Electricity Deregulation Causing Sparks In California Tuesday, July 25, 2000

LOS ANGELES  Deregulation has worked with airlines and telephones, but will it work with electricity?

Just like picking a long distance telephone carrier, consumers pick an energy provider. Some choices are cheap but others aren't, and Americans are learning the hard way about the power of deregulation.

"It was devastating to us," said Gary Khaz, a deli owner living in San Diego, Calif. The south California city was one of the first to deregulate power.

"Our bill has doubled, we've never paid so much for our electricity. What we're going to do is sell a pound of corned beef and add an electricity surcharge on it," Khaz said.

Many Americans could soon discover the same thing. California and Pennsylvania are the first of 22 states to approve deregulaton. In two states, legislation is pending while 24 states are undecided.

Blessed with an oversupply of cheap hydro-electric power to Idaho, deregulation didn't make sense but in Pennsylvania, it did.

"In Pennsylvania, we have a million people shopping for power, a billion in savings, and many new generating plants coming on line," said Norma Mead Brownell, the state's utility commissioner.

Carl Wood, the California utility commissioner said that when supply is short and demand is high, producers of electricity can charge whatever they want and that's what Californian's are seeing presently.

But many don't blame deregulation. They blame California politicians for failing to approve a single new power plant since 1984, despite rising demand and the fact that 10 new power projects stand idle, wrapped up in environmental red tape.

Brownell said people need to take the long view. "This is a new adventure," she said. "We do not have fully developed markets."

Advocates insist deregulation works when consumers use their electricity responsibly  treating a dryer like a telephone, using it when rates are cheap like nights and weekend.

Run your air condition on high all day and you'll pay for it. It's a lesson some consumers found out the hard way.

 Fox News' William La Jeunesse contributed to this report.

http://www.foxnews.com/national/072500/electricity_fnc.sml?refer=isynd

-- Martin Thompson (mthom1927@aol.com), July 25, 2000

Answers

SDG&E, city negotiate on franchise fee Council members unaware of possible effect on utility bills By Craig D. Rose UNION-TRIBUNE STAFF WRITER July 26, 2000

San Diego may have a tool to generate money that could ease the pain of soaring electrical costs: the fee SDG&E pays for using city streets.

Tapping a little-known provision in a 30-year-old agreement, city officials have quietly begun negotiating the fee, without input from the public and apparently without explaining the potential importance of those negotiations to members of the City Council.

The city's franchise agreement -- signed in 1970 -- requires SDG&E to annually pay 3 percent of its gross revenues for the use of public property. Last year, the deal provided San Diego with $28 million.

City, county boards come together in a power protest

The agreement contains a reopener clause, triggered last month, which allows the city to negotiate the fee that will stand for the next 20 years.

Several council members say the negotiation could be an important tool in crafting the city's response to the crisis created by skyrocketing power prices. But the fee negotiation was not discussed at a session yesterday -- even after the council asked the city manager to explore ways of directing money from the fee collection to rate-relief programs.

Council members said yesterday that, while they received a perfunctory briefing on the issue weeks ago, they did not realize its possible implications at a time when consumers' electric bills are soaring.

"This is a tool that this city needs," Councilman George Stevens said in an interview yesterday. "This should have been discussed today."

Councilwoman Christine Kehoe noted that, when the council received its briefing, soaring power bills had not become the riveting subject of the day for the city and county.

"I'm disappointed that the fee negotiation was not presented to us in that context," Kehoe said.

"We were not briefed in depth," added Councilwoman Judy McCarty.

George Loveland, assistant city manager, rejected characterizations that negotiations were proceeding without necessary council attention or had failed to move quickly.

"This is a matter that requires a lot of preparation," Loveland said. "We are not doing it in a rush because we don't want to make a mistake."

He said he briefed the council in mid-June, less than a week after the reopener clause was triggered. One negotiating session with SDG&E has been held and another is scheduled for the first week in August, he said.

The contract requires the city and SDG&E to reach agreement by mid- December or the matter will go to binding arbitration, with an independent party setting a new franchise fee.

San Diego's fee is higher than average in the state but not the highest, Loveland said.

Michael Shames, executive director of the Utility Consumers' Action Network, said franchise fees are complicated and agreed that they require careful deliberation, particularly in the current climate of steeply climbing rates.

Shames noted that the fees can be considered a hidden tax on residents, because the utility might pass along the cost. On the other hand, the fee could be a tool for building a city treasure chest, for use in providing rate relief to hard-pressed power customers. Power bills in the region are up 100 percent or more since spikes in electricity prices became a regular event.

But the consumer advocate said the process of renegotiating this fee must include public and council participation.

"My expectation is that City Council would have been told and consulted, and then we would have had a public hearing," Shames said. "Then the city goes and negotiates (in private)."

Loveland said the manager's office was assisted by City Attorney Casey Gwinn's staff in negotiating with SDG&E. Gwinn sparked controversy last week when he filed a motion with state regulators declaring that he could not support UCAN's proposal for a rate freeze. The attorney registered his position without input from the City Council or public hearings.

Yesterday, Loveland said the recent spikes in power prices were "not a major part of our thinking" in approaching the franchise-fee negotiation, although the subject had come up.

"I can't draw the conclusion that the franchise fee will be the major player or a major player in dealing with (the problem of rising bills)," Loveland said.

"The (power price) fluctuations for power were not meant to be a part of the regular thinking on this. The price spikes may not be part of this negotiation. My father used to say, 'There are many ways to skin a cat.' "

http://www.uniontrib.com/news/metro/20000726-0010_1n26power.html

-- Martin Thompson (mthom1927@aol.com), July 26, 2000.