Sunday, June 3, 2001 Blackouts go bicoastal Energy: New York and California have a big problem, and it's not deregulation. A page-one headline in The New York Times the other day read: "A Failed Energy Plan Catches Up to New York." It looks like deregulation all over again.

But it isn't. The best evidence of that fact is that almost nobody in New York wants to go back to the old system in which the state tightly regulated the construction of power plants and the sale of energy.

Energy policy definitely has gone off the tracks there. Summer is coming, and so are blackouts and price spikes in New York City unless the state can manage to quickly plug in enough small power generators, which is far from certain. But the problem is not deregulation.

New York got itself into trouble by being in too much of a hurry to break up the state's power monopolies in the expectation that a free market would encourage construction of new power plants and bring down rates. The high cost of electricity was driving out business.

But no new plants got built. Under administrative order from Gov. George Pataki, utilities sold their generating plants, dropped a 2 percent conservation charge from utility bills and cut back spending on conservation programs.

All the plants got sold at huge prices, but to only a few buyers, which made price manipulation likelier. Consumption rose, conservation declined, supplies tightened and the price squeeze began. Unlike Massachusetts, New York utilities were not required to sign long-term contracts with power generators. Unlike California, there were no price caps protecting consumers, and rising costs simply got passed along.

Relief for New York is not imminent. Power companies have proposed 21 new plants, but only two have been approved, for startup in 2003, and neither is close enough to serve New York City.

Of course New York's problems aren't nearly as threatening as California's, where the state allowed power generators to charge as much as they wanted but froze the rates that could be charged to consumers. The result has been bankruptcy for the state's biggest utility, Pacific Gas & Electric; the threat of bankruptcy or financial destruction for the second biggest utility, Southern California Edison; no real protection for consumers, and looming economic catastrophe for California.

Will deregulation or shortages cause such problems elsewhere? Not likely. Massachusetts sped up its permitting process, and will add enough capacity this year to serve 2.6 million homes. Michigan has ordered utilities to increase transmission capacity by 50 percent by June 2002. The PJM Interconnection, which serves most of Pennsylvania, New Jersey, Maryland, Washington, Virginia and Delaware, is introducing deregulation gradually over three years, with positive results.

It looks like New York will have to suffer through price increases and probable blackouts before public officials get their program together. California, in a class of its own as usual, will continue to spiral toward economic chaos until someone puts political self- interest aside and provides some common-sense leadership.

That, not deregulation, is the issue on both coasts.

http://www.ptconnect.com/archive/today/edi01.asp

-- Martin Thompson (mthom1927@aol.com), June 03, 2001

Answers

Now there's a common sense article if ever I saw one.

-- Loner (loner@bigfot.com), June 03, 2001.