Electricity Deregulation The only aspects of electricity production that is deregulated is how electricity is generated and the price. The price is controlled by pure supply and demand based on bidding or a market clearing price. In the past, electricity was controlled by area-specific utility monopolies. Now, power may be generated by various generators and sold to the California Power Exchange (CalPX). The other aspects of electricity: the utilities (at least for awhile), the power exchange and the transmission lines are all regulated. If they were not regulated, potentially each one would claim territory and prices would be out of control. Electricity is submitted to the California Power Exchange (CalPX) by natural gas plants, nuclear plants, “green” generators or co-generators. The major utilities (PG&E, SCE, or SDG&E, or Bear Valley Electric Company) buy power from the CalPX. Both the electricity generators and the utilities are required to have agreements with the Independent System Operator (ISO), who manages the electricity transmission lines. The regulatory agencies would like to have as much control as possible. Their job is to ensure a reliable and affordable energy supply (basically by controlling the rates at which electricity is bought and sold). They want to protect the public and society from monopolistic structures. Deregulation opened the door to the forming of CalPX which serves as a “electricity supermarket” for smaller generators to sell their electricity. The regulatory agencies also forecast future energy needs and keep historical energy data. They support renewable energy and developing energy technologies. The power supply industries have a mission of providing good customer service in any given situation. Their web sites provide informative pages to help customers decide to switch to an Electric Service Provider (ESP) or continue to pay for electricity from their utility. The utilities think deregulation is for the better “because it will benefit valued customers like you” (1.). They appear to like the fact customers now have the freedom to choose their ESP, and of course, they want the customer to choose them. It is in the utilities best interest to support deregulation because they are in the market to keep and satisfy their customers. If they had a negative point of view their customers would quickly find another provider. The environmental organizations believe that AB1890 should be gutted basically because the bill would require the Federal Energy Regulatory Commission (FERC) to compensate utilities for “stranded costs recovery” which would “stick California consumers with $28.5 billion in bad investments at the nuclear plants in Diablo, San Onofre and in countless other uncompetitive utility expenditures”(4.). In another view, deregulation has some advantages, mainly that nuclear power plants cannot compete with wind, water and solar plants because nuclear electricity generation is uneconomical compared to renewable energy. The renewable energy plants are, for the short-term, charging a little more because they hope to use the extra money to build more “green” power plants. Unfortunately, “green” companies like Green Mountain are loosing money because they do not have enough customers. The San Diego electric bill hikes this summer was due to the upsurge in economic growth and electricity demand, plus the San Diego utility company was the first to pay off their debt to the state, so they were allowed to unfreeze rates and began to charge their customers market-driven rates. One San Diego resident who owns a cafe had a combined business and residential electric bill of $3000! She said “deregulation is definitely not working if this is the result; someone, somewhere is getting rich and we are all getting screwed” ( 5.) Political parties like The Heritage Foundation, think the Founding Father’s “balanced constitutional framework means that deregulation will need to be a shared responsibility, administered by both state and federal officials. The goal should be clear: to ensure the nationwide development of competition and consumer choice on the most rapid timetable possible to benefit all Americans” (6.) . The Cato Institute thinks that Congress should “abolish the Federal Energy Regulatory Commission (FERC), eliminate all federal preferences for renewable energy and require open access to all federal public rights-of-way for electricity transmission except when such services present a public safety hazard” (7.). Depending on which political party is speaking, there is a wide variety of opinions on how government should handle electricity deregulation. References: 1. Southern California Edison Customer Service Center: http://www.sce.com/deregsca/index_de.htm 2. California Energy Commission http://www.energy.ca.gov/index.html 3. California Power Exchange http://www.calpx.com 4. Environmental News Network “Utility Deregulation in Turmoil - 6/3/1998 http://www.enn.com/enn-features-archive/1998/06/060398/0603fea_22134.asp 5. Environmental News Network “Electricity Deregulation Goes Haywire in California” - 8/12/2000 http://www.enn.com/enn-news-archive/2000/08/08122000/dereg_30442.asp 6. The Heritage Foundation “Electricity Deregulation and Federalism: How Congress and the States Can Work Together to Deregulate” http://www.heritage.org/library/categories/regulation/bg1125.html 7. CATO Institute “Cato Handbook for Congress: Electricity Deregulation” http://www.cato.org/pubs/handbook/hb105-40.html My Opinion: As a consumer, it appears to me that deregulation has taken a turn for the worse. The fact that our local utility can legally unfreeze their rates in 2001 makes me fret. Middle and Upper California will soon experience rate hikes from the local utility company just like San Diego experienced. Although, some of the literature I read states that when the deregulation transition is complete, consumers will experience lower rates. The San Diego incident makes me believe that someone is not telling the truth. As for “green” energy, I am an advocate for “green” electricity production and have signed up with Green Mountain Energy. I feel the extra cost that Green Mountain charges me is worth the effort. I hope my support will rub off on my friends and family so they too will switch to renewable energy. The only way Green Mountain can build more renewable power plants is if more people sign up with their services. Many people are afraid that Green Mountain Energy is not reliable and goes back to the stone-age. What they don’t realize is that the energy is submitted to the Power Exchange and bought by the utility companies. I know that my utility company buys 12% renewable energy, so some of that is provided by Green Mountain. I think the opportunities given to the smaller generators, like Green Mountain, to participate in the Power Exchange is a big boost in the deregulation scheme. In conclusion, there are some good and bad outcomes to deregulation. The higher prices which we might experience in the near future is bad. However, the opportunities for renewable energy generators to participate in the grid is a great outcome for our environment. Home