Consumers’ Voice on PUC Staff Has Ring of Authority

SAN FRANCISCO —  William R. Ahern, director of the California Public Utilities Commission’s Division of Ratepayer Advocates, has a jocular reply for those who ask him why he has devoted his career to public service.

The decision, he said, stemmed from his Vietnam War-era stint in the Air Force, when he found himself working as an information officer at Hickam Air Force Base in Hawaii.

“When I decided I was against the war and informed my commanding officer, I was relieved of all duties,” he recalled. As a result, he said, “I had a year of surfing in Hawaii as a fully paid Air Force lieutenant. So I guess I felt I had a debt to repay.”

Ahern, by most accounts, has repaid that debt many times over. Since his unit was established in 1984--it initially bore the more innocuous sounding name of Public Staff Division--the 45-year-old graduate of Harvard University’s Kennedy School of Government figures he and his staff of 200 have saved California’s consumers more than $8 billion in utility bills.

His official mandate from the commission is to “critically review and analyze” rate hike and other applications by utilities and to make recommendations “intended to serve the best long-term interests of all utility ratepayers.”

Ahern, who hates jargon, defined his mission this way: “The utilities have every incentive to blow smoke and shine mirrors, making it hard for the commission to discover the truth. Our job is to help the commission discover the truth.”

Ahern’s most recent triumph came last month when he, Atty. Gen. John Van de Kamp and Pacific Gas & Electric reached a settlement in the long-running Diablo Canyon rate case. The novel settlement shifts the financial risk of the nuclear power plant from PG&E;’s customers to the utility’s shareholders.

Tough Negotiator

Under the settlement, consumers will pay a fixed price for electricity they receive, a departure from the traditional method of setting rates based on a plant’s costs. “If the plant operates well, the customers will pay for it,” Ahern said. “If it operates poorly, the shareholders will.” Ahern and Van de Kamp figure that the settlement has the effect of disallowing $2 billion of PG&E;’s $5.5 billion construction costs.

Ahern had initially sought a $4.4-billion disallowance, citing management and construction deficiencies and other avoidable problems.

“Bill is a tough and resourceful negotiator,” said Warren Christopher, chairman of the Los Angeles law firm O’Melveny & Myers, which represented PG&E.; “He was also well informed.” For example, when PG&E; arguments relied on analogies with other nuclear plants, “he was often able to deflate our arguments by pointing out flaws in the analogies.”

Not all his adversaries are such big fans. “Bill’s as bright as they come,” said George Schmitt, vice president for state regulatory affairs at Pacific Bell. But, he added, “his staff is overly aggressive, and sometimes even unfair--particularly when they are trying to grab headlines.”

Schmitt also faulted Ahern for onerous data requests. “I sometimes get data requests on speeches, on comments by our executives that are quoted in the press.”

Ahern also gets criticism from the other side from such independent ratepayer advocates as Sylvia Siegel, head of Toward Utility Rate Normalization. “Ahern likes settlements, he’s pushing for settlements, and it’s wrong,” she declared. “There are times to settle and times to fight.” Such settlements, another critic maintained, amount to “rate making behind closed doors.”

Wears Two Hats

Another criticism is that Ahern’s group lacks complete independence. “California is fairly unusual in the way in which it has structured the consumer advocacy role,” explained Bill Julian, chief consultant to the Assembly’s Utilities and Commerce Committee.

“Most state regulatory schemes separate the consumer advocacy role,” he added. “That gives the advocate a freer hand in articulating consumers’ concerns, and in seeking judicial review.”

Ahern, he noted, “wears two hats: as a commission employee and as a ratepayer advocate. Given those constraints, he has done OK.”

But Ahern said that being part of the commission has its advantages. “We have the commission’s authority, but we also have an independent role.”

Moreover, he added, “no other state gives its consumer staff the kind of resources California does.” The Legislature, for example, allocated $5 million for Ahern to prepare his case against PG&E; in the Diablo matter.

And Ahern staunchly defended his pragmatic policy on settlements. “We litigated the San Onofre (nuclear power plant) case to the eyeballs.” In the end, the commission disallowed $240 million, compared to the $1 billion disallowance sought by Ahern.

Ahern argued that the deck is often stacked in favor of utilities. “The debate is always framed in favor of the utilities: It’s ‘how much will be disallowed?’ rather than ‘how much will the consumers pay?’ ”

As a result, he said, “utilities have wide latitude to make mistakes” in constructing huge multibillion-dollar plants. “Then they can hire all kinds of experts and lawyers to fuzz up their mistakes.”

Opposes Nuclear Power

Another favorite target of Ahern’s is utilities’ propensity to set up holding companies to manage regulated as well as unregulated businesses. “There are a million temptations to milk the regulated utilities to help the unregulated subsidiaries,” he contended.

Ahern learned utility economics as a staffer at RAND Corp., the state assembly and the California Energy Commission. He is a strong believer in alternative energy sources such as solar power, co-generation and windmills, and is deeply suspicious of nuclear power.

“Nuclear power plants have the potential to be financial sinkholes,” he declared, adding that he is deeply relieved to have Diablo “off the consumers’ backs.”

Ahern is paid $70,500 a year--a fraction of what his adversaries command--and augments his pay by teaching a course each term at the University of California at Berkeley’s Graduate School of Public Policy. He “absolutely” refuses to take free meals from utilities--and makes sure staffers do, too.

“If we go out with them, we pay,” he declared.

His boss, commission executive director Vic Weisser, said Ahern is a bargain. “I’ve been in government for 20 years, and you only run into a Bill Ahern once every decade,” Weisser said.

“He can translate the most complex and cumbersome regulatory language into English so that everybody can understand what the issues are,” Weisser added. “Utilities hold him in great respect. Do they fear him? Maybe. But some level of fear is appropriate.”