SACRAMENTO: After California’s failed attempt at energy deregulation, several influential lawmakers on Wednesday proposed to re-regulate the state’s dysfunctional electricity market.
“We’re not mending it, we’re ending it,” said Sen. Joe Dunn, D-Santa Ana, author of the bill that would kill the state’s experiment with deregulation.
The 1996 deregulation law was approved on the theory that competition would drive down electricity prices. Instead, wholesale electricity prices rose sharply in 2000, driving three utilities to the brink of bankruptcy when they couldn’t pass on higher costs to their customers.
The plan was opposed by energy companies and manufacturers, who said giving the state more authority over electricity would discourage investment in new power plants.
Dunn’s bill would phase out retail competition and let California regulators set profit margins for utilities.
He was joined at a Capitol press conference by several other Democratic lawmakers, including Senate President Pro Tem John Burton, Sen. Debra Bowen, chairwoman of the Senate Energy Committee, and Assembly Speaker Herb Wesson.
Gov. Gray Davis said he hadn’t seen the bill yet, but said he favored moving “back toward a regulated environment.”
A stable and affordable electricity supply “is essential for life, for the health of our economy and whatever the new plan for energy turns out to be, it will be one in which California can control its own fate,” Davis said.
Consumer groups welcomed Dunn’s bill.
“Californians were the lab rats for a deregulation experiment that went horribly wrong,” said Doug Heller, a spokesman for the Foundation for Taxpayer and Consumer Rights.
Lenny Goldberg, with the San Diego-based Utility Consumers’ Action Network, said the electric restructuring “failed dismally. The business community should be happy about this, seeing a more stable electricity market.”
But many in the business community assailed the proposal.
The California Manufacturers and Technology Association said the end of retail competition – also called direct access – would prevent customers from shopping around for cheaper electricity.
“Competition in the electric market and customer choice is a good idea. It made sense then and it makes sense now,” said Joe Lyons, a CMTA lobbyist. “Electric restructuring itself wasn’t flawed, it was the way the PUC dealt with problems when they cropped up.”
Energy companies said the bill would return the utilities to bloated monopolies.
It also sends confusing signals to energy companies considering building new plants in California, said Jan Smutny-Jones, executive director of the Independent Energy Producers.
The bill’s authors stressed that it would restore stability to the state’s electricity market. It would let the PUC set a reasonable rate of return for the utilities – generally about 11 percent.
It was unclear how the legislation would affect Pacific Gas and Electric Co., the San Francisco-based utility that declared bankruptcy at the height of the energy crisis, Dunn said.
The utility issued a statement Wednesday saying “the last thing the state needs is to lurch off in a new direction, without very careful analysis and a full understanding of what the results will be.”
Bowen, D-Marina del Rey, said the bill would return the state to a system “that produced for Californians reliable, stable, predictably priced electricity for more than 60 years.”
The state ceded authority over transmission lines to the Federal Energy Regulatory Commission when it approved the deregulation plan, and Dunn said that won’t be changed under his bill.
After two years of investigating the energy crisis, Dunn said, he now believes that there isn’t any way to deregulate electricity because unlike other commodities, it cannot be stored.
California officials have long blamed energy traders and generators for gaming the deregulated market, manipulating supply and driving up costs that resulted in six days of sporadic blackouts in 2001.
Energy companies said the price spikes and energy shortages were due to a drought in the Northwest and overall shortage of electricity in the region. They also blamed poor planning by the state that allowed power plant construction to lag, even as the state was using more electricity.
But a report issued last month by the Federal Energy Regulatory Commission found that widespread manipulation in the California market contributed to the high prices.
On the Net: Read the bill, SB888 by Dunn, at http://www.sen.ca.gov
The Independent Energy Producers: http://www.iepa.com