As the energy crisis deepens, the web of deceit woven by the energy industry and their cronies continues to unravel. The latest thread was plucked by a study released last week by the UCLA Anderson Business Forecast.
The study, prepared by Christopher F. Thornberg, a visiting professor at the university’s Anderson School of Business, dismisses many of the myths bandied about by the energy industry as the cause of the crisis. For instance:
– The myth that California consumers and businesses use excessive amounts of energy.
“The reality of the situation, however,” Thornberg writes, “is that the demand side of the issue has been largely over-emphasized.”
In fact, Thornberg reports the overall growth rate for energy usage in the state climbed by only 3.4 percent last year, equal to the state’s consumption growth rates for three of the last four years when there was no energy crisis. Per capita energy consumption last year was lower than most preceding years, and only slightly higher than 1997.
In fact, compared to the rest of the nation, Californians have been on a long-term energy diet. The average per capita energy consumption in California last year was only two-thirds the overall U.S. rate. Over the past decade, total energy consumption in the state grew only 15 percent compared to 25 percent for the U.S. overall.
“It is clear that increases in California consumption did not cause the crisis ” Thornberg concludes.
– The myth that California lacks adequate power production capacity.
Thornberg’s report shows 35 percent of total retail electricity sold in the state was produced by local utilities, while non-utility wholesale producers with power plants within the state provided 38 percent. Only 27 percent of our power was imported from outside California.
“The reality is there is no reason to believe that a large increase in wholesale prices would not have occurred even if necessary additional generating capacity were available within the state,” Thornberg concludes.
He also points out if there was collusion among energy producers to jack up prices, as alleged by a growing number of sources, “in-state producers were certainly part of the process since the large majority of electricity sold in the wholesale markets was produced in California.”
Energy producers and retailers keep perpetuating these myths in hopes of persuading politicians that California’s crisis is a simple supply-and-demand dilemma , too much demand, too little supply.
Far from being the fault of us tree-hugging power gluttons, however, Thornberg says responsibility for the energy crisis rests on the “unfortunate juxtaposition” of separate events. One was what he calls “the misnamed ‘deregulation’ of the power industry in California that was in reality just a restructuring of the industry.”
By allowing wholesale electricity prices to be set by a day-to-day “spot market,” California’s deregulation scheme “did little to allow the forces of competition into the industry,” Thornberg says.
Another factor was the sudden jump in price for natural gas, which has become the fuel of choice for power plants. The entire cost of natural gas , as well as “startlingly high” pass-through rates added on by electricity producers , is being borne by California energy consumers, Thornberg says.
The final straw, says Thornberg, was that energy production has not kept up with energy use across the entire United States. “The crisis in power production is not in California, but nationwide,” he writes. The only reason it hit California first is due to the state’s dysfunctional deregulation scheme.
Thornberg concludes the only way to save the system is to bring true competitiveness to the energy industry. “Consumers need to be given a choice as to where they buy their electricity,” he writes.
Unfortunately, Thornberg himself perpetuates another myth for the crisis: He puts the blame for the state’s failed deregulation scheme on politicians in Sacramento, rather than the state’s largest utility companies that foisted it upon us.
It was the utilities, after all, who devised the failed deregulation plan , including its now discredited Power Exchange, based on a similarly flawed system that resulted in outrageous energy rates in the United Kingdom. They did so in response to the open-competition form of deregulation originally advocated by the Public Utilities Commission.
The PUC’s original plan would have allowed consumers to contract directly with energy producers, increasing competition among the producers and turning the utilities into little more than delivery boys , a fate that would have crippled utilities’ stock prices. Ironically, what the PUC proposed is exactly what Thornberg now says is needed.
Thornberg misses another important point as well: the fact that the natural gas and power generation industries have largely converged; those selling the gas to power plants now own a large number of the plants too.
As each thread unravels from this web of lies, it becomes clearer California’s consumers and businesses are the victims of a massive and pervasive scam perpetrated by a megalithic energy cartel. We are the victims of a utility scheme to boost their profits under the thin disguise of deregulation, and now that their scheme has backfired, we are not only expected to take the blame for its failure but also bail out the energy companies with higher electric bills and taxes.
Make no mistake: The debt from this debacle will be borne by the consumers and small businesses of this state, the two vitalizing forces of the economy. Yet the state’s three largest utilities responsible for this economic train wreck and their wealthy Fortune 500 parent companies will, most likely, walk away with nary a scratch.
Something is wrong here. Something is terribly wrong.
