flatsville, I've put together a bunch of recent articles from around here to muddy up the picture on this power problem even more. Lots of blame is about to get thrown in all directions, but the truth as ever is more complicated than fingers pointed in a single direction.
- free marketers will blame the environmentalists for stopping new plants -- actually, there are 9 new plants approved for building, but will take time to come on line. Further, it was utilities in the early nineties who stepped in to stop new construction authorization, as there was a 30% surplus at the time, and shortages didn't pop up until 1999. NIMBY's certainly didn't push for a lot more plant construction, but with the sorry record of refineries blowing up here every six months or so and spewing toxics in heavily populated areas, it's little wonder. Still, long term forecasts were off base when the late 90s boom hit.
- consumers will blame utilities and brokers. Utilities initially opposed deregulation because of their monopolies, but industry pushed it and consumers remained essentially neutral. Later, as utilities saw the potential for paying off earlier cost overrun projects via fees in deregulation, they bought in :
sfgate.com
An excerpt:
Sounded pretty good until you noticed the fine print.
First, we would be financing the rate reduction
ourselves. PG&E had argued it couldn't compete in
the deregulated market unless it could retire $28
billion in "stranded costs" for investments in old
plants and equipment. So the state agreed to float
$7.4 billion in bonds that PG&E could use to pay
down these stranded costs. The reduction in debt
allowed PG&E to cut our rates by 10 percent.
But consumers had to pay off the bonds. So actual
rates decreased just 3 percent.
Legislators also agreed to freeze our electric rates at
1995 levels until 2002 -- for PG&E's benefit, not
ours. At that time, the cost of generating power was
dropping due to lower natural gas prices, low
inflation and other factors. So keeping our rates at
the 1995 level actually meant bigger profits for
PG&E, which used the money to recoup more
stranded costs.
A few consumer groups complained about this
sweetheart deal for PG&E. Why was the public
paying for PG&E's past financial blunders and lining
the utility company's pockets? PG&E's CEO
Gordon Smith responded with an explanation that
ought to be printed in large letters on posters and
waved in front of the PUC.
"If this were a guarantee, I'd sleep better at night,"
he said of the rate freeze. "We take the risk if our
costs go up."
Costs went up. But here's PG&E now:
"We have a legal and a moral right to be
reimbursed," says current PG&E Chairman Robert
Glynn Jr.
That pretty much explains why consumers and voters, who have little love for PG&E to start with, will insist that the fix be shared with PG&E investors.
This one tells you why most residents won't want to understand this thing -- they'll just call for a few heads:
sfgate.com
Here's a simple Q & A piece on the development of the deal, with an excerpt:
sfgate.com
Q: Why was deregulation put into effect, and when?
A: Traditionally, California has had higher electricity
costs than most of the nation. In the mid-1990s, the
large industrial ratepayers wanted a break in their
energy bills and said if competition was introduced
into the electricity market, rates would fall through
natural market forces. The industrial ratepayers
were joined by the utilities, who wanted out from
under regulation, and free-market theorists.
Consumer groups -- who now are the most vocal
critics of deregulation -- were neutral on the plan
A few longer pieces:
sfgate.com
contracostatimes.com
....with a telling excerpt:
Lawmakers didn't understand how electricity is fundamentally different from other markets. Many assumed the
electricity market would follow the lines of a textbook marketplace, with competition spurring lower prices and demand
prompting a greater supply. For many reasons, experts say, the electricity market is different in ways that change the
normal dynamics of supply and demand. Electricity can't be stored and saved, new power plants to increase supply
take years to build, and, most importantly, there is no way for people to know the price of electricity when they are
using it, meaning they are not responsive to demand.
When supplies began to run short, the market became easy for power producers to manipulate. Whether generators
held back power to boost prices -- something that is being investigated by five different government agencies -- is not
clear, but experts say the market became so tight that even the slightest cuts in supply impacted pricing.
More on price bidding, done in secret:
sfgate.com
So there you have (part of) it. It's not just a shortage, though there is that at peak times. It's not just price gaming, though that appears to be going on.
As for the Angelides proposal, it's the kind of thing that could gain support out here, but it apparently requires a 2/3 legislature vote, which would be tough to get.
Dereg may be best for industrial users. My guess is that consumers/residents will want to simplify - they'll say, rightly or wrongly, it worked before without huge price swings, what the hell's wrong now ? Bring back stability and reliability in pricing and service. Won't be as easy as they think. Natural gas prices are free to float I believe -- January bills will shock people. Electricity is what's capped currently. Gov. Gray Davis may become the bagholder.
As for Rose Bird ? She was the CA Supreme Court justice who got recalled 10 or 15 years ago, partly due to opposing the death penalty during the years when crime was a bigger issue than power out here. |
