Heat Is on Power Politics

Monday’s record temperatures sent demand for electricity skyrocketing. Generating plants in Southern California couldn’t produce enough power, and an overloaded transmission grid couldn’t import enough electricity from other regions. The unexpected power crunch faded as big energy users, alerted to the shortage, flipped on emergency generators. But the incident should shake state officials to clean up California’s still badly flawed energy regulation.

The power emergency, even as the season’s first major wildfires raged, seemed oddly prophetic. It resembled a worst-case scenario developed by the nonprofit organization charged with running the state’s electric grid -- a long, hot summer that fuels heavy demand for electricity, as wildfires knock out vital transmission lines and the state’s aging electricity generation plants unexpectedly conk out. It’s a scenario that Gov. Arnold Schwarzenegger and state legislators should keep replaying in their heads as they tackle energy reform. California risks a return to frequent rolling blackouts by the summer of 2006, if not sooner.

Two competing pieces of legislation that -- no surprise -- head in different directions already have surfaced. Assembly Speaker Fabian Nunez (D-Los Angeles) backs AB 2006, which reflects the concerns of traditional utilities that fear losing customers to nonregulated competitors. AB 428, by Assemblyman Keith Richman (R-Northridge), pushes a free-market approach that would make it easier for customers to leave utilities for other providers of electric power. Bridging the gap between the bills will take the bipartisan thinking that made possible the $15-billion bond measure to balance the budget, as well as a workers’ compensation reform package.

The state needs a regulatory review program that encourages competition among potential builders of badly needed power plants without gouging consumers. Those financing and building the plants deserve a predictable, reasonable rate of return -- electricity has a guaranteed market and there’s no reason to allow suppliers buccaneer-sized profits.

Most Californians will stay plugged into the local utility, even as larger and more sophisticated customers clamor for the right to seek better electricity deals elsewhere. Schwarzenegger has made it clear that he wants businesses free to buy power from someone other than a local utility. He sees it as key to encouraging new business in a state with such high power costs. The challenge then becomes to ensure that customers who stick with the utilities don’t end up subsidizing customers who leave. Those who leave the system can’t be allowed to duck back in if the deals don’t work out -- at least not without compensating customers who stayed behind. The free market brings risks, and occasionally situations go sour.

A mixed system -- regulated utilities alongside independent power providers -- may be the state’s future. But those controlling it have to think of the good of the state, not the pockets of political contributors.