Bureaucracy Cutting Red Tape to Ribbons
In the category of man bites dog, mouse hunts cat, and fish rides bicycle, consider the following: What if a government bureaucracy was so responsive, so lightning quick, that private businesses couldn’t keep up with it?
In a sense, that is what has happened in California this summer.
State officials, long accused of holding back development, have used everything short of WD-40 to make it easier to build power plants--so much so that some developers have found themselves struggling to match the bureaucrats’ pace.
The state Energy Commission faced the latest case Wednesday when the Calpine Corp. sought--and received--more time to build a plant in King City, an agricultural town between San Luis Obispo and San Jose.
The state had licensed the plant in May, 19 business days after Calpine applied. Calpine eventually had to admit that it was not going to be able to live up to its part of the bargain under the state’s emergency, 21-day licensing procedure, which called for it to supply power by Sept. 30.
“These are unusual circumstances, this 21-day process,” Calpine attorney Jeffery Harris told the Energy Commission, which is the umbrella agency handling power plant licensing in California.
They are, and it is.
For years, California offered a 12-month licensing procedure for power plants--and it usually took longer than that, sometimes much, much longer. Last year, as concern grew over the state’s energy outlook, the Legislature passed a streamlined set of rules that allowed some projects to be licensed in as little as four months.
When concern morphed into alarm in February, Gov. Gray Davis issued an emergency order that created the super-streamlined 21-day process for companies building small “peaker” power plants, intended to run during periods of peak use and save the state from blackouts. The key to the faster process was that it exempted companies from having to comply with the California Environmental Quality Act, with its voluminous paperwork obligations.
The only catch: The companies had to promise to get their plants online by Sept. 30, with the hope that at least some of them would be ready in time to help the state through what was expected to be a difficult, and maybe disastrous, summer.
The plan worked--to a point. Eleven plants were licensed under the three-week process, and three have begun producing power, churning out a total of 265 megawatts, enough for about 200,000 homes.
Of the remaining eight, five appear to be on track to open by Sept. 30. But at least three have run into problems.
One company, Ramco Inc., canceled its project in Chula Vista because it was unable to strike a deal to sell its power. Calpine ran into trouble with the King City plant when it proved tougher than expected to lease a site. A third project, Delta Energy’s Pegasus plant in Chino, is on hold and still hasn’t received approval from the South Coast Air Quality Management District.
Three other companies withdrew their applications in mid-licensing, saying that the 21-day process was too fast for them. Another backed out when its site in Baldwin Hills ran into substantial community opposition. Still another, which had applied under the four-month licensing procedure, begged off when it had trouble with its lease.
“I mean, hello!” said Energy Commission spokeswoman Claudia Chandler, incredulous that a company would seek licensing before it had secured a site. “What is the first thing you would do if you were going to build?”
What distinguishes the companies that have run into trouble is that, almost unanimously, they blame factors other than a tough state regulatory environment. In fact, several went out of their way to praise the Energy Commission; if they had a complaint, it was that the process was too fast.
“I never heard any developers say that the state was holding [them] up,” said J. Nelson Happy, chief executive of Cenco Corp., which withdrew its 21-day application to build a plant in Santa Fe Springs, saying that it would reapply under the four-month licensing procedure.
“It just may not have been possible to do it in 21 days,” Happy said. State officials “seemed to be on top of it and not overwhelmed, and relatively cool and calm about the process. I think we as developers were more overheated, because the pressure was on us.”
That is probably not the way a developer would have characterized California’s role in licensing power plants as recently as a year ago. In fact, when the state ran into serious power shortages beginning last year, there was a widespread assumption that it had regulated itself into the electrical poorhouse.
“California is one of the most difficult places on Earth to build a new power plant,” Cambridge Energy Research Associates said in March in an article analyzing the roots of the California crisis. “The environmental permit process, in contrast to other states, is complex, cumbersome and deeply discouraging to would-be investors.”
Since then, though, there has been a reassessment of the state’s role in the crisis.
In July, the Cato Institute, a libertarian think tank that looks at government red tape the way pacifists view nuclear warheads, issued a report that found that environmental regulations “scarcely played any role in blocking new capacity in the months leading up to the crisis.”
Rather, the organization said, the electricity shortage was caused by several years of low electricity prices and regulatory uncertainty surrounding California’s attempt to deregulate the utility industry.
This week, state Auditor Elaine Howle issued a report that looked at power plant licensing in the decade leading up to the electricity crisis. She concluded that although the process frequently took longer than it was supposed to, averaging 17 months, the delays were often caused by factors outside the control of the Energy Commission--including local government delays, but also foot-dragging by developers.
Furthermore, she concluded that California has not generally taken a great deal longer than other states to license power plants, and that at least one state, Oregon, has tended to take longer.
The National Conference of State Legislatures recently studied licensing procedures nationwide and came to a similar conclusion.
“We didn’t find California to be vastly out of line with anybody,” researcher Matthew Brown said. And no state, he said, has anything approaching the speed of California’s emergency 21-day licensing process.
Environmentalists have not been terribly happy about the accelerated process, although some acknowledge that a certain amount of streamlining was needed. Sandra Spelliscy, general counsel of the Planning and Conservation League, spoke out Wednesday against Calpine’s request for an extension at its King City plant and questioned whether the state’s environmental concerns were being left behind in the process.
“There was clearly harm to the public from exempting these plants from the [California Environmental Quality Act] process,” she told the Energy Commission, which nevertheless voted to extend Calpine’s deadline until Dec. 28.
Jesse Frederick, vice president of WZI Inc., a Bakersfield consulting firm that helps companies through the regulatory process, has nothing but praise for the state’s role in recent licensing cases, but also injected a note of reality into the debate.
“I’ve heard the argument about how difficult it is to do things in the state,” he said. “And certainly from a political and lobbying kind of standpoint, people will want to make everybody feel bad and make it easier to get a power plant licensed. And I don’t want to lessen their arguments, but my own experience has been that where the market for the power plant results in a profit . . . people will come and build it.”
