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Posted on 01/17/2004 3:02:24 PM PST by calcowgirl
Sen. Dianne Feinstein is urging more regulation of the state's electricity rates. Look for fresh sparks in the debate over California's electricity future in the coming weeks.
Gov. Arnold Schwarzenegger met with top energy aides late last week and is expected to make public soon a detailed version of the pro-deregulation plan he laid out during the recall campaign.
Sen. Dianne Feinstein, D-Calif., meanwhile, has written to urge the governor to halt further deregulation and guarantee that the bulk of the state's smaller electricity customers – 70 percent by her estimation – be protected by regulators. But Feinstein also proposes to allow up to 30 percent of the state's largest users to cut private power deals outside the regulated market.
For consumer advocates both proposals are flawed.
"The problem is that there is no such thing as partial deregulation," said Douglas Heller of the Foundation for Taxpayer and Consumer Rights in Santa Monica. "The debate should be over how we re-regulate the electricity system."
And one key legislator says he continues to explore a ballot initiative to mandate a return to a fully regulated power system, similar to that which served the state for most of the past century.
The backdrop to the debate is a growing realization that California could face power shortages again within two years, or sooner under worst-case scenarios. A host of new plant projects are stalled because of regulatory uncertainty, while older, inefficient and polluting plants continue to operate without plans for upgrades or with owners who are moving to mothball them.
James Sweeney, a Stanford University professor who helped craft the governor's energy policy during the campaign and met with him last week, said a working group has proposed a system under which large electricity users are allowed to seek cheaper electricity deals outside a regulated system. Sweeney said his proposal would require that these larger users bear the risk of their decision and not be allowed to shift costs to smaller users. He added that large users should also shoulder a share of the billions in crisis-related costs that utility customers continue to pay in their monthly bills. The Stanford professor said he did not believe utility companies should get back into the business of building electricity generating plants, preferring to leave that role to unregulated companies.
During the state's experiment with deregulation, San Diego Gas & Electric and other utilities were barred from building plants and sold off many of their generating units to unregulated companies. But expectations that market forces would provide sufficient power at reasonable prices collapsed during the crisis of 2000 and 2001, a time of soaring electricity bills and rolling blackouts.
In an interview yesterday, Feinstein expanded on thoughts she sent in a recent letter to the governor. The senator said she supports a return to power plant construction by regulated utilities, including SDG&E. "I don't care who builds power plants as long as they get built," said Feinstein.
She described her support of a mixed system – partly regulated, partly deregulated – as a practical compromise. In addition, she said some users had the wherewithal to navigate the open market for electricity. "I sort of think the big users are able to fend for themselves," said Feinstein. "It is really the small users, the 70 percent, that we have to be concerned about protecting."
State Sen. Joseph Dunn, D-Garden Grove, who led the state's investigation into the power crisis and now supports a return to regulation, said moves toward deregulation are doomed in the California Senate.
But Dunn said there is support for continuing to allow some large users to cut private power deals, despite his personal opposition. He added that he is not convinced that Feinstein's staff understands the implications of allowing 30 percent of the power market to cut private deals. "That would require shifting costs to smaller customers," said Dunn.
He and other opponents of the private deals – known as direct access agreements – argue that smaller customers end up carrying the bulk of the costs for maintaining the power grid and pay higher prices for electricity from the same plants providing low-cost power to big users. "The negative implications of 30 percent of the market going to direct access would be deadly, and I would never support an energy policy that required individual customers to subsidize big users. Never."
Dunn added that he and others continue to explore the possibility of a ballot initiative to return the state to a fully regulated system. "Every poll shows strong support," he said. "Some polls say 75 percent support for reregulation, others as high as 90."
In 1950 the average utility bill was $25 per month and the car payment was about $100 per month. Today the PG&E bill approaches $250 per month and the car payment is about the same.
Something has changed.
Yep. The stench gets worse every day.
I guess it depends on the meaning of the word "deregulation". If the loonies who run Kalifornia had simply allowed everyone's electricity costs to rise when the demand temporarily and only slightly exceeded supply, the demand would have decreased to match supply. The mismatch was only about 5% I think.
Instead, they held prices constant during the mismatch and used rolling blackouts during peak hours. The higher prices would have provided tremendous incentives to conserve and the increased income to producers would have encouraged the creation of additional supplies.
The issue is now more complicated in California because of the past screwups. But the answer is not reregulation.
And the answer is not to allow utilities that are fully regulated to build new power plants. That recipe only entices the utilities to spend as much as possible on each plant, because they're guaranteed a rate of return. The more they spend, the more they make.
It was California's failure to truly deregulate that caused the problem in the first place. They only half-tried, and since that was doomed to failure, they want to abandon the concept.
"I don't care who builds power plants as long as they get built," said Feinstein.
I just heard the orchestra leader tapping her batton on her music stand, ready to lead us in an encore performance of socialistic public power supplies!
The only trouble is... No one wants to even buy the intruments to play in her orchestra as the pay is lousy and the Demicrat score sucks canal water!!!
Yes. This one is clear regardless which side of the fence you sit on. They either need to regulate or deregulate but they can't continue in the current confused state.
Deregulation would be the easiest to try because of all that has changed since the first "fake" attempt at deregulation. Regulating would be the most difficult because of the changed nature of the industry in California and the intervention of the federal courts to sort out the bankruptcy messes.
The big question mark with deregulation is how the state would handle the class who simply couldn't afford the service. Would we simply ask these folks to move out of the PG&E service areas or would we create a new, entitled class, supported through tax revenues.
With regulation comes a whole host of headaches. The prevailing wage regulations in California make plant construction prohibitively expensive. The basic commodity to produce electricity, natural gas, is unregulated and out of state, beyond the control of the legislature. Environmentalists and the federal government have tied up both wind and water production. Off grid resources (solar or mechanical)will squeeze the burden of production and distribution costs onto the middle class. The vertical nature of the old industry has changed substantially in the past 15 years making regulation a complex issue with economic trade offs at every turn.
Very well said. It's kind of a no-brainer, but then again, we ARE talking a California Legislature.
Another drought, and we're right back to 2001. The economic downturn also helped, but that's hardly the solution to providing enough power to everyone.
I'm glad people are at least talking about it again, but I'm not terribly hopeful that anything positive will be done. The mentality there is that power plants are not acceptable near populated areas, or anywhere that wildlife exists, but power should be cheap, and preferably free. It doesn't lend itself to solving the problem.
And what's wrong with that?
The regulated public utility model served our nation well for many, many decades.
And unlike Enron stock, shares of public utilities were considered "safe" blue-chip investments, suitable for retirees, widows and dependent children and orphans. (Plus we always had plenty of electricity, not many "brownout" shortages.)
Item here somewhat related.
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New FERC Commissioner Gives Voice To West U.S. -- Many in the energy industry view new Federal Energy Regulatory Commission member Suedeen Kelly as the agency's best hope for improving relations with the Western states-- and it's a role she embraces gladly. In recent months, FERC has moved toward resolving the lingering issues from the West's 2000-2001 energy crisis, which was marked by blackouts, high power prices and utility insolvency. The commission has issued orders on contract disputes and new market rules, and its staff has reached settlements with many energy firms on charges of market manipulation. California's request for billions of dollars in refunds for power overcharges is also expected to be dealt with this year. Jessica Berthold in the Wall Street Journal -- 1/15/04
The same that was wrong with the airline industry before it was deregulated. Limited choices, high prices. Government-enforced monopolies.
It's the definition of fascism, Willie, and now, thanks to airline deregulation, you're free to move around the country.
Electricity deregulation in Texas has cut my power bill by 1/3rd. And I can switch providers anytime I want. Which I have.
I don't want the government making my choices for me if I can help it. As far as keeping regulation for widows who own stock, sheesh. It's a brave new world, and they can invest in any number of other safe investments.
There's no reason to think that they're any less savvy than you or me.
If you wish to subsidize the use of electricity for some people in Kalifornia, then you should just give them the money to buy it. The absolutely worst thing to do is to distort the energy market and saddle big users, which is another name for employers, with artificially inflated prices.
The Kalifornia energy market is so distorted that people don't even agree on who is subsidizing whom. Are the little people getting a break at the expense of the larger users. In that case, deregulation would raise prices for the little users and they would lose their subsidy.
I have heard other people claim that little users are paying higher prices so that larger users get a break. Some of the costs to support larger users are less per kwh because they have a single large connection to maintain and only one meter to read.
I now pay $15 per month for my phone and I buy 1000 minutes per month of long distance for $10. That would never have happened with a fully regulated phone system. Virtually anyone can afford a phone and there is no reason to force the phone company provide special services to any class of users.
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