Energy deregulation: Take the middle road

CALIFORNIA'S re-entry into the morass of electricity regulation is not going to be without a certain amount of fear, given the state's recent disasters and the future uncertainties of the power market.

Electricity industry groups are pushing for a quick transition to partial deregulation that would allow more competition. They've got a point, because competition can reduce consumer prices and, in theory, increase supplies and decrease the chances of blackouts.

Consumer advocacy groups generally favor a slower, more cautious approach. They have a point, too, because when lawmakers start tinkering with the energy market, bad things tend to happen. Last year state legislators abandoned an electricity market bill after admitting they didn't understand what they were being asked to vote on.

The state's Public Utilities Commission is divided internally on the question of a timetable. A report released this week from a PUC research team advises the state to wait to make any major changes until 2009, when the majority of the state's energy contracts will expire. The PUC's president immediately argued publicly against the study's findings, saying the state needs to push forward more quickly with a partially deregulated market.

The issue of energy market regulation is incredibly complex. A return to the past, when energy was a tightly controlled monopoly, may be politically tempting, but it's not advisable because that market had problems of its own. But if the market becomes too loosely regulated, or gets stuck with a mishmash of conflicting and confusing rules, it could allow the kind of market manipulation seen in the 2001 energy crisis.

New regulations ought to find a middle ground, providing enough regulation to protect consumers and enough competition to keep prices low and encourage the addition of new supplies.

The year 2009 is a sensible target for reform financially, because the state will finally be freed of most of the terrible contracts that former Gov. Gray Davis signed in haste and panic. Also, the contracts are providing price stability. But the state can't wait five years for a new power plant. Current supplies won't be enough.

The energy issue seems to be divided between those who want to run headlong into a new market and those who want to crawl. A walk should be the compromise, with careful but confident strides forward.