Consumers were angry in 2000 and 2001 over California’s
disastrous electricity deregulation plan that caused occasional
blackouts and major price increases that carry forward to this
day.
Consumers were angry in 2000 and 2001 over California’s disastrous electricity deregulation plan that caused occasional blackouts and major price increases that carry forward to this day.
Back then, tens of millions of ratepaying citizens and businesses victimized by the deregulation law – passed unanimously by state legislators in 1996 and quickly signed by then-Gov. Pete Wilson – were helpless when the laissez faire system’s full effects became obvious.
They’ll have a chance to turn back the clock at least partway this fall, thanks to a relatively unpublicized re-regulation initiative sharing the November special election ballot with three measures sponsored by Gov. Arnold Schwarzenegger and several others. If, that is, they’re still angry enough over the way utility companies and politicians lied to them before the electricity crisis.
But the clock cannot be turned back completely. That’s because big utilities like Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric long ago sold off most of their pre-existing oil- and natural gas-fired power plants. This made companies like Reliant Resources, Mirant, Duke Power and Calpine major players in the California energy scene, because they bought those plants.
November’s proposal, on the ballot as Proposition 80 and sponsored chiefly by The Utilitity Reform Network, a San Francisco-based consumer group, would return things to their pre-deregulation status for the big utilities. Those companies might not fight this initiative as hard as they did the 1998 Proposition 9, which aimed to roll back deregulation before its ill effects could be felt. They spent almost $90 million to defeat the rollback seven years ago.
But most benefits Edison, PG&E and SDG&E could ever hope to see from deregulation have already been achieved. They’ve pocketed hundreds of millions of dollars from selling off power plants, for one thing. Now they’ve seen that their profits were actually higher before deregulation than after.
So as yet, they’ve taken no major hand in trying to fight Proposition 80, which would return electric service providers to virtually complete control and regulation by the state Public Utilities Commission. The measure would also mandate that all retail electric sellers – including municipal utilities like the Sacramento Municipal Utility District and the Los Angeles Department of Water and Power as well as the privately-held companies – increase energy from renewable sources like wind and solar by at least 1 percent a year, with 20 percent of all power coming from renewables by 2010.
And the initiative would thwart a plan by Schwarzenegger and his appointees on the PUC to allow big electric users to buy cheap power from generating companies, then leave the more expensive sources to smaller businesses and residential customers. There would be no option for anyone in California other than buying from a regulated utility or installing solar panels and being self-sufficient.
The utilities ought to prefer the system outlined in Proposition 80 if only because it would put them back into an era of assured profits, with electric prices pegged high enough to guarantee them “reasonable” rates of return on any investments they make. Reasonable in the pre-1996 regulation days meant about 14 percent, and that was enough to keep the utilities building new generating plants right up until deregulation passed.
But 14 percent started looking paltry to utility executives back in the 1990s, when they saw dot.com stocks and others skyrocket while their own shares and dividends plodded along at a decent yet not spectacular pace.
But the dot.coms crashed long ago, PG&E is only recently back from bankruptcy and Edison came close, so a guaranteed profit in the 14 percent range doesn’t look so bad anymore. Edison, in fact, backed a 2004 legislative bill much like the current proposition, only to see Schwarzenegger exercise his veto because it wasn’t sweet enough for the oil refiners, chemical companies and others among his backers who would like to stock up on ultra-cheap power contracts.
Early polling shows Proposition 80 doing well, as many consumers remember the early years of this decade and don’t want a repeat. But the companies whose style it would crimp have not yet begun to fight.
When they do, it will be a challenge for voters to see past false claims like those made in the drive to defeat Proposition 9 seven years ago. But if voters are up to the task, Proposition 80 – the last item on the ballot – provides a rare chance to set the state back onto a course it never should have left.
Tom Elias is author of the current book “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It,” now in an updated third edition. His email address is [email protected].
