Electricity Crisis Eclipses Rapidly Rising Gas Rates

My sister’s voice on the phone was angry and anxious. Her natural gas bill for December had arrived at her Santa Monica home, up from $304.10 the previous year to $469.50 this time, despite the fact she had used slightly less gas.

Soon thereafter my own gas bill came to my home in Van Nuys. The January 2001 bill was $152.54, compared with the January 2000 bill of $112.59. I too had used less gas.

My sister’s bill, year to year, went up 54%. Mine was up 35%. Southern California Gas Co. spokeswoman Denise King said both of us were under the 60% average price increase.

So, here in two households, was the direct price effect of California’s energy crisis thus far: only nominal electricity rate hikes at her house. And at mine there won’t be any electricity increases in the foreseeable future, since the publicly owned Los Angeles Department of Water and Power wisely opted out of deregulation.

But in gas, there have been comparatively big increases. Deregulation came earlier in gas, and, unlike the electric utilities, the gas company wasn’t required to go to the Public Utilities Commission for permission to raise rates.

Yet the public furor by far has revolved around electricity--the threat of both huge rate increases and, in both Southern California Edison and Pacific Gas & Electric territory, the threat of bankruptcy for the utilities and, just Wednesday, the realization of rolling blackouts.

A key pricing factor so far, though, is that the gas company has been precise with its prognostications. With its larger use of long-term contracts, it was able to say in detail what would happen, while, here in the Southland, Edison’s talk about what increases it claimed to need shot up and down, from 10% to 76%, within days.

It’s an old story. The threat of iffy price increases seems far worse than when the public is hit with higher prices than it expects.

I went to the gas company to talk about its situation. Officials were soothing. Their own portfolios of a mixture of long-term contracts with spot purchases had held the price increases below what they might have been, they said.

Soon, they came around to what the public could do: Conserve.

My sister, they suggested, might cut back on heating her swimming pool. Anne Smith, a VP for customer service, said only about 30% of all the Gas Co.’s residential users had a price increase in December of $30 or more compared to the previous year, while my sister’s went up $165.40.

Conservation is a popular subject, and just thinking about it can lead to big savings in use, both in gas and electricity.

A man writing in not long ago said that in just a brief examination of conservation opportunities in his home he was able to identify a potential 16% cut in electricity use. Obviously, we should all undertake to implement such savings, often as simple as turning off unnecessary lights or shaving a degree off the thermostat.

But, at a doctor’s suggestion, my sister swims for health reasons to ease a congenital knee condition. Conserving gas by shutting off the heater and ceasing to swim much of the year may represent an unsound lifestyle change.

Similarly, a friend of mine in Sacramento mentioned the other day that her 86-year-old mother has received a suggestion from her utility in Santa Cruz that she cut her thermostat setting at night by five degrees, down to 63.

She thinks this might be dangerous to her mother’s health. If it comes down to making such conservation mandatory, she says she is determined to have her mother move to Sacramento and in with her, thus ending her independence.

These stories set reasonable limits on conservation and show how grim this energy crisis could quickly become.

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Meanwhile, both opinion polls and the defiant statements of the state’s political leadership demonstrate a prevalent determination not to easily accept huge price increases for such vital commodities.

Prices, we all know, under the right kind of pressure often prove to be elastic. Mere gestures, like President Clinton’s release last fall of a small quantity of the nation’s petroleum reserve, can have huge price-lowering influences. Clinton’s move seems to have bought months of some relief.

In this vein, Gov. Gray Davis’ efforts of the last week to deal directly with the power generators for long-term contracts by which the state might be able to buy electricity at a price about one-sixth the 30 cents per kilowatt-hour the utilities have been paying on the spot market, are more than commendable. They are vital.

A former president and current member of the PUC, Republican Richard Bilas, agrees with the Democratic governor’s suspicions that price gouging has been going on by the power generators.

“I believe there are people who are withholding electricity from the market for economic gain,” Bilas told me. “They are making the most of a chaotic situation.”

He quoted Adam Smith 225 years ago in his classic, “Wealth of Nations”: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

That’s what’s been going on here, said Bilas, and Davis’ efforts to stymie it “are pretty good from my perspective.”

Hard negotiating, both with the generators and the utilities, not to mention the new Bush administration in Washington, lies ahead, no question. But even if the governor can’t get his wholesale purchase price of 5.5 cents per kilowatt-hour, and must slide toward, say, an 8-cent price over a longer term than he would like, this would still represent a tremendous savings for Californians, little more than one-quarter the prevailing spot price.

Such a scheme could require some intercession from the new administration, which may have to choose between its energy friends in Texas and the interests of citizens of the most populous state in the union.

Ken Reich can be contacted with your accounts of true consumer adventure at (213) 237-7060, or by e-mail at ken.reich@latimes.com.