- Get the whole story every day - SUBSCRIBE NOW!The legislation, carried by Assembly Speaker Fabian Núñez, D-Los Angeles, at the behest of Southern California Edison, would have overhauled the state's energy market by moving to return much of the regulation that governed it before deregulation and the electricity crisis of 2001.
Schwarzenegger, who favors a more open-market and less-regulated approach, had intimated for several months that he would veto the measure, particularly after Núñez removed parts of the bill that would have let big businesses shop for better wholesale prices than utilities charge.
"This bill creates a redundant and burdensome energy procurement process that would steer the state back toward monopoly utilities without some of the consumer protections necessary to protect ratepayers," Schwarzenegger said in his veto message.
AB 2006, which sparked an intense lobbying and public relations fight during the legislative session, sought to provide greater assurance to utilities such as Edison of recouping costs for building new plants or signing supply contracts with independent generators.
Among its supporters was California Sen. Dianne Feinstein, a Democrat, who in a letter sent to the Republican governor two weeks ago urged Schwarzenegger to sign the bill.
Núñez's bill, the Reliable Electric Service Act of 2004, would restore "certainty to California's energy markets," Feinstein wrote. "Without such certainty, needed financing for new generation is not likely to materialize. The result may very well be a return to volatile energy prices and blackouts."
But the Schwarzenegger administration and the state's Public Utility Commission rejected that notion and said California's energy market was better off without the bill.
In his own statement released Saturday afternoon, Núñez said the veto was a costly mistake.
"By vetoing this bill, the governor has left Californians in the dark," he said. "This legislation contained all the elements needed to protect ratepayers and stimulate investment in new power plants that our state desperately needs to avoid blackouts."
The veto was applauded, however, by a coalition of business interests that lobbied against it.
The Partnership for Open and Workable Energy Reform said Schwarzenegger "stood up on behalf of California's electricity ratepayers and users."
"The governor's action today did more to ensure that new power plants will soon be built in California, and our vast energy needs are met, than all of the debate and discussion on energy this entire year, combined," the group said.
Southern California Edison, which spent millions of dollars promoting the bill in television and radio ads, has made several financial contributions to Schwarzenegger and his various political committees. But Schwarzenegger announced earlier this month that he would no longer accept money from energy producers.
The measure was also strongly opposed by such independent energy generators as San Jose's Calpine Corp., which builds plants and sells the power to utilities such as the Sacramento Municipal Utility District.
By vetoing the Núñez bill, Schwarzenegger appears to be keeping California on the road to a free-market, competitive energy system that gives companies like Calpine an equal opportunity to build plants and supply new power.
The debate over how much regulation the market should have is far from over with Saturday's veto, however. Consumer groups had promised to take some type of energy policy reform measure to the ballot if Schwarzenegger vetoed the bill. They've expressed concern that a veto could make it easier for independent generators to manipulate prices and gouge ratepayers as they did during the electricity crisis.
And Núñez, who tangled with Schwarzenegger on a number of issues during the legislative session, has said he pushed for the bill's passage - even when he knew Schwarzenegger would veto it - to pressure the governor to work with Democrats on an energy policy for the state.
So far, however, Schwarzenegger has appeared to favor crafting an energy plan through the rules and regulations of the state's Public Utilities Commission, whose members are appointed by the governor and must be confirmed by the Senate but are not otherwise subject to influence from the Legislature.
"Since the governor has no plan of his own on the table, the energy marketplace is more confused than ever," Núñez said in his statement. "There's no doubt that this will delay the construction of power plants California needs to fuel its economic growth.
He said the Assembly "does not share the governor's comfort" with the PUC process and that he will form a special committee to monitor the commission's actions.
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