Plan Would Replace PUC, Energy Commission : Legislature: Proposal, which would need voter approval, calls for a single regulatory agency and lower utility rates, lawmaker says. Consumer groups react cautiously.

After years of discussion, lawmakers appear to be close to a deal that would abolish the Public Utilities Commission and the Energy Commission and create a single new regulatory agency that legislators say would be more attuned to consumers.

The closed-door discussions on the issue are part of this summer’s state budget negotiations, and come as utilities are pressing for far-reaching deregulation of electrical service.

Prodded by Senate President Pro Tem Bill Lockyer, state Sens. Steve Peace (D-Chula Vista) and Bill Leonard (R-San Bernardino) are working on a deal to create a new entity called the Utilities Exchange Commission, and they have been meeting with Gov. Pete Wilson. The state’s voters would be asked to approve the change.

“These discussions are very fluid,” Peace said. “We’re trying to bite a huge apple. To do it takes on all the embedded institutions of the status quo. Make no mistake, they are mobilizing their forces as we speak and they will throw up all the canards.”

Leonard said that electric rates paid by Californians are 50% higher than the national average, and that the proposed Utilities Exchange Commission would be designed to lower rates for businesses and individuals.

“This is the first attempt since 1911 to deal with the way we regulate utilities, with an emphasis on the rates paid by consumers,” Leonard said. “We don’t think it’s worth doing unless” it lowers rates.

The Energy Commission has long been a target of budget-cutters, and Wilson called for its abolition in his proposed $56-billion budget.

But the Peace-Leonard plan goes beyond the governor’s idea by adding into the equation the powerful Public Utilities Commission, a San Francisco-based agency that is responsible for setting utility rates for every Californian.

The five PUC commissioners--there is one vacancy--are paid up to $103,178 a year and serve six-year terms. The five Energy Commission board members are paid up to $92,464 annually.

Creation of the new Utilities Exchange Commission would require voter approval of a constitutional amendment to replace the PUC.

No legislation creating the new entity has been introduced. But as initially drafted, the proposal gives the governor authority to appoint seven Utilities Exchange Commission board members, subject to Senate confirmation, to four-year terms.

In addition, the proposal seeks to stop a form of lobbying that is now commonplace, but criticized, at the PUC. The proposal would prohibit lawyers, lobbyists and others involved in rate-setting and other PUC matters from trying to influence the outcome of decisions by contacting commissioners privately, a practice common under the current system.

Representatives of utilities contacted Wednesday generally seemed supportive of merging the PUC and Energy Commission into a new agency, while those representing consumers and alternative energy producers were more skeptical. But both sides agree that the powerful PUC is a troubled agency in need of reform.

“Nobody is happy with these guys the way they are,” said John White, a lobbyist who represents environmental groups and alternative energy producers. “On the other hand, it could easily be made worse by the Legislature.”

Mike Florio of the consumers group Toward Utility Rate Normalization said he worries that the new Utilities Exchange Commission won’t have a strong consumer bent.

“What we fear here,” Florio said, “is a move by the utilities to muzzle the professional staff, so they can get what they want from the political appointees who they can influence with campaign contributions.”

The proposal comes as the PUC is enmeshed in one of its most significant endeavors ever--the deregulation of electrical utilities, something that would add competition to the delivery of electricity and affect electric rates statewide.

Both Peace and Leonard say they want those efforts to continue, and that their proposal will not slow work on deregulation.

Greg Pruett, spokesman for Pacific Gas & Electric Co., said “any kind of regulatory reform that results in lower rates for consumers, and relies more on the market and less on regulation is worth pursuing.”

The merger would not save money this year. But Peace said that in coming years, the number of people working for both commissions would be trimmed. The Energy Commission has about 460 staffers and a budget of $75 million, funded by special taxes on utilities and fuel. The PUC has 1,017 employees and a budget of $85 million.

The Energy Commission was created during the energy crisis of the 1970s to ensure a constant flow of energy. As part of its responsibility, the commission is supposed to locate new power plants. Given that there are few plants being built in California, critics say the commission is without a role.