Recapturing the Regulation Genie

Electricity deregulation, touted by the big private utilities and backed so obsequiously in 1996 by legislators who seldom can resist a multimillion-dollar lobbying campaign, so far hasn’t been good to Lynne Carrier of Coronado.

Like other consumers in San Diego and southern Orange County, where a rate freeze to 2002 doesn’t apply, Carrier has seen her electric bills move sharply upward, from approximately $25 a month in past summers to $80 this year.

And now she pays two bills instead of one. Carrier, taking the advice of deregulation advocates, went to an alternate provider, Green Mountain, for her power. Now, she pays Green Mountain for the electricity and San Diego Gas and Electric for distributing it.

“Since deregulation seems out of control . . . I personally favor making San Diego Gas and Electric a public utility,” Carrier declares.

But just how feasible would that be? It’s one thing to have a municipal company long established, like the Department of Water and Power in Los Angeles. It’s quite another for a public authority to buy a private company out.

One question now is whether what is termed the “difficulties in establishing a competitive market” will continue for two more years.

They well may, because when deregulation was first proposed, everyone stopped building new generating facilities, and now--at a time when demand for electricity has increased at an unexpectedly high rate and new facilities have yet to come online--there’s a shortage of power that experts estimate will last at least three years.

If the prices do stay high, many ratepayers in Los Angeles and the Bay Area, customers of Edison or Pacific Gas and Electric, will face increases like the ones in San Diego in about a year and a half.

That is, if sufficient power is available at all. Much of this summer, the state has been skating on the edge of demand’s outstripping supply, a problem that might only be exacerbated if price ceilings send out-of-state providers peddling their power elsewhere.

It’s a far cry from the fine situation consumers were assured would develop as deregulation took hold.

Signing the deregulation bill adopted unanimously by the Legislature four years ago, then-Gov. Pete Wilson saw “a powerful new stimulant that will help California lead the nation in job creation while lowering electric bills and making service more reliable.”

And in 1998 Dennis Loughridge, then CEO of the California Power Exchange Corp., which auctions 80% of the electricity used under deregulation, asserted, “This monumental achievement will benefit Californians by lowering the cost of electricity through use of true market price competition.”

Overconfident lawmakers even inserted as Section 330A of the Public Utilities Code: “It is the intent of the Legislature that a cumulative rate reduction of at least 20% be achieved not later than April 1, 2002, for residential and small commercial customers from the rates in effect on June 10, 1996.”

Fat chance! And under deregulation, with production of electricity in independent hands, separated from the major utilities, there is a division of responsibility: When things go wrong, it is nearly impossible to assess whom to blame.

So where do we go from here?

Already, while ostensibly resisting re-regulation, utility officials are suggesting they need help. This is not surprising. Deregulation is one of the most oversold concepts in American life. Without a continued government hand, things frequently run off the tracks.

When John E. Bryson, chief of Edison, came last week to The Times to meet with reporters and editorial writers, he expressed mystification that market prices have been so high, even at times when demand is relatively low.

He called for a federal investigation of the price levels.

In the meantime, he and aides suggested, some price ceilings might be temporarily in order.

I suspect they might not be all that temporary.

If after joining in a $40-million utilities campaign to defeat a quixotic ballot initiative that would have stifled deregulation, Edison leaders are now proposing so much regulation, it shows not only a commendable candor but also how grim they realize the immediate prospects are.

I talked, however, to Richard P. Bilas, a member and former president of the state Public Utilities Commission, and he warned that it is uncertain just what the authority of the old regulators is under the new deregulatory scheme.

“We don’t have a regulatory control over the new power generators,” he observed. “Our legal staff is looking into exercising regulation of the utilities’ distribution. That’s the only authority at the moment it’s clear we have.”

Maybe, he said, there will be legislative action to revise deregulation. But he asked, “How do you put the genie back in the bottle?”

Meanwhile, one of the legislators most responsible for the deregulation approved in 1996, state Sen. Steve Peace (D-El Cajon), has begun to squirm under pressure from unhappy constituents.

As a San Diego County legislator who has taken contributions over the years totaling $46,499 from Edison, $47,500 from PG&E; and $59,557 from San Diego Gas and Electric, Peace now is frantically proposing some re-regulation.

“The Legislature should reinstate the rate cap that was in effect last year by the PUC, and should keep it in effect until they can certify that the whole market is running reasonably,” he told me.

Still, like Bryson, Peace feels the situation is “fixable.”

One step forward might be to waive present confidentiality of the private trading among marketers and new generating companies.

Bryson said the traders would oppose greater openness.

But right now a cloud of consumer uncertainty and suspicion is gathering. The consequences may eventually be unpleasant for those who were able to push deregulation through the Legislature so easily, unless there is more openness in the whole process.

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Ken Reich can be contacted with your accounts of true consumer adventure at (213) 237-7060 or by e-mail at [email protected]