California Moves Toward Re-Regulation
The decibel level of the cries to rollback California's electric
industry deregulation was raised considerably last week with
consumer advocates, local and state elected officials, and
regulators joining the growing chorus. There is the prospect for
state legislative hearings before the summer session ends in
September to look at possible changes in the state's 1996
In the midst of this new push, a state report on proposed
additional competition in the electric industry was seized by the
two newest governor-appointed commissioners at the California
Public Utilities Commission (CPUC) as a reason to raise the
re-regulation question. They raised questions in an addendum to the
CPUC staff report as to whether the state's deregulation experiment
is hurting consumers rather than helping them.
One of the two regulators, Carl Wood, last Tuesday advocated
that the state re-regulate parts of its restructured electric
industry and re-establish some power he said it has ceded in the
process to the federal government. He cited his concerns during a
press conference in San Diego designed to assuage electricity
customers whose bills have doubled and tripled due to a summer
peak-load price and supply crunch.
Wood, a former statewide utility union leader, said one of the
actions that ought to be considered is the ability of the state to
mandate the construction of new generation plants if the private
sector nonutility market does not provide adequate generation.
(Wood did not comment on the more than a dozen new generating
plants under construction or in the state's approval process
presently, zeroing in on ways to ensure adequate generation next
summer 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 appointed
him to the regulatory agency --- of whether market abuses and
"collusion" among generators were responsible for the recent price
spikes and power shortages. He specifically said that he does not
think the market monitoring committees of the two state entities
created 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 are
operated under "stakeholder" boards that have a vested interest in
the continued deregulation of energy.
"[The current high electricity bills] are a logical consequence
of 15 years of ideologically driven regulatory policy at the CPUC,"
Wood said. "Despite projections from the California Energy
Commission for the need for future generation capacity, the CPUC
under the past two administrations has done everything it could to
prevent the construction of new utility-owned generating plants."
Then, in 1995, he said the CPUC under former Gov. Pete Wilson
issued "a radical deregulation decision aimed at ceding all
authority over generation to market forces. These are the roots of
the present crisis."
In the current public policy climate, the 28-page CPUC staff
report on further deregulation of the electric business is not
expected to be acted upon, according to sources at the CPUC.
However, there is a possibility it will be used as part of a
broader, en-banc hearing in which all five CPUC commissioners hear
testimony from energy industry participants and other stakeholders.
As part of a two-year CPUC effort, the report, "Electric Retail
Markets and Distribution Services," has drawn strong public ire and
criticism from CPUC President Loretta Lynch and her colleague,
Wood, both of whom said they want to "disassociate" themselves from
the staff document which advocates possible further unbundling in
the electric industry, although on a qualified basis.
The newest members of the five-member panel criticized the past
CPUC commissioners for failing to consider "potential adverse
consequences, such as consumer harm" in restructuring the electric
industry. They said the CPUC over this time has "dismantled" the
traditional distribution utility.
"Instead, the commission restructured an entire industry on the
basis of shaky assumptions and 'policy preferences'-not concrete
analysis of the factual circumstances surrounding high electric
rates in California," Lynch and Wood stated in their attachment.
"We will not support more deregulation of the electric industry
until we understand better the consequences for our state. The
staff study does not contribute to our understanding."
Richard Nemec, Los Angeles