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August 23, 2000
California's Move to Limit Power Rates Hits Resistance
By JAMES STERNGOLD OS ANGELES, Aug. 22 -- Mounting political concern over what many are describing as deregulation run amok in the electricity market in San Diego prompted a major but inconclusive battle in the State Assembly today over a bill that would place a broad cap on power costs in the city. The state utility commission narrowly approved a partial rate cap on Monday for San Diego, the first city in California to be deregulated, but many people said they believed it was too little to help people hit with bills that have doubled or tripled in just a few months.
By late tonight the Assembly had not voted on the bill, which the State Senate has passed, 28-0. The bill was facing great resistance because of the expected costs to the state, perhaps many hundreds of millions of dollars.
Several legislative aides said late in the day that it appeared that supporters of the measure simply did not have the votes to pass it and that its fate was unclear.
Nevertheless, the subject of skyrocketing power rates in San Diego, a virtual guinea pig in a pioneering state program, has suddenly become a source of enormous concern because of the unexpected rate change.
Deregulation was undertaken because the Legislature believed it would offer an antidote to what were already exceptionally high power rates in the state, roughly 50 percent above the national average.
Under the deregulation plan, passed in 1996 with the expectation that it would be phased in over many years, utilities had to sell off their generating plants and then purchase power through a state-controlled exchange. San Diego was opened before other cities because of a merger of its utilities to form Sempra Energy.
But many critics have complained that the market was opened before there was a sufficient supply of electricity available, skewing prices upward.
The strong economy and the added burden summer air-conditioning have accentuated the steep jump in wholesale power rates, which have been passed along to consumers.
Many people in the state, including Gov. Gray Davis and the chairman of Sempra Energy, have accused some wholesalers of price gouging, and the governor has written President Clinton, urging him to start a federal investigation.
"Time is of the essence, Mr. President," the Mr. Davis wrote in his letter of Aug. 10. "San Diego consumers have paid an enormous price for deregulation in a market that no one believes is functionally competitive."
Susan Golding, the San Diego mayor, said in an interview that she basically backed deregulation, but that the timing had been so ill-planned that some sort of market intervention was necessary to spare the city a major hiccup in what had been its best economic expansion ever after suffering through a brutal recession.
"In my experience, it takes a very long time to go from a bad economic climate to a good one, but almost no time to go the other way, and that's what I'm afraid could happen here," Mayor Golding said.
"I don't think this bill is the right long-term solution, but I chose to support it because it is needed," she said.
On Monday, the state Public Utility Commission narrowly approved a measure that would cap power costs in the city, but only for small businesses and residents who use 500 kilowatts a month or less. That left many people unsatisfied, particularly since a range of important users, from public schools to the high technology companies that have remade San Diego's economy over the last decade, would feel little improvement.
That prompted the State Assembly to resume its debate of the new bill, which is sponsored by two San Diego area state legislators, Senator Dede Alpert and Assemblywoman Susan Davis.
The bill would roll prices back to their levels in June, before rates began to increase, order the state utility commission to place a firm cap on rates at that level and create a mechanism for passing along excess profits to consumers.
The bill would also mandate an investigation into the spike in rates.
-- Martin Thompson (email@example.com), August 23, 2000