Activists, Utilities Propose Changes in State Energy Setup

California’s summer electricity crisis has given way to a new season of debate over what went wrong and how to fix it. The latest sparks flew Thursday as municipal utilities and community activists pushed separate proposals to overhaul the state’s electricity market.

To prevent a repeat of the summer’s record wholesale electricity prices, the California Municipal Utilities Assn. petitioned the Federal Energy Regulatory Commission to return California to the pre-deregulation practice of tying wholesale prices to each generator’s cost of producing electricity.

The utility group, whose members include the Los Angeles Department of Water and Power, also urged that the Legislature create a new ratepayer-owned system to own and operate electricity transmission lines in the state, replacing the California Independent System Operator as operator of the grid and taking ownership of the lines away from utilities.

Separately, requests by Pacific Gas & Electric Co. and Southern California Edison to pass at least $4 billion in uncollected electricity costs on to consumers drew strong criticism from a coalition of senior-citizen and low-income groups. At a meeting of the California Public Utilities Commission, the coalition proposed a 10-point “Energy Marshall Plan” to protect ratepayers with low or fixed incomes

To press its case before the commission, the coalition, called Concerned Californians for Energy Relief, brought nearly 400 people, some of whom boarded buses as early as 2 a.m. to reach the San Francisco meeting.

“Please think of us who are working and struggling to pay our bills,” said Gracie Sanchez, a Fresno-area mother of three, who also cares for her diabetic 75-year-old mother. “If I were to have to pay more in electricity, I don’t know what I would do. It will destroy us, completely destroy us.”

PG&E; Corp. unit Pacific Gas & Electric and Edison International’s SCE have filed an emergency petition asking the PUC to require consumers and small businesses to pay at least $4 billion in wholesale electricity costs that the utilities paid this summer but could not pass along to ratepayers because of a rate freeze.

“We have before us a crisis situation in California where the poor will pay up to 50% of its income just to keep the lights on,” John C. Gamboa, executive director of the Greenlining Institute, a San Francisco-based advocacy group, told the five-member commission.

The group’s plan calls for, among other things, a permanent rate freeze for low-income electricity users and continuing the temporary freeze for all ratepayers until the electricity problems are solved. Rates for small customers of SCE and PG&E; are frozen until March 2002, or until the utilities pay off so-called stranded assets, including nuclear power plants, that were made unprofitable by deregulation.

The 26 municipal utilities represented by the California Municipal Utilities Assn. have asked the Federal Energy Regulatory Commission to impose cost-based rates on generators until problems in the wholesale market are corrected. But FERC commissioners expressed reservations at hearings in San Diego last month about “re-regulating” California’s electricity market by returning to the sort of rate scheme that existed before the state opened its electricity market in 1998.

“The country’s electricity system functioned rather well from the time of Thomas Edison almost on the system of cost-based rates,” said S. David Freeman, general manager of the DWP.

“The great experiment that all of us wanted so desperately to work had a train wreck this summer,” Freeman said. “All we’re saying is until we examine the debris . . . we ought to go back to what we know will work.”

The association also floated the idea of replacing the California Independent System Operator, which was created under deregulation to operate the transmission grid for about 75% of the state, and doesn’t include most municipal utilities.

The utility association says the ISO--which is controlled by a board made up of stakeholders including investor-owned utilities, generators, power agencies and consumer groups--has failed to get significant new transmission lines built and has strayed into areas beyond transmission, such as procuring power, for which it was not created.

Under the association’s proposal, a new transmission company would take ownership for transmission lines from the utilities and could more aggressively push for construction of new lines, which are badly needed around the state.

CalISO Chairman Jan Smutny-Jones, who also runs a trade group representing power generators, defended the nonprofit corporation and said the municipal utilities “have not even identified the right problems, let alone the right solutions.”

“The CalISO has operated the system quite well over the last three years and has added significant transmission to the system,” Smutny-Jones said. Cost-based rates don’t address the significant market problem caused when utilities don’t schedule enough power in advance, he added.