Regulators Propose Changes in Buying, Selling Electricity in State : Energy: One plan would create an electricity ‘pool.’ Another would allow customers to shop for lower-cost suppliers.
California took another leap toward deregulation of its electric power industry Wednesday, with three regulatory commissioners proposing changes in how electricity is bought and sold in the state.
The California utility regulators have been in the vanguard of those seeking to dramatically transform the nation’s $200-billion electric utility business by breaking down the monopoly power of large electric utilities. As a result, their moves are being closely watched by utilities as far away as Virginia and Maryland.
But Wednesday three of the four commissioners in San Francisco showed an awareness of the complexity of the changes by voting for a more moderate proposal than the one they originally promoted.
However, one commissioner, Jesse Knight, split with the others and stuck with a more aggressive plan that would give some customers, even at the residential level, a chance to switch electricity suppliers much as they can change long-distance telephone companies.
The steps to create the electricity pool proposed by Daniel Fessler, president of the California Public Utilities Commission, and two other commissioners fell short of a more radical proposal that the commission had floated in April, 1994.
One key aim of the proposals is to lower electricity rates. But, according to some analysts, the first customers to benefit would probably be big industrial users of electricity rather than the average homeowner.
The three commissioners’ proposal would create a “pool” of electricity bought from power producersat auctions where the aim would be to seek more competitive prices. During a two-year experiment, from 1997 to 1999, new prices would be posted every half-hour so customers buying bulk electricity from the pool could shift to lower rates at non-peak hours.
“California is still moving toward the ultimate goal of lower electricity prices but at a more moderate pace,” said Barry M. Abramson, an analyst for Prudential Securities Inc. in New York. “You can’t expect a small state like Maryland to try this, but a large state could try the pool concept.”
“The proposal would help make the power-generation market more competitive, but we have concerns over the pool concept,” said Jack Hawks, director of corporate communications at Bethesda, Md.-based U.S. Generating Co., an independent power producer. “It would keep a utility at both ends of the buy-and-sell transaction, and it would create another level of bureaucracy.”
Commissioner Knight, arguing for earlier retail competition, predicted that such a plan would bring substantial reduction in rates, and that even a 10% drop in California’s power bill would mean a $133-million boost each month to the state’s economy.
The proposed changes have worried environmentalists, who feel that California’s much-vaunted support for energy efficiency and renewable energy sources, including wind and solar, might be abandoned if electricity were to be treated more like a common commodity.
The commission first announced its intention to deregulate California’s electric power industry on April 20, 1994.Its aim was to use a free market and new, less-expensive technology to bring down the state’s high electricity rates, which run about 50% above the national average.
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Electric Deregulation
Public Utility Commission members Wednesday issued two competing policy blueprints to convert the state’s electric utility industry to a market-based system. After public hearings and industry comment, a final policy is expected later this year.
THE RETAIL MARKET MODEL * Customers ranging from industrial users to residents could buy power directly from generators or through their utility. Residents would probably buy through homeowners groups or independent brokers. * Regulated utilities would distribute power to customers and offer energy-conservation plans and other services, but they would no longer generate electricity themselves. Independent administrators would control power transmission and distribution to customers, but according to contracts between customers and power generators. * The plan would take effect sometime in 1997. * This model is supported by Pacific Gas & Electric Co., PUC Commissioner Jessie J. Knight Jr., large industrial power customers and independent generators.
THE WHOLESALE POWER POOL MODEL * A pool for investor-owned utilities would buy the cheapest electricity available from any source--a traditional utility, independent power company or out-of-state utility--on a wholesale market, where prices could change as often as every 30 minutes. Independent administrators would control bulk power transmission lines. * The utilities would buy from the pool for distribution to residential, small business and industrial customers. * By 2003, all customers would have meters showing the cost of their power throughout the day, allowing them to change usage patterns to save money. * The pool would be implemented on Jan. 1, 1997. * Some form of wholesale pooling is supported by Southern California Edison Co., San Diego Gas & Electric Co., PUC President Daniel W. Fessler and PUC Commissioners P. Gregory Conlon and Henry M. Duque.
