Power bill may allow big users to shop;

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San Jose Mercury News (California)

Utility bills have stabilized, and rolling blackouts are a fading memory, but California’s electricity system is reaching a critical juncture as state leaders debate letting some large-business customers shop around again for power.

Lawmakers, businesses, utilities and consumer advocates disagree whether and how to reintroduce electricity shopping — a key feature and casualty of the state’s deregulation disaster.

But they say a decision is needed soon to prevent another energy crisis a few years from now. Power generators aren’t willing to build the additional plants needed to meet California’s future needs until they know who’s going to buy the electricity.

”If we don’t this year establish a clear energy framework, then we are at risk of not getting adequate generation,” said Assemblyman Keith Richman, R-Granada Hills. ”There has been an unwillingness to invest in new generation because of the lack of a clear framework for our electricity market.”

Most consumers are unlikely to see a return of the option launched in 1998 that let all utility customers choose their power supplier. In 2001, the state capped that option to ensure there would be customers to pay for electricity supply contracts the state signed during the energy crisis.

But businesses, particularly large industrial companies, say they’re suffocating under high rates and need options to stay competitive.

”For manufacturers, energy is a critical component,” said Joseph Lyons, lobbyist for the California Manufacturers and Technology Association, whose members include Intel. ”Anything that allows them to manage energy needs and reduce costs is very important for manufacturers and the state’s economy.”

State leaders are pushing a compromise that would let the biggest businesses choose power suppliers.

Lawmakers have produced two competing bills to that effect, one by Assembly Speaker Fabian Nunez and another by Richman and Assemblyman Joe Canciamilla, D-Martinez. Both bills have passed the Assembly and are scheduled for a Senate Energy Committee hearing June 22.

The bills call for a ”core/non-core” system, where a core of residential and small-business consumers get power exclusively from a regulated utility like Pacific Gas & Electric, while the largest customers are free to try another supplier.

But while the state already uses a core/non-core system for natural-gas service, electricity is different — it cannot be stored to guard against shortages. No other state has a core/non-core electricity system, and that makes even some utility officials wary.

Advocates wary

Utilities and consumer advocates worry that big customers will leave, saddling the remaining ratepayers with the entire cost for power plants and electricity contracts.

They also fear big companies will jump back to the utilities if their new suppliers fail, forcing PG&E, Southern California Edison and other utilities to buy expensive additional power on short notice. That could drive up prices for all ratepayers.

John Bryson, chief executive of Edison‘s parent company, told a shareholders’ meeting last month that such ”further experiments” in deregulating California’s electricity markets ”would be like playing Russian roulette with the state’s electric system.”

Utilities like Edison argue that they need a stable customer base if regulators expect them to commit to new power plants and supply contracts.

Consumer advocates oppose letting any customers shop around for power.

”Deregulation is a dangerous game, and we should not put Californians back on that path,” said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights.

California’s chief utilities regulator, Michael Peevey, and Gov. Arnold Schwarzenegger are sympathetic to businesses’ concerns and support a core/non-core electricity market.

But lawmakers and regulators disagree on how to create a system that gives businesses choices they want and protects small consumers from higher rates.

Nunez’s bill, drafted with Edison‘s help, would allow only large industrial customers that use 500 kilowatts or more to shop for power. Customers could not leave the utility until 2009, when utility energy contracts begin to expire, and would have to give five years’ notice before switching service.

”Those people who think we ought to deregulate are totally off the mark, but people who think we ought to re-regulate are not being wise,” Nunez said. ”We think the way to do it is a little of both — protect residential customers but force utilities to diversify and let big industrial customers shop around.”

Canciamilla says Nunez’s bill ”returns us to a marketplace dominated by the utilities.”

Richman and Canciamilla’s bill would let businesses shop for power as soon as 2006 and leave other details up to the California Public Utilities Commission.

No position

PG&E has taken no position on either the Nunez or Richman bill, though spokesman Ronald Low said the utility supports customer choice.

The ”direct access” option of choosing electricity suppliers never gained widespread appeal. Nearly two-thirds of industrial customers and all but 1 percent of small-business and residential consumers stayed with their utility.

Today, 14 percent of utility customers continue getting power outside their utility under deals signed before the state shut the door on that option.

That’s why Edison officials, despite serious doubts about the wisdom of blending regulated and free-market utility service, worked with Nunez on legislation.

”From a practical standpoint, you have people out there in that market now, and no one is advocating that they should lose that privilege,” said Robert G. Foster, president of Southern California Edison. ”We’re recognizing the reality of the marketplace.”

But Foster warned state officials at a recent utility commission hearing to be careful.

“The people of California,” he said, ”will allow us only one more chance to get this right.”
Contact John Woolfolk at [email protected]

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