When Loretta Lynch accepted Gov. Gray Davis' appointment to head the California Public Utilities Commission a year ago, she knew the job would involve facing a certain amount of controversy. After all, the PUC is a huge agency with regulatory authority over telecommunications, energy, trucking and a whole host of other areas directly affecting California residents and businesses.

But nothing prepared the 39-year-old Lynch for finding herself at the center of the state's worsening energy storm. The former civil litigation attorney and Democratic political campaign worker had little grounding in the massive changes wrought by the state's risky plunge into electricity deregulation.

Yet that hasn't stopped Lynch from weighing in on energy issues. Last August, she issued a report warning of the crisis to come. In January, the PUC approved a rate increase averaging 9 percent. And last month, she pushed through the PUC a proposal to raise rates up to 46 percent, supposedly without consulting Gov. Davis, who steadfastly opposed such a rate hike.

But all along, Lynch , who hails from President Harry Truman's hometown of Independence, Mo., has said the buck really stops with the Federal Energy Regulatory Commission, which she says has shirked its responsibility to clamp down on wholesale electricity prices.

Lynch, in a meeting with editors and reporters at the Business Journal offices earlier this month, offered her assessment of the situation.


A team of congressional "fact-finders" recently visited California. What did you tell them?

Answer: My message was that Congress needs to get the Federal Energy Regulatory Commission to enforce the law. The FERC is not following its mandate to ensure just and reasonable pricing; if it were, we wouldn't have this problem we're facing now.

FERC has said the market is dysfunctional, they've said the prices California is being charged are unjust and unreasonable, but they haven't taken the next step and said the prices are unlawful.

Instead, they have given the generators and the sellers every opportunity to come up with some concoction about why these prices should be justified.

Q: So what needs to happen to get Congress to put pressure on the FERC?

A: The California delegation needs to unite, and businesses need to add their voice, to force FERC to do its job and get these wholesale prices under control. I was heartened the other day to hear Republican business owners and legislators in San Diego saying temporary rate caps are needed. They had the experience of last summer, when their electricity bills shot through the roof. They know what harm can be done to the economy.

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