California dims electricity deregulation after power crisis
SACRAMENTO, Calif. (AP) – When California’s Public Utilities Commission votes Thursday, it could strip away most of the state’s deregulated energy market created in 1996.
Replacing it most likely will be a system dominated by the governor, a new public power authority and three troubled utility companies. Other states once contemplating deregulation are backing away from the experiment that was supposed to revolutionize the energy industry.
The PUC vote Thursday could wipe out the last vestige of deregulation – direct access, the ability of consumers to choose their electricity provider.
Without direct access, customers will lose their ability to bypass their utility and buy power from retailers, such as Green Mountain Energy or Enron Corp. About 200,000 customers had switched utilities by September.
Touted at its creation as a way to stimulate competition and lower electric rates, deregulation foundered after a year of price spikes, a utility bankruptcy and energy shortages that led to rolling blackouts.
Today, California’s government is deeper into the power business than ever before and electricity deregulation is dead, said Public Utilities Commissioner Carl Wood.
”There’s no way in the world deregulation would ever get an affirmative vote from the people or its representatives,” Wood said.
If it acts as expected, the PUC vote will continue a trend that started in January, when the California Department of Water Resources started buying a third of the power needed by customers of the state’s three largest private utilities – Southern California Edison, Pacific Gas and Electric Co., and San Diego Gas & Electric Co.
All three companies faced bankruptcy because the deregulation law wouldn’t allow them to pass on higher wholesale energy costs to customers.
From there, the state’s foray into the power business deepened, including:
– Spending almost $9 billion in state money on power and signing at least $43 billion worth of long-term contracts that last until 2021.
– Committing $850 million for conservation programs and $30 million in incentives for speeding power plant production.
– Creating the state’s first public power authority, the California Consumer Power and Conservation Financing Authority, which can float $5 billion to build, buy or lease power plants.
By creating the Power Authority, consumer advocates said, the state has traded its deregulated system for a government-run network that encourages renewable energy and stable rates. It, unlike investor-owned utilities, also doesn’t have to answer to Wall Street.
Instead of bringing the benefits of the free market, consumer activist Harvey Rosenfield said, deregulation ”brought us higher prices and the creation of a government agency to protect the people.”
The state’s move toward long-term contracts included an order that the PUC restrict direct access so the state wouldn’t be stuck with a shrinking pool of people to pay for the energy it ordered.
By restricting direct access, the PUC may also discourage energy retailers from ever returning to the California market, said Rick Counihan, Green Mountain Energy’s general manager. Instead, Green Mountain will ”relocate to other states that are more friendly.”
While the state has a larger role in the energy market, government’s role is tapering off, said S. David Freeman, director of the new Power Authority.
Just because the authority can build or buy power plants doesn’t mean the state is more involved, Freeman said. ”The U.S. government has a petroleum reserve, but no one says they’re in the oil business.”
PUC Commissioner Richard Bilas disagreed, saying the authority is ”even more extreme than what we had before restructuring began.”
The authority and other parts of the state’s role comes from lawmakers reacting piecemeal to a series of crises, said Assemblyman Bill Leonard, a Republican involved in creating the 1996 plan.
”It’s hard to know which way it’s going,” Leonard said. ”The governor isn’t giving us a vision that he wants the Power Authority to be around forever. The Power Authority could take off and David Freeman would have an empire as big as the Tennessee Valley.”
Freeman disagreed, saying the Power Authority will give ”private enterprise another shot at doing the job in a way that’s fair to the customer.”
Other states considering deregulation, Freeman said, have looked at California’s experience and reconsidered. ”Some states might decide they’re OK the way they are.”
Nevada and Oklahoma lawmakers delayed plans to deregulate their states’ electricity market, citing California’s troubles. Iowa, Minnesota and Wisconsin have slowed their deregulation plans.
On the Net:
California Public Utilities Commission: http://www.cpuc.ca.gov
California Energy Commission: http://www.energy.ca.gov
Electricity Oversight Board: http://www.eob.ca.gov
California Consumer Power and Conservation Financing Authority: http://www.capowerauthority.ca.gov
California Independent System Operator: http://www.caiso.com
California Department of Water Resources: http://wwwdwr.water.ca.gov
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