Daniel Weintraub: Now it's illegal to purchase your own electricity

(Published Sept. 25, 2001)

Buying your own has been banned in California. Electricity on the open market is now officially contraband. Like prescription drugs, which you can get only from a licensed pharmacy, electricity is something you can buy from your local utility, which can make its own or buy it from the state. Beyond that, it's an illegal substance. It was the grand hope of a deregulated electricity industry that you and I and the factory down the street would be able to buy our own juice from the lowest bidder. It might have been a pain -- kind of like shopping for telephone service. But just as breaking up Ma Bell spawned great leaps in mobile phone technology, busting the utility monopoly was supposed to usher in a new era for electricity.

Not that there were mobs of shopkeepers and apartment dwellers lobbying the Legislature for consumer choice. It was the biggest users who really wanted to cut their own deals. Under the old, regulated system, the huge factories that make steel and cement and computers, and gobble up electricity by the megawatt, were paying 50 percent more than their competitors in other states. They wanted the right to shop around.

The Legislature agreed, but only to a point. Lawmakers permitted choice, but they rigged the new system in its early years to favor the utilities that were a powerful force in the Capitol. They made it nearly impossible for the private generators to undercut the utilities' pricing, and they put roadblocks in the way of cities that might have gathered their small customers together and used their market clout to negotiate for lower rates.

The government spent millions on an advertising campaign trying to persuade us of the wisdom of buying our own energy. But there weren't really many deals to be had. Now there are none.

Consumer choice died a quiet death last week at the hands of the Public Utility Commission. Its demise was collateral damage from the mess that was California's experiment in electricity deregulation.

Choice couldn't survive because the state, which now controls the energy business, can't cope with the competition. If Californians were allowed to buy their own electricity, pretty soon most of us would figure out that we are getting a rotten deal from the state. As more people left the state system, the few that remained would have to pay higher and higher rates to keep the books balanced. Eventually, the whole thing would collapse of its own weight.

We're in this fix because Gov. Gray Davis, when he stepped in to buy electricity on behalf of the failing utilities in January, went too far. Craving stability at any price, Davis bought almost all the energy the state will need for the next few years and much of what we'll need for a decade. And he bought that electricity at the top of the market, paying prices that had never been so high, and might never be again.

As those prices were passed along to consumers, suddenly choosing your own electricity supplier got more attractive than ever. Thousands of businesses jumped at the opportunity. Among them were the big steel factories in the Inland Empire region east of Los Angeles.

Tamco Steel of Rancho Cucamonga, which makes rebar, realized its annual electricity bill was going to climb from $12 million to $26 million if it stayed with the local utility, Southern California Edison, according to a report in the Riverside Press-Enterprise. The company, which just laid off 70 people, one-fourth of its workers, desperately started searching for cheaper energy. It signed a deal with a private supplier on Sept. 1, just days before the state slammed the door shut on such opportunities.

That's a scenario that was repeated up and down the state all summer, and it illustrates why, in the twisted world of electricity regulation, the Public Utilities Commission had to step in and just say no. Without the ban there would have been a "jailbreak," in the words of one commissioner, leaving small customers or the taxpayers holding the bag.

That decision might have been unavoidable, given the circumstances. But it didn't have to be this way. Davis could have swallowed hard and ridden out the storm earlier this year. He could have signed electricity contracts for shorter terms at higher prices. That would have been painful, financially and politically, but once the crisis passed, Californians would have been free again to set their own course. Instead, we are imprisoned in a high-priced, state-run system, and will be for years to come.

California, in fact, is worse off than it was in 1995, when companies stuck with high utility rates first asked for the freedom to buy their own electricity. This does not seem like an unreasonable request, an act that should be against the law. Yet now it is. The real crime, though, is the state bungling that destroyed the electricity industry.

The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at dweintraub@sacbee.com.

http://www.sacbee.com/voices/news/voices05_20010925.html

-- Martin Thompson (mthom1927@aol.com), September 25, 2001