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A Better Choice for Energy

There appear to be some breaks forming in the storm clouds of California¹s electricity crisis.  An important, hopeful sign is the Governor¹s recent statement that it's in our best interests to have the most knowledgeable, expert people buying power, not to have the state consuming all its time and energy and resources to do this work.  Something I have been saying for some time.  Get the State out of the power business, restore the utilities credit, and transfer the State¹s financial commitments to provide energy back to the private sector.  Public officials are no match for savvy power-industry executives in a competitive market place and the State cannot guarantee lower rates by building its own power plants.

Our seasons change subtly in California, but it is still important to consider the passing of the year, to reflect on how we have fared, and plan for our future.  Last winter brought us panic as the electricity crisis came upon us.  Spring brought anger at the little control we had over the precarious position we were put in.  And Summer brought us dread of frequent blackouts, which luckily we seem to have avoided.  But now that it is late summer and Fall is upon us it is time to turn toward the question of where things should go from here.  It will not be possible for California to pretend this was just one big nightmare, a bad year, and that a return to the good old days when electricity was provided by regulated utility monopolies somehow lies ahead.

Recently, I was reading a high school advanced placement history textbook and was struck by the many similarities of our electricity crisis to the turmoil of the Rennaisance.  To quote: ³European reciprocity required the upper classes to act with self-restraint and the lower classes to show deference to their ³betters.² It also demanded strict economic regulation to ensure that sellers charged a ²just price² - one that covered costs and allowed the sellers a ³reasonable² living standard but that barred them from taking advantage of buyers¹ and borrowers¹ misfortunes or of shortages to make ³excessive² profits.  Yet nothing could stop the charging of interest or sellers¹ price increases in response to demand.  Slowly a new economic outlook took form that justified both the unimpeded acquisition of wealth and unregulated competition, and insisted that individuals owed each other nothing but the money necessary to settle each transaction.  This new outlook, the central value system of capitalism or the ³market economy² was the opposite of traditional demands for the strict regulation of economic activity to ensure social reciprocity and maintain ³just prices.²²

Since the days when Thomas Edison designed the first electricity distribution system, we have followed a model that this resource had to be managed as a monopoly regulated by government.  What that has brought us to is having the fate of the state's second-largest utility being decided by politicians rather than by the consumers, power generators, bondholders and other creditors, and the utilities themselves.

Renewables got nowhere under regulation.  The only ray of hope was under deregulation when consumers had a choice to purchase green power and demonstrated their commitment by paying more for it.

So what path California chooses is its choice.  But what should the Federal government do to facilitate whatever path California chooses?

First, we should remember that the efficient production and allocation of any energy resource is best achieved in fully competitive markets.  End use consumers will maximize considerations of efficiency only in markets that fully reflect energy costs and fully compensates them for the actual savings they create by their actions.  We should open the retail market to consumer choice while requiring reasonable consumer protections in contracts for retail gas and electricity service.

Second, in energy markets that suffer from under-supply it is essential that demand be engaged to check the growing competition between buyers and limited supplies.  Congress should enact legislation to require markets for price responsive customer loads be established under the auspices of each FERC jurisdicional ISO or RTO.

Third, we should dismantle laws designed for the monopoly market.  PUHCA repeal. Repeal the PURPA subsidy, which has caused high consumer prices.

Fourth, We should revitalize the opportunity for alternative energy choices.  Interconnection standards  (distributed generation, open access, deregulation).

Congress should mandate that FERC has the authority to order utilities to permit the installation of real time price meters at individual¹s homes.  Congress should require utilities to settle and permit billing on the basis of data produced by those meters.

Congress should mandate that FERC adopt governance protocols for the RTOs that permit all affected parties, including retailiers not affiliated with utilities and who serve residential customers, to be members of the organizations and to have a voice in governing the organizations.