January 19, 2001


Utilities Engineered Their Own Troubles - Let Them Reap The Costs

By Peter Asmus

It's beginning to look like the fix is in once again — consumers are being asked to bail out two electric utilities that are the real culprits behind today's energy supply fiasco. Before we get too scared by the threat of blackouts — which will occur, by the way, whatever happens to these two utilities — it helps to put their latest plea for help in proper context.

Governor Gray Davis would have us believe that poor Pacific Gas & Electric (PG&E) and Southern California Edison (SCE) are at the mercy of greedy out-of-state electricity generators, most of them Texans, probably pals of George W. Bush. These outsiders conspired to perpetrate the state's energy crisis, and we must all help our benevolent utilities so we can regain control of our energy destiny.

In his speech on the crisis, Davis never mentioned the fact that PG&E and SCE want to collect $11 billion from folks like you and me to avoid bankruptcy. SCE and PG&E have benefited more than anyone from a deregulation plan they pretty much wrote. They were guaranteed at least $28 billion in funds collected from their ratepayers for their nuclear facilities and other power plants judged to be overpriced.

They have already collected, by some estimates, at least $18 billion of this — the only reason they haven't collected it all is that they are getting even more dough now because at today's spiraling prices their nuclear reactors are cash cows.

Because we gave the utilities billions to cover their investments, their cost to produce power at Diablo Canyon (which had $5 billion in cost overruns we paid for) and San Onofre is less than 2 cents a kilowatt-hour. And they, like the greedy out-of-state guys with black hats, are raking in anywhere from 30 cents to 60 cents to $1.50 per kilowatt-hour for the electricity they produce!

Both PG&E and SCE have had so much cash they have gone on a spending spree, investing in power plants all around the world. The way I see it, if we bail them out again we should get a piece of the profits from those plants. Hell, give us a piece of the action on the nukes, too — it's time we get something back from our investments.

Most disturbing is the fact that these utilities continue to kill solar and other new renewable projects. SCE went so far as to petition the Federal Energy Regulatory Commission (FERC) in 1995 to kill 1,400 megawatts of new power plants that offered fixed prices in the 5-cent range (a fifth of average electricity prices recently). Many of these were clean, renewable facilities such as wind power. They would have generated enough electricity to power 140,000 homes.

More recently, the utilities have continued to charge fees in a way that stalls and kills solar power projects. Five proposed solar installations at U.S. Post Offices in Southern California were abandoned because of these utility charges.

The simplest solution to our supply shortfall is to mandate the strictest energy efficiency standards for everything from homes to appliances to entire neighborhoods — and cover every roof possible with solar PV panels. According to PowerLight Corporation of Berkeley, California state could generate a third of its entire electricity supply from solar panels placed on every commercial building in the state at a cost far below what we are paying today.

And the easiest way to solve the fiscal crisis facing PG&E and SCE is to tear down the walls erected between different arms of these two companies in the name of deregulation and consumer benefit. Merge the good parts of their business with the bad and the need for a bailout goes away. Knowledgeable attorneys tell me this is quite legal and could be done by the California Public Utilities Commission.

If the two big privately owned utilities go belly-up, perhaps a rebirth of publicly-owned power systems could bring some sanity to the question. A century ago, power systems were largely community-based and highly competitive. Let's create green buyers co-ops and allow local governments to represent their constituents in the energy marketplace if they want to. Let a thousand flowers bloom.

The biggest irony in all of this mess is that PG&E and SCE wrote ground rules so slanted to lining their own pockets that less than a handful of the hundreds of electricity suppliers, including many that wanted to sell green power, even exist anymore to offer customers a choice. The utilities crafted the whole deregulation system so that it would fail.

They got exactly what they wanted. Let them eat crow.

Peter Asmus is author of "Reaping The Wind," a new book from Island Press.

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