Editorial: Deregulation is Not the Answer

SAN FRANCISCO — After an interview with Southern California Edison President Bruce Foster, the Register incorrectly concluded that more deregulation is the way to lower electric prices (Freer Power Market Will Better Serve State, June 6, 2002). One of the few things TURN agrees with Foster about is the need for continued government regulation of electric service, although our experiences with deregulation are very different. Edison has fared far better in the free market than consumers. The consumer arguments for regulating electric power are far more persuasive than the utility's.

To suggest, as the Register does, that California's deregulation plan failed because it didn't go far enough ignores what we have learned about deregulated energy companies in recent months. Enron, Mirant, Reliant and others did not come into California with the goal of supplying us with an essential commodity at a competitive price. They came to gouge us, and were willing to violate the law in order to do so. The evidence suggests that their greed even drove them to manufacture blackouts, with their resultant health and safety hazards, in order to drive their profits up to obscene levels.

Why try to draft more precise laws when we know we’re dealing with companies dedicated to finding ways around those laws? And why continue to experiment with a failed policy? The original experiment was launched on the backs of consumers and the bills are still coming due.

Jeffrey Skilling and his cronies promoted deregulation in California as a way to lower bills. Not only have consumers never seen the lower bills we were promised, our rates have gone up 40%. On April 1 of this year, consumers were scheduled to receive a 20% rate decrease. Since the Federal Energy Regulatory Commission (FERC) capped wholesale prices, costs have come down. But the utilities are refusing to pass those lower costs on to consumers, claiming they need a second bailout. While Southern California Edison and PG&E pocket billions in electric overcharges, consumers face years more of inflated bills.

Foster forgets the deal that was made in 1996, and his own part in it. The 20% decrease was supposed to be the quid pro quo for the high rates consumers started paying in 1997 under the deregulation scheme cooked up by Edison and the other utilities. While much was made of the "low'" rates consumers were paying during the height of the energy crisis, those rates were actually higher than what they would have been under regulation. The initial increase in deregulated rates was supposed to compensate Edison and PG&E for the risks they would face in a deregulated environment. But the $10 billion Edison collected from ratepayers looked like chump change to the utility when the very same frozen rate that had netted them billions stopped them from passing exorbitant wholesale costs on to customers.

When their creditors came knocking on the door, the utility had transferred much of the $10 billion to its parent corporation, Edison International, and claimed to be broke. With Foster at the helm, Edison launched a vigorous campaign to get consumers to pay for the very risks to which Edison had agreed. When the company failed to convince the Legislature that it was deserving of another bailout from its customers, they found a less public way to get what they wanted.

Behind closed doors, they negotiated a settlement of a lawsuit against the CPUC in exchange for $3.3 billion in additional surcharges from customers. That settlement excluded TURN, despite our status as both a legal intervenor and the lone voice for consumers in the proceeding.

You dismiss our suit against the bailout as "trying to void Edison's legal settlement" In fact, the purpose of our suit is to prevent Edison from bilking customers for an additional $3.3 billion pursuant to a secret settlement with an agency that is supposed to represent the public. What we need is stronger and more independent regulators, not stronger and more independent energy companies.