Lessons from history: Electricity still needs a public role

(Published April 8, 2001)

"The question is whether the state herself shall develop and distribute ... at least a large share of this power ... or whether the people shall suffer private corporations, operating solely for profit ..." --Bee editorial Aug. 29, 1912

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As California struggles to regain control of its electricity system, it is easy to lose sight of the big picture and hard to contemplate how history could provide any guidance to something so contemporary, so monstrously complex. Yet history turns out to be a valuable compass that could help lead us in the right direction.

This seemingly new fight over generators, grids and prices is actually a very old one. Dormant for decades as the status quo remained unchanged, it has abruptly reawakened. Today's debate is couched in the language of our time, with all those energy institutions with abbreviations like FERC, ISO, PUC and PX.

Fundamentally, however, the dilemma remains unchanged. Electricity is as unique a commodity as it is vital. It cannot be stored. It must be generated precisely when it is needed. This poses an extraordinary challenge for government to guarantee a reliable, affordable supply. It demands a balancing of the vital roles of the public and private sectors. Given today's crisis -- private utilities wallowing in debt, merchant generators extracting high prices, consumers facing ever-rising rates -- the search for that right balance remains an elusive one.

This newspaper first engaged the question near its very inception. The West was young. The rules of the game were largely unwritten. And the public interest was threatened by private greed. Would government or companies dam the rivers and build the hydroelectric plants? Who would control the grid? And perhaps most important, could citizens revolt against the local, privately held monopoly and turn power into a public enterprise?

That's what Sacramento did against PG&E in the 1920s. Voters created the Sacramento Municipal Utility District. They funded hydroelectric projects in the Sierra. And they wrested the local distribution system from a resistant PG&E.

Other cities such as Lodi, Roseville, Modesto, Los Angeles and Redding created public power agencies or city power departments with leaders elected by voters, not shareholders. The eventual result in California was a blend of public and privately held agencies. Public power provided a yardstick by which to measure the private sector. This system was hardly perfect. But it wasn't broken.

Now it is. The fixes must redefine the roles of the public and private sectors to bring the system back in balance.

Will government or private companies own the new plants that supply those precious last megawatts of power at the pricey peak? Who will own or expand the transmission grid to relieve bottlenecks that stifle competition? Will private utilities be allowed to take their customers for granted, or will citizens have the unfettered right to create a public power agency in their community?

In our race to deregulate in the 1990s, we forgot how public power has provided the discipline for the private marketplace that left to itself will feast on price volatility. The public interest simply cannot be delegated to the private sector. Not then, not now, not ever. This is the lesson of history. As we go about the fixes, we cannot afford to forget this yet again

http://www.sacbee.com/voices/news/voices01_20010408.html

-- Martin Thompson (mthom1927@aol.com), April 08, 2001