FEBRUARY 2001

Capitol Shavings

by Edith T. Carper

Today’s truth becomes tomorrow’s fish wrapper when you attempt to report on the current (no pun) status of electric power in California. The two principal companies there have gone nearly bankrupt, and there are rolling blackouts, dimmed traffic lights and sometimes even dead silence in Silicon Valley.

California’s two senators want federal authorities to step in and assist the two utility companies to restore reliable electric power. On 22 January, Senators Diane Feinstein and Barbara Boxer sought help from the Federal Energy Regulatory Commission (FERC) because it is the only agency with authority over energy generators and marketers. At the same time, the Bush Administration gave notice that the problem is California’s and that help from the federal government is and will be minimal. However, President Bush issued an order on 23 January (which can be renewed) requiring electricity and natural gas-producing companies — inside and outside California — to continue for two weeks to provide power to utilities that don’t have the money to pay up. Bush’s Energy Secretary, Spencer Abraham, said the "real solution must address the need for the construction of more electric power generations in California, reform the flawed state market rules, restore the financial health of California’s utilities, and encourage greater conservation."

Something of a solution was reached in late January, whereby California will issue bonds to buy long-term power at favorable rates. In return, the state would gain equity in the utility corporations. The plan calls for issuing up to $12 billion in revenue bonds, and using the money to buy electricity on the wholesale market. This remedy is complex, and will take both diplomacy and time to work out details.

A novel proposal for a fix comes from a British utility expert who suggests that California return to the system of utility regulation "that has given America some of the cheapest and most reliable electricity in the world."

"Put the genie back in the bottle" proposes Gregory Palast, a British columnist (with The London Observer). He goes on to say (in an article in Washington newspapers on 28 January) that regulation, though "politically unfashionable," does work. Palast also charges California’s two utility companies — now nearly bankrupt — with being "in the forefront of the army of industry lobbyists fighting to establish the system that got California into this mess."

The U.S. procedure, before deregulation, was "unique in the world." Palast notes that consumers, competitors, citizens and observers could testify at open hearings held by the state’s utility commission. The commission, in turn, could set a price per kilowatt hour."

He described the procedure in tones of a folktale: Observers could "pore over a utility company’s account books, cross-examine the company’s executives, and question the regulators’ staff. Based on that evidence, public utility commissions could set a price per kilowatt hour based on verified costs plus a small, tightly controlled profit for shareholders." The process was "prone to political manipulation" but "that’s true of any democratic process."

Edith T. Carper is a Special Correspondent to IEEE-USA. She can be reached at todaysengineer@ieee.org.