If the Legislature fails to act on two key energy-related issues when it returns from summer recess later this month, California will have taken a major step toward establishing a government-run, statewide utility system. Given the complexity and politically charged nature of the electricity market quagmire, some openly advocate a state-run system as a legitimate solution.
However, a state-run system is hardly in the best long-term interest of electricity consumers, state taxpayers or California’s economy. One need only look at other state-operated systems (departments dealing with transportation, motor vehicle registration, and veteran affairs come to mind) to imagine the operations of a state energy authority.
The state’s involvement in the business of buying electricity has already been a nasty experience for taxpayers. As numerous press accounts demonstrate, state government was unprepared to engage in this marketplace. Yet that is exactly what state officials have been forced to do, and could be forced to do in the indefinite future, because California’s utilities lost their investment-grade credit status and the Legislature has failed to take action.
With the state in the energy-buying business, taxpayers are at great risk. The state of California has already spent billions of public dollars to underwrite the cost of electric energy for homes and businesses, and until bonds are sold, taxpayers, public schools and transportation programs remain at great risk.
Near Paralysis Of Government
In addition to the billions of tax dollars fronted for electricity purchases, no one has yet calculated the economic impact of the near paralysis in state government that has delayed much needed attention and resources to priority issues of California residents.
When the Legislature returns, it will have one more opportunity to effectively deal with the energy crisis on behalf of taxpayers, small business, wage earners, retirees and all who are a part of our economy. Members of the Legislature must return from the summer recess with the single-minded focus on two issues.
First they must get state government out of the electricity buying business. There is only one way to accomplish this goal: pass legislation to return Southern California Edison to investment-grade credit status.
Ideally this legislation will serve as a model to expeditiously bring PG & E; to financial health as well. Only then will the utilities be able to resume the hard job of buying and selling power in the most economically efficient way.
Direct Access
The solvency of investor-owned utilities is critical to the delivery of reliable and affordable energy in California. This is the best strategy to assure direct access for large industrial energy consumers so they can chose their energy supplier or generate it themselves.
State government procurement of electric energy on a long-term or permanent basis will have damaging consequences for taxpayers and the economy.
Second, lawmakers must equitably allocate costs. The Legislature must allocate responsibility for energy costs equitably while sheltering residents of the state that are truly in need.
For more than a year, the California energy crisis has been aggravated by the failure of policymakers to allow the commodity cost of electricity to flow through to business and residential consumers. Attempting at this point to load all under-collection costs on business in order to insulate most residential consumers from the realities of the California energy market discourages conservation and jeopardizes the fiscal health of the state.
Reliable and affordable energy is critical to California’s economic future. It is necessary to sustain the current workforce and attract additional investment. Failure to meet this state’s electric energy needs as soon as possible will cost California jobs and worsen the already-slowing economy as businesses move to other, more capable regions of the country.
The Legislature must act now with the end goal in mind that utilities must be restored to financial solvency to do what only they can do best: buy and sell power. Equally important is the equitable allocation of energy costs to avoid further destabilizing California’s economy.
McCarthy is president of the California Taxpayers’ Association.
