Looks like the CPUC drove a stake through the heart of deregulation in California. Following the Yahoo news is a summary, by a knowledgeable poster from Yahoo Board, of the ramifications for the sales of Capstone Turbines' microturbines in California. QueHubo, do you have any opinions on this? BTW, MacDonalds in Illinois decided to install microturbines in their restaurants.
Thursday September 20, 5:05 pm Eastern Time
Calif. drops power choice, heart of deregulation law
By Leonard Anderson
SAN FRANCISCO, Sept 20 (Reuters) - California utility regulators on Thursday jettisoned Californians' right to choose their power provider, tossing out the core of the state's disastrous bid to deregulate its electric industry.
The California Public Utilities Commission (CPUC) voted 3 to 2 to immediately suspend consumers' ``direct access'' to independent power retailers, further dismantling the 1996 law that was supposed to foster competition among power generators and drive down the state's steep electricity prices.
The move makes it easier for the state to tap revenue from retail power sales needed to fund a record high $12.5 billion bond issue planned for later this year.
The bond will be used to repay the state Department of Water Resources (DWR) for its emergency power purchases.
DWR was tapped in January to secure electricity for most of California's 34 million residents after soaring wholesale power prices drained the state's two biggest utilities of their cash and credit.
``Direct access is one half of a failed and collapsed deregulation project,'' commissioner Carl Wood said at Thursday's CPUC meeting.
He attributed the rest of the blame on the law's retail rate cap, which blocked investor-owned utilities from passing wholesale power costs down to their customers, incorrectly assuming wholesale prices would fall.
When energy supplies grew tight and prices soared in spring 2000, PG&E Corp.'s (NYSE:PCG - news) Pacific Gas & Electric utility, the state's largest, and Edison International's (NYSE:EIX - news) Southern California Edison were forced to absorb $13 billion in unanticipated costs.
Pacific Gas & Electric subsequently filed for Chapter 11 bankruptcy protection in April and SoCal Edison may be forced into involuntary bankruptcy by creditors. Pacific Gas & Electric has around 13 million customers and SoCal Edison about 11 million.
NEVER EMBRACED
Direct access was never a big hit.
Despite an $80 million advertising and public relations campaign to educate Californians about deregulation and retail choice, most utility customers ignored the retail choice option and stayed with their local utilities.
Big businesses and industrial customers, however, cut their own deals with energy companies for cheap bulk power supplies and want them to continue.
But state officials fear keeping direct access offers these customers a way to dodge paying for the emergency power already purchased by the water agency.
The CPUC estimated that 5 percent of the state's peak electricity demand of 46,000 megawatts is in direct access contracts. About 10,000 businesses that signed new deals this summer when wholesale power prices dropped will be able to keep their contracts.
``The commission is permitting a jailbreak by deregulation's backers, forcing captive consumers to once again pick up the tab for deregulation's mistakes,'' said Nettie Hoge, executive director of The Utility Reform Network, a San Francisco-based consumer group.
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End of Customer Choice in CA
by: kalistani (M/Houston, TX)
Long-Term Sentiment: Strong Buy 09/28/01 09:25 am
Msg: 8685 of 8687
biz.yahoo.com
In case any of you missed this article, read it. In case you missed the importance of this news for Capstone microturbine sales, I'll lay it out for you.
California's deregulation attempt was built upon the concept that customers could choose their energy service providers (ESPs). The ute would get out of the energy side of the business and exist merely as a distribution/transmission company. The ESP's would take on all of the commodity risk, competing for CA customers, hence driving down the cost of the commodity. Didn't work, customers were never given free access to the market, and the ESP's failed miserably, most dropping out of the biz all together.
Once the massive rate surcharges went into effect (July 1, 2001) the ESP business was resurrected. Now that retail rates were considerably higher than wholesale rates the ESP's could bring their customers value (lower rates) and still make a handy profit. The utes and the CPUC readily recognized this and banned Customer Choice. This was done knowing that soon every sizeable customer would leave the ute and its outrageous rates and the state would have no means of recouping the billions it spent on power. Only solution was to ban departure from the grid.
What does this mean for CPST? It spells HOME RUN. A customer cannot contract for energy deliveries from another entity, but it can self-generate. In fact, not only can it self-generate, the state is going to SUBSIDIZE that self-generation with its 30% rebate program. That leaves microturbines/fuel cells as the only game in town (diesel generation cannot be run in baseload because of emmission allowances). Paybacks on fuel cells are running about 40% longer than microturbines leaving Capstone as the ONLY game in town/state.
With nat gas totally crushed, Capstone is finding itself in the Perfect Storm of Sales Opportunities. Shareholders are finding themselves in a position to hit one out of the park with CPST due to the cheap price of its stock. |
