Lawmakers Ignore Lessons of Energy Deregulation

Lawmakers Ignore Lessons of Energy Deregulation

Jul 12 - Daily Breeze

So now it's just the state Senate standing between California and another experiment with electric deregulation, one whose design is similar to the disgraced system that caused the energy crisis of 2000-2001.

This time, at least, the state Assembly wasn't unanimous in passing the plan. The vote was 49-25, with only two Republicans supporting the latest deregulation even though the bill embodies much of what Republican Gov. Arnold Schwarzenegger has called for since his election. The vote for the plan was 5-2 in the first Senate committee to consider it. Eight years ago, every single legislator voted for deregulation.

The latest votes mean at least some lawmakers are aware the new plan invites a consumer disaster that could be even worse than the last one, for which all California electricity users must pay inflated rates at least through 2008.

Easy Assembly passage of the new plan, in the form of AB 2006, sponsored by Democratic Speaker Fabian Nunez, demonstrated the fear legislative Democrats feel of today's popular Republican governor.

Schwarzenegger has not yet endorsed the Nunez bill, but it gives him most of what he wants without his even doing anything. This bill would let the state's largest businesses -- also the biggest electricity users -- stop buying power from large utility companies like Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric. Instead, they could negotiate their own supply contracts directly with generators.

They would, of course, go after the cheapest power available, produced mostly by the same companies that have paid large fines for manipulating the energy market just a couple of years ago. These generators, companies like Dynegy, Reliant Resources, Mirant and AES, produce electricity at natural gas-fired plants built by the utilities with money from California consumers that were sold off under the old, discredited deregulation scheme.

The Nunez plan would leave all other Californians, including residential and small business customers, to buy power from the utilities, which would produce it partly at new plants called for in the bill. That power, plus what's produced at nuclear plants, would likely be far more expensive than the output of older facilities.

What's more, the Nunez plan would let the big utilities build power plants with virtually no cost limits, guaranteeing that all cost overruns could be passed on to consumers unable to opt out of the general grid. Even some significant business interests that usually favor deregulation can't accept this notion. Among them are the California Farm Bureau Federation, the Building Owners and Managers Association, the League of Food Processors and the Wine Institute. Few of their members are big enough energy users to qualify for the opt-out, so they'd be exposed to ever-higher rates.

True, the Nunez plan stipulates that letting big companies leave the overall grid must not cost other customers anything. But the old plan made an even stronger assurance, promising lower prices than before. All it took to override that so-called guarantee was a single emergency signature by then-Gov. Gray Davis.

And what if generating companies eventually raise their prices to milk the large corporate market as much as possible? With no price controls, they could do this. If and when it happened, the big corporations could come back onto the utility company grids, demanding more power and very likely producing a shortage.

For legislators, an important lesson may be that all those perceived as primary architects of the last deregulation plan saw their political careers decimated. The same for Davis, who mismanaged the crisis. This is something Schwarzenegger and the state senators he loves to schmooze ought to remember.

Tom Elias is author of The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It, now in an updated second edition. His e-mail address is tdelias@aol.com .

For far more extensive news on the energy/power visit: http://www.energycentral.com .