Electric Restructuring Moves to the Front Burner

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, April 14, 2003 Share this on FacebookTweet thisEmail this to a friend

Efforts to wind out of the energy crisis and move toward a sensible regulatory structure for electricity are being played out in two bills, SB 888 (Joseph Dunn, D-Santa Ana) to re-regulate the industry by eliminating direct access and putting the utilities back in the business of building generation, and AB 428 (Keith Richman, R-Northridge) to reopen direct access for large "noncore" customers in order to stimulate private investment in new generation.

Both bills are being offered as part of the solution to under-investment in new generation and transmission in the state. The slow California economy has reduced demand for electricity and given California a chance this year to restructure itself in an environment of plentiful supplies and low wholesale prices. But Terry Winter, CEO of the Independent System Operator, recently testified before Congress that "If our economy turns around, it can add back (demand) in a matter of months….we could be getting into trouble in 2005, 2004 with bad weather. Next year could be a problem if the economy grows and Silicon Valley's high-tech industry moves back to full production."

California imports nearly 20% of it's total electricity needs and is more dependent than any other state on electricity and natural gas from outside its borders. Until California builds more generation and transmission and customers can respond to rising wholesale rates through conservation, Pat Wood, Chairman of the Federal Energy Regulatory Commission, said that nothing can "protect California customers from the inevitable problems that will result."

The energy crisis put a halt to the plans of many private investors to build generation after the enactment of electric restructuring legislation in 1996. These projects could be revived under the right regulatory conditions. Other states like Texas have shown that a rational competitive energy market protects customers, reduces costs and increases supplies. California should pursue a similar strategy.
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