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San Gabriel Valley Tribune
Mar 26, 2004 - 01:00 AM

by Thomas Elias

OPINION - Big-business backers won't give up notion of deregulation

No one has wanted to use the word de-regulation in polite company since 2001, when the California energy crunch thoroughly discredited the notion, at least for electricity and natural gas. And no one is more studiously polite than Gov. Arnold Schwarzenegger, at least in public.

But when Schwarzenegger talks about plans to "reform' this state's energy system in major speeches, he is really advocating much of what the old, disastrous deregulation plan allowed.

For Schwarzenegger, a frequently avowed advocate for business and job growth, has been far more concerned since the day of his election with the big businesses [Cingular Wireless, Health-Net, Southern California Edison and many more] which regularly fatten his campaign coffers than with the myriad small businesses that are now the state's biggest job-growth area.

An estimated 3,000 small businesses [100 employees or fewer] were forced to close during 2001-2002 strictly because of sky- high electricity rates imposed on them and other customers by illegal market manipulations during the power crisis of those years. That represented at least 3,000 dreams destroyed and more than 100,000 jobs lost. No large business went under because of the high rates.

So who does Schwarzenegger seek to protect when he talks about reforming the electricity system? Naturally, big business.

While steering completely clear of the nasty term "deregulation,' Schwarzenegger has advocated allowing very large electricity customers like oil refineries, automobile and aircraft factories and some large canneries to make their own deals with power generators. This would essentially remove the largest consumers from the overall rate structure, which is based on a combination of the actual cost of power production, building new power plants and updating transmission facilities, with a substantial profit tossed in.

If done that simply, this Schwarzenegger notion would saddle small business and residential consumers will almost all the cost of maintaining California's energy network, leaving out the consumers who use the most power.

Just such a setup was a major feature of the 1996 deregulation law. At that time, though, even small residential customers were supposed to be able to cut their own deals with generators like Enron, Reliant and Mirant. Those companies quickly stopped offering deals to small customers after they saw the notion didn't work, and large companies lost their options when the crunch became severe.

Now even some Democrats are falling into the latest "not quite deregulation' trap. One is U.S. Sen. Dianne Feinstein, who advocated in a recent letter to Schwarzenegger that very large power consumers be allowed to choose between rates regulated by the state Public Utilities Commission and making their own deals.

In a vague addendum, she suggests those big outfits should still be held responsible for "their share of costs for system improvement and system reliability.' She doesn't say how that might be enforced, and it probably couldn't, since buying power in bulk might leave the biggest customers free of any need to report exactly how much electricity they are using. And what if some set up their own lines to receive the power they use?

Meanwhile, much the same idea is endorsed by Michael Peevey, the former Southern California Edison chief installed by ex- Gov. Gray Davis as president of the state Public Utilities Commission. In mid-March, Peevey denounced as "overly timid,' a report by the technical staff of his own commission which recommended waiting at least until 2009 before experimenting with even a partly deregulated power system.

And Schwarzenegger keeps saying, as he did in his State of the State speech, that "We must reform the retail market so that large customers get competitive prices.'

Translated into reality, that likely would mean that smaller customers get much less competitive prices. Which would discourage creation of new small businesses and the many jobs they produce. Plus, Schwarzenegger complains there are too many energy agencies.

Is he really suggesting an end to the 2-year-old Public Power Agency, described by the consumerist Foundation for Taxpayer and Consumer Rights as "the one public agency that can ensure that if consumers do not have access to inexpensive electricity, the Power Authority can step in and produce it'?

The bottom line: Just because folks like Schwarzenegger and Feinstein avoid that nasty "d' word, they have certainly not given up on the basic notions behind deregulation, a concept pushed by big companies and their allies in the Legislature and enacted by Republican ex- Gov. Pete Wilson - who not coincidentally has been a major adviser to Schwarzenegger since he began his run for office.
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Thomas Elias is an author and freelance writer. E-mail him at tdelias@aol.com




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