California
Captolweek January 12, 2001
((Jack)) Just ahead, will you have to pick up the tab for California’s energy crisis? Several bailout plans are on the table that could leave consumers holding the bag. But are these proposals short-sighted?
((Melissa )) Could Green energy help meet more of our energy needs? Plus . . . is Governor Davis ready to step up and fix the de-regulation mess? Hello I’m Melissa Crowley.
((Jack)) And I’m Jack Kavanagh, those stories and more next.
((Mel)) Thank you for joining us. Solving the state’s energy crisis continues to take center stage. The Governor revealed his plans is his third state of the state address this week . . . but are his proposals workable? And what was not said in the state of the state address? Jack Kavanagh will have more on that later. But first . . have we explored all our options to tackle the mounting problem? Green energy is getting a second look, and so are public versus private owned utilities.
ALTERNATIVE ENERGY SOLUTIONS PKG.
Mother Nature…
Can
she offer long term relief from the state’s current energy woes? Those driving efforts to harness renewable
efforts like wind and solar power think so…
((Ken Keddington, Tenderland Power Company))
Overall it will become cheaper than fossil-fuel generated plants.
The
Tenderland Power Company supplies energy to forty-thousand California customers
by harvesting wind power, and at a price of about nine cents a kilowatt hour,
this green energy is cost effective compared to current market rates…
Backers
say there’s another benefit…
((Ken Keddington, Tenderland Power Company))
Cleaner air, a better environment, protecting the existing environment and improving it for the future.
But
renewable energy can be pricey to develop and only accounts for a small percentage
of the state’s overall energy supply…
Hydropower
is generally accepted as an energy powerhouse.
Although dependent on rain and snow levels, hydro, in part, helps the
Sacramento Municipal Utilities District provide power to its customers, but
SMUD customers are now enjoying reasonable rates for a different reason…
((Jim Tracy, SMUD)) PG&E is a private utility, which answers to shareholders. SMUD is a public entity, and we’re basically governed by a board of directors that’s elected here locally.
That
meant that SMUD opted out of deregulation, enabling them to enter long term
contracts for more stable energy prices and keep operating power generating
facilities themselves…
((Jim Tracy, SMUD)) We decided that we should hold onto ours.
The
result: saving for customer since SMUD does not have to buy back the majority
of their power from wholesalers at market rates…
((Jim Tracy, SMUD)) As it’s turned out, it has been quite an advantage.
That’s
made creating more public utilities attractive for lawmakers looking for solutions
to the state energy crisis…
But
SMUD warns that municipalities will still be affected if the private companies
like PG&E go bankrupt…
((Jim Tracy)) What I think that people don’t understand is that for years there are contracts that have been developed that link SMUD and others to these utilities, and the repercussions of having them go bankrupt go far beyond just their shareholders.
The
legislature is looking at potential fixes to keep PG&E and Southern Cal-Edison
afloat. Consumer advocates object
to bailing out the private utilities. Lawmakers
promise consumer concerns will be addressed…
((Robert Hertzberg, Assembly Speaker [D])) The public deserves to know what went wrong. They deserve to know where the money went, and they deserve answers, and we are going to get them.
Meantime,
all sides agree a greater energy supply is still needed. Industry insiders say more power needs to be
made, not just imported. Like a busy
freeway, transmission lines can only handle so much traffic effectively…
((Jim Tracy, SMUD)) Electricity is really an interesting commodity. It’s really the only thing out there that you can’t manufacture and then put in a warehouse and then, when demand gets really high, pull it out of the warehouse. It has to be done instantaneously.
But
whether an affordable, sufficient supply can be delivered under the terms
of deregulation is still debatable…
The
Governor called deregulation a failure. Others,
like Ken Keddington, believe it can still work…
((Ken Keddington, Tenderland Power Company)) The end goal of having cheaper power and a better supply for the end user is there.
END ALTERNATIVE POWER SOLUTIONS PKG.
(( Melissa )) So here’s what’s on the table –
The Governor has pledged one billion dollars, including funds for new power generators.
He’s also calling on legislators to restructure the state’s independent system operator.
State treasurer Phil Angelides is floating a plan for the state to take over the grid.
Other potential fixes include tax incentives for more generation.
Some lawmakers suggest taking over private hydropower facilities.
Money has been pledged to push conservation measures among consumers
And Republican state Senator Tom McClintock wants the budget surplus used for energy rebates to cover energy costs
Joining us now to sort this out:
Loretta Lynch, President of California’s Public Utilities Commission. . . And Lenny Goldberg, lobbyist for TURN, or the utility reform network.
Thanks for being with us. We also want to mention we’ve received many questions about deregulation and we’ll get to some of those in a moment.
((Melissa)) Loretta, first question. As a ratepayer, how much is this going to cost us?
((Loretta
Lynch, President of California’s Public Utilities Commission)) You know, it
entirely depends on what the forward price of power is.
The single biggest factor in our electric is what we have to pay for
power tomorrow and the next day and the next day, so Governor Davis went to
Washington to meet with the generators, the people who own the power plants
to say, “Get the price down now,” and, so, if we can get that price down low
enough, we’re not going to have rate increases.
That’s the big question that’s on the table.
((Melissa)) Now, you’re just back from D.C., and we’re getting the sentiment here that the federal government is not necessarily overwhelmed with sympathy for the state of California. Ultimately, are we going to have to fix this within the state’s borders?
((Loretta Lynch, President of California’s Public Utilities Commission)) I think so. It’s a state fix to a problem that might well have reverberations outside of California, but we need to talk to our power plant owners, our utilities, our customers, and everybody to conserve to fix this.
((Melissa)) All right, Lenny. As we look at some of the fixes on the table, this is the day you dreaded as a consumer advocate, this kind of mess. Do you think if the state takes over the grid, is that a workable solution for consumers?
((Lenny
Goldberg, Utility Reform Network)) Well, it may be a part of the solution.
It’s not the only solution. We
have to be really convinced that it’s really going to take some power back,
frankly, from the federal government. One
of the advantages to taking over the grid is to get out from under the Federal
Energy Regulatory Commission, which has been totally irresponsible in terms
of policing the market. Now we’ve
got to change those market rules, and that’s one of the fixes that’s moving
through the legislature that the Governor has proposed, and that’s a major
concern. We may need to take over
the grid. There may be some real advantages
to it, but it doesn’t solve the problem.
((Melissa)) All right, Lenny, as we look at the problems we’re facing today, why did no one foresee this when deregulation was cooked up?
((Lenny Goldberg, Utility Reform Network)) You know, I have to say the one issue that we raise continuously is the question of market power, and that is the issue that is destroying this energy market, if there can be one. If you look in the middle of the night on Christmas Eve, when only Santa was out and about and people were lighting candles instead of lights and the price of power was six times what it should have been, and that has nothing to do with supply. Supply is an issue for sure, but the market is so completely dysfunctional that us [sic] ratepayers are absolutely not paying for that mess. You know, the utilities shouldn’t be paying for that mess. You know, we’ve got to fix this. We’ve got to go back to some form of regulation, taking the retain generation that we currently have and dedicating that to residential and smaller business customers, and let the big dogs go at the market and do what they have to do.
((Melissa)) All right. Now as we talk about regulation, let’s get to a question that a viewer sent to us. They write: “The real question is not will the energy industry be regulated, but who will regulate it? I prefer the municipality or the state.” That’s from Leland in Fairfield. Loretta, as we look at some of the mistakes from deregulation, what is there to protect us from—if the state takes over the grid, the wholesaler issue rearing its ugly head again. In other words, these outrageous charges for power. How will the state be able to run that any more efficiently?
((Loretta
Lynch, President of California’s Public Utilities Commission)) Well, you know,
Leland has it exactly right. Four years ago, the Wilson administration did
not deregulate the industry; they federalized deregulation. So, they handed power to control rates off
to the federal government. The problem
is the federal government isn’t doing its job.
It’s not controlling rates, so the state of California needs to take
several steps, everything we can do, to remove ourselves from under federal
control. It’s really difficult to put the genie back
in the bottle because, basically, the utilities sold off their power plants,
and now new people own the power plants.
The problem is they formed a cartel, and they’re charging outrageous
prices.
((Melissa)) And how do we prevent that from happening again?
((Loretta Lynch, President of California’s Public Utilities Commission)) Well, one way is to have what Governor Davis proposed, which is to have California get into the competition as well. A California power authority or joint power authority could also build power at the very lowest cost, and if you blend in very low cost power with some of the power you have to purchase from the power pirates, then the overall price will go down.
((Melissa)) Lenny, are you comfortable from a consumer protection standpoint with the state possibly taking over the grid, and, again, do you think that will be enough to prevent wholesalers from—
((Lenny Goldberg, Utility Reform Network)) Yeah, I think the state has to take much more aggressive activity. One other part of the question is municipalities. People need to get much greater control of their energy future, and that means we need to energy efficiency in renewable dollars out in ways that they have not been successful so far. They’ve been in the hands of the utilities, and they need to be really getting out into the communities, where people can really do the job. I also think, though, that if you look at Edison’s cost or PG&E’s cost of producing in their own generation plants, it’s three and a half cents. The market is giving us twenty-five cent power, so we’ve got to take the native generation that we currently have some control of, not let the utilities spin off one megawatt more than they currently have, and have that dedicated to meet your small customer load, and in addition, do some contracting, do some intervention, but so far I think we’re missing that point of making sure that that dedicated load is dedicated to protecting customers at very reasonable prices. The cost of producing electricity is nowhere near what we’re paying for electricity
((Melissa)) Well, let’s look at the power issue because, ultimately, if we get out of the situation that we’re in now, we’re still facing a supply problem, so even if the state were to take over the grid, don’t we need more power generation facilities to keep costs low?
((Loretta Lynch, President of California’s Public Utilities Commission)) We do. We need a mix of both energy efficiency. We all need to use energy wiser, but we also do need more power. You know, Governor Davis has really been focused on getting more power online in California. In the last eighteen months since he took office, nine power plants have been permitted and five are under construction. That nine and five number is more than the entire prior two administrations either permitted or built in California, so he’s been focused on this. California can, by building and using energy smarter, we can get ourselves out of this problem. The biggest problem lies in the next three years when we have to get over the hump of the lack of power plant building for the last sixteen years, and in that time frame when power supplies are short, the power producer cartel has a lot of power, so I agree with Lenny. One of the things that Governor Davis called for in his state of the state is for the utilities who still own power plants to keep them, and then we use that low cost power to serve their folks.
((Melissa)) Okay, we’re in our final few seconds here. As we look at a bailout for the utilities, do you think it’s fair to ask consumers to pick up the tab when the utilities backed deregulation? Loretta?
((Loretta Lynch, President of California’s Public Utilities Commission)) You know, the problem is there’s been a lot of idle talk about bankruptcy, and the problem is even if the utilities went bankrupt, that wouldn’t solve our problem because the utilities cannot cover electricity for you and me. Maybe they can cover electricity for one of us, but they don’t have enough power plants to cover electricity for all of us, so it’s not the normal bankruptcy situation.
((Melissa)) All right, Lenny, a quick, final word?
((Lenny
Goldberg, Utility Reform Network)) We bailed them out once in this first deregulation;
we’re not going to bail them out again. Fool
us once, shame on you; fool us twice, shame on us.
We’re not going for another bailout.
(( Melissa )) All right. Unfortunately, that is all the time we have. We want to thank you both very much for joining us.
((Melissa)) We would like to know what you at home think about all the proposals we have talked about. How do you think we should fix our energy crisis? Send us an email to capitolweek dot org or a letter to the address on your screen, Jack?
(( Jack )) Time now for “at issue” . . . your inside look at what’s really being said behind the scenes at the Capitol. Faced with a cooling economy and sagging approval ratings, this week’s state of the state address was a critical point in Governor Davis’s administration. The Governor came out swinging at California’s energy crisis . . but his short term and long term proposals drew mixed reviews. So how did he do . . what did he say . . . and what didn’t he say? We were there for the reaction.
ming,
“Watch out!