Energy Alliance to Fight for Direct Access

Electricity marketers said Wednesday that they may sue state utility regulators over their latest plan to end customers’ ability to shop around for power.

The marketers, which compete with the traditional utilities to sell power to business and residential customers, said they were stunned by a draft decision by the California Public Utilities Commission to suspend “direct access” retroactively to July 1. The marketers have been rushing to sign up new customers in recent weeks, assuming that the PUC decision would not take effect before Sept. 1.

The PUC, in issuing the proposal Monday, said it seeks to protect the flow of revenue that will be used to repay $13.4 billion in bonds the state intends to sell to pay for electricity.

The draft decision--as well as other bond-related measures scheduled before the PUC on Sept. 6--is expected to generate a parade of lawsuits, any of which could delay the issuing of the bonds.

The commissioners and state lawmakers fear that a flight of customers, especially large businesses, from the traditional utilities would saddle the remaining consumers with an unfair burden in paying off the bonds. The money raised by the bonds will be used to pay for power the state is buying on behalf of Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric.

Direct access was a key element of the 1998 deregulation of the state’s power market because it ended the utilities’ retail monopolies.

But the state Legislature, worried that too many customers would abandon utility service, passed legislation this year directing the PUC to suspend the program.

PUC Administrative Law Judge Robert Barnett moved the suspension date back to July 1, arguing that customers and marketers had been given ample time to prepare for the suspension since Gov. Gray Davis signed the legislation in February.

Such a retroactive suspension would be an unconstitutional government abrogation of existing contracts and seizure of private property without just compensation, said Daniel W. Douglass, a Woodland Hills lawyer representing the Alliance for Retail Energy Markets.

The group, which includes electricity marketers such as AES NewEnergy, Enron, Green Mountain Energy and Calpine, is preparing a lawsuit should the PUC adopt the draft decision, Douglass said.

“We believe retroactivity is fundamentally unfair to both direct access customers” and marketers, he said.

“We are not trying to delay the bonds. We think they are very important,” Douglass said. “We think the state has created a self-inflicted injury by instituting retroactivity.”