Poizner, a 48-year-old moderate Republican from Los Gatos, said he planned to run for state insurance commissioner next year instead.
"I couldn't serve there without recusing myself" on many votes, Poizner said.
According to a statement of economic interests filed in late 2003, Poizner held millions of dollars of investments in a variety of telecom companies.
Much of his wealth came from his role as founder of SnapTrack Inc., a cellphone technology company. Poizner sold the company to Qualcomm Inc. for $1 billion in 2000.
Poizner's personal views favoring alternative energy development and modest deregulation of the electricity market are in line with those of Gov. Arnold Schwarzenegger.
In December, when the governor announced his intention to nominate Poizner to the PUC, Poizner said that he "hoped to serve as a unifying force and consensus builder" on the five-member commission.
The panel, until recently, has been riven with dissension that Schwarzenegger aimed to heal with the appointment of Poizner and another new member, environmental attorney Dian Grueneich, who took her seat in January.
Poizner's withdrawal from contention leaves the PUC one member short at a time when the four sitting commissioners are busy trying to ensure that California has enough electricity to avoid blackouts on hot afternoons during the summer.
The commission, which has its offices in San Francisco, also is the focus of a long-running struggle between consumer advocates and cellphone companies over a proposed telecom bill of rights.
The protections, which were adopted by the commission last May but shelved on a 3-1 vote in January, would address complaints of false advertising and confusing billing practices.
Consumer activist Michael Shames, director of the Utility Consumers Action Network in San Diego, said he was relieved that Poizner and Schwarzenegger had given up on the nomination.
"It's good that he's finally pulled his name because the delay has been causing a lot of problems for the other commissioners," Shames said.
Schwarzenegger's naming of Poizner to the $114,191-a-year job originally was greeted enthusiastically by business groups and environmentalists, who said they liked Poizner's openness and lack of ideological baggage.
But much as he wanted to serve, Poizner said he couldn't figure out a way to satisfy lawyers at California's watchdog agency, the Fair Political Practices Commission, that would allow him to vote on decisions affecting the telecommunications companies -- numbering at least 100 -- with ties to his portfolio.
Although he immediately sold his shares in public companies such as SBC Communications Inc., BellSouth Corp. and Verizon Communications Inc., Poizner said he couldn't find an economical way to create a so-called blind trust for a number of illiquid, long-term investments.
Those holdings in diversified venture capital funds and so-called exchange funds could not be sold quickly because they are in start-up companies and "are going to take a long time to mature," he said.
As for his plans to run for state insurance commissioner next year, Poizner said the job "impacts every consumer in the state, and I think I can make a contribution there."
A Schwarzenegger spokeswoman said the governor's office didn't want to speculate about who might be nominated for the PUC vacancy.