Don’t Let Lawmakers Pull Deregulation Plug

Skyrocketing electricity bills in the San Diego region--the first part of the state to experience the dynamics of an open, competitive power market--has many calling for more direct government intervention, a repeal of a law passed unanimously in the state Legislature and a return to the days of the regulated electric utility monopoly provider. The best answer to the current dilemma in San Diego, where consumers are up in arms over their recent electricity bills, is more deregulation, not less.

Deregulation of the electricity industry follows on the heels of telephone deregulation. There are some important parallels between the two. Most consumers were initially shocked by their initial phone bills when that industry was “deregulated.” Certain calls ended up costing a lot more because they were made during peak times.

Because consumers eventually began paying more attention to these price signals, they started changing their behavior. Calling card plans emerged offering an array of ways to distinguish or level prices, each tailored to the specific demographic phone-use profiles. The telecommunications industry also responded to deregulation with a vast array of new technologies that did not rely on the poles and wires for completing a phone call. Cell phones and crossover links to the Internet and computer systems are results of breaking up the old phone monopolies and allowing entrepreneurs to carve out niche markets.

The real goal of the deregulation of any industry is to let price signals affect behavior, which is a far more efficient means of achieving policy objectives than relying upon well-meaning, but typically overwhelmed, government regulators. The reason why electricity deregulation has not yet emulated the innovation evident in telecommunications is that the daily pricing of electricity is invisible to most consumers.

To have a chance of really working, all of us should have time-of-use meters that could show us that today, in the middle of this heat wave, electricity is costing 20 times as much as off-peak. Smart companies have installed systems that automatically perform these functions to boost efficiency and lower costs. If we had access to time-of-use pricing and these products and services, we would be paying bills the same or lower than today--even with the same power spike prices we are seeing today in San Diego.

State Sen. Steve Peace (D-El Cajon), the prime architect of California’s deregulation legislation in 1996, has proclaimed that California’s competitive power market isn’t working, that the government should take back control. He claims we should consider going back to letting utility monopolies build and own new generation facilities. This effort smacks of political expediency and will cause more--not fewer--blackouts as well as pose dire threats to electricity reliability in both the short and long term.

The answers to today’s high prices do not lie on the quagmire of Sacramento politics, where campaign contributions have a funny way of dictating final outcomes in the dog days of August. The best response to this energy crisis lies with some basic common sense.

Does anyone remember the words “energy efficiency”? Rather than burning their power bills or picketing the state Capitol, consumers would be better off petitioning legislators and regulators for investments in time-of-use meters, energy efficiency and on-site distributed generation sources such as solar photovoltaics and fuel cells. All of these solutions can be found in the market right now.

San Diego consumers should be asking San Diego Gas & Electric why it has always lagged behind the other two investor-owned utilities in the state when it came to reducing electricity consumption. The lack of emphasis on energy conservation in San Diego is part of the price consumers there are now paying.

Energy is expensive stuff. The electricity industry is the most polluting industrial enterprise on the planet. The single most important thing we can do to reduce costs is to respond to market signals by becoming as energy efficient as possible. Everyone wins in that scenario, including small consumers and the environment.