The decibel level of the cries to rollback California’s electricindustry deregulation was raised considerably last week withconsumer advocates, local and state elected officials, andregulators joining the growing chorus. There is the prospect forstate legislative hearings before the summer session ends inSeptember to look at possible changes in the state’s 1996electricity law.

In the midst of this new push, a state report on proposedadditional competition in the electric industry was seized by thetwo newest governor-appointed commissioners at the CaliforniaPublic Utilities Commission (CPUC) as a reason to raise there-regulation question. They raised questions in an addendum to theCPUC staff report as to whether the state’s deregulation experimentis hurting consumers rather than helping them.

One of the two regulators, Carl Wood, last Tuesday advocatedthat the state re-regulate parts of its restructured electricindustry and re-establish some power he said it has ceded in theprocess to the federal government. He cited his concerns during apress conference in San Diego designed to assuage electricitycustomers whose bills have doubled and tripled due to a summerpeak-load price and supply crunch.

Wood, a former statewide utility union leader, said one of theactions that ought to be considered is the ability of the state tomandate the construction of new generation plants if the privatesector nonutility market does not provide adequate generation.(Wood did not comment on the more than a dozen new generatingplants under construction or in the state’s approval processpresently, zeroing in on ways to ensure adequate generation nextsummer and the following summer.)

Wood also is going to push the CPUC to do its own investigation— ordered earlier this summer by Gov. Gray Davis, who appointedhim to the regulatory agency — of whether market abuses and”collusion” among generators were responsible for the recent pricespikes and power shortages. He specifically said that he does notthink the market monitoring committees of the two state entitiescreated as part of California’s de-regulated electricity industry— the Independent System Operator (Cal-ISO) and Power Exchange(Cal-PX) — are impartial enough to do the job because they areoperated under “stakeholder” boards that have a vested interest inthe continued deregulation of energy.

“[The current high electricity bills] are a logical consequenceof 15 years of ideologically driven regulatory policy at the CPUC,”Wood said. “Despite projections from the California EnergyCommission for the need for future generation capacity, the CPUCunder the past two administrations has done everything it could toprevent the construction of new utility-owned generating plants.”

Then, in 1995, he said the CPUC under former Gov. Pete Wilsonissued “a radical deregulation decision aimed at ceding allauthority over generation to market forces. These are the roots ofthe present crisis.”

In the current public policy climate, the 28-page CPUC staffreport on further deregulation of the electric business is notexpected to be acted upon, according to sources at the CPUC.However, there is a possibility it will be used as part of abroader, en-banc hearing in which all five CPUC commissioners heartestimony from energy industry participants and other stakeholders.

As part of a two-year CPUC effort, the report, “Electric RetailMarkets and Distribution Services,” has drawn strong public ire andcriticism from CPUC President Loretta Lynch and her colleague,Wood, both of whom said they want to “disassociate” themselves fromthe staff document which advocates possible further unbundling inthe electric industry, although on a qualified basis.

The newest members of the five-member panel criticized the pastCPUC commissioners for failing to consider “potential adverseconsequences, such as consumer harm” in restructuring the electricindustry. They said the CPUC over this time has “dismantled” thetraditional distribution utility.

“Instead, the commission restructured an entire industry on thebasis of shaky assumptions and ‘policy preferences’-not concreteanalysis of the factual circumstances surrounding high electricrates in California,” Lynch and Wood stated in their attachment.”We will not support more deregulation of the electric industryuntil we understand better the consequences for our state. Thestaff study does not contribute to our understanding.”

Richard Nemec, Los Angeles

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