http://www.contracostatimes.com/stories_sidebars/0powertalk_20010405.htm Published Thursday, April 5, 2001

'Chaos' in state electricity planning

Economic and power analysts meet with PUC president, who admits that deregulation has failed By Rick Jurgens TIMES STAFF WRITER

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LOS ANGELES -- Two hundred of the finest economic minds in California gathered Wednesday at UCLA's Anderson School of Management to discuss the state's energy crisis but, as state Public Utilities Commission President Loretta Lynch spoke, the power to her microphone cut out intermittently and unexpectedly.

"I don't have any control over this," the beleaguered technician operating the sound system called out after repeated outages.

"I feel your pain," Lynch replied with a smile.

No one in the audience doubted that. After two rounds of rolling blackouts that state officials were powerless to prevent, Lynch last week led the commission to hike retail power rates 42 percent, sparking protests from consumer groups.

But at UCLA Lynch had power and natural gas producers in her sights. She promised to lead "a war against the sellers who are taking so much value out of the California economy and not adding a whit of value."

Lynch said she favored reinstatement of wholesale price caps that were ended by the Federal Energy Rate Commission in December but wasn't counting on that.

Even without those caps, she said she was optimistic that the state had enough tools to restrain price hikes by wholesalers and avoid another rate hike.

Those tools include conservation, purchases of long-term power contracts by the Department of Water Resources, utility cost cutting and making sure the small power producers known as qualifying facilities are online, she said.

Lynch dismissed the state's 1996 deregulation plan as a "failed experiment" and said she did not accept a questioner's premise that "true deregulation is our goal." The problem was that "the state stepped back too much" from management of the power system and that there had been "too much ideology and theory and not enough practical solutions," she added.

A panel of experts offered some grim predictions. "We are expecting severe difficulties for this summer and next summer," said Barry Sedlik, a Southern California Edison manager.

Mark Bernstein, an analyst with the Rand Corp. in Santa Monica, said the electricity problems are spreading. "This may go on for a while and it's not just California," he said. "In the near term we've got chaos," he added.

But he offered one macabre ray of hope. He said that federal policymakers may feel more urgency to step in if, as now appears possible, rolling blackouts occur in 2002 in Florida where, he didn't need to add, President Bush's brother is governor.

Problems with the transmission system there, as well as generation shortage, could hurt Florida but the state has enough time to avoid a crisis, he said in an interview.

Rick Jurgens covers economic developments and trends. Reach him at 925-943-8088 or at rjurgens@cctimes.com.

-- Martin Thompson (mthom1927@aol.com), April 05, 2001