Sparks Fly Over Electricity Deregulation

Californians take for granted the electricity that powers everything from hair dryers to heavy equipment in homes and businesses. But whoa! California electricity rates are 50% above the national average. Last April the state Public Utilities Commission embarked on an effort to deregulate the electricity industry in order to bring down rates.

On Wednesday the agency is expected to take some action on its proposals, which are aimed at easing the current state-regulated electricity industry into a market-based one. The tricky task for the PUC is to assist in an orderly restructuring without sacrificing the important objectives of equity, energy conservation, development of renewable and alternative fuels, and programs for low-income consumers.

One very controversial proposal involves freeing all customers of the three private utilities--Pacific Gas and Electric Co., Southern California Edison Co. and San Diego Gas and Electric Co.--to buy electricity from any source. Major commercial and industrial buyers could then buy from independent producers by 1996--and residential users would have that option starting in 2002. Sounds good, but there’s a hitch. Consumers could wind up subsidizing lower electricity costs for businesses; after all, it is unlikely that low-volume residential users could cut large-volume deals that would yield savings comparable to commercial users’. There must be a way to provide lower electric rates across the board.

Another worry is that if rates drop, what is to prevent utilities from finding it more profitable to push higher electricity usage while dropping conservation incentives and commitments to renewable or alternative fuels? Perhaps conservation programs could be maintained by recovering the cost of these programs, via some sort of fees, from all parties along the electricity distribution line, from independent power producers to distributors to users. And there’s another concern: The PUC is taking up these hefty questions at a time when the five-member board has only three commissioners. Why hasn’t Gov. Pete Wilson made appointments to the PUC a greater priority? After all, high electric rates contribute to the high cost of doing business in California. As for the PUC itself, it must be much more accessible in all its proceedings. When the agency held expanded public hearings on the electricity issue, often not one commissioner was present. And the PUC does not routinely hold scheduled open meetings. Bad idea.

As it embarks on deregulating the electricity industry, the PUC is separately considering a number of rate cases. This is a worrisome traffic jam--and a piecemeal process that could result in contradictory rate and deregulation decisions that separately surface and become “virtual restructuring,” as some PUC critics have put it. That’s no way to weave together coherent public policy.