has no energy responsibilities that I know of,writes a letter to a member of Congress suggesting that a law recently enacted by the Legislature violates federal law. And he got back a long-winded answer that says, ‘no.'”
The letter lists a few possible scenarios where FERC might have jurisdiction over the state power authority, but that’s about it, said Freeman, who also took a few swipes at FERC.
“It strikes me that an agency that sat on its collective rear ends for month after month while we were being overcharged,and they did not do their job in carrying out their jurisdiction,really has got extreme nerve to come in here and dream up a bunch of theoretical situations that are absolutely different from the mission the governor laid out for us,” he said.
The only reason that California is in the power-buying business at all is due to FERC’s inaction, Freeman argued.
“The staff member of FERC who wrote this letter needs to look in the mirror to recognize that he represents an agency that has been responsible for the state of California losing billions of dollars. And if they can’t help us, the least they could do is stop writing letters,” he said.
Jones strongly disagreed, on all counts. The state power authority agency is too powerful, he said.
“A cursory review of (the legislation) indicates that the authority has the power to establish, finance, own, operate, acquire or construct electrical power facilities,” Jones said. “In addition, the authority has very broad powers to collect service charges for energy projects and energy sold in and out of California.”
Jones, a possible gubernatorial candidate, also took a few swipes of his own.
“From the outset of California’s energy crisis, brought about by the inattention and mismanagement of Gov. Gray Davis, I have said that the state should not be in the energy business,” he said. “However, the Davis administration embarked exactly on that course. They did so sloppily and without adequate regard for proper review, analysis or safeguards.”
Michael Shames, executive director for the Utility Consumers’ Action Network, came down on California’s side in the letter spate but said the state likely will have to share responsibilities with federal regulators.
“As a legal analysis it is almost embarrassing,” Shames said. “It suggests that there are ‘conflicts,’ but in fact, it simply means that there may be ‘shared jurisdiction’ on issues pertaining to transmission lines and hydroplants.”
If the power authority gets involved in these assets, it would have to get FERC approvals, just like every other public power authority does, Shames said. That is hardly a conflict, since Bonneville Power, the Sacramento Municipal Utility District and others are in similar situations, Shames said. The letter is more a political warning shot more than a bona fide legal analysis, he said.
“It is FERC’s ham-fisted attempt to warn the (power authority) that FERC will try to stand in its way,” Shames contended. “It clearly represents the FERC’s antipathy to any state involvement in the energy industry. It also reveals the extent to which FERC continues to carry the water of the energy industry, which is opposed to any state involvement.”
Zion is a staff writer with the San Diego Business Journal.
