Associated Press

SAN FRANCISCO: California power regulators will allow large businesses and institutions with pre-existing contracts to continue to bypass their local utilities and buy cheaper electricity from competing energy sellers, which critics say disregards the intent of a 2001 state law.

The Public Utilities Commission, voting 3-2 on Thursday after months of delay and debate, chose to let hundreds of customers who signed energy deals before Sept. 20, 2001, retain those contracts. Customers include the University of California, McDonald’s, factories and industrial plants, who say they’ve saved thousands, even millions, of dollars on their energy bills as a result.

“What we are attempting to do is create a standstill situation,” said Commissioner Jeff Brown, who sponsored the measure.

Thursday’s decision means the California businesses and institutions that bought from competing energy sellers won’t have to pay among the most expensive electric rates in the country.

“I think it’s in the best interest of the state,” said Dan Douglass, counsel for the Western Power Trading Forum and the Alliance for Retail Energy Markets. “It will permit customers to continue to have the right to choose their energy supplier while at the same time ensuring that there are no cost shifts that unfairly burden those customers that opted not to choose.”

Consumer advocates and lawmakers counter that millions of California residents and small businesses didn’t have the clout to negotiate cheaper power deals, and could get stuck with an unfairly large portion of the state’s multibillion dollar power-buying debt unless businesses are forced to pay their share.

“It wouldn’t surprise me one iota to see a business that’s been handed the keys to the candy store with this decision challenge the PUC‘s legal authority to impose a subsidy repayment schedule in the future,” said Sen. Debra Bowen, D-Marina del Rey and head of the Senate energy committee.

The PUC “should not have done that until there was a guarantee that the residential and small business users’ rates will not go up as a result of this,” said Sen. John Burton, D-San Francisco.

While the Legislature’s February 2001 law left it up to the PUC to decide when to stop customers from shopping around for electricity, no one thought the commission would wait so long and that so many customers would switch to competing energy sellers in the process, said Doug Heller of the Foundation for Taxpayer and Consumer Rights.

“The state law that allowed the state to buy power said the state PUC should ban direct access to protect against this exact problem,” Heller said. “They’re allowing the very same businesses that pushed for deregulation to escape the problems that resulted from deregulation.”

The PUC had spent months debating the issue. A recent change on the commission gave supporters of direct access the extra vote they needed Thursday to approve the plan, despite a written request from Bowen, Burton and fellow Democratic Sen. Byron Sher to delay the vote.

In a nod to their letter, Brown promised the PUC would consider charging direct access customers an “exit fee” to ensure they pay some portion of the debt. If the PUC can’t wrangle an exit fee, Brown said the decision allows it to reconsider a retroactive ban on those energy-buying arrangements.

The recent change on the PUC left commission president Loretta Lynch without a majority of votes in Thursday’s debate.

Lynch who had hoped to delay voting on the measure until next month, said the commission’s role is to carry out and enforce the law, not to interpret it. Lynch and Carl Wood both voted to end competition, saying the commission must heed the Legislature’s year-old request to do so.

But Brown, Henry Duque and Gov. Gray Davis‘ recent appointee, Michael Peevey, overruled Lynch’s hold on the measure. They said it’s better for the state’s economy if rules and regulations are consistent.

“There’s a principle that’s terribly important to the economy of any state, and that’s regulatory consistency,” Brown argued. “You cannot turn it on and turn it off at short intervals.”