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PG&E Executive: CA Progress Not Bad At All

February 22, 1999
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PG&E Executive: CA Progress Not Bad At All

Those bemoaning the lack of a competitive market for electricity in California should look on the bright side. Things are moving along, and the process is not finished, said Daniel D. Richard Jr., senior vice president government and regulatory relations for Pacific Gas and Electric.

"We were, as far as we know, the first utility in the United States to put itself on a glide path out of the generation business," Richard told early attendees at the ninth annual Houston Energy Expo last week.

"We did this because we learned from the mistakes we made in the gas business. As change came, Pacific Gas and Electric Co. tried to hold onto its monopoly. We learned the hard way that no dikes composed of legislation, regulation, and litigation can hold back the tides of demand for a competitive marketplace. So when confronted with competition in the retail electric business, we were ready for it and we embraced it." Richard noted the California experience has been used to bolster and condemn arguments for restructuring proposals in other states. "If your only standard of progress in electric industry restructuring is how many customers have switched to new suppliers, then one can paint a negative picture." However, so far, progress has been made, and there is more to come, according to Richard.

Examples of progress include:

Every electric customer of investor-owned utilities in California has supplier choice regardless whether they choose to exercise it.

The independent system operator (ISO) has assumed control of most of the state's transmission system to provide non-discriminatory access. System reliability has been maintained. Customers have access to wholesale power through the state's power exchange.

Residential and small business customers have received a 10% rate cut for more than a year now, and "all customers are expected to enjoy substantially greater savings in a few years - when the transition is complete and costs associated with the old monopoly marketplace are paid off and are no longer included on customer bills."

Consumers also have been given the option of purchasing "green" power.

Richard acknowledged, however, that some are unhappy with the progress to date and have sought to take a step back from competition. He noted a proposition, which Californians voted down, that would have modified the program to bring competition to California.

"The voters concluded, however, that this proposition would take away the benefits they had received so far and the promise of future progress, so the ballot measure was overwhelmingly rejected on Nov. 3. On that same day in Massachusetts, voters were asked whether they wanted the benefits of competition. They overwhelmingly said 'yes.' So voters in two key states have affirmed that the direction we're taking is the right one."

Challenges ahead include finding ways to equalize customer acquisition costs among market players - utilities and marketers, whether to require utilities to exit the merchant function entirely, rationalization of pricing for energy services, and unbundling of services such as metering.

"The challenge we face is to determine where the ultimate line will be drawn between the services that a utility can (and should) provide and those that should be provided from a retail energy services company."

Richard called for an end of cost-of-service rate-making and a move toward performance-based rate-making. "Performance-based rate-making (PBR) systems, when properly applied, can provide the utility with pressures and challenges that closely mimic a free-market system. But PBR schemes can inflict serious financial harm on utilities if their starting point is set too low or if public service commissions create revenue leaks through other means."

Joe Fisher, Houston

©Copyright 1999 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
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