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California and the West

Davis Seeks Price Controls on Electricity

Energy: Governor also asks federal regulators to give refunds to California consumers who felt the impact of deregulation this summer with high bills.

November 15, 2000|TONY PERRY | TIMES STAFF WRITER

SAN DIEGO — Gov. Gray Davis warned federal energy regulators Tuesday of a "ratepayer revolt" unless they order refunds and immediate price controls to keep bills from skyrocketing under California's newly deregulated electricity market.

"The consumers of California will flock to the ballot box and strip you of your authority to deregulate our electricity market," Davis told a meeting of the Federal Energy Regulatory Commission, suggesting that the state could reassert control of electricity production.

Returning to a publicly controlled system could remove much, if not all, of the commission's authority over California energy matters. It does not regulate municipal utilities.

Davis' speech contained his toughest words to date on deregulation, a plan adopted in 1996 by the Legislature that was supposed to lower utility bills. But San Diego Gas & Electric customers in San Diego County and southern Orange County, first to feel the effects of deregulation, saw their bills jump this summer.

Commissioners listened to Davis' comments, and those of numerous other public officials, largely without response.

The commission has agreed with Californians that the increasing bills are unreasonable but has insisted that it cannot order refunds unless given authorization by Congress. By one estimate, energy producers and marketers made an additional $6 billion in profits this summer from California ratepayers.

Davis' talk of a revolt brought immediate support from state Sen. Steve Peace (D-Chula Vista), architect of the 1996 deregulation plan.

"He's focused and he understands the issue," Peace said. "There is just no appetite among consumers, among voters, to accept the kind of price volatility that FERC thinks is necessary to keep capital in the market."

Energy producers have insisted that if the state returns to a regulated system, in which rates and profits are controlled, the state may find it impossible to attract investors willing to spend billions of dollars on new energy plants.

Harvey Rosenfield, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, said he is preparing a ballot measure for 2002 to reregulate electricity but would prefer that the governor and Legislature "fix this problem the Legislature created."

"The experiment we're having--greed determining how much we pay for an essential commodity--is a disaster," Rosenfield said. "If they [the Legislature] continue to be subservient to the utility companies, we'll have no choice but to go . . . directly to the people."

A 1998 attempt at reregulation, Proposition 9, promised a 20% reduction in electricity rates for residential and small commercial customers of state-regulated utilities. But a $40-million campaign by the utility industry countered that the measure would mean higher rates; Proposition 9 was defeated by a margin of 3 to 1.

One method being considered by the governor to reassert public control over energy is to pass legislation that would give the state direct control over appointment of members of the Independent System Operator and the California Power Exchange. The former operates the state's power grid; the latter is a marketplace for selling and buying electricity.

Davis, who promises a more detailed plan by Dec. 1, told the hearing that SDG&E customers "became unwitting victims of the ill-conceived" attempt at a market-based energy system. He said that the so-called "soft caps" proposed by the energy commission to moderate price swings will do little or nothing to keep down consumer bills.

"There is no question in anyone's mind in California that the market here and the rules it operates by have been manipulated to generate obscene profits," Davis said.

The 1.2 million customers of SDG&E were the first to feel the impact of deregulation, because the company was the first to complete the transition and divest itself of power-generating plants.

The state's two largest power utilities, Pacific Gas & Electric Co., in Northern California, and Southern California Edison Co., will complete their transition as early as next year.

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Times staff writer Nancy Vogel contributed to this story.

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