Thomas Elias: Move toward deregulation a mistake
There’s only one way to describe the 4-1 vote by which the California Public Utilities Commission has opted to examine whether it can reinstate electricity deregulation throughout the state: dumb as they come.
Not only does a 2001 state law specifically give authority to the Legislature – and only the Legislature – to reconsider deregulation anytime before 2016, but there’s also the fact that deregulation proved to be an unmitigated disaster, leading to blackouts and encouraging felonious market manipulation.
None of that could stop this Public Utilities Commission, whose members serve fixed five-year terms.
Of course, it’s hardly surprising when this commission does dumb things. This, after all, is the same commission that almost exactly 10 years ago voted to set up a deregulation system that capped what electric utilities could charge their customers while placing no limit on what electric generators could charge those utilities for power. It was a sure-fire recipe for financial crisis in the utility sector, and that’s what happened, as Southern California Edison Co. came near bankruptcy and Pacific Gas & Electric did declare itself bankrupt.
This is also the same commission that in 2004 ruled that California faces an impending natural gas shortage, even though the federal agency charged with forecasting gas usage sees no such crisis for at least the next 25 years. The PUC’s solution: Allow natural gas utilities to give up as much as one-fourth of the gas they now get from domestic sources. Huh?
How would giving up one-fourth of the gas now coming to California solve a coming shortage? The PUC’s answer was that allowing liquefied natural gas from foreign sources into California pipelines would more than make up for what was being abandoned. But commissioners never explained why it makes sense to give up an assured supply for something quite uncertain in the face of a shortage, even if the shortage exists only in their imagination.
A commission capable of such doltish action cannot be expected to suddenly become a nest of geniuses.
And so the PUC voted to examine the question of whether it can reconsider deregulation even in the face of the 2001 law suspending deregulation at least the end of 2015.
If the commission in its ineffable wisdom determines it can lift that suspension on its own, despite a law saying it cannot, then members say they will begin to examine a new deregulation scheme.
Needless to say, the PUC vote delighted business interests that might profit from deregulation, which some commissioners prefer to label “direct access.” “We’re pleased,” said the head of the Alliance for Retail Energy Markets.
These are the people who would like to see electricity sold directly to consumers, both business and residential.
That’s exactly what the failed deregulation plan passed unanimously by both the PUC and the Legislature in 1997 planned to do. For a short while, billboards touting generating companies like Enron and Reliant sprouted across the state.
Those ads disappeared quickly once it became clear the deregulation plan was no bargain, but rather a form of piracy that ended up costing California consumers a minimum of $6 billion and possibly as much as $9 billion. No refunds have ever been made directly to utility customers, despite more than $5 billion in so-called restitution by companies that manipulated the market illegally.
Nevertheless, deregulation advocates on the PUC want to press on. “I say to those who will totally…oppose direct access, why are you afraid of healthy debate?” asked PUC President Michael Peevey. “Have you no confidence the average consumer can make rational, reasonable choices?”
No, Mr. Peevey, it’s not that consumer advocates and state legislators who have told you to cease and desist lack confidence in customer decision-making.
Rather, they lack confidence that you and your agency can be trusted to make rational, reasonable choices. For the PUC has demonstrated over and over during the last 10 years that it is prone to irrational, irresponsible decisions – and there is no reason to believe that reconsidering deregulation would lead to anything better.
Thomas D. Elias is a syndicated columnist who writes about California issues. Contact him via e-mail at firstname.lastname@example.org.
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