New president, member called too pro-industry

The San Francisco Chronicle

SACRAMENTO: Shaking up the powerful agency that determines what Californians pay for electricity, Gov. Gray Davis appointed one of his closest advisers to the Public Utilities Commission and elevated a former energy industry official as the commission’s new president.

The moves were blasted by consumer groups, who complained Davis had consistently stacked the five-member commission with administration insiders who favor businesses over consumers.

Davis’ New Year’s Eve appointment of Susan Kennedy, the governor’s Cabinet secretary during his first term, gives him a critical ally on a commission that regulates private industries like telephone companies and is a central player in sorting out the lingering effects of the energy crisis.

His move to oust President Loretta Lynch in favor of Michael Peevey also seemed likely to give Davis more control over the commission. Lynch is a former confidante of Davis, but the two clashed over what to do when the state’s experiment with electricity deregulation went awry.

The governor’s demotion of Lynch had been rumored for months. A spokesman for Davis said the governor was looking for someone with a “new perspective” to lead the commission.

Peevey, a former executive of the utility Southern California Edison who also ran an unregulated energy company, was given an interim appointment to the commission earlier this year and was reappointed Tuesday to a six-year term.

Lynch remains on the commission, but Peevey will be able to control commission staffing and have more say than the other commissioners on setting the agency’s agenda.

Consumer groups soured on Lynch during the energy crisis — she oversaw the largest rate hikes in state history — but said they preferred her over Peevey.

“This is devastating to consumers,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights. “He (Peevey) is the energy industry, and now he’s the top regulator of that industry.”

REPONDING TO CRITICS

Peevey disputed characterizations that he favors industry over the little guy.

“I try to be pro-consumer with an understanding of how business works,” he said.

Peevey, 64, said he was grateful to the governor for the chance to lead the PUC and said he hoped to provide predictability to the commission’s decisions. He noted he was a fervent supporter of the state’s efforts to extract refunds from power companies that overcharged consumers during the energy crisis.

Lynch issued a statement saying she was proud of her tenure as president and would continue to serve on the commission.

Kennedy replaces the last remaining Republican appointee, Henry M. Duque, on the five-member commission.

The appointment puts the commission at an interesting crossroads, as the pro-business Duque often sided with Commissioners Peevey and Geoffrey Brown on issues that pit them against Lynch and Carl Wood.

Where Kennedy will fit in remains to be seen. She has said her political philosophy closely matches that of Davis, a liberal on social issues and moderate when it comes to business and economic policy. Kennedy has described herself as a strong Democrat and a pragmatist.

MANAGED DAVIS’ CALENDAR

As Davis’ Cabinet secretary for four years, Kennedy became a master of filtering the constant demands on Davis’ time. While Davis chief of staff Lynn Schenk is considered more powerful, Kennedy became a one-stop machine to get legislation passed and cajole action out of the Byzantine state bureaucracies and Davis himself.

“I’m a firm believer that no one is indispensable, but Susan comes as close as anyone, in my experience, to being indispensable,” said Daniel Zingale, the state’s chief HMO regulator and a former Davis chief of staff.

Kennedy, 42, reportedly was eager to leave after four years of juggling dozens of issues at once and dealing with a notoriously demanding boss. She was a key adviser during the energy crisis, during state budget negotiations and on nearly every major piece of legislation in the past four years.

“I’m actually used to dealing with 100 issues at the same time, and I find one of the frustrating things of my work is I don’t have time to concentrate on policy areas when I want to,” Kennedy said in an interview. “This is a great opportunity to really focus on some fascinating areas.”

KENNEDY PARTNER APPOINTED

Two weeks ago, Davis appointed Kennedy’s partner, Marin psychotherapist Vicki Marti, to a $99,000-a-year job on the California Medical Assistance Commission, which negotiates Medi-Cal payments to hospitals.

The CMAC job is considered one of the plum appointments in government, since much of the commission’s work is done by its staff, and commissioners meet formally only a few times a year.

Kennedy replaces a PUC commissioner whose tenure was marred by conflict-of-interest charges. In April, a San Francisco Superior Court judge fined Duque and ordered him to step down from the commission for investing in a wireless telephone company the PUC regulates. Duque had invested $27,000 in Nextel Communications in May 1999.

Duque appealed the judge’s order and was in court just two weeks ago arguing against his ouster. The court date was essentially moot since his term expired Tuesday.

Both Kennedy’s appointment to the commission and Peevey’s appointment as president must be confirmed by the state Senate.

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E-mail Robert Salladay at [email protected] and Mark Martin at [email protected]