Assembly Panel Grills PUC Chief Over Crisis

California Public Utilities Commission President Loretta Lynch, faulted by some for reacting too slowly to early warnings that an energy crisis was looming, endured her first public grilling Thursday before an Assembly oversight committee.

During a three-hour Capitol hearing, Republicans sought to poke holes in Lynch’s job qualifications while Democrats tried to determine when she first concluded that the electricity situation was dire--and what she did about it.

Today the committee will conduct its third hearing, with testimony expected from the heads of Pacific Gas & Electric and Southern California Edison.

Lynch, a 38-year-old former political strategist appointed by Gov. Gray Davis last year to the $113,287-a-year job, appeared poised throughout the sometimes hostile questioning.

She defended her response to last summer’s spiking energy costs, and said she issued warnings about problems with the wholesale electricity market in a report prepared at the request of Davis and published Aug. 1.

Soon afterward, she said, the commission launched an investigation to determine why the wholesale market was malfunctioning--even issuing subpoenas to officials from energy companies and others with a role in the energy system.

“We came out early saying this wholesale market doesn’t work; it’s dysfunctional,” Lynch said. “Many economists at the time were still arguing that it was a question of supply and demand.”

In another line of questioning, Lynch rejected claims by utility executives that the commission stymied their efforts to get out of the expensive spot market and sign long-term contracts for power, a move that would have eased the companies’ financial problems.

Assemblyman Darrell Steinberg of Sacramento, head of the committee and the leading Democratic questioner, suggested that she should have done more to pave the way for long-term contracting--now seen as the answer to the power crisis.

But Lynch retorted that the commission gave the utilities the authority to enter into such contracts in August, and said she assumed they were doing so.

“From my perspective, they had clear authority and they were in fact . . . [contracting] under that authority,” she said.

The PUC, with five members appointed by the governor, sets the rates the utilities can charge, balancing consumers’ interests--reliable and reasonably priced power--with the utilities’ need to make profits for their shareholders.

Lynch previously served as the governor’s director of the Office of Planning and Research. With PUC Commissioner Carl Wood at her side, she retained her composure Thursday despite attacks on her qualifications by Republican Assemblyman John Campbell of Irvine.

Campbell suggested that Lynch, a lawyer, had little experience in the energy world and asked her whether she thought she was the best person to lead the commission, given “the import and the gravity of the position.”

Lynch coolly replied that she believes she brought a “fresh, consumer look” to the job, and noted that three-fourths of the commissioners appointed since 1980 had no background in energy.

Campbell’s attack was widely anticipated. Earlier this week, Republicans began circulating a sensational report on Lynch, titled “The Corruption of Power” and assembled by veteran GOP political consultant Sal Russo.

The report says “the political ambitions of Gov. Gray Davis led him to select a Democratic campaign warrior and Whitewater-tainted Clinton aide with no energy experience to serve as the president of the PUC.”

Lynch, a campaign aide to Bill Clinton in 1992, was one of the two initial lawyers retained by the Clintons to answer questions about the Whitewater affair.

Later, Campbell said he had concluded that Lynch was unfit to serve as PUC chief during the current crisis, which he believes needs a more experienced hand.

“Hundreds of thousands of jobs, the economy of this state is at stake, and we have someone at the helm who just started learning about energy in the past year,” he said.

Steinberg said that while he was impressed with Lynch’s “intelligence and grasp of the big picture,” the committee’s inquiry has “raised a lot of questions about the ability of the commission to deal aggressively with the crisis.”