Deregulation of Power Sends Prices Skyward

Deregulation of Power Sends Prices Skyward

From a news story by
CNN San Francisco Reporter Rusty Dornin

August 5, 2000

Power

Restaurant owner Joe Busalachhi didn't know much about San Diego becoming the first city in California to deregulate (see definition below). Then his accountant gave him a quick lesson, multiply his previous utility bill by two.

"He says sign a check for three thousand dollars. I said what? Excuse me there's a mistake here."

In 1996, the state voted to gradually deregulate, with the hope there would be more competition, and rates would come down.

California's governor says some suppliers have taken advantage of a continued imbalance in supply and demand. Gray Davis says, "I'm asking the electric generators to act responsibly, even though they have leverage there's no need to charge twenty or thirty times the true price of electricity."

Take sky-high prices in San Diego. Then add hot weather. Aging power plants and not enough of them and you have a power crisis in California.

This week the state nearly had to turn off power to many residents. Simply because there wasn't enough. Neighboring states didn't have any to give either.

How did this happen?

In the face of deregulation utilities here quit building power plants, limiting supply, while demand kept going up.
Greg Conlon is a Former PUC commissioner who says, "If you can't get those power plants built then you can't have a competitive market."

This week San Diegans pleaded with the state's public utility commission to roll back the rates that had doubled or tripled last month, and freeze them until there was more competition.

Diane Jacob of the San Diego board of supervisors says, "Our economy could die. We need help and we need it now."

The commission balked at freezing electricity rates for San Diegans instead asking for a federal investigation and rebates, rebates critics say won't give any relief.

Maureen O'Connor, the former San Diego mayor says, "It means devastation, financial devastation, for the people of San Diego."

But high prices and inadequate supplies of electricity are not unique to San Diego. Here in San Francisco the shortage is so acute the power company is proposing bringing a floating power plant all the way from Texas to meet demand.

Additional Notes:

Definition

Deregulation -- The process of removing restrictive regulations on previously regulated companies. "Deregulation" describes a change through which many companies compete to offer products and services that previously, under regulation, were offered through just one government-controlled company.

Related Sites:

The Federal Energy Regulatory Commission home page provides timely access to FERC orders, notices, and rule- makings.
Energy.com Corp.

Energy.com Corp. was formed to inform and educate energy consumers worldwide. The site's mission is to draw together energy companies, product suppliers, and industry experts to provide tools and information for making intelligent energy decisions and purchases.

This site contains several tutorials to learn more about deregulation and how to choose an energy supplier. To find the tutorial, enter your zip code or any American zip code. Where it says, select the home or business button, click on the "Home" button. At the bottom of the next page, you will see the tutorials.
Power Quality, the Leading Magazine for Insuring Power System Reliability
Several articles describing in detail deregulation in the power industry.
Managing energy in a deregulated environment: Opportunity or chaos?
TRB from Washington: Power Surge (Article from the New Republic)
Statement of Ralph Nader on Energy Deregulation and the Impact on the Latino Community before the Congressional Hispanic Caucus Institute’s 1999 Issues Forum

This article has a lengthy section expressing Ralph Nadar’s opinion how the California problem developed.
NCPA Policy:Electric Power Deregulation Benefits All
U.S. Businesses Staying Flexible on Power Deregulation - April 2000