We Didn't Ask for Energy Deregulation and We're Not Paying for It

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We Didn't Ask for Energy Deregulation and We're Not Paying for It Source: The San Francisco Chronicle Publication date: 2000-10-09

CALIFORNIANS HAVE seen the future and it is dark -- unless you can afford to pay a few hundred dollars a month for electricity. In San Diego, the first area of the state to pay deregulated electric rates, prices have risen so high that operations of businesses, public services and the public health have seriously been affected. It's not the future the proponents of deregulation promised us, a rosy future of helpful and responsible electric companies robustly competing to serve each and every valued residential customer. In that fantasy future, electric rates went down instead of up.

It's also not the future that the utility companies envisioned. Their plan was to freeze rates at a high level so that they could collect a "competition transition charge" on customers' bills, which assured them of profits in the newly deregulated environment. Now that high wholesale prices are threatening those assured profits, the rate freeze doesn't look as appealing as it once did -- so the utilities are looking into ways to pass their wholesale costs on to us, despite the freeze. If they get their way, market rates will hit the rest of the state long before 2002 -- and long before prices go down. If they ever do.

For the state's new electric power generators, the future is brighter than they ever could have imagined. They'll make about $3 billion more on the electricity they sell in California this year than they did last year. They've been able to manipulate the poorly planned "competitive" market in order to drive prices up and keep them unconscionably high. And their coffers are brimming with the hard-earned dollars of unfortunate San Diegans.

Deregulation may be the largest mass transfer of funds from consumers to shareholders in history, with companies including El Paso Energy, Sempra Energy Trading and National Energy Corp. (an unregulated utility owned by PG&E Corp.) seeing their profits rise more than 200 percent.

The politicians, economists and other apologists would have us believe that unless more power plants are built we can't depend on the lights going on. But the fact is that the system wasn't broken before they decided to fix it. With effective regulation in place, we could dispatch power in a coordinated manner and maintain reliability at reasonable rates, even with current supply shortages. But with a dysfunctional electric market, we've created incentives for generators to withhold power until peak demand drives prices up.

Just how dark will the future be? That depends on what Gov. Gray Davis, the state Legislature and the California Public Utilities Commission do. Our legislators handed us over to the "free" market at the urging of PG&E, SoCal Edison and SDG&E, despite the consistent and vocif erous objections of consumer advocates.

Now its time for them to acknowledge their mistakes and act quickly and decisively. The governor's political future will be determined by whether or not he can maneuver the state out of this mess.

The utilities are accustomed to buying what they want in Sacramento. But the voters are not the ones responsible for this huge public policy failure, and they're unlikely to return a governor to office that allows the gouging to go on -- or to increase. On the other hand, a creative and fair solution would make Davis a hero.

The state needs a comprehensive energy policy that addresses the need for conservation and better energy efficiency, that encourages renewable power and keeps retail costs reasonable. Deregulation has accomplished none of those things.

Consumers are tired of being told to have faith in deregulation. We didn't like it in theory, we don't like it in practice and we won't pay for its failure.

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=14634871&ID=cnniw&scategory=Utilities%3AElectricity

-- Martin Thompson (mthom1927@aol.com), October 09, 2000

Answers

As always, the people who understand out free enterprise system the least are the first to jump up and down the hardest, with the lowdest howls of protest.

-- Wellesley (wellesley@freeport.net), October 09, 2000.

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