California regulators kill retail choice

After a lengthy delay, the California Public Utilities Commission ended consumer choice for electricity Thursday as required under a law adopted in January that also allowed the state to get into the power business. A trade group called on lawmakers to reverse the ruling.

Sept. 21, 2001

2 min read

By the OGJ Online Staff

HOUSTON, Sept. 21 -- After a lengthy delay, the California Public Utilities Commission ended consumer choice for electricity Thursday as required under a law adopted in January that also allowed the state to get into the power business.

The state Treasury and the state's Department of Water Resources were pressuring regulators to formally end choice so the state can move ahead with financing a $12.5 billion bond issue to pay for power purchases. DWR claimed the state will get better terms if investors have an assured revenue stream to service the bonds.

DWR has been buying power on behalf of San Francisco's Pacific Gas & Electric Co., operating under bankruptcy protection, and Southern California Edison Co, which is teetering on the edge of bankruptcy. The utilities lost their ability to finance power purchases on the wholesale market after revenue fell short of their costs. The PUC would not allow retail rates to increase and the utilities lost creditworthiness.

Many electric retailers began exiting the deregulated California market when a limited supply of power resulted in skyrocketing power costs, while rates for most retail customers remained below these costs.

Green Mountain Energy Co., Austin, Tex., which stuck it out and continued to serve customers throughout the California energy crisis called the PUC's action "extremely disappointing." The company said the decision negatively affects thousands of Californians who may want to choose power generated from renewable clean burning facilities.

Green Mountain will be allowed to continue providing power for 6,000-8,000 customers in the San Diego area who are on a fixed price "green" contract. But the company will no longer be allowed to sign up new customers, a spokeswoman said.

A trade organization representing electricity retailers, the Alliance for Retail Energy Markets, said direct access to electricity providers doesn't need to be "killed" for the state's bond issue to be successful.

The trade group said the remaining hope of keeping choice alive in California is for the legislature to change the law. Even though Gov. Gray Davis called the third special session for a different purpose, it provides one last opportunity for retail choice, the group said.