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California Legislature Rejects Schwarzenegger Energy Agency Reorganization Plan
By Christopher A. Hilen
[August 2005]
On August 25, 2005 another of California Governor Arnold Schwarzenegger’s government reform proposals encountered defeat. The California State Senate rejected the Governor’s plan to restructure California’s multiple energy agencies (the Energy Reorganization Plan). The Governor submitted the Energy Reorganization Plan, A Vision for California’s Energy Future, to the California Commission on California State Government Organization and Economy (commonly referred to as the Little Hoover Commission) on May 12. He submitted a revised version of it to the Commission on June 13, and at the same time he submitted the Energy Reorganization Plan and implementing legislation to the Legislature.
The State Senate's response to the Energy Reorganization Plan
The Governor submitted the Energy Reorganization Plan under California’s little-used governmental reorganization statute. Under that statute, the Legislature could not amend the Energy Reorganization Plan; it could only reject it or let it become law in its entirety. Thus, the Energy Reorganization Plan as submitted by the Governor would have become law if neither house of the Legislature had voted to reject it by September 12. By adopting Senate Resolution 19 on August 25, the State Senate rejected the Energy Reorganization Plan in its entirety.
The Senate’s rejection of the Energy Reorganization Plan was not unexpected. In June, both the California Attorney General and the Legislative Counsel of California issued separate legal opinions in June concluding that several elements of it are illegal. California’s governmental reorganization statute prohibits the use of the governmental reorganization process to transfer to another agency any function conferred by the state constitution on an agency created by the constitution. The Energy Reorganization Plan would have transferred from the California Public Utilities Commission (CPUC) to the proposed new State Department of Energy (the Department) significant ratemaking powers and functions conferred on the CPUC by the California Constitution. These legal deficiencies caused the Little Hoover Commission to recommend that the Legislature reject the Energy Reorganization Plan.
The members of the State Senate expressed a number of reasons for rejecting the Energy Reorganization Plan, among the most prominent being:
- Legal Concerns: The legal infirmities pointed out by the California Attorney General and the Legislative Counsel.
- Insufficient Time to Review and Inability to Amend: Under California’s Governmental Reorganization Statute, the Legislature was limited to an up-or-down vote on the Energy Reorganization Plan that had to be taken by September 12 with no opportunity to "correct" troubling provisions through the normal legislative amendments process. To many members of the State Senate, the broad scope of the Energy Reorganization Plan and its implication required more detailed legislative review and the ability of the Legislature to amend the proposal to address key concerns.
- Impact on Key Constituencies: Transferring authority for siting electric transmission line projects from the CPUC to the Department would hand a significant advantage to the utilities proposing such projects. The transfer of authority would eliminate the role of the CPUC’s Office of Ratepayer Advocates, which is charged with representing ratepayer interests before the CPUC. It would also significantly reduce or eliminate the ability of ratepayer, community and other public interest groups to participate in transmission line siting cases.
- Limited Judicial Review: The Energy Reorganization Plan would have limited judicial review of Energy Commission decisions on energy infrastructure facilities to the California Supreme Court; in contrast, judicial review of CPUC decisions can be sought in either the California Supreme Court or the California Court of Appeals.
What the Energy Reorganization Plan would have done
The Energy Reorganization Plan would have established a State Department of Energy that would be responsible for the state’s energy policy and a significant number of related functions. The Department would have been headed by a cabinet-level appointed Secretary of Energy reporting directly to the Governor. The California Energy Commission would remain in existence, with the Secretary of Energy serving as its chairperson. The remaining Energy Commission members would serve staggered four-year terms appointed, as they are now, by the Governor subject to confirmation by the California State Senate. The president of the CPUC and the president of the California Independent System Operator (CAISO) would sit as ex-officio non-voting members of the reformed Energy Commission.
Under the Energy Reorganization Plan, most of the current functions of the Energy Commission would have been assumed by the new Department of Energy, including its energy analysis and strategic planning functions. The Energy Commission, as a component of the new Department, would have retained its authority for the permitting of power plants that are 50 MW or larger. It would also take from the CPUC responsibility for permitting and siting of electric transmission lines. The California Power Authority and the California Electricity Oversight Board would each be eliminated. A new Office of Energy Market Oversight within the Department would perform electricity market monitoring and oversee the CAISO.
The Office of Energy Market Oversight and the CPUC would share responsibility for representing California before the Federal Energy Regulatory Commission (FERC), with all other state agencies and offices excluded from representing the state before FERC. (Under the present practice, it is not uncommon for up to half a dozen California regulatory agencies and executive offices to file separate pleadings, often advocating different positions “on behalf of the People of State of California” with the FERC).
Many elements of the Energy Reorganization Plan will be proposed in new legislation
Although the Energy Reorganization Plan died on August 25, the restructuring of California’s energy agencies may not have. The Schwarzenegger Administration has already drafted replacement legislative revisions to address the legal concerns raised by the Attorney General, the Legislative Counsel, and the Little Hoover Commission. While it is possible the amended energy reorganization legislative language could be adopted in legislation before the current session of the Legislature ends in early September, the lack of time and restrictive legislative rules make it more likely the proposal will be introduced as legislation in January and be subject to the traditional legislative process in both houses of the Legislature.
This Advisory is a publication
of the Energy Department of Davis Wright Tremaine LLP. Our purpose
in publishing this Advisory is to inform our clients and friends
of recent developments in energy law. It is not intended, nor
should it be used, as a substitute for specific legal advice
as legal counsel may only be given in response to inquiries
regarding particular situations.
Copyright © 2005, Davis Wright
Tremaine LLP.
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