Chronologically Ordered LOCAL POWER News Index Local Power's Community Choice Law, Septebmer 2002 Link to July 7, 2003 Local Power Position Paper on Senate Bill 888

California Senate Electric "Reregulation" Bill Would Deliver Unregulated Monopolies:

California Senator's Bill Threatens Communities Seeking Alternative Power Providers and Big Solar under California's Community Choice Law

by Paul Fenn

A new bill sponsored by Democrat State Senator Joe Dunn would phase out competition and set profit margins for utility monopolies that California ratepayers have already paid tens of billions of dollars to renounce their electric monopoly. Under the mantle of "re-regulation" the Dunn bill would restore the bailed out "market neutral" wires companies to vertically integrated monopolies with ratepayers on the hook to guarantee their profits, all in a severely diluted regulatory environment. Most threatening, the new bill appears to be an effort to curtail cities like San Francisco that are seeking to find new alternative power providers under the state's new Community Choice law.

Appealing to voter disillusionment with deregulation, Dunn's legislation pretends to restore state regulation while actually restoring the utility monopolies that wrote and championed California's deregulation law as a national model in 1996, transferred billions of dollars of bailout funds to out-of-state unregulated affiliate power companies, and declared or threatened banktuptcy. With half the state's power plants already sold to unregulated power companies under the 1996 law, environmental laws gutted by a Democratic Governor, and regulatory authorities radically diluted over the past seven years, Dunn's bill appears to restore the Good Old System while actually installing a Banana Republican system of unregulated or semi-regulated monopolies that are allowed to build power plants, reassert a power purchasing monopoly, recapture control of $300 million/year ratepayer energy efficiency funds that were taken from them by the 2002 Community Choice law, and continue to block development of solar power and other new footprint-reducing technologies, all the while putting California ratepayers back on the hook to pay them a guaranteed rate of return for the privilege.

While language in the bill formally exempts Community Choice from its elimination of electricity choice in California (section 366, which would otherwise eliminate individual customer direct access, there is a specific cross reference to preserving 366.2), Community Choice advocates called the exemption academic and meaningless given the real market impacts of reinstating utility mononpolies with guaranteed profits in power plant development and power purchasing in addition to the role they now play in distribution and billing. If re-established as vertically integrated monopolies with guaranteed profits on their investment, they warn, the pool of competitive power suppliers able to serve California communities will be diluted. With the additional powers of monopolies to suppress competitors, the prospects for finding alternative providers will dim considerably.

Senator Dunn's bill is strongly opposed by Local Power and many California communities preparing plans to combine their purchasing power to find alternative suppliers, build large-scale solar power facilities, and locally control funds paid by their residents and businesses for local energy efficiency installations. Governor Gray Davis told the press that he had not studied the bill, but his spokesman indicated that ''it might not be the right time to upend the apple cart'' with the state's bankrupted and bailed-out monopolies still recovering from debt and lacking any credibility whatever. Confused by the bill's anti-deregulation message, some consumer groups have declared support for Senator Dunn's bill, threatening a repeat of the non-profit aphasia of 1996 that put the consumer and green stamp of approval on Assembly Bill 1890.

Led by Democratic Senator Steve Peace and Republican Jim Brulte, California's legislature then unanimously approved a law to deregulate the electricity market under the theory that allowing power companies to sell power to any individual they wanted would automatically drive down electricity prices: a model that led to cheaper power for five percent of customers (the largest corporations) but left not a single provider even interested in selling power to the other 95% of Californians, which were left to spot market power under monopoly control. Using a "stakehoder" process that marginalized opponents of deregulation such as Local Power's "Stop the Nuclear Pork Bailout" coalition, the legislature railroaded a deregulation bill in the Fall of 1996 that specifically forbade whole communities from switching providers. Calling it a "national model" that was copied by 20 states, they put in place a system that left 95% of California energy customers captive to the electric monopolies during the "open market" that followed from 1998-2001, and created the spot market-based energy selling system that led predictably to the crimes of Enron et. al., the largest loss of wealth to the state of California in its history.

With the state's new Community Choice law (Chapter 838 of 2002), however, whole cities or even groups of cities, led by the City and County of San Francisco, are now preparing to switch to an alternative energy provider and use "H Bonds" to finance neighborhood solar power plants and other green energy technologies. If built, San Francisco's 50 Megawatt Solar Power Facility plan will be five times larger than the world's largest solar photovoltaic facility, a green beacon of hope in an otherwise dark period of energy war, oil drilling, nuclear proliferation, climate change and urban childhood asthma, all caused more by the electricity than any other source.

There is indeed a second energy crisis approaching, which is reminiscent of AB1890: it is a crisis of vision. Every major consumer and environmental group in California either supported the 1996 deregulation law or remained silently neutral. Now some of these same groups are announcing support of Dunn's "reregulation" bill. It remains to be seen whether the aphasiac and amnesiac political climate in Sacramento will add the insult of "re-reguilation" to the injuries of "deregulation" in 1996, or if these consumer groups will take notice of a major move by communities to find new power suppliers and use municipal revenue bonds to develop solar and other green power resources on a larger scale than heretofore imagined. Look forward to Community Choice, H Bonds and Solar Networking, not backward with a fuzzy nostalgia for a system of state regulation that was, after all, promoted by the utility monopolies themselves and without which there would be no nuclear power plants in America.

The Dunn bill is not the only legislation put forward to limit the new Community Choice law. On March 5, Assembly member Reyes, the new chair of the Assembly Committee on Utilities and Commerce, put forward a bill, Assembly Bill 1734, that would assert monopoly control of funds paid monthly by ratepayers that the Community Choice law took away from the monopolies after decades of utility abuse and mismanagement.

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....................... Founder and Director of Local Power, Paul Fenn is author of California's Community Choice law, Chapter 838 of 2002, which allows municipalities to switch their communities to alternative energy providers - as well as author of San Francisco's 2001 voter-approved "Solar Bond" authority, as well as a plan to use H Bonds and Community Choice aggregation to build the world's largest solar power plant in San Francisco starting next year. Mr. Fenn is also author of new state "Solar Networking" legislation, Senate 697, sponsored by Pomona Senator Nell Soto. Local Power is based in Oakland, California and may be found at www.local.org

Copyright 2003 by Local Power.