Proposal Defies U.S. Power Plan

In defiance of federal power regulators trying to break down geographic and political boundaries, a state senator proposes changing California’s constitution to mandate state control of the electrical grid.

Sen. Steve Peace (D-El Cajon) said he intends to introduce the amendment this week. It would set the stage for a federal-state showdown by barring California from turning over management of hundreds of thousands of miles of transmission lines to multi-state organizations favored by the Federal Energy Regulatory Commission.

“We now have California back in control of our energy grid and we’re keeping the lights on and we’ve moderated the market and we’ve got the energy companies on the run,” Peace said. “But now the energy companies have gone to their strong suit, which is FERC, and they’re plotting their comeback.”

Last week, FERC proposed a 600-page order that attempts to standardize the rules for moving electricity nationwide. It would require utilities to turn over control of their transmission systems to independent agencies that guarantee private companies equal access to the grid.

FERC officials say such a uniform system would encourage power plant construction, make the grid run more efficiently and save utility customers money.

If passed, Peace’s amendment would stand as the most explicit act of resistance to the federal government’s plans. But California leaders are not alone in rejecting FERC’s vision of making the nation’s power lines run like an interstate highway system, rather than what FERC calls an “obsolete patchwork” of electricity grids.

C. Clark Leone, manager of the Public Power Council, which represents government-owned utilities in the Pacific Northwest, responded to FERC’s proposed order last week by saying, “So far deregulation has led to civil disorder, bankruptcy, suicides and criminal corruption.”

“What more do these guys want?” she asked.

Generally, states in the Southeast and West are most unhappy with the federal proposal, said Ken Rose, senior economist at the National Regulatory Research Institute at Ohio State University in Columbus.

Fewer complaints have come from states in the Northeast and Midwest, where regional transmission organizations have served as a model for FERC.

Rose called the disagreement philosophical.

“FERC says competition works if you get the details right,” he said. “And others view the idea of allowing competition in this industry as flawed.”

Peace said that, if his amendment fails in the Legislature, where it must pass with a two-thirds majority in each house, he will try to take it to voters as a ballot initiative.

Senate leader John Burton (D-San Francisco) said he strongly supports Peace’s measure.

The proposed amendment reads: “Neither the Legislature nor the Public Utilities Commission may allow for the transfer of ownership, operation or control of any asset of a public utility to any institution, public or private, not subject to the exclusive authority of the People of this State and their agents.”

Peace acknowledged that the federal government holds top authority to regulate wholesale electricity as a commodity that crosses state lines. But California must protect public safety by guaranteeing an adequate supply of electricity, he said.

“It’s certainly clear that, if you can’t assure the reliability and affordability of an electrical transmission system in your state,” he said, “you can’t ensure health and safety.”

Peace played an important role in shaping California’s ill-fated deregulation plan in 1996 as the chairman of a legislative conference committee.

He has long blamed the federal energy commission for failing to keep its promise to step in and impose order should California’s experiment in deregulation go awry.

Kevin Cadden, director of external affairs at FERC, said commissioners had not seen Peace’s proposal and could not comment.

But what Peace is trying to accomplish, he said, seems “diametrically opposed” to FERC’s goal.

“Electrons don’t stop and start at state borders,” said Cadden. “Standard market design brings efficiency. It ends economic discrimination against merchant generation. It’s a matter of fundamental fairness.”