53.7 F
San Diego
Thursday, Mar 28, 2024
-Advertisement-

Commentary—Energy crisis: Like a bad novel with no heroes

It has all the elements for a riveting read: greedy power companies, powerful lobbyists, near-sighted cause groups, out-of-state exploiters, incompetent bureaucracies, and plenty of small guys getting ground under the collusion of big forces.

What it lacks for publication is a hero.

It also needs a title. Calling it simply “Energy Deregulation in California” will do nothing for sales, and throwing Martha Stewart’s name on the cover as a recipe for a great public policy hash is a bit of a stretch.

Here is how the story unfolds.

In the early ’90s, utility companies had it fat and sassy. Operating as state-sanctioned monopolies in designated areas, they were always able to pay their shareholders a dividend.

But a recession hit, and many big businesses, which can spend as much as 25 percent of their operating costs on power, noticed that energy prices in California were some of the highest in the country. They threatened to vacate the Golden State for cheaper pastures. They also saw independent power providers charging a lot less than their friendly utility company.

Into the spat stepped the state of California. Businesses wanted cheaper rates; utilities wanted guaranteed profits; and environmentalists wanted no new power plants.

Something For Everyone

Government officials devised a plan to please everyone:

– Large users of power could buy directly from independent producers.

– Rates were set high in order to allow utility companies to recoup money from bad investments in exchange for their agreeing to divest themselves of total control over power production and supply.

– To ensure California and out-of-state power producers kept the juice flowing, a market-clearing price was established guaranteeing the highest price for wholesale electricity based on the last bid, which is almost always the highest.

– No new power plants would be built in California.

– And, in order to grease the deal with the public, residential customers of electricity were given an immediate 10 percent cut in their rates.

Missing in all this was a standard textbook on economics. California’s deregulation experiment was founded on principles of government price-fixing, cost controls and proscribed prohibitions on capital expansion.

From Riches To Rags

A decade ago, California had an oversupply of power by as much as 30 percent. Today it begs for power like imploring gypsies on the streets of European cities.

Before deregulation, the wholesale price of energy per megawatt hour averaged $30. Today it is about $1,500.

Most unforgivably stupid was our state’s decision to forgo construction of more power plants that would be needed to meet California’s growing population and prosperity.

State policymakers also placed too much faith in an open market that wasn’t really an open market as long as California was a major player.

California’s energy crisis is a mess created by big utilities, big government, and big business.

Small business , California’s biggest employer , is not only bearing the brunt of utility rate hikes, but must now fret over what lies ahead in the mad dash back to re-regulation, which many are seeking as the most expeditious corrective.

Many are very angry and are not shy about using the R-word: re-regulation. Others worry about the cure being worse than the pain. After all, capitalism is the lifeblood of every single small-business owner, and de-regulating the airline industry and phone company has worked wonders for the economy and everyday living.

As California director of the nation’s largest small-business advocacy organization, I will be holding meetings with many of our members to get their ideas on a way out of our energy crisis. This time, I believe it would behoove policymakers to pay heed to the people who sign more paychecks than any of the players who brought us the deregulation mess.

It is time to write a closing chapter to this page-turner. The heroes of our story are the tens of thousands of small-business owners who managed to keep their doors open and their communities employed in spite of the threats to their solvency made by people in Sacramento.

Hopper is California director for the National Federation of Independent Business.

-Advertisement-

Featured Articles

Oberon Eyes Europe for Renewable DME

Leaders of Influence in Law 2024

-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-
-Advertisement-