Electricity deregulation offers a historic opportunity for communities and consumers--if they take advantage of it.
Thursday, March 12, 1998
There''s plenty of bad news about the deregulation of electricity in California. The private utilities have taken control of the process. Big business is poised to get most of the benefits, at the expense of small consumers. And residential and small-business consumers are stuck paying off a $28.5 billion tab for the utilities'' bad investments in nuclear power plants like San Luis Obispo County''s Diablo Canyon.
But there''s a small ray of hope in this dismal swamp. Although almost nobody has noticed, deregulation could offer a historic opportunity for communities to take back control of electric power from the private monopolies--and promote the use of renewable energy in the process.
For the first time in almost a century, cities, counties and community groups in Northern California have a real chance to form publicly owned cooperatives that could break the stranglehold of Pacific Gas and Electric Co., work to reduce the astronomical rates we pay for electricity, and bring vast amounts of money into public coffers.
Those co-ops could make purchasing decisions that encourage the production of renewable energy and help move the nation away from a reliance on fossil fuels.
From Palm Springs to San Jose, California cities are exploring establishing municipal co-ops to buy electricity. In San Francisco officials are well aware of this opportunity, and city workers familiar with the situation say they are ready and willing to take advantage of it.
Locally, the cities of Salinas, Monterey and Gonzales are planning on using aggregation as a way of saving on municipal electric bills--an option that isn''t open to residential customers since aggregation requires an even demand for electricity. "With peaks and valleys [power] is more expensive, so residential users really can''t aggregate," says Wayne Green, assistant to the Salinas city manager."
Deregulation, which takes effect March 31, turns the electricity business into something resembling long-distance phone service. PG&E will still own the poles and wires that deliver power to San Francisco consumers, the same way Pacific Bell owns the local telephone wires. But consumers will be able to choose one of numerous competing companies to provide electricity through those wires, the same way you can choose one of numerous long-distance carriers to handle your phone calls.
Unlike the breakup of the telephone monopoly, though, energy deregulation is heavily stacked in favor of the existing big private utilities in the state. Energy companies that want to compete with PG&E, Southern California Edison, and San Diego Gas and Electric are facing major barriers, especially when it comes to providing residential service. Many would-be competitors have decided not to offer residential service at all (see chart, page 18).
It''s a different story for big businesses and institutions that buy huge amounts of electricity. They can bargain with plenty of competing companies that want to sell them power--and get very favorable rates.
But there''s an alternative for small consumers too. It''s called aggregation. The concept is simple: Thousands of consumers get together and bargain as a group, buying power in bulk at low rates and distributing it among the members. Those aggregators can also set standards for the power they buy--for example, they can require that some or all of it be generated from wind, the sun, or other renewable energy sources.
Anyone can become an aggregator--private companies, nonprofits and public agencies. But because of legal issues, particularly the liability problems associated with providing electric service, experts say the best and most effective way to aggregate is to do it through a city or county.
"By combining the electricity loads of their citizens into one large buying group, municipal governments can purchase reasonably priced power generated from clean renewable resources, thus capturing a share of restructuring''s economic efficiencies while delivering the environmentally sustainable energy that American wants," Sacramento-based energy expert Peter Asmus wrote in a recent report.
Asmus, coauthor of Reinventing Electric Utilities: Competition, Citizen Action, and Clean Power, prepared a report for the Renewable Energy Policy Project in December 1997 called "Power to the People: How Local Governments Can Build Green Electricity Markets."
In the report, he wrote: "Among the reasons local governments might explore alternatives to incumbent electricity providers are the following: Municipalities can reduce rates for residential customers and small businesses, offer new services, meet citizen demand for clean air and water, and comply with the state and federal environmental standards."
The city of Palm Springs has taken that advice. The city has been working for several years to begin aggregating consumers--both residential and commercial--to get better rates and cleaner power than the community has received from Southern California Edison. SoCal Ed is pulling every trick it can dream up to derail the process (such as initially requiring applicants to fill out forms with 49 categories of information before allowing them to switch to the municipal power co-op). But former mayor Art Lyons, who is spearheading the city''s effort, says 9,000 residents and businesses out of 32,000 queried have signed up to get their electricity from the city''s new energy-services company.
"We''re slugging it out here," Lyons told the publication American Local Power News this month. "The political leadership [of the city] has to be willing to do something for its constituents," says Lyons, "And our [city] council has been."
If public-power and consumer activists are successful, Palm Springs won''t be the only city moving to become an aggregator. The Sacramento-based Local Government Commission, an independent nonprofit, is working to educate municipalities on their options under deregulation, including aggregating their consumers and entering the market. The group is sponsoring a conference on the issue in Sacramento on June 5.
"Local governments are awake to this issue," says consumer advocate Paul Fenn of the Oakland-based American Local Power Project. "Probably over the next year you''re going to have an explosion of muni aggregation around the country."
Meanwhile, consumers who want solar power can start working toward that goal now. The $540 million available for renewable energy projects under AB 1890 includes rebates for solar panels. Call Vince Schwent at the California Energy Commission at (916) 653-1063. cw