Posted: March 7, 2008
The state Public Utilities Commission wants
to revive “Direct Access”—the cornerstone of California’s disastrous experiment
with deregulation.
Despite warnings from state legislators and
from the state’s utility unions, the CPUC voted on Feb. 28 to examine ways to reinstitute
Direct Access, a policy that allowed power customers to bypass the state's
regulated utilities and buy electricity directly from independent producers and
marketers.
The CPUC began discussing the revival of
Direct Access last year. Legislative leaders warned at that time that state law
expressly forbids reviving direct access for as long as the California
Department of Water Resources continues to supply electricity to the utilities
under long-term contracts signed during the energy crisis. The last of those
contracts won’t expire until 2017.
To get around the prohibition, the CPUC is
studying whether the long-term contracts could be assigned to someone else,
such as the utilities.
The California Utility Employees (CUE), a
coalition of utility unions that includes IBEW Local 1245, strongly urged the
CPUC on March 5 to abandon all plans to revive the discredited policy of
dregulation through Direct Access. CUE noted that Direct Access undermines the
regulated utilities’ ability to predict and plan for future generation needs.
CUE also pointed out that current providers of Direct Access (grandfathered in during the energy crisis) provide virtually no renewable generation. While the state’s regulated utilities are required to achieve 20% renewable generation by 2010, the CPUC seems “either unable or uninterested in enforcing” renewable obligations on Direct Access suppliers, CUE said.
Independent generators are still making the
same claims for Direct Access that were commonly heard in the 1990s, when Enron
led the lobbying charge at the state legislature to deregulate California’s
electric system. Direct Access, these generators argue, can lower California's
chronically high electricity prices by forcing utilities and power plant owners
to compete for business.
But the theory proved completely at odds with
the generation and pricing of electricity in the real world, as was
demonstrated in 2000-2001 when California’s energy markets melted down, leaving
Californians reeling from blackouts and soaring prices. The Legislature was
finally forced to take emegency action to rescue the state’s electric
system—and economy—from utter collapse. Direct Acess was suspended by
legislative order, and the state signed several long-term power contracts
through the Department of Water Resources to stabilize electricity supplies.
Large power customers who had already signed
Direct Access contracts were allowed to keep them, but everyone else had to
continue buying electricity from the utilities.
Now the CPUC seems determined to revive the
discredited policies of deregulation—as if the disaster of 2000-2001 never
occurred.
“They've yet to demonstrate what the benefit
is to the (utility) ratepayers,” said Sen. Christine Kehoe of San Diego, chair
of the Senate's Energy, Utilities and Communications Committee.
The consumer group TURN shares the unions’
concerns that Direct Access will make it difficult for utilities to properly
plan for how much energy they'll need to generate or buy for their customers.
TURN Senior Staff Attorney Mike Florio told the San Francisco Chronicle that
utilities would be forced by Direct Access to rely on expensive, short-term
contracts with power plant operators rather than cheaper, long-term contracts.
“It's really inevitable that prices will be
higher for everybody,” Florio said. “It's when you have the long-term deals
that the utilities have traditionally relied on that you get stable rates.”