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CA Electric Deregulation A Bust for Consumers

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 reduction."

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 unprofitable investments.

"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 exchange."

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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