California’s electricity regulator, the Public Utilities Commission, has unanimously authorised a plan to raise electricity rates by up to 46 per cent for customers of the state’s two largest utilities to help them weather the crisis caused by the critically tight power market. Rates will take effect immediately but will be graded to hit hardest those who use greater than average amounts of power. However, the PUC has rather compromised California governor Gray Davis’ position – he had promised publicly to solve the crisis without a major price hike. In fact the price hikes are the biggest in California’s history and affect 25 million people served by Pacific Gas & Electric Co and Southern California Edison. The PUC also ordered the utilities to pay the state for billions of dollars of electricity it it has bought on behalf of their customers, although the total amount involved has not been disclosed.
Rolling blackouts and staged alerts are continuing on a regular basis in California, after a short lull, despite the relatively low demand typical of the Spring months, and look likely to continue for another year at least. The most recent were caused by maintenance shut downs and hold-backs owing to non-payment of bills by the State’s near bankrupt utilities, now indebted to the tune of $13 billion after a long period of out of control wholesale prices. Farmers are reconsidering the way they use power after months of low crop prices and rising energy costs. In an attempt to stave off some of the worst effects, some growers are organising themselves into power buying groups or investigating alternative energy sources. In some areas rural food processors are building their own power plants.
The knock-on effect on deregulation is also beginning to take effect. Twenty four states have enacted legislation in recent years opening up competition in the energy retail sector, but the process is slowing down as a result of events in California. 18 states are still in the study phase and eight others have done nothing at all to deregulate their markets. Some states have suspended deregulation efforts owing to instability in the market and lack of evidence for the beneficial effect to consumers. Operators of successful systems, such as Pennsylvania’s, formed their deregulation plan on the basis of plentiful supplies. Now other states, not wanting to deregulate themselves into the classic position of the chronic buyer in a seller’s market, are learning the Cal-ifornia lesson – don’t create a flawed and incomplete deregulation plan.
•$9 billion in debt and out of favour with the governor’s office, Pacific Gas & Electric Co has filed for Chapter 11 bankruptcy protection, meaning that the California bankruptcy court will decide which creditors will be paid and in what order. Although the state government is still technically in negotiations with PG&E, in fact they have been reduced to a slanging match, with Davis characterising PG&E’s management as ‘suffering from denial and greed’ while PG&E accused him of a campaign-style attack on them.
