Arnold's Energy Script Needs a Power Bar

Unlike Arnold Schwarzenegger's high-powered Hollywood PR machine, no one on his campaign team will speak about his energy policy or even say who is working on the matter. Former governor Pete Wilson and members of his inner circle are among those known to be coaching, but his media office did not know who was advising the modern-day power juicer on energy issues.

Also silent on the all-important power-policy-to-be is the Governor-elect. "Have you ever heard him talk about his energy policy?" asked one Capitol insider.

The campaign's website does lay out a six-point energy plan for the state, but it is hardly bulging with details. Its stated goals include boosting private investment in power plant and transmission projects, renegotiating the state's renegotiated long-term power contracts, and significantly boosting renewable energy supplies.

Some praised the energy outline as progressive, while others shredded it for lacking originality and/or being full of unrealistic promises.

The Independent Energy Producers welcomed Schwarzenegger's six-point plan. "It is a forward-looking document," said Jan Smutny-Jones, executive director of the association of non-utility electricity generators that include many using renewable resources. He noted it was not a "radical departure from an orderly direction we are heading in" but was a good sign the Governor-elect wanted to learn from restructuring schemes in Texas and other states and to increase the supply of green power.

One source said the plan "looks like the IEP platform." Smutny-Jones replied that the association's energy plan was floating around and just could have ended up next to one of Schwarzenegger's hefty dumbbells. "It is possible he read it between takes of Terminator 3."

For California State Senator Joe Dunn (D-Santa Ana), "It is a pie-in-the-sky wish list by the folks trying to save the failed deregulation plan." Dunn did not disagree with many of the points raised in Schwarzenegger's online document and supported the proposition requiring utilities to boost their renewable power supplies to 33 percent by 2020. But achieving that goal, according to Dunn, would require Schwarzenegger "to take on his political friends in the wholesale energy market" -- including those at Duke, Dynegy, and Mirant.

In spite of Schwarzenegger's quick rise to political power, he faces some potential land mines. Besides the whopping state budget, there is also the looming issue of what went on during his May 2001 meeting with Kenneth Lay, head of scandalous and bankrupt Enron. Recently released Enron emails noted Schwarzenegger was among those who met with Lay, a key deregulation mover and shaker, in a Beverly Hills hotel room in the midst of the state's energy market turmoil.

A May 11, 2001, email to Lay from an Enron employee states, "Explain about our comprehensive solution. . . . We'd like to position this meeting as an insider's conversation of what's going on with the energy situation." Muckraking journalist Greg Palast in a recent article alleged that Schwarzenegger "knowingly joined the hush-hush encounters as part of the campaign to sabotage a Davis-Bustamante plan to make Enron and other power pirates then ravaging California pay back the $9 billion in illicit profits."

Davis and his lieutenant governor, Cruz Bustamante, were and remain in court to force some energy companies to "disgorge" what they maintain are illegal profits from the energy crisis. If the Enron allegations are true, Schwarzenegger's policy could square with the Enron meeting only if he were to sabotage the potential for energy company refunds. He might get away with groping, but it's unlikely he'd get away with that.

Schwarzenegger has refused so far to address the issue. On October 6, at a tightly directed Schwarzenegger event, Palast reported, a protester shouted that the gubernatorial candidate was "in bed with Ken Lay"; Arnold responded, "I certainly wasn't in bed with you."

Back to the energy bed, which is far from made.

Schwarzenegger's online blueprint states he will "align" the state's 13 energy agencies and get them on the same page. First off, he can count a lot more agencies than I can. And one of the ones I can count is the California Power Authority (CPA). He claims the mission of the CPA, which has accomplished little in its short life, "is in direct competition with private industry and will divert investments in private projects." That doesn't make sense. Further muddying his policy waters is the additional statement that the CPA may have a role if it "can be reformed to support a sustainable energy policy." So, will the agency be evaluated or dismantled? asked Mike Florio, The Utility Reform Network pro-consumer attorney.

The plan also proposes expediting the prudency review at the California Public Utilities Commission and limiting its ability to judge the reasonableness of an energy deal after it is signed, something legislation passed a couple of years ago, AB 57, set out to do.

He will also "restructure the wholesale market," something exclusively within the authority of the federal government. "If that was possible, we would have done it in a heartbeat in 2000," Dunn mocked.

Other proposals listed, which are in the works or have been debated since the state's energy crisis, include setting power reserve requirements to prevent blackouts and increasing demand response. For months, the CPUC, the California Independent System Operator, the California Energy Commission, and the CPA have debated the appropriate level of reserves, which is in the 15 to 17 percent range. There is also wide support for providing consumers with information on energy pricing levels to encourage them to shift their power use, reduce the strain on the system during peak hours, and lower their utility bills.

He also supports the development of liquefied natural gas -- but how and to what extent is unknown. It appears he would support big energy consumers making their own power deals, but the language is murky, referring to allowing commercial, industrial, and government consumers the "right to opt out of reserve charges."

Whatever his final energy script may be, Schwarzenegger is not the only actor on the stage. He also has to deal with term-limited legislators, who face a mega budget deficit and are split on which direction the state's energy market should take.

Elizabeth McCarthy is editor of the independent weekly publication California Energy Circuit.

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