How One Slick Move Marred Arnold’s Treasured Legacy

Legacies are exactly what any governor's appointments to the state Public Utilities Commission can be. The PUC's five members serve five-year terms and cannot be ousted by any governor, either the one who appoints them or any successor.

So when Schwarzenegger reappointed the current PUC president, Michael Peevey, to another term as the kingpin of what may be the most powerful agency in state government, he was determining part of his legacy.

That legacy will say, in a nutshell, that Arnold Schwarzenegger doesn't give a fig about California's millions of consumers. Rather, it assures that Schwarzenegger will be remembered as one who did the bidding of big business, especially those big businesses who donated money to his various campaign committees.

All it takes is a look at Peevey's record to see all this. For Peevey, a former president of Edison International, parent company of the Southern California Edison Co., has turned the PUC into a rogue agency whose actions sometimes defy both state law and all logic except that of corporate welfare.

How Connections Pay

Ordinarily, it would be expectable that the strongly Democratic state Senate would look long and hard before rubber-stamping an appointee with an anti-consumer record like Peevey's. But don't expect that to happen. For Peevey is perhaps better connected in the state Senate than any appointee in decades: his wife, Democrat Carol Liu, was sworn in this month to a four-year term in the Senate, representing much of eastern Los Angeles County. She previously served six years in the Assembly. Other senators are not likely to quarrel with the appointment of any colleague's spouse.

But this time, they should do more than quarrel. They should flatly refuse to approve this appointment, politics and political courtesies be damned.

Here's one example of what Peevey has done at the PUC:

Back in 2002, after an energy crunch that saw criminal market manipulation cause rolling blackouts and skyrocketing electricity and natural gas prices, state legislators decided they did not soon want to see another deregulation scheme remotely like the one that led to the crisis.

Direct Access Vanishes

So they passed a law banning competition between the state's major utility companies and independent power generators until 2017, when the last of the power contracts signed under duress by the state in 2001 will expire.

It's that simple: No deregulation for at least eight more years. That also means no "direct access," where electric generators sell directly to business or residential consumers and bypass the utilities, as Enron and other disgraced companies tried to do in the late 1990s.

But Peevey's PUC doesn't care about that law.

The agency, which in 1996 pushed for the previous, failed deregulation scheme, now wants to revive direct access. The commissioners voted last spring to examine ways in which they might reinstate direct access. Even though residential consumers might technically be allowed to buy power directly from generators, the real world would see almost all such deals involve electricity customers that use very large quantities of power. Megawatts, not kilowatts. Think oil refineries, factories, universities, large office complexes.

A Boon for the Big Guys

Those large users could negotiate price guarantees, so in times of shortage they would pay the same price as before, while residential users must pay higher prices for power produced by small-scale generating plants that generally come online only in times of high consumption.

It's a system of corporate welfare, favoring big companies over the little guy. Which is the same direction where Peevey has steered the PUC in regulating cellphones and natural gas, too.

The classic among his illogical decisions was the 2004 ruling that allows California utilities to give up as much as one-fourth of their reserved space on the pipelines that bring natural gas here from Texas, Oklahoma and the Rocky Mountains. The commission's reasoning was that a gas shortage looms and so the state must bring in liquefied natural gas from foreign sources. But there is no shortage, and even if one existed, how could giving up existing supplies help resolve it?

All in the Family

This decision made sense only for Sempra Energy, the San Diego-based company that just opened an LNG plant in Baja California and wants to sell some of its gas to the Southern California Gas Co. and San Diego Gas & Electric Co. — both also owned by Sempra. Sempra happens to be one of more than a dozen firms that have contributed significant campaign funds to Peevey's wife. Anyone see any conflicts of interest here?

The bottom line: If Schwarzenegger wanted to be remembered as "the people's governor," he would have let Peevey leave quietly when his term expired. But now only the state Senate can protect Californians from five more years of his steering the PUC in wrongful, rogue directions.