The electricity provider gains a powerful ally in its effort to restore consumer choice.
The Los Angeles Times
SACRAMENTO — Assembly Speaker-elect Fabian Nunez will push a Southern California Edison-backed bill that would again allow “direct access,” a cornerstone of the 1996 deregulation law that let consumers choose their own electricity provider.
The bill, which hasn’t been introduced yet, would also ensure that utilities could recover the cost of building power plants and contracting for electricity from independent generators, Edison officials and an aide to Nunez said Friday.
The time to restructure the state’s market is now, while the state isn’t in the midst of an electricity shortage, said Bob Foster, president of Southern California Edison.
“We believe there’s a looming energy crisis. You can look out in the 2006 to 2008 timeframe and see there there’s a potential problem,” Foster said.
A recent report from the Independent System Operator, managers of much of the state’s power grid, looked at the number of power plants in California expected to retire in coming years. The ISO found that demand for electricity could surpass supply in the next few years if the state had a hot summer and low water for hydroelectric dams.
The state isn’t replacing those old plants fast enough because investors who would pay for the construction are scared off by uncertainty in the state’s power market, Foster said.
The Edison plan differs from one by Assemblymen Joe Canciamilla, D-Pittsburg, and Keith Richman, R-Chatsworth, which would establish an auction for wholesale electricity contracts and new power plant construction and also allow direct access.
That bill, which is stalled in the Senate Energy Committee, would require utilities to compete to build their own power plants against independent generators. If utilities prove they could do it cheaper, they would recover their construction costs, but not any overruns.
Both plans allow direct access, but require large energy users, such as shopping malls and manufacturers, to give utilities plenty of advance warning if they want to leave for a competitor, or if they decide to return to the utility.
Dan Eaton, Nunez’ chief of staff, said the speaker-elect would “absolutely” be introducing Edison‘s proposal because of the need to “avoid potential disaster.”
Consumer advocates warned against reviving direct access, saying it’s not possible to strike a balance between regulating electricity and allowing retail competition.
“It’s buying into the false promise that semi-deregulation or any deregulation of electricity can work. It can’t,” said Doug Heller, senior consumer advocate for the Foundation for Taxpayer and Consumer Rights.
With Nunez, the incoming Assembly speaker, carrying Edison‘s plan, the energy issue will likely take center stage again, said Mike Florio, an attorney for The Utility Reform Network, San Francisco-based consumer advocates.
Edison seems to want a “hell-or-high-water” guarantee that they’ll recover all investments, Florio said.
“The traditional framework was that they had an opportunity to earn a rate of return, but not a guarantee,” he said.
But TURN also doesn’t like the Canciamilla-Richman bill, Florio said.
“We don’t like (direct access) and we don’t think an auction is in the best interest of ratepayers,” he said. “We’ve got a big fight shaping up where we hate both sides.”
State lawmakers halted direct access in September 2001 to stop customers from fleeing utilities for lower-priced competitors, leaving the remaining customers to repay billions in debts during the energy crisis. While wholesale prices soared, retail rates were capped, and utility customers will be repaying the difference for years in higher rates.
Regulators said the exodus of customers also made it hard for utilities to make long-term plans, such as signing extended electricity contracts or building new power plants.