CA Regulators Divided on Future of Customer Choice

Customer choice and so-called direct access retail power deals between end-use customers and supplier/marketers may be an ultimate casualty of California's year-old energy wars. State energy regulators indicated last week they are divided over the issue along political lines.

In taking two actions related to utility restructuring and consumer education, two California Public Utilities Commission members appointed by the present Democratic Gov. Gray Davis expressed distain for customer choice and industry restructuring while two holdover commissioners from the previous Republican administration re-affirmed their support for the concepts. The fifth, and newest Davis appointee was on the fence, saying he supports the concept, but doesn't think it has much relevance in the state's current crisis.

Meanwhile, one of the state legislature's energy leaders, Sen. Debra Bowen, is still pushing clean-up emergency energy legislation that would include the re-institution of customer choice at some point in the future.

The issue arose as the CPUC dealt with decisions involving a statewide consumer education program mandated by the state's 1996 electricity restructuring law and with a filing by Southern California Gas Co. for rewards based on its current performance-based ratemaking (PBR) process.

A 3-2 vote by the Davis majority to refocus the consumer education program from messages of "customer choice" to ones providing conservation and energy efficiency information sparked a heated exchange of contrasting responses from the five regulators.

"This decision addresses the need to change the focus of the CPUC's community outreach to reflect the reality of today's electricity market," said Commissioner Carl Wood in sponsoring the order to change the consumer program. "It signals a shift in priorities and emphasis.

"I am concerned about emphasizing customer choice when there is so little choice evidenced in today's electric industry. Only a handful of energy providers (ESPs) are serving residential customers. Several have pulled out of the retail market due to the extremely high price of wholesale electricity."

Former CPUC president and a free-market economist Richard Bilas strongly disagree with the change in focus, noting the state "cannot have a functional wholesale market without direct access. It is still alive and kicking, although maybe gasping for breath. It needs resuscitation rather than a policy to smother it."

Bilas' fellow Republican-appointed commissioner, Henry Duque, said he hoped Sen. Bowen "will abolish the current ban on direct access." And the newest commissioner, Geoffrey Brown, said that "fundamentally I don't oppose direct access," but he noted that it currently is "under-used and under-reached," so he hopes the state lawmaker's efforts can "clarify the issue" eventually.

In a related philosophical discussion of PBR in voting 4-0 (CPUC President Loretta Lynch abstaining) to grant SoCalGas a reward, the Davis appointees as represented by Wood indicated that so-called incentive-based regulation may get cast aside in the future as another remnant of the failed state experiment with restructuring.

Saying he has always opposed PBR even before he joined the CPUC two and one-half years ago, Wood told his fellow commissioners that PBR "is a crude substitute for serious regulation. Careful ratemaking includes close scrutiny by regulators of the utilities we regulate rather than creating crude surrogates for good regulatory standards."

Wood noted, "this is a deal we struck with this utility, and I think we are appropriately bound to carry out our part of the deal when they meet standards that we established."

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