Schwarzenegger Understands Impact of Energy on Business

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Oct. 10, 2003 Share this on FacebookTweet thisEmail this to a friend

Governor-elect Schwarzenegger's positions on energy issues are very much in sync with the views of CMTA and its members. Because they are still preliminary, the positions are lacking in details – and there are some areas where CMTA would suggest a somewhat different approach – but in large part Schwarzenegger's views are consistent with what CMTA has been advocating in recent years.

First and foremost, Schwarzenegger understands the impact of energy costs on California's businesses. High energy costs are putting the state at a competitive disadvantage, he says, and are “placing a severe drag on our economy.”

Schwarzenegger also laments the current regulatory uncertainty and the “lack of a clear energy policy.” According to Schwarzenegger, “California cannot attract investments and build the needed energy capacity under the current regulatory framework because potential investors do not know whether they will be allowed to sell electricity in a viable market.” This is consistent with the views of CMTA, as expressed recently by President Jack Stewart, who noted that California's energy supply may fall short of demand in the near future (perhaps as soon as the summer of 2005 if the economy picks up steam) and that we must take action to encourage the construction of new generation in this state. According to Stewart, “Without a reliable supply of electricity at competitive prices, industries that we hope will grow California's economy will not prosper. Stabilizing the electricity market and bringing more power online is as critical a task as any facing California today.”

Schwarzenegger proposes to create a uniform state energy strategy to stimulate investment and to reform the state's energy bureaucracy to support that strategy, a proposal that if enacted would go a long way toward reducing the current regulatory uncertainty.

On a few issues, CMTA takes a somewhat different approach than the Governor-elect.

Schwarzenegger proposes merging the functions of the California Independent System Operator (reliability of the grid) and the former California Power Exchange (energy marketplace) into a single entity. CMTA opposed efforts to do this as part of AB 1890 (Jim Brulte, R-Rancho Cucamonga), the landmark electric restructuring bill signed into law in 1996, and remains opposed to the idea. Reliability and providing an energy marketplace are two very different functions; the ISO should continue to focus on providing reliability. There are currently other private exchanges that can and do play that role.

Schwarzenegger proposes implementing real-time pricing for large commercial and industrial users. CMTA would support this proposal provided that: (1) it is phased in for industrial customers, and optional in the first phase; (2) that the CPUC in implementing the plan can't discriminate against customer classes or shift costs toward industrial customers and reflects actual wholesale prices rather than a price that is manipulated or tinkered with by regulators; and (3) applies also to residential and small commercial customers. Without including smaller end-use customers (whose air conditioning and lighting requirements drive peak demand during the hot summer months), real-time pricing won't fulfill its promise to reduce demand during peak periods.

CMTA appreciates the Governor-elect’s focus on energy issues and the impact of energy costs on businesses in the state and looks forward to working with the him to improve California's energy outlook and future.
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