PUC report pans power deregulation

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Copley News Service

SAN DIEGO — As the Legislature considers bills to partly deregulate the state’s electricity market, a staff report from the California Public Utilities Commission pointedly declined to endorse any market opening and warned against any move toward deregulation until 2009.

The report, released this week, was criticized by Michael Peevey, president of the commission, who advocates moving more quickly to deregulate the state’s electricity market.

Under current state law, customers are barred from terminating their regulated utility’s electric service and signing contracts with unregulated suppliers until 2013, when all the expensive, long-term power contracts signed by the state during the crisis of 2000-01 expire.

The theory behind this ban is to ensure that all residents share the burden of paying off the costly supply deals. But bills introduced by Assembly Speaker Fabian Nunez, D-Los Angeles, and Assemblyman Keith Richman, R-Chatsworth, would allow large electricity customers to leave regulated power service sooner if they pay exit fees to cover their obligation under the power contracts.

The legislators argue that some market opening and clarification are needed to encourage investment in new power plants and transmission lines needed by the state.

Remembering the power crisis spurred by the last attempt at deregulation, consumer advocates say a fully regulated electricity market could accomplish the same goals and have vowed to fight any move to loosen controls. They say the departure of large customers for private power deals would invariably shift the costs of the crisis onto residential and small-business owners.

While the staff report from the PUC declined to endorse deregulation – in fact, it suggested the status quo could be affirmed until 2013 – it recognized the possibility that the Legislature would move toward deregulation and suggested a series of conditions that it said would chart “a best course forward.”

The conditions include a requirement that larger electricity users intending to terminate utility-provided power declare their intentions by 2006; a ban on such departures until 2009; a ban on allowing smaller customers to aggregate their electricity demand to reach the threshold required for unregulated power deals; and detailed conditions for allowing customers to return to utility service.

In a letter submitting the staff report to the Legislature, Peevey said the document was “overly timid” and of limited value.

“In contrast to the staff’s view, I do support (partial deregulation) for reasons the report fails to adequately embrace,” Peevey said. Those reasons include the value of competition on utilities and the value of choice for large electricity customers, he added.

But Douglas Heller, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica, called the PUC staff report a thorough study.

“It sends a warning that you cannot dive headfirst into deregulation again,” Heller said. “California would be better served with a regulated electricity system, and we will fight any form of deregulation.”

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