Measure likely to reach governor; veto possible

The San Diego Union-Tribune

A key electric re-regulation bill moved to the brink of passage yesterday, setting up a likely confrontation between the Legislature and Gov. Arnold Schwarzenegger on the future of the state’s electricity industry.

Assembly Bill 2006, which would largely restore the power industry to the utility-run, state-regulated business it was for the better part of last century, won a 22-14 vote in the Senate late yesterday afternoon and was expected to win approval in the Assembly late yesterday or today.

That would send the measure to the governor’s desk for his signature or veto, and he has repeatedly signaled his opposition.

Although the debate around the measure includes mind-numbingly dense industry jargon, the dispute essentially continues the long-running debate over whether to more tightly regulate or deregulate the electricity industry.

The bill’s supporters — an unlikely coalition including Southern California Edison and consumer advocates — favor regulation.

Opponents would carve out much of the $25 billion-plus state electric industry for deregulation, though they avoid use of that term because of its disastrous association with the power crisis of 2000-2001, when the state loosened regulation and electricity costs soared.

Opponents of the measure include the governor, large electricity customers and unregulated power plant builders, including Calpine Corp., the state’s largest developer of electricity plants.

These opponents say competition is needed to temper potential cost overruns by utilities and to spur innovation. They also staunchly support allowing large electricity customers to enter into electricity supply contracts with non-utility providers.

Supporters say tight regulation of the industry is needed to protect consumers from market manipulation. They argue that only a highly regulated industry can ensure that the largest electricity users don’t cut deals outside of utilities, allowing them to shift their share of the huge overhead costs required to keep electricity flowing in the state onto smaller customers.

Schwarzenegger has declined to offer counter-legislation, instead indicating that he is content to allow the California Public Utilities Commission rather than the Legislature to set electricity policy.

Commission President Michael Peevey also supports partial deregulation of the power market. The governor later this year will appoint two new members to commission, likely giving him majority support for his policies on the five-member body.

But AB 2006 supporters say that if the governor exercises his veto, they may convert the measure to a ballot initiative and take it directly to the voters.

“The polling is very strong on this,” said Lenny Goldberg, a lobbyist for The Utility Reform Network, one of the state’s larger consumer advocacy groups. “The public wants re-regulation.”

Todd Harris, a spokesman for the coalition opposing the bill, says AB 2006 would be a bad deal for consumers.

“This bill discourages competition, which means energy prices for the average consumer will go up because there is no incentive for utilities to buy the cheapest power,” Harris said.

“Most Californians believe competition not only drives prices down but spurs innovation and that monopolies are bad for people looking for the lowest cost.”

San Diego-based Sempra Energy, parent company of San Diego Gas & Electric, also opposes the measure. Jennifer Andrews, a spokeswoman for Sempra, said the bill fails to ensure adequate power supplies in the state because it does not include sufficient incentives for plant building and does not deal with what she said was the currently unfair rate structure.

Douglas Heller, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica, which supports the bill, says opponents of the bill avoid talking about deregulation, although he said that is their objective.

“They want an unfettered market,” Heller said. “The never use the word deregulation even though that is exactly what they’re pushing, because they know California will never support another deregulation attempt.”

Heller added that that his group and The Utility Reform Network would not have supported the bill if it did not include protections against gouging by utilities.

He said the law would reinforce the concept of allowing only just and reasonable utility charges — an old legal concept intended to protect ratepayers — but noted that much still depended on the role of the PUC.

“The language provides sufficient protection,” Heller said. “But regulation, no matter how strongly worded, depends on the regulator.”
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Contact the author Craig Rose at: (619) 293-1814 or [email protected]