Calpine's Metcalf Energy Center is a $300 million, 600-megawatt natural gas power plant that may one day sit on a hillside overlooking south San Jose. But before its turbines ever start generating electricity for power-famished Californians, it must first win approval from the California Energy Commission. And that is no simple task, as a quick glance at the Metcalf Energy Center's CEC docket indicates.
The docket currently overflows with more than 1,000 entries that add up to a two-year, 3,000-page record of public debate and unresolved discord. Along with complaints brought by networking giant Cisco -- which reportedly has its eye on that same south San Jose hillside for its own expansion purposes -- the docket includes endless reams of "air quality data requests," "notices of need for additional time to respond," "letters of opposition" and "letters of concern." There are also revisions of Calpine's initial application, revisions of those revisions, "workshop sign-up sheets" and several cases of "testimony in the areas of: Project Description, Compliance and General Condition, Geology & Paleontological Resources, Cultural Resources."
No wonder the California Energy Commission has this running joke: "No plant gets approved unless the paperwork weighs as much as the plant itself." The docket is a Sisyphean boulder of information -- no sooner is one request for information satisfied than an avalanche of additional requirements comes tumbling down.
Is there a better way? Calpine and other power wholesalers think so. Although nine new power plants are scheduled to come online in California in the next three years and a dozen more are under review, the wholesalers are currently lobbying California legislators for reforms that would supposedly speed up the process: fast-track approval of new plants that sit on old sites, faster and fewer instances of public input and changes in the tax structure. California, argue the wholesalers, should be more like Texas, where the average approval time for power plants is a nimble eight to nine months. Two new power plants will come online in California this summer, says Calpine spokesman Bill Highlander. If the approval process for those plants could have been accelerated by a mere six months, says Highlander, it "would have made a significant impact on the present situation."
The wholesalers aren't the only parties pointing figures at California's regulatory system. Washington's newly ascendant Republicans are also harping on the dangers they say are wrought by overheated environmental concerns. As the California electricity crisis worsened, aides to President Bush repeatedly cited the state's woes as evidence proving environmental restrictions should be relaxed -- specifically recommending that the nation move quickly to open an Alaskan wildlife refuge to oil and gas drilling. Sen. Phil Gramm, R-Texas, told the Los Angeles Times that California's crisis is essentially a lesson on the consequences of "environmental extremism."
But blaming California's regulatory regime and environmentalism for the state's energy crisis isn't supported by the evidence, say some researchers. The present crisis "is a 'Perfect Storm' scenario," says Robert Burns, senior research specialist at Ohio State's National Regulatory Research Institute. "There are so many unforeseen factors hitting California all at once -- the price cap, rising prices, increased demand. It's very complex."
The call for relaxed environmental scrutiny is nothing less than a call "to do away with regional oversights and public reviews," says Daniel Kammen, director of the Renewable and Appropriate Energy Laboratory at UC-Berkeley. "It's a classic end run around the issue." And while it's true, he says, that certain aspects of California's approval process could use tweaking, the idea that it needs an overhaul is without merit. Some reforms have already been enacted, making California's approval system at least as fast as several other states' and ultimately "as efficient as it needs to be," Kammen says. Enacting additional reforms, say Kammen and other energy researchers, could have dire consequences -- not just for the environment but for democracy.
"When you don't include public comment, you've got Russian Communism," says Amory Lovins, CEO of the Rocky Mountain Institute, an energy policy nonprofit. "It just doesn't work."
There is little doubt that environmental regulations will come under attack during the new administration's tenure. Bush's aides have reported that the president is already considering a rollback of federal air quality regulations -- a complete reversal of his campaign energy plan, which included a promise to "propose legislation that will require electric utilities to reduce emissions and significantly improve air quality."
Regardless of ideological or political affiliation, few will deny that environmental laws are complex, convoluted and difficult to understand. "The Regulation of Public Utilities," the definitive public policy text on the issue, lists 28 relevant federal laws. Some, such as the Wild and Scenic Rivers Act, the Outer Continental Shelf Lands Act and the National Historic Preservation Act, protect land. Others -- the Fish and Wildlife Coordination Act and the Endangered Species Act, for example -- protect animals. Then there's the Air Quality Act, which makes it illegal to poison what we breathe.
Many of these regulations intersect, creating a tangled web of requirements and jurisdictions. State and city laws tack on another layer, occasionally fine-tuning federal standards to fit local variables or, in some cases, add to them. California's topography, for example, makes it more susceptible to smog, which is why the state's power plants can release only .04 parts per million of sulfur dioxide per day rather than the federally mandated limit of .14 ppm.
"This is one of the most complex areas of law in the entire country -- and economics and science too," says Bill Golove, a Lawrence Berkeley National Laboratory researcher who focuses on electricity restructuring. "Very few of us really have comprehensive knowledge. Even experts don't know it all. It's impossible."
But the regulations themselves are just a precursor to a much larger hurdle: the public. The environmental laws so hated by Republicans as overly burdensome rarely lay out specific limits detailing exactly how close a new plant can be to a river or how deep it can sink into a shoreline. Calpine can't point to specific rules that prevent the killing of one spotted owl. The Endangered Species Act, for example, simply forces companies to "consider the impacts," as one Environmental Protection Agency primer puts it. Companies must research the effects of their proposed development and then let the public decide if it "results in the destruction" of the specified resource or "adversely impacts" something that the public cherishes.
Therein lies the nut of contention, says Berkeley's Kammen. Environmental laws give power to the people. Republicans can huff, puff and scream about what they consider strict regulations, but when they cry out for reform, for a quicker process, they're really calling for a restriction of the rights of people to be involved in the planning process. "They're not asking for streamlining," Kammen says. "They want a relaxation of the levels of input. They want to have a discussion just with the CEC and not the people."
Even the power wholesalers give lip service to environmental concerns. "We have no problem with the environmental regulations," says Bill Highlander, a Calpine spokesman. "We want to be environmentally friendly."
One would not expect Calpine to declare itself an enemy of the environment, so it's difficult to assess the sincerity of Highlander's stance. But it is possible to see some truth in wholesalers' frustration with the regulatory process. California takes twice as long to approve a plant than Texas does because there are too many cooks in the kitchen, says Tom Williams, director of public affairs for the Western region for Duke Energy, another power wholesaler. On the central California coast at Morro Bay -- where Duke aims to spend $650 million to turn a 198-megawatt facility into a 1,200-megawatt pair of gas-fired plants -- "it's impossible to keep up with everyone," he says. Construction might have started by now but for appeals by "Friends of the Otters, Voices of the Wetlands and some other group called the Monterey Parkway," he says. "I don't know who they are or what they're all about. They never commented at all in the process, but now, here they are."
Compared with other states, he adds, "California is not for the fainthearted." Which is why the Legislature, he and others at Duke argue, should really step in. Every tree-hugging Tom, Dick and Harry shouldn't have the power to hold up a project, they argue -- to oppose, appeal and whine even in the midst of a crisis. The California Energy Commission should be able to slam on the accelerator.
Roger Johnson, a CEC official who manages the process of approving power plant construction, sympathizes with Williams and other people in the energy industry. He admits that Morro Bay has become complicated and that the Metcalf Energy Center is suffering under massive public scrutiny. The latter is scheduled for a June decision but that date's looking increasingly unattainable because -- as the docket reveals -- "it has more intervenors than any project ever," Johnson says.
Had power companies started sooner -- few filed proposals during the early and mid-90s; none completed the process -- there would be no lack of supply, officials argue. Now, even in the midst of crisis and despite their own self-deprecating jokes, the California Energy Commission remains proud of its process. "Listening to everyone is more important," Johnson says. "Our reviews are complete, thorough and reasonable."
Power companies prefer to call the process "onerous." First, a company must file a report detailing where it wants to put a new plant and what the advantages and disadvantages of the site would be. The CEC responds with requests for more specific data, typically environment related. When the application is complete -- which typically takes about four months, according to representatives of Duke Energy and Calpine -- the CEC assigns a project manager and two commissioners to the proposal, setting a 12-month schedule that concludes with a vote of the full five-member board. During this time, the CEC corrals comments from more than a dozen government agencies affected by the plant: the local air board and water board, the California Transit Commission and others.
The CEC also hosts hearings in which the general public is shown the plan and encouraged to comment. About six months later, the CEC files a final report. More hearings are held, after which the CEC files its proposed decision. Again, the public may comment at scheduled hearings and via e-mail. An online docket records every bit of back and forth because "we're trying to get as much public comment as possible," Johnson explains. "We've made it so a person can monitor one of these projects just by checking the Web." Finally, the two commissioners write a proposed decision; a final vote determines approval or rejection.
The "one-stop process" sets California apart, says Ohio State's Burns, an expert in so-called siting regulations. Though California is not the only state to have a centralized forum and schedule, its system far surpasses the dispersed approach of Missouri, New Jersey and several other states. Because the law governing California's electricity gives the CEC "exclusive power to certify all sites and related facilities in the state," the process is faster and more efficient, says Burns. "You don't have to go from commission to commission to get a whole slew of permits together," he says. "Most people in the energy industry consider that to be desirable."
But representatives of the energy industry say that despite the one-stop centralization, the system is still too slow. Local agencies shouldn't have to comment, and those that do must have deadlines, says Mark Seedall, Duke's director of electric modernization. "Then the only question is, if they don't comment, can we go forward?" he says. "We think we should be able to. If you make a proposal and no one says anything, you should have the right to build."
That's how it works in other states, Texas in particular. But should California and the rest of the country follow Texas' lead? Has President Bush's former fiefdom actually found a balance between local rule and responsible capitalism? Could Texas -- which deregulated its electricity industry in 1999, under then-Gov. Bush's watch -- provide a model, a third way that simplifies regulatory procedures while maintaining environmental and public input?
Not quite. The Lone Star State has one of the worst environmental records in the country. Houston, not Los Angeles, is now the nation's smog capital. At the same time, state figures show that regulators have approved power plants producing a whopping total of 34,263 megawatts worth of power since 1996 -- enough to supply electricity to about 34 million homes and more than five times the amount of power that California will fire up by the end of 2003. The success of Duke Energy, Enron and other power wholesalers in getting their plants approved does not, however, seem to be because Texas residents care more about business than birds.
The big difference lies in the land. "Most applications are in nonmunicipality areas, outside city limits," says Erik Hendrickson, a regulator in the air permits division of Texas' Natural Resource Conservation Commission. In other words, they're for places where no one complains or even has the right to. But Texas doesn't exactly go out of its way to find out what people think; if no one responds in 30 days to solicitations for comment, "we assume they don't have anything to offer," Hendrickson says.
The impact studies relating to culture, noise and construction hours, which are part of every application in California, are largely unnecessary in Texas, says Ohio State's Burns, because there's rarely anyone whose culture or sleeping habits would be affected. Most plants sail through without complaint because "there's not much there besides scrub desert and a few people," says Burns. "They don't get much public participation. They just ram it through."
For some locals, declaring that the Texan way is good simply because no one is around to complain is specious. "One reason why Dallas, Houston, Longview, Austin and San Antonio are areas that violate federal health standards is the poor siting of power plants," says Jim Marston, regional director of the Texas office of the Environmental Defense Fund, a national advocacy organization. "All of east Texas is violating federal air quality standards precisely because we didn't pay attention to where we put power plants."
In contrast, Californians struggling for space in an increasingly crowded state might be excused for desiring clean air to breathe. But that doesn't mean, say some experts, that the proposed reforms desired by power wholesalers should be completely dismissed. The current system is only four years old, the product of deregulation. Like the deregulation scheme itself, it could stand a few improvements. There are clear benefits, for example, in creating a separate track for certain "repowering" plants -- upgrades for dirty old plants or replacements," suggests Burns. Before-and-after pictures reveal the advantages of demolishing the old to make room for the new. Everybody benefits if the procedures for replacing old high-polluting power plants with relatively cleaner new plants are expedited.
"Particularly in terms of land use, as opposed to air pollution, new plants [on the sites of old plants] wouldn't have any additional impact," Burns says. "In fact, they usually have less of an impact. [The CEC] should try to speed things up in those cases."
Also, the tendency of consumers to feel that new plants are worth fighting against because the costs outweigh the benefits could be offset -- as power companies suggest -- by creating obvious incentives. Much of the present crisis' intensity can be traced to a lack of behavioral stimuli, says Paul Kleindorfer, an economist at the Wharton School of Business. Power companies had no incentive to build in the early '90s because they couldn't be sure how deregulation would affect them.
"It's not so much the regulatory process that created the shortage of supply as it is the fact that people haven't had to face the music," he says. "Because of the [deregulation-based] price caps, the citizens of California never gripped the seriousness of the wholesale increases. They paid and still pay the same price, so they haven't changed their demand." Take away the price caps and you'll remove "everyone from the land of felicitous ignorance," he says. They'll decrease their electricity use, reduce overall demand, require fewer new power plants -- and move faster to allow for those that are needed.
Mark Seedall, director of electric modernization at Duke Energy, has another idea: Give up to half of a new plant's property taxes to the local community. Under the present law, about 12 percent goes to the town or towns affected by a plant. Morro Bay, for example, stands to earn only $780,000 from allowing the new plant. Seedall would like to offer $3.25 million "so the community will have an incentive to approve it."
Will these proposed reforms ever become a reality? That's up to the Legislature -- a body that has shown some signs of interest in reducing bureaucratic obstacles in the past few years. For example, immediately after deregulation the CEC required a "notice of intent," a pre-preliminary report that added another layer of bureaucracy and several months' wait to the system. But two years ago, the Legislature, acting under the advice of the CEC, did away with the notice.
More recently, in September, Gov. Gray Davis signed a bill that accelerated the approval process to six months for "peaker plants" -- plants that run only during times of peak demand. And in January another law went into effect, setting 180-day deadlines for comments from the public or interested agencies.
But none of these reforms have managed to successfully bring a major power plant online in the past decade. And while smaller plants poured more than 6,000 megawatts onto the market in the '90s, according to U.S. Department of Energy figures, that wasn't enough to forestall the current energy crunch.
Nevertheless, Johnson and others say the crisis, however miserable, must not dictate long-term policy. Californians are a conflicted lot. "We're torn," says Golove at the Lawrence Berkeley lab. "We demand a lifestyle of convenience but don't want these power plants anywhere near us." And reducing the right of the public to raise concerns over new power plants is a giant step backward, not forward, he suggests.
"Bush's desire to relax environmental regulations generally to increase economic activity is a false paradigm motivated by concerns that have nothing to do with helping California or the economy," Golove says. "Part of what most people in California value is the quality of life; that's part of our economy. We don't want a couple of extra bucks and cheaper rates in return for fears about cancer and dead endangered species. If that means higher prices, we'll have to live with that. But making this process more backroom based is not the solution."
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