02/01/2001

Here is an excellent article on how Electricity Deregulation worked just fine thanks in Pennsylvania and Texas. I would be happy to pay for the article at the UnionTrib site (to be proper about it) but thus far am not able to. I will not link an article requiring a $1.50 payment from every site visitor.

My own thoughts, for now, are as follows:

We've had a monopoly situation in place for a century or so in various aspects of the power industry. Isn't it a bit predictable that our first efforts at deregulation might not work out?

Ten years ago I read an interesting article discussing the fact that if you think Telecommunications deregulation proved to be an exciting opportunity for investors, just wait for the deregulation of the power industry.... a much larger overall industry. But the same problems apply. Deregulation of long distance telephony, for example, took two decades of close court supervision. Although deregulation began in the early eighties, it is only recently that long-distance telephone rates have been so competitive that consumers think little of using long-distance and producers question whether the industry is profitable for all of them.

In the California Energy situation, damage has been done to real people and real lives, and more will be done. I don't have all the answers to the situation, or even many of them, and anyone who tells you they do is, in my opinion, someone to be wary of.

Still, I have some thoughts on the matter, so for better or worse, here they are in no particular order.

Regrettably, even as I write, it seems that California politicians and consumers alike are still trying to have their cake and eat it too. We are going to have to raise rates to all electricity users. That's the reality of it. To ask a few large companies to fall on their swords and take the fall for the collapse of the entire system is absurd. Southern California Edison and PG+E and SDG+E are being asked to pay huge amounts of money for electricity, in a system which (apparently) has forbidden them from locking in rational long-term contracts, and then they are being forbidden from passing on any of those costs to consumers. The system has not been deregulated, but rather botched. No one Earth can do business that way. The immediate situation is not precisely their fault, even if they are guilty of feeding at the trough of monopoly economics for so many decades.

Reportedly, they have been selling electricity to themselves from out-of-state production which is partly owned by their own holding companies. Thus, some of their claims of debt are mitigated by this quiet shell-game. Nevertheless, the larger issue is that we should not be surprised when such companies go out of business when forced to operate at a loss.

As a consumer I have been offended that I am not allowed to pay San Diego Gas and Electric the full amount I owe them, even if I want to. The State of California is forcing me to take on a debt that I neither want nor need. We will start to overcome this crisis when we are allowed to pay for and feel the full force of the situation. In fact, conservation in San Diego decreased usage by everyone by about 10%. When prices were artificially capped, usage went right back up. As cliche as it may be, free market forces are not being allowed to work their magic of having high prices and limited supply force demand downward to more sustainable levels.

As the system presently exists, consumers cannot seem to find a way to shop around and get better rates. While forward-minded alternative-energy activist home-owners may be very close to installing solar energy or home-generating fuel cells, the average person just wants a way to buy affordable reliable energy and not have to master the intracacies of energy generation. Very understandable. Being an activist for solar energy does not amount to having all the answers for the political science problems raised by the California Energy Crisis.

Valid criticisms have been made, I think, of the irrational politics which led Californians to believe they could have super-affordable power and not build any power plants in-state. If you want power, you have to make power. The plants needn't have been super-dirty coal or nuclear plants. Had we planned ahead, we could have had a variety of solutions in place, including renewable energy plants. Although their 10 Megawatts of solar energy seems like a pittance, I think Sacramento's policies provide an example of this.

It has been very frustrating for example to arrive in San Diego and find that the mayor, notoriously disliked, has been more interested in desireable football tickets for herself than in helping the city plan ahead for its future electricity needs. The Seventeenth largest Metropolitan Statistical Area in the US might easily have provided for much of its own power needs by arranging for the construction of solar energy plants, in the many desert areas throughout the county, rather than simply doing nothing. With the many resources at this city's disposal, including world-class Educational institutions, a vibrant high-tech industry and nuclear engineers aboard local naval vessels, there's a lot we could have accomplished.

Even making allowances for the essential free-market private-enterprise motive to work, such matters should not have been left to a complete do-nothing think-nothing attitude. Laissez-faire doesn't mean ignore your community's needs and they'll be somehow "taken care of" by magically competent capitalists. Communities can and should take action and encourage progressive thinking, under a system of laissez-faire, even as their government make certain to observe and protect property rights of individuals and small and large businesses.

Another specific action which San Diego should have taken, and still should take, is to encourage its many Indian Tribes (a greater number of different reservations than in any other county in the US) to use some of their land for properous harvesting of solar energy. Such an effort could supplement the income of the newly prosperous tribes which are benefitting from the gambling industry.

If Coleman and Ballard would work harder, then I might be able to recommend their new portable generators for my friends who need a more affordable source of electricity, but until that happens, then I'm afraid those who don't own their own houses are going to have a hard time of it. If you do own your own house of course, you can take out a loan and install some solar shingles. Expensive, yes, but it's a thought.

At the recent CARB hearings, GM, oligopolistic jerks that they are... , used the Electricity crisis as a pretext to claim that Electric Vehicles are not advisable at this time. While it is certainly true the electricity is presently in short supply, there is no reason to assume that we won't be able to overcome this crisis. Every moment that I've put into researching GM's anti-electric-vehicle campaign has convinced me that their real goal is to prevent the manufacture of long-lifetime low-maintenance affordable vehicles which use so little energy and no gasoline or Oil. (I heard that Ford actually spoke not unreasonably, so I guess I'll leave them out of this castigation. As for Chrysler, ever since the Germans bought them I don't see them as American, and I think that's probably why their sales are down... Americans aren't as inspired to buy Chrysler any more.)

This is why I campaign for low-energy-use cars. I don't have all the answers... I don't know precisely which type of car will be the best for consumers. But it's been obvious for decades that we could have much better energy use in our cars, such as in regenerative Braking, hybrids, fuel cell power plants and, yes, in pure-electric storage and locomotion. All of these technologies are on the verge. I thought that Maxwell's agreement with GM's Allison division, to supply ultracapacitors for regenerative braking, was an exciting if obscure development. I've always felt that regenerative braking is arguably the most universal and therefore important single progressive vehicle technology. Conventional brakes throw energy away as quickly as possible, as though it is the enemy. But is it? Energy is valuable. Regenerative brakes help conserve it.

Anyway, the Governor of California seems like a slick dude, on the short-list of Presidential Candidates just by virtue of his office, and I guess he's taking action where it's needed. Problem is, we're probably going to end up with a prejudice against deregulation and for state-interventionism and that's kind of a bummer.

Another thought is that you sort of have to look askance at the behaviour of the 5 or 6 out-of-state utilities which have profited from the crisis. I salute them for watching out for their shareholders' interests, but are they not killing the goose which might have laid more golden eggs? Yes, I think that's what's happening. Enron, Duke, Reliant, Dynegy, etc. etc. They made so much money from selling energy to California over the last half-year they didn't know what to do with it. They spent weeks having their accounting departments try to hide it prior to Earnings releases. The least they could do is help devise a better system. But they seem to content to just let the entire system collapse.

I recall reading, some years ago, a Pennsylvania bureaucrat making a scathing statement about Enron's deplorable disingenuousness in their proposals to the State. Pretending to be on the side of helping the little guy keep rates down, Enron had made proposals for energy for Pennsylvania that would have really driven rates up and lined the pockets of Enron shareholders at a cost to bewildered Pennsylvania consumers. In the end, Enron pulled quietly out of the bidding never to return: a bureaucrat had done his assigned job and the consumers of Pennsylvania were able to lobby for a better deal with another provider. I hope that Californians, having erred, are able to build a better system.