One Way to Keep the ‘Big Boys’ Honest

With the California Consumer Power and Conservation Financing Authority set to debut today, Californians may wonder how many state agencies it takes to keep the lights on.

Californians have a right to be skeptical given the year of power ups and downs we have all faced. But it is important to keep in mind the cause of the problems: the short supply of cheap, available power.

The power authority’s critical mission is straightforward. To provide the reserve power necessary to ensure that the market provides low-cost, available power sufficient to guarantee that Californians never again have to worry about rolling blackouts. The goal is to keep the “big boys”--the power generators and suppliers--honest.

There are myriad ways in which the agency can achieve its mission. The best way to ensure cheap, available power and keep the generators honest is to restore California’s energy reserves to levels we enjoyed before the disaster of deregulation.

Before deregulation, utilities kept available a 15% reserve above peak loads. This hedge against uncertainty kept the lights on and the prices affordable. In today’s deregulated, bottom-line market, the 15% rule is extinct. As a result, California remains vulnerable to the price gougers and pirates. Reestablishing that 15% margin rule is the best way for California to keep the generators honest.

This can be done in several ways.

First, the authority will, as early as its first meeting, listen to dozens of proposals for peaker plants (plants used at peak energy use times), wind and solar projects and conservation investments. Together these projects will in a few short years provide the needed 15% reserve. The authority has the ability to raise money through bonds to finance these types of projects. This approach will help provide low-cost electricity.

By diversifying California’s power portfolio with all types of renewable energy technologies, the authority will find a way to answer Gov. Gray Davis’ call to meet 17% of the state’s energy supply with renewable energy.

Finally, California has reinforced its leadership position in energy conservation this year with record-level reductions in consumption. But in order to meet the state’s long-term needs, the power authority could create a significant revolving fund to finance loans for efficient energy-using equipment. It would thus ensure that conservation continues to be a California way of life.

The power authority will serve all the people of California--consumers and business alike--in an open and public way. Its strategy will be to keep power prices down, conservation and efficiency efforts strong and an energy portfolio that is diverse enough to meet the state’s power demands.