STATE LAWMAKERS WANT TO RE-REGULATE UTILITIES, INTRODUCE MORE CONTROLS

San Jose Mercury News

Hoping to take California back to its pre-energy-crisis days, state lawmakers unveiled a bill Wednesday that would re-regulate the state’s private electric utilities.

Crafted by Sen. John Burton and Sen. Joe Dunn, both Democrats, the bill would undo the 1996 law that shifted California’s monopoly energy system to a competitive marketplace.

Backers said the bill would protect ratepayers by putting tighter controls over how much the utilities pay for power.

Under the bill, utilities would again be authorized to invest in new power lines and plants, and they could enter into long-term contracts with power producers.

At the same time, the bill would revoke the right of businesses and individuals to shop for power on the open market.

Dunn said legislators ”made a mistake of epic proportions in 1996. Now we as legislators have to fix that mistake.”

Consumer groups lauded the proposal, noting that California’s energy system is hobbling along.

“We’re in the middle of the ocean right now,” said Doug Heller, of the Foundation for Taxpayer and Consumer Rights. “We don’t have any guideposts or rules. . . . This assures we will have affordable electricity because we’ll be able to regulate it.”

When California upended its monopolistic, regulated energy system, utilities were forced to sell off their power plants. The system encouraged a competitive electricity market where megawatts were sold to the highest bidder.

But the plan backfired spectacularly. Utilities, now buying power instead of producing it, saw their costs soar dramatically, in part because of market manipulation by energy producers. At the same time, state law prohibited the utilities from passing their costs on to consumers, which drove Pacific Gas & Electric into bankruptcy.

The state eventually had to step in and purchase power on behalf of cash-strapped utilities, which led to rate increases for California consumers.

The bill would obligate utilities to ”provide adequate service at just and reasonable rates” while guaranteeing them a fair profit.

”This bill is what is going to give back stability in our energy system,” said Sen. Deborah Bowen, D-Redondo Beach, another author of the bill.

Independent power generators lashed out at the plan, saying it would threaten their livelihood and further destabilize the system.

Although Bowen said energy producers such as Calpine or Mirant could still participate in the new system, the companies remain skeptical.

”It’s a clear attempt to re-monopolize the energy system in California, and we don’t like it,” said Jan Smutny-Jones, executive director of the Independent Energy Producers, a trade association for energy producers. ”It pulls Southern California Edison and PG&E back into the ‘let’s build power plants’ business, and that was a disaster before.”

The bill could face hurdles in the Assembly, where lawmakers have introduced legislation that would continue to deregulate the power market.

Through a spokesman, Gov. Gray Davis expressed reservations about the bill.

”It’s an opportune time to have this debate, but with one utility in bankruptcy and another edging out of it, it might not be the right time to upend the apple cart,” the governor’s spokesman, Steve Maviglio, said.

PG&E gave a muted response to the bill, stating: ”The last thing the state needs is to lurch off in a new direction, without very careful analysis and a full understanding of what the results will be.”

————

Contact Michael Bazeley at [email protected]