Scrambling on Ratepayer Shock

Politicians in Sacramento and Washington, scrambling for political cover, are trying to ease the rate shock of the poorly planned deregulation of California’s electric power industry. It’s the least they can do: The lack of official foresight helped create the problem, especially the sudden rate spikes suffered by customers of San Diego Gas & Electric Co.

Gov. Gray Davis and lawmakers on Thursday met again to fashion legislation that would roll back rates for San Diego’s 1.2 million customers to pre-June levels, cutting the average monthly bill from about $120 to $70. Still at issue is who would absorb the cost. Under one proposal, ratepayers would reimburse the utility over time, but consumer groups argue that customers should not have to foot the whole bill. One compromise would compensate homeowners through a state tax credit.

The 1996 deregulation law, sponsored by state Sen. Steve Peace (D-El Cajon), provides that the cost of buying power from energy companies be passed straight through to customers rather than being absorbed by the utility and its stockholders.

Rate relief is clearly needed, especially for low-income households and businesses, but this would not generate a single kilowatt or alleviate the basic problem: On hot days, California faces possible brownouts and blackouts.

Assembly Republican Leader Scott Baugh (R-Huntington Beach) has a good idea in asking Davis to call a special session of the Legislature in September to deal with energy issues. These include the construction of new “emergency” generators to provide power during periods of highest demand. Another proposal is to streamline the licensing of big new power plants without lowering air quality and other environmental standards. Sacramento should also encourage more aggressive efficiency and conservation programs and development of alternative and renewable energy sources.

In addition, regulators must work with federal agencies, especially the Federal Energy Regulatory Commission, which has authority to cap runaway wholesale power rates throughout the West, an action urged by Sen. Dianne Feinstein (D-Calif.).

Both the governor and the San Diego utility have accused energy producers of taking advantage of a tight energy market to reap exorbitant profits. If the federal commission finds that to be so, it should force the firms to rebate excess charges to the utility and its ratepayers.

Deregulation will work if there is enough power to fuel a competitive market. San Diego became an unfortunate guinea pig because it was the first California utility to enter the market during power shortages. The other big investor-owned utilities, including Southern California Edison, will go into the market by the end of 2002. As a municipal utility, the Los Angeles Department of Water and Power has exercised its option not to be in the open market.

Without action, other sections of the state could feel San Diego’s shock and outrage. Much depends on what the governor and Legislature do in the next few months to increase production and improve conservation.