Got it. Thanks.  Another article suggesting that we need to get our message 
out.  Heard Skilling and Davis are going to talk.  He sign the bill yet?

Best,
Jeff



Power deregulation backfires in infancy (9.27.2000)
MANY OFFICIALS SAY IT WILL WORK EVENTUALLY 
BY STEVE JOHNSON
Mercury News 
With its residents reeling from surging summertime electricity bills, this 
coastal state's deregulated energy market has triggered bitter accusations, 
legislative hearings and a push to re-regulate the whole system. 
Sound familiar? Except this isn't California. It's New York, one of 23 other 
states that are ending what has been for decades one of government's key 
functions -- keeping tight control on the price of power. 
The great national experiment to open the sale of electricity to competition, 
which California has been largely credited with pioneering, was supposed to 
lower prices by freeing consumers from the monopolistic grip of government 
regulated utilities. Indeed, energy officials in many states retain hope that 
it eventually will do that. 
But throughout the country, a sense of foreboding has overtaken people like 
Susan Peckman, who manages Peckman's Liquor Store in Pearl River, N.Y. Hers 
is the only state outside California so far where consumers have been exposed 
to the discomfitting impact of fully deregulated prices. And she doesn't feel 
liberated. 
``There's nothing we can do about it,'' said Peckman, who estimated that her 
store's electricity bill has jumped about 20 percent this summer over last 
year's. Faced with the option of paying it or closing down, she added, 
``you're between a rock and a hard place.'' 
It has been four years since California became one of the first states to 
pass an energy deregulation law. Yet the movement to revamp the way power is 
sold in this country remains mired in a ``prolonged and muddled transition,'' 
according to a study published this month by Cambridge Energy Research 
Associates and the Arthur Andersen consulting firm. 
It's unclear when or even if that transition will ever be completed. In many 
parts of the country, public officials are terrified of plunging ahead with 
deregulation, given the high prices and other problems in California and New 
York. Some even harbor suspicions that California has led the nation astray 
by promoting an idea that is inherently flawed. 
California Public Utilities Commissioner Henry Duque said he encountered that 
attitude during a summer meeting of the National Association of Regulatory 
Utility Commissioners in Los Angeles. 
``I had other commissioners coming up to me saying, `What the hell is going 
on here,' '' Duque said. ``They were concerned. I think their thought was, 
did we in California see something that was wrong with deregulation but 
weren't going to level with them now that they had started down the path?'' 
Actually, the federal government bears much of the responsibility for 
initiating the drive to ease public control of electricity markets. 
Hoping to encourage new sources of electricity, Congress passed laws in 1978 
and 1992 that forced utility companies to buy increasing amounts of the power 
they use from other, unregulated energy suppliers. In 1996, the Federal 
Energy Regulatory Commission also made it possible for other firms to ship 
their power over the high-voltage lines the utilities owned. 
Consumers were looking for a change, too. By the mid-1990s, the service 
provided by utility firms had become a sore subject. California had some of 
the highest utility rates in the country, and the electrical system's 
reliability was under fire. 
If only other companies could be lured into the market to compete, it was 
widely assumed, prices would plummet and overall customer satisfaction would 
improve. 
New York, New Hampshire and Rhode Island passed laws or made administrative 
rulings to deregulate slightly before California, where deregulation was 
approved in September 1996. 
Rhode Island and Massachusetts were first to give residents the ability to 
choose which company sold them their electricity. But because of its size and 
much publicized deliberations about its plan to deregulate during the 1990s, 
California was labeled the national leader on the issue. 
In many ways, however, deregulation in the state has been a flop -- at least, 
so far. 
Californians have had the right to pick their energy supplier since March 31, 
1998, when the electricity market was officially unfettered. That ability to 
choose was seen as an essential way to spur competition and, ultimately, 
lower energy prices. 
But as of Aug. 15, less than 2 percent of California's homeowners, businesses 
and others had seen fit to drop their local utility for some other supplier. 
By contrast, in Pennsylvania -- one of 13 other states that now let people 
choose -- 10 percent of customers have switched. 
Critics say that's a misleading comparison since Pennsylvania, unlike 
California, gives an energy price discount to consumers who make the switch. 
Nonetheless, Pennsylvania officials are clearly happy about how deregulation 
is working. 
A study in August by Pennsylvania Gov. Tom Ridge concluded that electricity 
competition will result in 36,400 new jobs and a $1.4 billion boost in 
personal income across the state by 2004. 
``We do not anticipate the problems in Pennsylvania that you have out there 
in California,'' said Kevin Cadden, a spokesman with that state's Public 
Utility Commission. ``I am not nervous at all.'' 
A study this summer by the non-profit Center for the Advancement of Energy 
Markets, which promotes deregulation, found that Pennsylvania has pushed 
electricity competition more effectively and quickly than any other state. 
Others listed in order in the top 10 were New York, Maine, Massachusetts, 
Texas, Nevada, Maryland, Rhode Island, New Jersey and Connecticut. California 
was 16th. 
But consumers may have a different measure of success: whether their lights 
will stay on and how much electricity will cost them once government controls 
are removed. Unfortunately, in the two states where prices have been fully 
deregulated, the evidence is not encouraging. 
In San Diego, the first place in California to have its state-mandated cap on 
utility rates lifted under deregulation, electricity bills for many consumers 
this summer doubled, while power blackouts also rolled through Northern 
California. New York's experience wasn't quite as bad. But in the few 
counties there that were exposed to fully deregulated electricity rates this 
summer, the average residential bill rose 22 percent. 
Investigations are under way in California and New York to determine what 
happened. Nonetheless, the problems in both states have been largely blamed 
on an insufficient supply of power plants to meet their demand for 
electricity, which has forced consumers to pay just about whatever 
power-producing firms want to charge. 
``It's the piece that the economists missed'' when deregulation was touted 
several years ago, said Mike Donovan, a spokesman for Orange and Rockland 
Utilities, Inc., which supplies power to Susan Peckman's Pearl River liquor 
store, among other parts of New York. ``There isn't sufficient generation to 
really administer a full-scale competitive market.'' 
Ralph Cavanagh of the National Resources Defense Council in San Francisco 
maintains that deregulation has been unfairly maligned because the dearth of 
power plants has made it impossible for consumers to benefit from 
competition. Once that and some other problems are fixed, he said, ``I'm 
confident we'll have a more orderly market in the future.'' 
Others are growing nervous, however. This summer's difficulties have spurred 
calls to significantly stall or even reverse deregulation in North Carolina, 
Nevada, New Mexico, Minnesota, Oregon and Alabama, among other states. 
A Wisconsin consumer advocate recently chuckled over the phone as she read 
aloud a story about California's energy crisis, noting that such news made 
her opposition to deregulation much easier. 
``I am absolutely convinced that we are on an inexorable march toward the 
choice model,'' said Ken Malloy, president of the Center for the Advancement 
of Energy Markets. But he acknowledged that the experience in San Diego and 
New York ``is undeniably a bad thing that has happened to this movement, and 
it will set us back.'' 

Contact Steve Johnson at sjohnson@sjmercury.com or (408) 920-5043.