FERC Report Magnifies Need for Re-Regulation of Electricity in California

The Federal Energy Regulatory Commission (FERC) have failed to protect California consumers by refusing to take any action against energy companies that charged excessive prices for electricity this summer, according to consumer advocates. Announcing today the findings of FERC’s investigation into energy price gouging in the deregulated California electricity market, which caused San Diego electric rates to skyrocket 200%, FERC Commissioners agreed that electricity rates this summer were neither just nor reasonable (federal law requires just and reasonable electricity rates). The Washington agency did not, however, order refunds for the excessive prices, which was considered the primary remedy available for beleaguered San Diego consumers.

“This report is a bureaucratic whitewash by the deregulation fanatics in Washington,” said Douglas Heller, consumer advocate with the Foundation for Taxpayer and Consumer Rights (FTCR), a California-based non-profit organization. “California politicians from the Governor down were hoping FERC would bail them out of taking action. Now it’s clear that the energy industry and their pro-deregulation academics and bureaucrats aren’t going to rescue us from the disaster they created in California. The responsibility is on the Governor and the Legislature to pass new laws to protect California’s consumers and small businesses by regulating the industry and establishing a public power system that will provide us with reliable and affordable power. Electricity is simply too important to our lives to leave it in the hands of the greed-driven energy industry.”

California laws passed this summer to temporarily relieve San Diego ratepayers were predicated on the belief that FERC would punish the market manipulators that forced wholesale and retail energy rates far above reasonable prices. San Diego residents and small businesses, many of which were forced to close due to the price spikes, were counting on FERC to provide retroactive relief for this summer’s high electricity bills. It is likely that the state’s utilities will continue to seek massive long-term rate increases for ratepayers as a result of this report, according to advocates.

“After a five billion dollar fleecing of Californians, the only regulator left to protect consumers has failed us,” said Heller. “Deregulation was premised on a federal backstop that would protect consumers from the unlawful price gouging that occurred this summer. Now we know that FERC will not regulate out-of-control energy companies, so we must go back to doing it ourselves, at the state level.”

FTCR and national experts are developing a proposal to re-regulate California’s utilities

According to FTCR, California must now begin the process of building a new regulatory structure for the state’s electricity system. FTCR is developing a three-pronged proposal:

• Retail electricity rates must be based on a standard of just, reasonable and non-discriminatory prices and set by the California Public Utilities Commission;
  

• The state must create a Power Authority to build publicly owned plants that will mitigate market manipulations and price spikes; and
  

• The state must ensure that ratepayers, who are the innocent victims of this energy crisis, are not forced to pay for the grossly overpriced energy of the summer of 2000 and beyond.

“Without effective regulation, Californians and ratepayers throughout the country will continue to be victims of price gouging and market manipulation. We must now dump the deregulation experiment and reconfigure a regulatory system with meaningful pricing mechanisms and real consumer protections,” said Heller.

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