The U.S. barons of fossil and nuclear fuel have used a contrived energy
crisis in California and the nation as a pretext to declare an all-out
assault on environmental protection. George Bush, Dick Cheney and their
cohorts from the oil industry claim the rolling West Coast blackouts justify
rolling over a century of carefully crafted environmental law.
But this rationalization ignores a telling detail: California does not
have an energy shortage. And according to some of the states highest
officials, the blackouts have been choreographed for massive price gouging
by some of Bushs closest associates and contributors.
The blackouts, rising electricity prices, government subsidies, utility
bankruptcies and near-bankruptcies have many causes. But neither a shortfall
in supply nor a surge in demand for electricity is among them.
California is in fact among the most energy efficient of states. Though
its population and economy have soared, its overall demand for electricity
has risen only modestly in recent years. The amounts of electricity it
can generate in state or has contracts to purchase out-of-state are more
than sufficient to meet overall and peak demand, and have been throughout
the states crisis.
Californias electricity crisis was precipitated by a botched deregulatory
scheme pushed by the very utilities now screaming about alleged losses,
a plan that has immensely profited both the utilities parent corporations
and a few pirate power generators close to George W. Bush.
Californias deregulatory disaster is a failure by design,
prompted not by a real shortage, but by a corporate agenda, says Paul
Fenn of the Oakland-based American Public Power Project.
In the view of the states leading consumer and clean power advocates,
Californias consumers and taxpayers are victims of a massive, complex
double-theft, first by the states biggest electric power utilities,
and then by huge oil and gas companies close to George W. Bush.
STRANDED COST CATASTROPHE
There was very little public debate leading up to the Golden States
decision to deregulate its electric utilities in 1996. The early battles
were muddled and muzzled. The state legislature deliberated for a scant
three weeks. The media barely covered those few hearings that were open
to the public. Southern California Edison (SoCalEd) essentially wrote
much of the legislation, AB1890, in its corporate offices.
When the legislature unanimously voted for the bill and watched its September
signing by a beaming governor Pete Wilson, the utilities and their lobbyists
gushed. This is a great day for us, cheered John Bryson, president
of Southern California Edison, widely regarded as the bills chief
architect. We believe this plan is the best way to facilitate a
smooth, timely transition to a competitive electricity market and maximize
value for our shareholders and customers. It was a large achievement
and a sound achievement for the state in terms of giving customers choice,
he said.
Ostensibly, AB1890 was meant to dismantle the regulated monopolies that
had supplied California with electric power since the early twentieth
century. Instead, consumers would be able to choose among competing suppliers.
The bill presumed the electric market would fill with power companies
vying to sell low-cost juice of all varieties, including green power
from wind and solar.
But the states three biggest utilities SoCalEd, Pacific Gas
& Electric (PG&E) and San Diego Gas & Electric made
sure that before competition could come they were first reimbursed for
their investments in nuclear power, which they argued was inefficient
and could not compete in an open market.
In exchange for this payback, they engineered consumer rate caps that
were to remain in place until the utilities collected up to $28.5 billion
in surcharges for their obsolete generating plants. Once they collected
that money, they said, rates would fall as competing generators came into
the open market.
With abundant infusions of utility cash (the utilities spent more than
$3.6 million lobbying to win the bill in 1996, and another $4.1 million
to promote it in 1997), the states energy interests promoted AB1890
as a way to save customers money through the magic of the marketplace.
In 1995, Bryson trumpeted deregulation as the best, soundest way
to move to a desirable competitive market that will benefit all customers,
large and small. SoCalEd, he said, was committed to a 25 percent
rate reduction effective January 1, 2000. As near as were able to
tell, this [legislation] is consistent with our goal.
A broad coalition of consumer and environmental groups knew better. They
saw the crisis coming right from the start, and bitterly opposed
the original AB1890. In 1998, as deregulation was taking effect, Herbert
Chao Gunther of the San Francisco-based Public Media Center, Harvey Rosenfield
of the statewide Foundation for Taxpayer and Consumer Rights, Ed Maschke
and Anna Aurilio of the California and U.S. Public Interest Research Groups,
Fenns American Public Power Project and others fought back. Operating
on a shoestring budget, they gathered an astonishing 700,000-plus signatures
to put on the fall ballot an initiative Proposition 9 that
would have nipped the crisis in the bud. Among other things, Prop 9 would
have restored regulation to the electric power system and prevented the
huge stranded cost bailout that was AB1890s central
feature.
But the supporters of Proposition 9 ran into a hugely funded utility opposition
that would not be denied. Still intoxicated by the promises of deregulation,
William Hauck, chair of the Concerned Stockholders of California, a SoCalEd
front group, spoke for the industry when he warned that returning to public
regulation would dismantle the competitive electricity market and
customer choice, and will actually result in higher electric rates.
Big energy steamrolled the campaign with a $40 million counteroffensive.
The greens had only $1 million. California voters rejected Proposition
9s proposal to repeal electricity deregulation by a 73-to-27 percent
margin. (A parallel Massachusetts campaign was crushed on the same day,
by a similar margin.)
It was a grim day for green and consumer advocates who had fought hard
to avoid whats now happened. Eugene Coyle, one of the states
most respected energy analysts, and a host of others warned that the electric
power industry was a natural monopoly that would never foster true competition.
They showed that AB1890 was a cover for a massive bailout for the utilities
bad nuclear investments. They demanded public control. They predicted
disaster right from the start.
One early opponent of deregulation was Dan Berman, an energy expert working
to win public utility ownership for his hometown of Davis, California.
With Boston-based activist John OConnor, Berman wrote in the 1996
book, Who Owns the Sun, Today deregulation, cheap electricity, and
natural gas are all the rage.
But few people are paying attention to what will happen when the
price of natural gas and oil go up, as they most surely will, after falling
by 75 percent in the last decade, Berman and OConnor wrote.
What will happen when the new, unrelated independent power
producers of cheap electric power fired by combined-cycle gas turbines
pass on whopping rate increases to the public as the price of natural
gas soars? Will big industry come weeping to the public, hat in hand,
as the savings-and-loan investors did? Are the energy corporations crippling
American industry by reinforcing an addiction to cheap fossil fuels and
electricity? Will there be a massive ratepayers revolt when utilities
try to stick consumers with doubled and even quadrupled utility bills?
AB1890 did include measures that appeared to benefit ratepayers. The bill
implemented an immediate 10 percent rate cut, and froze it into place
for as many as four years.
The same critics who now say the bill was written by the utilities
to benefit the utilities were there in Sacramento in 1996 when the legislation
was drafted and passed, says Jon Tremayne, a PG&E spokesperson.
Their input, for instance, ensured that residential customers were
included in the bill.
But the resulting rates were still 50 percent higher than the national
average. And the fixed rate blocked what would have been a natural decline
with the onset of new renewables.
Deregulation opponents emphasize that had the natural transition to cheaper
and more desirable wind and solar power been allowed to proceed along
with efficiency and conservation programs being mandated by the Public
Utility Commission (PUC) rates would have drifted downward as green supply
increased and demand was held steady.
In the early 1990s, a major program for building renewable-based capacity
was eliminated by the utilities through a legal filing in front of the
Federal Energy Regulatory Commission. Had that renewable building plan
been allowed to proceed, rates would have been on their way down throughout
California.
Furthermore, AB1890s so-called rate cut was financed by an elaborate
bonding scheme that would force consumers to pay huge sums of long-term
interest.
In effect, the small customers are borrowing to give themselves
this rate cut, which is like borrowing money to give yourself a raise,
said Coyle at the time. This is a hidden tax that Californians will
have to pay to private utility owners.
GREEN POWER BLOCKED
In the midst of todays crisis, Vice President Dick Cheney, media
pundits and others contend that the environmental movement has somehow
blocked construction of new power plants that could have helped the state
avoid the current crisis.
Consumer and environmental groups respond that the Federal Electrical
Regulatory Commission (FERC) colluded with SoCalEdison to kill a clean
generation initiative that would have provided enough additional generating
capacity for the state to meet its own needs once deregulation began.
On February 23, 1995, responding to a SoCalEdison petition, FERC blocked
a California Public Utilities Commission order that required the utilities
to purchase more than 600 megawatts of renewable energy, primarily from
wind and geothermal sources. Among other things, the FERC said
with what now seems terrible irony we have grave concerns
about the need for this capacity, mostly because the state commission
was relying on 1990 data, which FERC called stale.
Throughout the 1990s, Californias private utilities resisted the
green demands for increased renewables and efficiency.
AB1890 further stifled competition to the benefit of the entrenched utilities
that wrote the bill by making it more difficult for startups to lure new
customers away from the established giants. But AB1890 included complex
procedural roadblocks that made it virtually impossible for communities
to band together to form buying groups that might circumvent the established
monopolies.
As Paul Fenn puts it, AB1890 raises serious questions about the
ability of small consumers to exercise any market power. Unless residents
and small businesses have the means to purchase power in aggregate through
their local governments, consumer choice will mean little
more than paying higher rates to a middleman or to your current utility.
PG&Es Tremayne disagrees. AB1890 provided the opportunity
for customers to band together through aggregation and go out on the open
market and seek better rates. That was not available prior to deregulation.
People are not doing this now, Tremayne says, because the market
is all screwed up. Those lower rates are not out there. Some significant
steps need to be taken to stop the out-of-state generators from gouging
California customers. Whether its short-term price caps at the federal
level or those generators acting in a responsible fashion, we have to
have changes that address the problems of the market.
There were some incentives for conservation and renewables written into
AB1890, largely sponsored by the Natural Resources Defense Council, whose
chief San Francisco-based energy advocate, Ralph Cavanagh, energetically
supported the bill. But the provisions proved marginal at best.
Meanwhile, Cavanagh, with support from the Energy Foundation, supported
the utilities at every turn, including acting as a key leader opposing
the 1998 grassroots referendum aimed at repealing AB1890.
Cavanaghs role in helping to pass AB1890 and then defending it from
repeal has earned him widespread outrage and contempt from the states
green/consumer groups. He still opposes legislation that would take mandated
efficiency measures away from utility control and give it to municipalities.
The California experience, warns the states green/consumer coalition,
should stand as a warning to energy activists against accepting the marginal
green provisions being tacked onto the Bush/Cheney energy plan.
TOO CHEAP TO METER?
AB1890s driving force was a utility-sponsored provision to pay the
utilities up to $28.5 billion in surcharges for investments in nuclear
power, a technology once billed as too cheap to meter.
In 1996 hearings, SoCalEd and PG&E branded their nuclear reactors
at San Onofre and Diablo Canyon as too uneconomical to compete in the
competitive free market that deregulation would allegedly bring.
They demanded that ratepayers compensate them for these and other bad
investments before deregulation kicked in. That was the rationale for
freezing rates at the 1996 established level.
The utility argument, echoed in states around the nation, was that since
regulatory agencies had approved the nuclear investments, the public had
an obligation to compensate the utilities for their nuclear expenses before
opening the electricity market to competition.
Those watching closely argued that not only did this arrangement constitute
an outrageous bailout for the utilities, but that the subsidies would
be siphoned off for uses that would be of no benefit to Californians.
Taken as a whole, warned Gene Coyle at an August 1996 press conference,
deregulation and the torrent of cash it would generate for the utilities
will not build infrastructure in California. PG&E and Edison
will likely invest it overseas, in places like Indonesia and Australia
where both companies are already active. In fact, the entire $27 billion
is a liquidation of California assets, with almost all of this ratepayer
and taxpayer money likely to flow to foreign investments. That prediction
proved prescient.
PG&Es Tremayne responds that the company was under no obligation
to reinvest in California. Under deregulation, the utilitys
investors the shareholders of this company were to get paid
back for the investments they made years and years ago. [After the company
sold its California generating plants] the shareholders either received
the dividends by stock repurchase programs or by investing that money
in other investments, including generation facilities outside of California.
The way deregulation was set up, [it] intended to do exactly that
pay the utility investors back money that they had invested in power plants
that they were now forced under law to sell. So the shareholders essentially
recovered their investments and reinvested them. This was done under the
direction of the Public Utilities Commission, in synch with state law.
Both SoCalEd and PG&E say they have suffered huge losses in the last
year or two, as the wholesale energy market has spun out of control, though
these are losses for the utility subsidiaries, not necessarily for the
parent companies which own generating companies as well as the utility
subsidiaries power distribution system. PG&E, the utility subsidiary,
not the parent company, has run to bankruptcy protection (handing its
executives huge bonuses the day before). In mid-May a federal judge barred
consumer groups from participating in those bankruptcy proceedings, meaning
the prime suitors in those hearings will be the very power generators
who jacked up wholesale prices in the first place.
But by most accounts, the utilities losses are billions less than
the stranded cost bailouts theyve laundered to their parent corporations.
Its a mafia operation, says Paul Fenn. What happened
to all that money?
The Public Media Centers Gunther says the parent companies have
spent much of this rogue cash as if they were drunken
sailors. Just as Coyle and others warned when AB1890 first became
law, Pacific Gas & Electrics owner has made huge investments
in power supply networks in New England and New York through its National
Energy Group affiliate. SoCalEds parent, operating through its Mission
Energy subsidiary, has been deeply immersed in controversial speculations
in Indonesia during the regime of the deposed dictator Suharto.
The money has not gone to help things in California, thats
for sure, says Gunther. But where is it?
FOLLOW THE MONEY
While an angry California public increasingly demands to know what its
own utilities did with their money, they have also been forced to confront
a second band of power magnates the oil and gas companies close
to George W. Bush.
To create competition, the AB1890 deregulation bill of 1996 established
a complex scheme by which the utilities divested some, but not all, of
their power plants. Those promoting the bill claimed the utilities would
become pure distribution companies that would battle one another for the
business of small customers.
The transmission wires that delivered the power would remain as regulated
monopolies.
And then the generating facilities would, in theory, be bought by dozens
of small, entrepreneurial power companies. The magic of the marketplace
would drive prices down and service up.
The key to the utilities deregulation scheme was the assumption
that wholesale electric prices would stay low. SoCalEd and PG&E had
devised its cap on consumer prices based on the idea that they could dominate
supply.
In fact, the utilities did not divest themselves of all their power plants.
And, for a series of complex reasons, they failed to enter into long-term
contracts with the new generators, thus leaving the utilities dependent
on spot markets, where short-term prices could shoot up without notice.
Whereas long-term contracts might have established stable prices over
time, the spot market where energy is sold daily, often in small
quantities is prone to price spikes. Those spikes are supposed
to be moderated by the Federal Electrical Regulatory Commission. But over
the past year demand on the spot market has regularly been higher than
the supply generators make available at any given moment. Prices soar,
leaving utilities little choice but to bid prices up dramatically in an
effort to procure the electricity to supply their customers.
Thus California was put at the mercy of a handful of out-of-state energy
speculators, most notably Duke Power of North Carolina, and Dynergy, Reliant
and Enron, all of Texas. These are very big players, who more closely
resemble the OPEC cartel than feisty Silicon Valley-type competitors that
free market zealots envisioned.
According to Washington, D.C.-based Public Citizen, Enron, Dynergy and
Reliant gave in excess of $1.5 million to Bushs campaign and inauguration
committee, and to the Republican National Committee. In all, Public Citizen
says nine power companies and a trade association with substantial interests
in the California energy market gave more than $4 million to Republican
candidates and party committees in the 2000 campaign. Bushs new
Secretary of Energy, Spencer Abraham, was the energy industrys largest
single campaign recipient during his failed U.S. Senate re-election bid
in Michigan. Kenneth Lay, president of Enron, the largest U.S. natural
gas supplier, is one of George W. Bushs key contributors, and very
closest advisers. So is James Baker III, his fathers former Secretary
of State, and a principal at Reliant.
So while Governor Gray Davis and much of the California legislature received
big campaign contributions from the states utilities, the power
companies that manipulated their power supply had their key connections
in Washington, which they made good use of.
In a national radio address on May 19, Davis charged that price
gouging sent the states annual power bill soaring from $7
billion in 1999 to as much as $60 billion in 2001. Davis blamed it, pure
and simple, on unconscionable price gouging by the big energy
producers most of them, incidentally, located in Texas.
While Bush has emphatically rejected price caps, widespread charges that
his backers price manipulations are illegal have been given new
heft by Loretta Lynch, head of the California Public Utilities Commission.
On May 19, the San Francisco Chronicle reported that whistleblower evidence
indicated that generators illegally manipulated prices by deliberately
withholding electricity during shortages.
Lynch told a state Senate committee that in at least one instance three
power plants simultaneously reduced output, causing prices to spike, and
then restored output to cash in. We certainly see a pattern,
she said, while warning of possible criminal prosecutions to come.
By and large the targets of those charges have invested heavily in George
Bush, and stand to gain billions if his national energy plan moves ahead.
When push came to shove in the California case, they were vastly rewarded
by the FERCs crucial refusal to cap prices at which they were selling
power to California on the spot market. They also benefited from the FERCs
prior opposition to investments in renewables and efficiency, which would
have dampened the demand that helped fuel the crisis.
Lynch and the CPUC are not the only state officials warning of legal retribution.
On May 2, Lt. Governor Cruz M. Bustamante filed a civil lawsuit against
Dynergy, Duke Energy, Mirant, Reliant Energy and Williams Energy Services,
alleging that they have systematically engaged in a price-fixing conspiracy
to manipulate Californias electricity market to extract
unlawful profits that are draining the states treasury.
A cartel of five out-of-state generators has been holding us hostage
through a practice of illegal and unfair price-fixing, Bustamante
says.
The energy crisis is not a problem of supply, says Democratic
California Assemblywoman Barbara Matthews, who joined Bustamante in filing
the suit on behalf of California taxpayers. Its a problem
of manipulation of our supply by out-of-state generators. Generators withhold
power, create artificial shortages and play the Great American Shell
Game at the publics expense. We will not tolerate this any
longer.
While Duke Energy and the others would not comment on the lawsuit, the
company says it is committed to continue playing a major role to
help California address its electricity shortfall and the high prices
many felt [last] summer. Duke officials say they are working to
solve the problem by modernizing and bringing additional generating capacity
online at existing power plants as well as signing long-term wholesale
electricity contracts with Pacific Gas & Electric (PG&E). But
the companies are keeping the terms of those contracts secret.
Public Citizen reports that Enron showed a 42 percent increase in profits
last year, Reliant a 55 percent jump and Dynergy a 210 percent rise, all
thanks to federal regulators refusal to cap wholesale prices.
As energy analyst Eugene Coyle puts it: Weve been FERCed.
In April 2001, FERC did finally agree to a price cap scheme that is at
best a mixed bag. But in the hot summer of 2000 with Bill Clinton
in the White House FERC stood by while wholesale prices soared.
San Diego Gas & Electric, having collected its final stranded cost
money, was allowed by the Public Utilities Commission to unfreeze its
consumer prices. The first shockwave of the deregulation disaster hit
southern California consumers. SDG&E doubled and tripled its bills.
Consumer rates for SoCalEd and PG&E, however, remained capped. As
wholesale prices soared, these large utilities claim to have lost more
than $12 billion. When they and Governor Davis appealed
to President Bush to re-cap wholesale rates, Bush refused, yielding spectacular
profits for his friends at Enron and Reliant, among others, not to mention
the utilities parent companies, Mission Energy and the National
Energy Group.
It is this vise between skyrocketing wholesale prices combined
with frozen retail rates that has prompted the contention that
the problem in California is not a failure of deregulation, but rather
that there simply hasnt been enough. The utilities have been desperate
to end the rate freeze for consumers that they themselves invented.
In the breach, the utilities convinced Gray Davis to use state funds to
buy power, continuing to deliver huge profits for the gas companies. But
while escalating his rhetoric against the out-of-state suppliers, Governor
Davis has refused widespread consumer demand that he use the states
leverage to take over the assets of the utilities that were still in the
process of collecting more than $20 billion in the stranded cost cash
bailout, money they promptly laundered to their parent companies.
In all, the double rip-off has yielded at least $20 billion for the utility
parent corporations, and another $20 billion for the Bush-related gas
companies, all for which California has nothing tangible to show. While
PG&E has filed for bankruptcy protection, SoCalEd continues to pressure
Davis for concessions, and the gas producers continue to demand that the
taxpayers guarantee the purchase of power at rates that appear to fluctuate
wildly based not on supply, but on their willingness sell at uncapped
prices.
Fossil & Nuclear vs. Clean and Public
In the midst of a convoluted crisis that has so vastly enriched George
Bushs supporters, the utility and gas industries are now furthering
their agenda on other fronts. Bush and the industrys Congressional
allies most importantly Republican Senator Frank Murkowski of Alaska
want to lift environmental restrictions so that more power plants
can be built, as Davis has already done within California. Alaska should
be drilled, they say, as well as sensitive protected offshore eco-systems
along both coasts and in the Gulf of Mexico, and virtually anywhere else
the oil companies think they might make money.
But oil, however, has virtually nothing to do with solving an electricity
crisis. Nationwide, less than 4 percent of U.S. electricity is generated
from oil. The percentage is even smaller in California.
And then theres the push for more nuclear power plants. Around the
April 26, 2001 anniversary of 15 years of fallout from the Chernobyl catastrophe,
the mainstream media filled with talk of a revival of atomic energy. Not
one of the major stories carried coverage of the huge stranded cost bailouts
that had prompted the California crisis in the first place, or the fact
that the builders of those nuke plants had labeled them uncompetitive.
Nor was there much mention of the February 3 fire at San Onofre that knocked
out a turbine and may keep that nuclear plant off-line for months, at
a cost of up to $100 million. In the midst of the states worst energy
crisis, this disaster knocked out, in a flash, fully 25 percent of SoCalEds
generating capacity, and 25 percent of the states nuclear capacity,
enough to supply more than 1.1 million homes.
Little attention has been devoted to the fact that wind power is now far
cheaper than all other sources of new generation except brown coal. At
2.5 cents/kilowatt hour, it is far cheaper than any projected costs for
new nuclear capacity, and is even lower than natural gas in many instances.
In 2000, Germany, which is moving to shut its 19 nuclear reactors, brought
on line 1,300 megawatts of wind, 200 more than was lost at San Onofre.
Great Britain has just committed $2.5 billion to offshore turbines. The
Public Utilities Commission of Minnesota has deemed wind its least
cost alternative and ordered at least 300 megawatts of capacity
to be added to the 400 already in place. A major wind farm along the Oregon-Washington
border began construction in February, and will go on line in December.
It is widely known that the Great Plains between the Mississippi and the
Rockies are the Saudi Arabia of wind, with virtually infinite
capacity. With current technology, and with additional offshore capacity,
wind power could meet much if not all the nations electric needs
long before a new generation of nuclear reactors could be built.
Even atomic energys staunchest supporters acknowledge it would take
at least five years to bring new reactors on line, far more than it would
take to bring on vast new supplies of still other alternative technologies,
most importantly photovoltaic cells (PV), which transform sunlight directly
to electricity. Within five years, PV is expected to plummet far below
even the most optimistic projected costs of atomic power. Increased efficiency
and conservation are already far cheaper.
PG&Es Tremayne says conservation is only part of the solution.
PG&E is a leader in conservation efforts and has been for 20
years. Our programs have been looked at from across the country as models
of how to institute energy efficiency programs with high customer participation.
As a result, Californians are the most energy efficient in terms
of per capita consumption in the country.
The problem is that over the past 10 years demand has grown and
supply hasnt, Tremayne says. Weve been able to
rely upon the Pacific Northwest and the Southwest to supply power to help
California meet its needs: As much as 8,000 or 9,000 megawatts on any
given summer day. But those two West Coast regions have experienced significant
growth as well over the last six years, so they dont have the available
power to export any longer. We havent built any new power plants
in California in a period where 600,000 new residential customers
have been added each year.
But as Paul Fenn puts it, the crisis is not about supply. Theres
plenty of capacity around. Its a problem of who controls the supply,
and the money that pays for it. Thats why local control of electricity
supply is critical to real solutions and why the idea of gutting environmental
laws under the auspices of energy relief is such a horribly impotent gesture.
Were so afraid to let these companies go under, Fenn
complains. But when all is said and done, the public would be better
off letting them go down and using eminent domain to buy their assets.
At least then well have gotten something tangible out of the deal.
While Governor Davis has talked about possibly buying the utilities
transmission lines, the green/consumer community is increasingly demanding
public utility ownership. But Fenn and others are not particularly eager
to have the state run a single public-owned utility. Rather, they look
to a more local-based solution.
That point of view has gotten powerful backing from James McClatchy, publisher
of the Sacramento Bee, and one of the few dissenting voices in the major
medias coverage of the California crisis. Beyond the states
taking over the transmission lines, McClatchy wrote in a February 18 editorial,
the next step would be for the state to buy the associated generating
facilities.
Any final solution, says McClatchy, would have to include
public ownership of the generating plants that PG&E and Southern California
Edison sold to speculators, as well as the facilities they still own.
The way to deliver the power, McClatchy adds, would be through existing
locally owned and managed utility districts, as well as through
ones newly organized to handle the job. With public ownership of
these systems, he says, would come increased public transparency
on all aspects of the operations where there is little now
and thus less opportunity for sweetheart deals with friendly financiers
or broker, leaving less room for the rapaciousness of speculators
and selfish political partisanship.
PG&Es Tremayne denies that public ownership of the companies
generating plants will solve the current crisis.
Our facilities continue to be regulated under a cost-of-service
structure under the Public Utilities Commission. So our generation is
being provided to customers here in California at cost and arent
part of the problem. The real problem comes from the out-of-state generators
that have been gouging the market for a year. Thats where people
need to be focusing their efforts.
As for local ownership of the distribution or transmission system, Tremayne
says that wouldnt solve the problem either. Those [distribution]
costs are regulated by the CPUC and the FERC. The problem is in the generation
market. It doesnt matter who owns the distribution or transmission
system the problem will still exist if we dont get control
of the generation market.
The Municipal Alternative
The greatest of the untold stories of the California crisis is the stunning
success of the states two municipal-owned utilities, the Sacramento
Municipal Utility District (SMUD) and the Los Angeles Department of Water
and Power (LADWP). Both have not only weathered the storm, but thrived
in it.
McClatchy and others point to SMUD and the LADWP for keeping rates stable
for their customers while reaping substantial profits selling power into
the grid.
In June 1989, Sacramento voted to shut the districts one nuclear
reactor, at Rancho Seco. S. David Freeman, who now runs the Los Angeles
utility and previously ran the Tennessee Valley Authority, led SMUD into
an era powered increasingly though modestly by wind and
PV facilities, including enough rooftop solar panels for some 6,500 families.
SMUD also inaugurated an unprecedented campaign for increased efficiency.
It offered its customers $100 rebates for retiring wasteful old refrigerators
(refrigerators account for 20 percent of the average households
electricity consumption). It distributed energy-efficient light bulbs.
It promoted solar water heaters and PV panels. It also planted thousands
of shade trees to slash summer air conditioning demand.
SMUDs progress occurred amidst a state-wide deregulatory wave that
headed in precisely the opposite direction. In the rest of the state,
public conservation and efficiency programs were weakened with the deregulation
of wholesale supply. The uncertainties of impending consumer price deregulation
stalled strong statewide movements to build windmills and install solar
panels. And AB1890 freed the utilities from the renewable and efficiency
programs mandated by the Public Utilities Commission which SoCalEds
Bryson had once headed.
This record confirmed public interest advocates belief that deregulation
was incompatible with environmental concerns. Meanwhile, Dan Berman says
SMUD was doing the kinds of things you expect a utility owned by
the public to do. Its what we want to see all over California.
Berman has worked for years to win a municipal utility for his home town
of Davis. Parallel campaigns have sprung up elsewhere throughout the state.
The San Francisco Board of Supervisors has approved a fall referendum
for municipal ownership, and five East Bay towns, including Oakland and
Berkeley, will hold similar votes. San Diego may also vote on municipal
power, and other cities, towns and counties are virtually certain to join
in, though they will face massive utility resistance. In mid-May, San
Franciscos board of supervisors announced it will take bids on at
least 50 megawatts of solar power to be installed in the city and paid
for with public bonds an effort that may be joined by Sacramento.
SMUD is a role model, says Berman. If were to
see any progress at all, public power and municipal control is crucial.
Nuclear opponents have long argued that if the hundreds of billions that
went into reactors like the ones at the core of the California crisis
had gone instead into renewables and efficiency, nothing like Californias
current crisis would have ever happened. Critics who predicted the disaster
that is AB1890 insist that electricity is a service, not a commodity,
and that its production and distribution can never be left to an uncertain
market that will always be subject to the whims of private utilities and
the barons of fossil fuels.
The last thing the utilities and the independent power producers
want is public ownership, says Fenn. But municipal power,
controlled at the local level, is ultimately the key. Until we get it,
things are only going to get worse.
Deregulation of the electricity monopoly is a failure, adds
McClatchy. The monopoly should be returned to the tax-paying consumers
who support it and depend on it.
Harvey Wasserman is the author of The Last Energy War: The Battle
Over Utility Deregulation and a senior advisor to Greenpeace USA.
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