In Sacramento, politicians are scrambling to cover their political rear ends in the ongoing scandal over electricity deregulation. But none of the Band-Aid remedies being bandied about will be of much help to San Diegans, or to the state as a whole.
Lawmakers want to believe our dilemma is a temporary problem related to summer heat; wait a few weeks and it will correct itself. But the meteoric rise in local electric rates is not the result of a temporary shortage of generating capacity due to summer heat, and it’s not going away.
Our problem is the result of a poorly thought out deregulation plan that relinquished all oversight of the power industry, allowing it to run amok through this region like Sherman through Georgia. Unless drastic reforms are made, the entire state of California runs the risk of economic ruin.
It was, first of all, pure folly to believe a commodity so deeply rooted in our basic social infrastructure could be turned over to an unregulated marketplace without falling victim to corporate greed.
Electricity, after all, is not a discretionary expenditure like cable TV. Electricity is the essential lifeblood of our modern society. It lights and heats our homes, cooks our meals, keeps our businesses humming. Without it, our modern social and economic structure collapses.
The energy cartels knew just that when they lobbied so hard for deregulation at both the state and federal levels, when they wrote and tweaked the legislation that brought it about, and paid out millions in campaign donations to politicians who ushered it into existence.
It’s doubtful now we can turn back the clock to a time before this dismal system was foisted upon us. But there are steps we can take to make it less dysfunctional.
Consider the following:
– Construction of new power plants. This is the solution touted by the power industry, which wants to build new generation plants cheaply and quickly by avoiding environmental red tape. But a review of the news coverage of the closure of power plants in this state over the past decade shows most were shut down, in large part, because they were excessively polluting. New power plants are needed, but not at the expense of our health and the environment.
Nor are new power plants a solution by themselves. Nothing mandates the electricity produced by new plants be made available to San Diegans or even the state. Under deregulation, the electricity produced by new plants could be sold anywhere, including foreign markets which the power industry has been hungrily eyeing.
It’s also questionable whether this summer’s rate rise actually resulted from a shortage of energy supplies. According to the California Public Utilities Commission staff, electricity producers appear to be withholding power to produce artificial shortages that allows them, under deregulation, to sell their electricity into the market at higher, emergency prices. This type of illegal, collusive behavior won’t change no matter how many new power plants we build.
– Abolish the Independent System Operator (ISO) and Power Exchange (PX). These two private, nonprofit corporations have full control over the pricing of electric power in California, and are governed by boards consisting of power industry executives whose companies stand to profit by their decisions. Is it any wonder the ISO wants to expand its dominance to other states?
The ISO and PX essentially legalize antitrust collusion among the power industry. Nothing in the deregulation legislation requires their boards be held accountable to the consumers or the government. Both need to be replaced with agencies that serve the people, not the energy industry.
– Create a state agency to oversee coordinated energy planning for California. After deregulation, this type of planning was relinquished in favor of a catch-as-catch-can form of energy provision under what was supposed to be a competitive market. No one is truly responsible for determining our power needs.
– Take back California’s ability to project, plan for and control its electricity supply shortages. Under deregulation, that authority was abdicated to the Federal Energy Regulatory Commission (FERC). As a CPUC report notes: “By handing the reins of California’s electric system to federal authorities, the state of California no longer possesses the ability to protect California businesses and consumers.”
– Re-embrace renewable energy sources and energy efficiency programs. California once was famous for its devotion to alternative energy and energy conservation. In the mid-1990s, however, the CPUC turned away from these programs to promote energy competition. As a result, alternative power producers, such as wind-generated electricity companies, are virtually locked out of the California power market, and energy conservation programs have been on the wane.
– Break up the monopolies. The energy industry is made of a handful of corporate conglomerates that control the fuel used to create electricity, the generation plants that produce it, and the facilities that distribute it. To believe San Diego Gas & Electric Co., as an example, is somehow separate from the power generation and trading subsidiaries of its parent corporation, Sempra Energy, is ludicrous.
– Require an investigation by the state Attorney General’s office. There are too many indications that the energy price hikes of the past several weeks were the work of something other than a competitive marketplace. If illegal activities are discovered, then prosecute the responsible individuals , not the corporations , to the fullest extent of the law. Only by holding real people responsible for the behavior of their corporations will illegal business activities cease.
Unfortunately, instituting changes like these will require action on the part of politicians who are less than eager to bite the hands that feed them. I doubt there are many politicians in Sacramento or Washington willing to stand up to them and do the right thing.
But someone has to. The mistakes of electric deregulation must be undone.
Hill is editor of the San Diego Business Journal.
