Deregulation Plan Attacked From All Sides : Energy: PUC proposal for electricity competition draws complaints. Officials say the issue could reach the Supreme Court.
The state’s bright vision for lower power bills through electric utility deregulation is likely to be tied up in years of legal and technical wrangling, federal and industry officials said Tuesday.
In their first round of written comments on the ambitious deregulation proposal sketched by the state Public Utilities Commission in April, virtually all interested parties are leveling major complaints.
Utility companies want to postpone competition, while consumer groups want to speed the advent of lower rates. And the U.S. Department of Energy is warning that the PUC’s legal strategy could keep any deregulation plan tied up in the courts for years.
“It sure looks to us as though they’re getting into murky water,” Susan F. Tierney, assistant secretary for policy at the department, said on the eve of today’s deadline for comments.
“Our legal analysis is that at best it’s a very high-risk legal position for California to take--that it can . . . order retail (competition) and set rates that look and behave as though they’re transmission rates,” a component of utility rate making that falls under the jurisdiction of the Federal Energy Regulatory Commission, Tierney said.
She predicted that lawsuits will be filed over the PUC plan and that they will eventually be resolved by the U.S. Supreme Court.
A series of public hearings on the proposal begins next Tuesday and Wednesday in Los Angeles.
The commission has proposed allowing the largest industrial users of electricity to start shopping among competing power suppliers in 1996. Small industrial customers would follow in 1998, commercial users the next year and residential consumers by 2002.
The commission is attempting to create a competitive marketplace in hopes of bringing down California’s electricity rates, which run 50% above the national average.
But even the significance of that statistic has come under fire.
Ralph Cavanagh, energy policy director for the Natural Resources Defense Council, an environmental group, faults the commission for “the false notion that somehow California has buried its economy under a mountain of electricity costs. That is just not true.”
While rates are high, Cavanagh and others point out, Californians use much less electricity than consumers in other states. In large part, that is because of energy conservation efforts, which drop consumers’ monthly bills to among the lowest in the country. Indeed, the council argues in its comments, electricity represents just 2.5% of California’s gross state product, compared to 3.1% of the gross national product.
The council contends that the PUC plan could, in effect, dismantle the programs that are bringing energy savings and give California the world’s most diverse mix of electricity-generating fuels.
The group also calls for the commission to strengthen the existing wholesale market for electricity--in which utilities can buy power from other utilities or independent producers--before moving on to the more complex task of establishing retail competition.
Southern California Edison Co. takes the same position, proposing a three-stage plan that would establish a wholesale power pool in the western states but indefinitely delay retail competition.
“Think of it as the brains and the control” of the regional transmission system, said John E. Bryson, chairman and chief executive of Edison. The pool would be an independent company owned by investors with no interests in either independent power generators or utilities. It would channel the lowest-cost electricity to utilities, without favoring any producer or group.
“One analogy would be the air traffic control system,” Bryson said.
Such a structure could be modified to handle retail competition somewhere down the line, he said.
San Francisco-based Pacific Gas & Electric Co. also wants to put off residential retail choice, in its case until 2008--six years later than the commission proposes.
In exchange for a delay, PG&E; will offer to forgo the “transition” fees envisioned in the PUC plan that would let it charge ratepayers for the costs of existing assets--not least its Diablo Canyon nuclear plant--that could become uneconomical in a competitive environment.
In a move that mirrors recent PUC approval of an Edison proposal, PG&E; wants to accelerate by $200 million a year the depreciation on its nuclear investment instead.
“We want to use time instead of larger transition costs to manage a period of transition into the future competitive market,” said Robert D. Glynn Jr., PG&E; senior vice president and general manager of customer energy services.
Meanwhile, consumer groups--from industrial to agricultural to residential users--plan to file comments raising the drumbeat for lower power rates and faster implementation of the PUC plan.
San Francisco-based Toward Utility Rate Normalization, for instance, will call for introducing retail choice to residential users first, or at least at the same time it is granted to big industrial consumers.
