Page One

A group of 22 professors and economic experts say that a state utility takeover will only worsen California’s power crisis while raising power rates will help stakeholders, “share the pain.” 

The Institute of Management, Innovation and organization at the University of California, Berkeley issued a report this week called the “Manifesto on the California Electricity Crisis.”  

The manisfesto states that raising power rates will promote conservation (which would reduce wholesale prices) while also restoring financial viability to the state’s utilities. 

“There is no other way out,” the report states. “Either retail prices must go up, or blackouts will continue with the consequent high costs to the California economy. Facing the pain now should reduce the ultimate price increase. We must put the horse before the cart.” 

The report states that deregulation failed because it did not anticipate the current reduction in supply and the increase in demand. That, the report said, combined with a retail rate freeze meant that consumers were buffered from situation and did not conserve energy as they would have if rates rose according to higher market prices. It also reduced incentives to turn to lower-priced competitors that deregulation helped create. When wholesale prices went up, the report said that retail prices did not, creating the current power crisis.  

By raising rates, the report states that California will be able to purchase more available power while new contracts are sought to stabilize prices during the two to three year transition while more permanent solutions are identified.  

A State purchase of electric utilities would only shift the burden to the taxpayers, the report said. Because buying the utilities would do nothing to increase supply, the report said that the state government should instead focus on creating a “supportive environment for necessary new private investment.” 

The report also emphasized the need to pay all existing energy bills and to build new power plants.