March 31 marked the first anniversary of California lawmakers' greatest assault to date on the word “reform.” On that day, California bailed out the state's largest electric utilities. Euphemistically called “electric utility reform” or simply “deregulation,” last year's industry overhaul was, in fact, nothing more than a giant corporate welfare package for the state's biggest utilities: San Diego Gas N Electric, Pacific Gas N Electric (PG&E) and our own Southern California Edison (SCE).
For the past year, electric-power consumers throughout the state have slowly begun paying off $28 billion in bonds, subsidizing the utility companies' unprofitable investments in obsolete and dirty generators like nuclear and coal power (also known poetically as “stranded costs”). With the utility companies effectively exempt from paying for the infrastructure they took over from the state last year, the companies are free to pursue unprecedented profitability and market share as they slowly acquire more plants and generators across the U.S. and the world.
“California has one of the worst laws passed in any state,” said Charlie Higley, a senior policy analyst with the Washington, D.C.-based consumer group Public Citizen. “The law gives so many advantages to the incumbent utilities. Consumers will have to pay off those bonds before they see any real savings.”
Mindy Spatt, media director for the Utility Reform Network, which is based in San Francisco, agreed. “Thus far, deregulation has been a complete failure,” she said. “For residential consumers, there have been no savings.”
Of course, that's not how local corporate boosters see the utility deregulation. “California small businesses are already benefiting from the new market and will realize even more benefits when the transition is complete no later than 2002,” wrote Betty Jo Toccoli, president of the California Small Business Association (CSBA), in a letter published in the April 5 issue of the Orange County Business Journal. Although ostensibly an independent lobbying group for small companies, the CSBA Web site lists SCE as a “premier corporate partner” and PG&E as a “partner.” Toccoli derided the old laws governing utility companies (“an overly regulated, high-cost electric system”), glorified the new system (“an open, competitive electricity market”), and insisted that “certain safeguards in the deregulation plan have guaranteed that the state's smallest consumers are already prospering during the transition.”
The “safeguard” is the utilities' vaunted “10 percent rate cut.” A particularly arrogant sham that SCE and the other utilities promote ceaselessly, the rate cut actually calculates out to a mere 2 percent. That's because the utilities financed the cut through 10-year bonds. Those bond payments appear on everyone's electric bills as TTA-Trust Transfer Account. In many individual cases, the TTA bond payment actually exceeds the so-called rate reduction.
Further on in her letter, Toccoli attacks deregulation opponents. “Misguided critics have condemned the new market, claiming that not enough energy-service providers are competing for the business of smaller consumers,” she wrote. “This criticism is premature, given that we are still in the early stages of the deregulation process.”
Ah, the “process”-that favored corporate explanation for why projects cost so much and take so long. In this case, the “deregulation process” isn't fostering alternate power companies to consumers because there aren't any new companies in the market.
“We can't assume we'll ever have a competitive market,” said Spatt, who added that just 1 percent of California's consumers have switched providers despite the California Public Utilities Commission's $80 million in education funds given to the utilities. “Affiliates of the big three utility companies are entering the market. New companies can't come in because spin-offs [of SCE and PG&E] are grabbing as much market share as they can.”
Deregulation has proved one thing: the real power produced by utilities is political. When 1998's pro-consumer Proposition 9-which would have dismantled the stranded-cost subsidies and mandated a permanent 20 percent rate reduction-appeared last year, the utilities went wild, ultimately spending $40 million (money taken, once again, from the ratepayers) to defeat the measure. The lopsided victory-73.5 percent of the electorate voted with the utilities-surprised no one, not the least of whom were those who had campaigned for Prop. 9. They raised a little more than $1 million.
Had Prop. 9 passed, the California Energy Commission reported last year, consumers really would have paid at least 20 percent less than they do under the “deregulated” system. The report added that the measure wouldn't affect energy efficiency or environmental programs. But fearing the report would “affect” the election, the Energy Commission-all appointed by former Governor Pete Wilson-sat on the report until two weeks after the polls closed.
“We're really behind the 8-ball,” said Higley. “There is just too much power in the hands of the utilities.”
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