LOS ANGELES — California’s energy crisis has some of the state’s most powerful players, including lawmakers, public utilities and consumer watchdog groups, calling for the return of a regulated market.
Among the potential options on the horizon are a voter initiative and legislative proposals to create a publicly owned system of power generation and distribution.
Utilities warning of possible bankruptcy want to be able to generate some of their own power rather than being forced to buy all of it on an open market.
“We’re calling for an end to this failed experiment,” said Tom Higgins, a senior vice president of Edison International, the holding company for Southern California Edison. “The market has to be reformed and brought back to a cost-based system on pricing electricity, as opposed to what we have today, which is a cartel.”
Edison, which originally embraced deregulation, has launched a publicity campaign to lobby for ending it.
But even those who want to reduce the threats of rolling blackouts and rein in spiraling energy costs concede that undoing the state’s four-year-old deregulation experiment is like trying to stuff the genie back in the bottle.
The out-of-state energy wholesalers that bought power plants after deregulation took effect in 1996 counted on an open marketplace.
“We didn’t enter California to participate in a regulated market,” said Tom Williams, a spokesman for Charlotte, N.C.-based Duke Energy, one of six companies that spent more than $3 billion to buy power plants in the state after deregulation. “We entered California to participate in a deregulated market.”
Opposition to fully re-regulating the market also could come from the federal government. The Federal Energy Regulatory Commission supports deregulation and so far has resisted establishing a firm price cap on wholesale energy prices.
Gov. Gray Davis has called for a special session of the state Legislature next month to deal with the crisis. Creating a public power authority and allowing utilities to retain their generation capabilities are among the options, said Steven Meviglio, a Davis spokesman.
“California is looking at some amount of re-regulation, whether it’s price caps or public power facilities,” said Evan Goldberg, chief of staff for state Sen. Debra Bowen, D-Marina del Rey, who heads the Senate’s Energy, Utilities and Communication Committee. “The question is, ’To what degree is it going to occur?”’
California’s deregulation law forced the state’s major investor-owned utilities – Southern California Edison, Pacific Gas and Electric and San Diego Gas and Electric – to sell their dams and power plants by March 2002. They also were required to buy power on the open market.
San Diego Gas and Electric completed its sell-off first, lifting a rate freeze imposed by the law. The result: Summertime utility bills doubled and in some cases tripled for ratepayers when wholesale energy prices soared.
Edison and PG&E remain subject to the rate freeze, preventing them from passing along the skyrocketing wholesale costs to their customers.
That scenario has led both to warn of insolvency.
Utilities have been lobbying for a 20-percent rate increase and were before the state Public Utilities Commission on Thursday asking for permission.
Customers of the state’s 30 smaller utilities already owned by the public don’t face the same prospect of higher rates.
Industry watchdog groups said the investor-owned utilities have exaggerated their losses to justify a rate hike. They favor a wide range of re-regulation proposals to protect consumers.
The Santa Monica-based Foundation for Taxpayer and Consumer Rights has proposed a statewide voter initiative that could be on the ballot in 2002 or be considered sooner by the state Legislature.
In late November, the group filed papers with the Secretary of State to form a campaign committee, Californians for the Protection of Ratepayers, to sponsor the initiative.
A draft of the measure calls for taxing the excess profits of power generators to pay refunds to customers who faced higher electricity bills because of deregulation.
It also would create a state power authority to build and operate new power plants, transmission lines and distribution facilities. The state also would be able to buy existing plants and distribution lines or acquire them through eminent domain.
“It ought to be public power,” said Harvey Rosenfield, the foundation’s executive director. “I don’t see the virtue of having this commodity in the hands of private companies whose sole purpose is to maximize profits.”
Any re-regulation proposal, however, is likely to hit stiff opposition from power generators.
Duke Energy, for example, bought three California power plants for $501 million and has earmarked $1.1 billion for building new plants, investments it doesn’t want to jeopardize if it loses the ability to operate in a free market, said Williams, the company’s spokesman.
“We have a lot of money at risk in this market and we’re working to develop solutions,” he said.