Power Firm Taps Former Regulator

SACRAMENTO —  An official who played a key role in the state’s response to the 2000-01 energy crisis is now a director of a power company that became noteworthy when Californians faced persistent shortages and occasional blackouts.

William J. Keese, 66, quit in April after eight years as chairman of the California Energy Commission, where he had a lead role in deciding where power plants could be built. Last week, he joined the board of directors of Calpine Corp., a San Jose company that needed commission approval for its new plants.

With Keese as chairman, the five-member Energy Commission approved several of Calpine’s new facilities, including some that stirred opposition among neighboring residents and businesses. During the energy crisis, Calpine gained attention because it was willing to sell electricity to the state at prices viewed by state authorities as stable and favorable, and because it had invested heavily in power plant construction.

Like all Calpine directors, Keese will receive an annual retainer of $50,000, plus options on 50,000 shares of the company’s stock, the firm reported in a filing last week with the Securities and Exchange Commission. Although Calpine was once a Wall Street favorite, its stock, valued at more than $40 a share in late 2001, closed at $2.46 Wednesday. Keese’s option price is $3.25.

Keese “brings firsthand knowledge of the energy industry” to his new post, Calpine spokesman Kent Robertson said Wednesday, and “has had a front-row seat and has seen what has happened in the western United States.”

Under state law, Keese is barred for a year from lobbying his former colleagues, formally or informally. Still, some officials and others who were involved in California’s response to the energy shortage criticized the appointment as an example of a revolving door between regulators and the regulated.

The appointment could “undermine public confidence in the neutrality of the Energy Commission,” said state Sen. Debra Bowen (D-Marina del Rey), who chaired the Senate Energy Committee during the crisis.

A 1975 state law bars former energy commissioners from accepting employment for two years at utilities such as Southern California Edison and Pacific Gas & Electric Co. Independent energy producers such as Calpine, however, did not exist 30 years ago, and the statute does not appear to apply to them, Bowen and others said.

“It demonstrates how outdated the law is,” she said.

Bowen pushed legislation this year that would have updated the law to include independent producers and extend the two-year ban to include California Public Utilities Commission members. But the measure stalled in an Assembly committee that oversees utilities and energy producers.

Gov. Pete Wilson appointed Keese, a Republican, to the Energy Commission in 1997. Gov. Gray Davis reappointed him in 2001. Keese attracted attention in 2001 when a newspaper reported that he held energy company stock. He said at the time he was unaware of the holdings. State and federal regulators cleared him of any wrongdoing.

The commission’s responsibilities include overseeing conservation programs, forecasting energy needs and supplies, and overseeing the siting of power plants. Commissioners and their staff impose an array of restrictions on power facilities, in such areas as location, architecture to emissions.

In an interview Wednesday, Keese said that early this year at a conference he mentioned to Calpine’s chairman and chief executive, Peter Cartwright, that he would soon retire and wanted to talk upon his departure from state service.

“I believe I have something to offer in terms of strategic consulting and corporate governance,” said Keese, who was an oil industry attorney and later chief of governmental affairs for the California Dental Assn. before he was named to the Energy Commission in 1997. “I clearly recognize I am not allowed to lobby the Energy Commission.”

Keese and Calpine may be making a “lawyer’s case that it is technically legal,” said Lenny Goldberg, lobbyist for the Utility Reform Network, a consumer advocacy group. But the decision amounts to “poor judgment on both ends.”

“They’re clearly not within the spirit of the law.... Nobody did more business than Calpine before the Energy Commission while Keese was on it,” Goldberg said.

Others dismissed any notion of conflict.

“The Energy Commission is basically a think tank,” said S. David Freeman, who was one of Davis’ top energy advisors and is now president of the Los Angeles Port Commission. “They do approve permits. But no one has ever been turned down.”