Bill Would Re-Open Electricity Direct Access

Santa Monica, CA — Legislation to re-institute a key provision of California’s failed electricity deregulation experiment was met with strong criticism from consumer advocates who point out that just last week the Federal Energy Regulatory Commission disclosed thousands of pages of documents exposing the market manipulation that came about as a result of deregulation. Advocates with the nonprofit, nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR) said Assembly Bill 816 (Reyes) could result in another bout with soaring electricity rates.

In a letter sent to members of the California Assembly Utilities and Commerce Committee, FTCR said: “There is no public policy in recent memory that failed so dramatically and with such dire consequences as energy deregulation.”

The bill, which will be heard today in the Utilities Committee, would allow energy corporations to sell power at unregulated prices to energy customers. These transactions, known as “direct access,” have been the subject of great debate in recent months because the major beneficiaries of “direct access” have been the private power companies and a small number of large California businesses, while most consumers have suffered as a result of the unregulated marketplace.

FTCR noted that the legislation would offer undeserved legitimacy to the energy marketplace, which power companies used during the crisis to gouge California consumers and businesses.

“The most important lesson from California’s disastrous deregulation experiment is that electricity is too vital to our economy and public safety to leave in an unregulated marketplace. AB 816 does not heed that lesson and instead would recommit California to the misguided faith in electricity markets,” wrote FTCR.

The group has called on lawmakers to reject the legislation, warning that if the bill is passed a repeat of the California energy crisis may be on the horizon. “Only this time, Californians will not point to AB 1890 as the cause of our tribulations, but to AB 816 and those who pushed for the reinstatement of deregulation,” the group concluded.

Lawmakers are expected to consider the proposal at an Assembly hearing this afternoon.

FTCR’s letter to lawmakers concerning the legislation follows:

March 28, 2003

The Honorable Sarah Reyes

Chair, Assembly Utilities and Commerce Committee

California State Assembly

Sacramento, CA 95814

Re: AB 816 (Reyes) — OPPOSE

Dear Assemblymember Reyes:

There is no public policy in recent memory that failed so dramatically and with such dire consequences as energy deregulation. That is why the Foundation for Taxpayer and Consumer Rights was shocked to read AB 816, which we oppose. This legislation would attempt to resuscitate the direct access scheme that stood as a chief provision of the failed deregulation policy.

The most important lesson from California’s disastrous deregulation experiment is that electricity is too vital to our economy and public safety to leave in an unregulated marketplace. AB 816 does not heed that lesson and instead would recommit California to the misguided faith in electricity markets. Indeed, earlier this week the Federal Energy Regulatory Commission disclosed thousands of pages of evidence that the electricity marketplace was rife with manipulations, gaming and profiteering at the expense of the consumers, businesses and taxpayers of California. We should not attempt to revive the direct access system that depends upon and validates the wholesale energy marketplace.

AB 816 re-opens the door to the out-of-state energy corporations that wreaked havoc on California, at a time when we should be dead-bolting it shut and reconfiguring our energy system in recognition of the fundamental need to regulate electricity. Even the best case scenario for this bill — a small number of large business users get deals on electricity, while the rest of California consumers are left carrying the weight of the past energy crisis for decades — is unacceptable. Another possible outcome is a repeat of the California energy crisis. Only this time, Californians will not point to AB 1890 as the cause of our tribulations, but to AB 816 and those who pushed for the reinstatement of deregulation.

The Foundation for Taxpayer and Consumer Rights, a nonpartisan, nonprofit organization, urge you to withdraw this legislation.

Sincerely,

Douglas Heller

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