CA Electric Deregulation A Bust for Consumers
One year into electric deregulation, the benefits promised
consumers by the California legislature have failed to materialize,
making monopoly utilities the primary winners in the state's
deregulation game, according to San Francisco-based The Utility
Reform Network (TURN), the state's major utility consumer group.
The state's large industrial customers, labor unions, big
utilities and some major environmental groups are hailing the
one-year mark as proof competition works, claiming residential
customers are saving at least 10% on their electricity bills and
there is more to come in the future. But TURN claims small
consumers scored zero on savings, despite the "legislated 10% rate
reduction" appearing on their bills. The rate reduction, financed
by consumers through a transition charge, is actually about 2%, far
less than consumers would have seen had generation regulation
remained, TURN said. "And consumers must pay inflated rates for 10
years to pay off the bonds sold to pay for the minuscule
TURN maintains fewer than 1% of California's residential
customers have switched electric companies, despite the $80 million
the CPUC awarded to utilities to explain deregulation and millions
more spent by would-be competitors on sales and marketing. The
utilities have collected billions in accelerated recovery on
"There was lots of talk about the incumbent utilities being
'poles and wires' companies only, but now we've got these same
utilities acting like they want to be the major purchasers of
power-and not through affiliate energy service providers (ESPs),"
said Nettie Hoge, TURN's executive director.
"I don't think the legislators or regulators thought too much
about the end of the transition period [when competitive transition
surcharges are all collected] when there might be no more power
Even though TURN has its reservations about the PX, Hoge said
the consumer group may have to fight hard to keep the PX in
business and to maintain the requirement that the utilities buy
their power through it. Marketers such as Enron have long argued
the PX is unnecessary in a competitive power generation market.
"So what does that open up? It opens up Enron coming in and
complaining about an integrated monopoly doing all the purchasing
for the default market and it's not through the power exchange, so
why shouldn't these customers be auctioned off? I see a great deal
of potential for that to go down the road of placing all the risk
on the customers who decide to stay with the utilities."
Joe Fisher, Houston; Richard Nemec, Los Angeles
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