In the Energy World, Customers Always Pay
Anger certainly would be an appropriate response to the state Public Utilities Commission’s decision this week on electrical rate hikes. California consumers did not ask for deregulation, but now that the grand adventure in free market energy has ended in ruin, they will be forced, through whopping rate increases, to pay for it.
Alarm, too, might be justified. There is no guarantee this will be the last rate hike. “When you look down the road,” PUC Commissioner Richard Bilas warned on Tuesday, “we’re going to have to go through this exercise again sometime in the next three months.” Yippee. If this keeps up, some Californians might well see their mortgage payments--or monthly grocery budgets--eclipsed by their utility bills.
Moreover, the increase only applies to energy purchases from March 27 forward, leaving unresolved the not-so-little matter of who should pay to repair the billion-dollar holes deregulation blasted in the budgets of PG&E; and Edison over the past year. It’s a safe bet that the answer to that question will be this: Same as above.
You see, among the many possible reactions to the PUC rate decision, shock should not be one of them. An unwavering rule of the energy business seems to be that, in the end, the customer pays. To revisit a remark made early on in the current crisis by Doug Bosco, a former California legislator familiar with utility finances: “There’s a misconception that only some costs get passed on to consumers.
“All costs get passed on to consumers. This is a giant shell game that goes on all the time, but when it’s all said and done, consumers are the only source of revenue that utilities have. And sooner or later, they always foot the bill.”
Sooner or later has become now.
And, thinking it through, who else was going to pay?
Certainly it wasn’t going to be the out-of-state generators. Their response has been that there’s nothing illegal about the breathtaking profits they have extracted from California. Hey pardner, they say, we didn’t write the rules, we simply played them to the hilt. We stole it all fair and square. Also, please quit complaining about it--you’re hurting our feelings.
Nor would it be the California utilities. PG&E; and Edison are proven masters at finding ways to pass along the cost of everything, even their biggest blunders, to ratepayers. Their world view is simple: Our profits belong to us, our losses belong to our beloved customers. And, by the way, please be a nice consumer and pay your monthly bills on time. Or else we cut you off.
And it wouldn’t do politically for “taxpayers” to be stuck with the bill. I put the word in quotations because, in the vast chunks of California serviced by PG&E; and Edison, the distinction between taxpayer and ratepayer is rather meaningless. Pay through higher taxes, pay through higher utility bills--it makes no difference. Either way, it’s money out the wallet.
Los Angeles, though, is different. Because the Department of Water and Power avoided the deregulation stampede, Los Angeles and other communities with public power find themselves in the strange position of sitting out this crisis--as long as the bills, including the state’s ongoing purchases of wholesale power, eventually are passed along to utility ratepayers.
Filling in the fiscal holes with state tax dollars, however, would shift the politics. Imagine the sometimes rebellious voters of the San Fernando Valley being slapped with tax increases in order to pay for energy consumed by San Francisco or the Silicon Valley. They’d be circulating petitions faster than anyone can say Howard Jarvis.
As for the Bush administration stepping forward to help bail out California--oh, why bother.
No, the outcome has been fixed all along. Call it a bailout. Call it a pricing signal or pass-through costs. Call it a concession to reality. In the end, consumers will pay for the failure of energy deregulation. But let’s not exit on that sour note.
Happily enough, the game does not end there, for in time payment will be--or at least ought to be--followed by payback. At present, all Californians can do is conserve like crazy, brace for blackouts and pay through the nose for their electricity and natural gas.
As they sit and sweat in their unlighted abodes, however, they also can begin to brood over such questions as these: Whom do we run out of office? What will be the thrust of the ballot proposition? When do we take over the power plants? Just how do we get even?
