MONDAY, AUGUST 7, 2000

Californians face threat of life without electric juicers

The state that pioneered utility deregulation is now struggling with potential blackouts and soaring bills.

Sara Terry Special correspondent of The Christian Science Monitor

LOS ANGELES

It's the kind of thing most people take for granted: Flick a switch, you get light. Press a button, the computer starts up. Or the dishwasher begins churning, or the television blares.

But Californians are learning to think otherwise. Severely strained power supplies gave consumers around the state a nasty shock last week, bringing them to the brink of rolling power outages - which would have meant no electricity for hours at a time.

The state that became the nation's model for electric utility deregulation in 1996, promising cheap and plentiful supplies, narrowly avoided imposing rolling blackouts, which have never occurred here, and have happened only rarely in the rest of the country.

And though the soaring temperatures that contributed to the crisis are expected to ease somewhat in the week ahead, the political heat has been turned up for some time to come. Consumer groups, legislators, industry officials, and state and federal investigators have jumped into battle - proposing various solutions, while also raising questions about the effectiveness of deregulation.

In San Diego, the one part of the state where deregulation has taken full effect - resulting in a doubling of electricity bills in recent months - outraged consumers have been burning their bills and refusing to pay.

"This is an opportunity for us to wake up and smell the coffee," says Nettie Hogue, director of Utility Reform Network, a San Francisco-based consumer advocacy group. "This market thing is nuts, it's madness. It didn't make sense to deregulate what is an essential commodity."

Ms. Hogue is a proponent of re-regulating the industry in some ways, such as the cap put on wholesale electricity prices last week by the California Public Utilities Commission. She and other consumer advocates also argue that utilities need to install new meters in customers' homes to track what time electricity is consumed - thus passing along to consumers the savings gained by using electricity at off-peak hours. Most customers currently have meters from the days of fixed prices, when electricity usage was measured on a monthly average, and therefore do not benefit from deregulated pricing.

Californians are beginning to understand a few things about deregulation, a highly confusing and complex process that is still taking hold, with some price freezes in effect until at least March of 2002.

Under deregulation, consumers are allowed to choose the company that delivers their power service - one of the benefits of free-market competition. Although the state's big three investor-owned utilities still dominate the market - and most people seem unaware of their right to choose a different service - some Californians are now finding other alternatives.

At Utility.com, a San Francisco-area company that offers electricity at discounted rates, new customers are signing up every month, according to CEO Chris King. Although the 18-month-old company does not disclose numbers, he says, it has seen its client list rise by a factor of 10 over the past year. Between June and July of this year, it saw its San Diego customer base grow by 400 percent.

"It's a hard thing for people to understand," says Mr. King. "But customers are definitely getting more savvy. They used to just ask, 'What's your price?' But now they're saying, 'How do you handle transmission? Where do you buy your power?'"

But consumer awareness is only part of the picture, say the state's energy players. New power plants - which have not been built in California for the past decade or more - are desperately needed to ensure that there is enough supply to meet the state's soaring energy demands, which have been fueled by a hot, technology-driven economy. This past week, in response to the crisis, Gov. Gray Davis gave state agencies a bureaucratic shove, directing them to speed up the lengthy process of approval for new plants.

In addition, state and federal officials will investigate whether there has been illegal manipulation of wholesale electricity market prices by businesses that generate that power. And state legislators will consider emergency relief for those consumers hardest hit by price increases.

Still, utility industry spokesmen maintain that the current problems are all part of the process - however painful - of shifting into a free-market climate.

"These are markets that are still in transition," says Jim Owen of the Edison Electric Institute, a trade association of investor-owned electric utilities. "As the markets become more regular, and as more generation is brought on stream, I think we'll see definite improvements."

http://www.csmonitor.com/durable/2000/08/07/fp2s2-csm.shtml

-- Martin Thompson (mthom1927@aol.com), August 07, 2000