California Screaming

Editor’s note: As a
Kentucky task force on electric utility restructuring marks the
halfway point in its four-year study of whether to change the
industry in this state, other states are wrestling with the same
issues. Here’s a view by Darryl Gates, vice president of
communications for the Alabama Rural Electric Association.

The results of California’s grand, unbridled experiment with
restructuring its electric utilities have forced several other
states to question the wisdom of pushing the process.

The problems California utility officials have had keeping the
juice flowing are well-documented. For example, in December the
state declared a stage 3 emergency after power reserves dropped to
1.5 percent. There were reports of residential power bills
doubling and tripling as desperate utilities scrambled to buy
blocks of power.

Regulatory officials predicted a "ratepayer rebellion,"
which may still come. Meanwhile, many utility regulatory bodies
across the country have slowed the restructuring boat, or even
anchored it, because of California’s experience. It’s no
rebellion, but it may be a minor mutiny.

In October, the Alabama Public Service Commission, for example,
pulled the plug on the state’s restructuring process, citing last
summer’s "disasters" in the Golden State. A PSC task
force on electric industry restructuring issued a report saying
that any form of deregulation is not in the public interest in
Alabama-for now.

Alabama is not the only state having second thoughts about
restructuring. Other states that have decided that restructuring
is not in their public interest at this time include Mississippi
and Minnesota. In Arkansas, Oklahoma, and Montana-states that
already have enacted restructuring legislation-they’re debating
whether to delay the start-up date.

Although Alabama’s electric co-ops do not fall under the
jurisdiction of the state’s Public Service Commission, co-ops know
they have to be a player in any restructuring effort, or the rules
of the game will be set without them…and possibly against them.
So when the PSC asked for comments pertaining to restructuring the
state’s electricity market, cooperatives weighed in heavily on the
side of caution.

Our argument essentially stated that "Hey, we
have a good thing going. Let’s not blow it." Alabama, you see, has some of
the lowest electricity rates in the country, an average of about 7.5 cents a kWh.

Electric co-ops have fought long and hard to keep rates low.
Through the efforts of the Alabama Rural Electric Association, the
Alabama Electric Co-op (the generation and transmission co-op in
the south), and the Tennessee Valley authority in the north,
wholesale prices have stayed low. Distribution co-ops have
likewise kept their costs low. Alabama Power Co.-the state’s only
investor-owned utility-and municipal utilities also have worked to
keep rates down.

None of this has been lost on the Public Service Commission. Any
restructuring could be "extremely costly and initially
unworkable," the PSC task force report says.

One only needs to take a look at today’s headlines about the
California experiment to see how true that can be.