Power Authority Debuts Amid Easing of State Crisis

SACRAMENTO — The new state public power authority held its first meeting Friday and was quickly confronted with questions about whether it is still needed.

A new state report issued Thursday suggested that California’s electricity crisis is waning, causing critics to ask whether a large new government program is a good idea.

But despite a cool summer without blackouts and a forecast of growing electricity surpluses, authority Chairman S. David Freeman said another round of shortages could still cripple the state.

“How quickly they forget,” Freeman said after gaveling the new authority to order. “If we have a hot summer and some of these new [power] plants don’t come on line, we’re into blackouts again. . . . Our job is to not let this government go back to sleep.”

The five-member California Consumer Power and Conservation Financing Authority met to discuss its mandate: how to tame the state’s volatile electricity market. With $5 billion to spend, its primary aims are to build “peaker” power plants the state can fire up quickly to avoid blackouts when electricity runs short, and to prevent private generators from gouging consumers.

But the state Energy Commission reports that new power plants capable of supplying nearly 4 million people are already coming on line. Those plants should help the state dodge blackouts next summer, the commission suggested, adding that by 2004 energy should be so abundant that conservation programs won’t be necessary.

The report prompted two members of the commission, both Republican appointees, to question whether the new power authority, created by the Democrat-controlled Legislature, needs to exist.

At the power authority meeting, however, Energy Commission Executive Director Steve Larson declared the report’s release premature, and said the authority needs to act to guarantee energy surpluses.

“You have to do something now,” Larson told board members. Then he added in an interview: “I think we’re making progress, but I don’t think the crisis is over.”

A more pressing worry, Larson said, is the state’s ability to distribute natural gas that fuels most of the new power plants.

“There’s no doubt there’s a problem internally in California,” he said. “Work has to be done. We’re sort of at this cusp point where we don’t know what’s going to happen.”

Indeed, the new report said that one of California’s most serious energy problems is that a shortage of pipeline capacity for natural gas could lead to large price fluctuations over the next couple of years.

Power authority members assured officials from the Energy Commission and the state Public Utilities Commission that they would work closely with them to address the problem.

In its opening session, the authority also moved to avoid the problems of another Davis administration agency thrown into the breach to confront the energy crisis.

Five energy traders and consultants at the Department of Water Resources were fired last month for buying power from energy companies in which they hold stock. Such ownership won’t be permitted at the power authority under a strict conflict-of-interest and ethics code that was the first item on the authority’s agenda.

“This agency starts life without a tarnish,” Freeman said. “And we’re going to keep it that way.”

All board members and employees must file conflict-of-interest statements before they are hired, he said.

In opening statements, board members said they were convinced the power authority is making history.

State Treasurer Phil Angelides, a board member, said the authority’s goal is to make power generators truly compete, which they sometimes failed to do last winter. He said he sees the authority “as a competitor” with private industry.

Angelides said he considers the power authority’s generating plants “a birch rod in the cupboard to be taken out only when the child gets stubborn.”

The board also heard pleas from dozens of businesses that want financial help for a wide range of projects. Many promoted renewable energy facilities that would run on wind and solar power. Others forwarded projects that feature energy efficiency and conservation.

About 60 promoters asked to speak. And some said they were greatly encouraged because the power authority has the money and the will to support renewable energy projects.

“This authority is a good idea,” said John Schaefer, a project manager at Duke Solar.

Schaefer pushed a plan to build Mojave Desert power plants that use the sun for fuel during the day and burn natural gas at night on winter evenings, when demand is greatest.

“We could supply all of the electricity that California needs,” Schaefer said. “It would be a little more expensive than with fossil fuels, but we could do it.”

Historically, the biggest drawback for solar plants has been financing, Schaefer said. The power authority may be the answer.

“This is what the solar industry has been needing all along: capital up front,” Schaefer said. “Mr. Freeman understands that.”