State authority calls for a 15 percent reserve at all times and will pursue renewable energy projects

By Andrew LaMar
source: CONTRA COSTA TIMES
http://www.contracostatimes.com/news/leads/stories_two/power_20010825.htm

SACRAMENTO -- Even though California has gotten through the summer so far without blackouts, the state's new
public power authority still has plenty to do to eliminate the threat of energy shortages and price spikes, the
agency's top officials said Friday.

Meeting for the first time, the power authority's five-member board of directors approved a $1.5 million budget, agreed
to make board Chairman S. David Freeman the agency's interim chief executive officer and directed its staff to seek
out a financial adviser.

Directors outlined a vision for the agency that entails delivering a 15 percent reserve of power for the state, pursuing
renewable energy projects and assessing the supply of natural gas.

"Let's be clear about it," Freeman said. "The Legislature has created a consumer protection agency. We are
flat-footed on the part of the consumer. Our job, if I could borrow a phrase from the Boy Scouts, is to be prepared."

Freeman also called for establishing "rigorous" ethics standards for prospective employees to avoid any conflicts of
interest or the appearance of them. The topic has been a touchy one for Gov. Gray Davis' administration, which last
month fired five energy advisers and traders in the wake of revelations that they held substantial stock in energy
companies.

"This agency starts life off without a tarnish," Freeman said. "We intend to keep it that way."

Phil Angelides, the state treasurer and power authority board member, said he hoped the new agency would
represent the best of what public power has to offer and would take a leading role in developing renewable energy.
He called for an "active" and "robust" agency.

"I do believe this needs to be a permanent player of the marketplace," Angelides said.

Freeman invoked the history of public power agencies, many of which were started during the Great Depression and
involved building dams to generate electricity and tame large rivers.

"We live in a different era," Freeman said. "What we need to tame is that runaway market that was gouging the
heck out of us all."

The inaugural session of the board drew a standing-room-only crowd of more than 300 to the modern chambers of
the Central Valley Auditorium, which is part of the recently built downtown Sacramento skyscraper housing the
California Environmental Protection Agency.

The Legislature created the public power authority in May, but it didn't begin operating until last week. Some believe
the agency may end up being the most enduring legacy of the policies spawned by the meltdown of California's
energy market last year.

Republicans have criticized the authority as another form of ineffective big government. Independent energy experts
have questioned the new agency's mission and whether it can deliver power efficiently.

The authority has no staff yet and is using energy experts from other state agencies. The agency also has borrowed
$10 million from the state and will finance its operations with as much as $5 billion in revenue bonds.

Kellan Fluckiger, an energy adviser to the governor, told the board that California has benefited from mild weather
and good fortune this summer to avoid blackouts. So far, the state has not come within 7,000 megawatts of the
forecasted peak load for the summer, he said.

But as insurance against the stresses brought by hot weather, plant breakdowns and other unpredictable changes
in the market, the state should make sure it has a 15 percent reserve, Fluckiger said.