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Deregulation near death in California

PUC to vote on measure to end power debacle

SHARE Deregulation near death in California

SACRAMENTO, Calif. — California's Public Utilities Commission was set to vote on a measure that could strip away one of the last vestiges of the state's failed experiment with energy deregulation, which was widely blamed for rolling blackouts and ballooning bills.

Deregulation would be replaced with a system dominated by the governor, a new public power authority and three troubled utility companies. The vote comes as other states are backing away from the experiment that was supposed to revolutionize the energy industry.

Thursday's PUC vote could wipe out consumers' ability to choose their electricity provider and buy power directly from retailers such as Green Mountain Energy or Enron Corp. About 200,000 customers had switched utilities by September.

Trumpeted at its creation in 1996 as a way to stimulate competition and lower electric rates, deregulation foundered after a year of soaring wholesale electrical prices and customer bills, a utility bankruptcy and energy shortages that led to rolling blackouts.

Today, California's government is more directly involved in the power business than ever before and deregulation is dead, said PUC Commissioner Carl Wood.

"There's no way in the world deregulation would ever get an affirmative vote from the people or its representatives," Wood said.

The expected PUC vote will continue a trend that started in January, when the Department of Water Resources started buying a third of the power needed by customers of the state's three largest private utilities — Southern California Edison, Pacific Gas and Electric Co., and San Diego Gas & Electric Co.

All three utilities had faced the possibility of bankruptcy because the deregulation law didn't allow them to pass rising costs on to customers. That and the record-high wholesale prices led the three utilities to run up more than $14 billion in debt.

As their debt rose, their credit ratings dropped and some wholesalers refused to sell to them. PG&E filed for Chapter 11 bankruptcy in April.

Six days of rolling blackouts earlier this year cut power to more than 3 million customers and shut down refrigerators, ATMs and traffic signals. State regulators approved a rate increases of 30 percent or higher for utility customers.

However, the threat eased after many residents followed recommendations to conserve, wholesale prices dropped and the state enjoyed an unseasonably cool summer. The last rolling blackouts were ordered May 8.

Since January, the state has spent $9 billion to buy electricity and has signed at least $43 billion worth of long-term contracts that last until 2021. It also created a Consumer Power and Conservation Financing Authority, which can float $5 billion to build, buy or lease power plants.

By creating the authority, consumer advocates said, the state moved even further from deregulation and created a government-run system that encourages renewable energy and stable rates. Unlike businesses, it doesn't have to answer to Wall Street.

The state's decision to sign long-term contracts included an order that the PUC restrict direct access so the state wouldn't be stuck with a shrinking pool of people to pay for the energy it ordered.

But by voting not to allow consumers to choose their power provider, the PUC may discourage the energy retailers that benefited from it from ever returning to the California market, said Rick Counihan, Green Mountain Energy's general manager.

He said Green Mountain would "relocate to other states that are more friendly."

Nevada and Oklahoma lawmakers delayed plans to deregulate their states' electricity market, citing California's troubles. Iowa, Minnesota and Wisconsin have slowed their deregulation plans.

On the Net: Public Utilities Commission: www.cpuc.ca.gov

Energy Commission: www.energy.ca.gov