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California and the West | ON CALIFORNIA

Are We Having Fun Yet?

March 28, 2001|PETER H. KING

SAN FRANCISCO — Think of the California energy crisis as an amusement park thrill ride. Every week or so, it hits another unexpected twist in the track, another stomach-churning dip. Climbing off the ride is not an option. The captive passengers, also known as utility customers, can only throw up their hands and scream.

After all the excitement, however, a strange thing happens. In the same way a roller coaster always returns to the exact point where the ride began, the seemingly raucous developments that occur on Reddy Kilowatt's Wild Ride in the end never move matters forward in any fundamental way.

In this context, the state Public Utilities Commission's decision Tuesday to raise electricity rates as much as 46% for some can be seen as just one more lap around the convoluted track. Other than promising to thin the wallets of consumers--like any thrill ride, passengers on this one must pay for their terror and nausea--it's not clear what, if anything, a rate hike will do to resolve the basic underpinnings of the crisis.

Electricity suppliers who gouge still will be free, and motivated, to gouge. Southern California Edison and the other utilities still will face multibillion-dollar holes in their budgets, debts that they insist are not their responsibility. And consumers still will be buckled into their seats, uncertain when, where or how they might ever get off of this now tiresome ride.

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The five commissioners, of course, didn't view matters quite this way. They acted in the belief that increasing electricity rates by 3 cents a kilowatt-hour would stabilize the reeling utilities, foster widespread conservation and, as commission President Loretta Lynch phrased it, ensure "the electricity system does not collapse." Said Jeff Brown, another commissioner: "What we are doing today is responding to the need for reliable energy in California."

If such talk sounds familiar, there is a reason. More or less the same sentiments were expressed in January when the PUC raised rates by a penny a kilowatt. They were expressed again when the state stepped in to start buying electricity on the spot market . . . and when Sacramento officials decided to issue bonds in order to purchase more energy . . . and when they began to negotiate long-term contracts with suppliers. . . .

California has been creative, indeed, in finding new ways to stuff money down the hole to its energy suppliers. The money keeps disappearing, but there is scant evidence the hole is anywhere close to being filled. So even if this new rate increase helps California squeak through the summer, what then? Presumably, the state at that point will start hunting for short-term fixes to keep the lights on through Christmas. After which, of course, it can turn its attention to the next summer. And so around and around we ride, a thrill a minute.

What is missing, of course, is any hint of an overarching idea, of an end game strategy. At the PUC hearing, any number of big solutions were volunteered by the public witnesses who testified, almost uniformly, against the rate increase--re-regulation, eminent domain seizures of generating facilities, municipal power, public power. All have their drawbacks, certainly, but they at least offer the virtue of breaking free from this cycle of expensive short-term fixes that never fix much of anything.

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In their defense, the commissioners conceded that the rate increase alone would do nothing concrete to deflate sky-high wholesale power rates or discourage the market manipulators. And they readily acknowledged that the increases would create a public outcry. In fact, said Commissioner Richard Bilas, "It is my hope that our raising rates will finally place some discipline on the dysfunctional wholesale markets as a result of consumer backlash and conservation.

"Nothing else is working. Perhaps consumer fury will."

This seems to be a convoluted and risky bit of business: raising consumer rates in order to foster a public fury that will force changes needed to corral a runaway market and, presumably, bring rates back down again. Public fury and consumer backlashes are notoriously unpredictable forces. The fury might be directed at federal regulators and the Bush White House, as some of the commissioners apparently hope. It might, however, just as easily boomerang and seek out the commission itself or, more on point, the governor who appointed its majority.

Finally, there is that always reliable, if sometimes messy, venting mechanism known as the statewide ballot proposition--a twist on this roller coaster run that more and more seems just around the bend. Exactly what shape would such a measure take? What devils will lurk in its details? Who knows? That's part of the fun of the ride, folks. Now buckle up, and keep those arms and hands in the car.

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