Power Engineering - Schwarzenegger wants large electricity users to be able to find best deal

29 April 2004 - In his first major statement on energy since he said the issue would become his central focus, Gov. Arnold Schwarzenegger on Wednesday called for giving large electricity users the freedom to bypass utilities and shop around for the best deal for power.

The position, while not unexpected, drew applause from business interests and pro-market supporters but prompted concern from leading Democrats and consumer advocates, who said they worry residential users would face higher costs as a result.

However, the Republican governor vowed those remaining with utilities would not bear an additional burden. And any plan giving customers the right to bypass utilities and buy power from independent generators would have to be approved by the Democratic-controlled Legislature.

In outlining his policy in a letter to the Public Utilities Commission, Schwarzenegger stepped squarely into the contentious debate over how to reshape California's energy market in the aftermath of the state's disastrous crisis of 2000-01.

Schwarzenegger emphasized many of the policies being pushed by the California Public Utilities Commission. The governor endorsed renewable energy, conservation and so-called "demand-response" programmes that allow consumers to see when power prices fluctuate and tailor their use accordingly.

The governor asked the regulators to move up a deadline for utility companies to have higher energy reserves. He said that would help forestall an energy shortage.

The utilities are supposed to maintain a 15 per cent reserve by 2008, but Schwarzenegger wants the date pushed up to 2006, a year some energy experts warn could see the return of blackouts.

Also, Schwarzenegger requested that the commission speed up writing rules that would allow and encourage utilities to lock up power through long-term contracts with suppliers. Experts believe long-term contract swill help utilities keep prices down and stimulate investment in power plant construction by independent generators.

The letter is the first piece of the administration's initiative to bring greater stability and lower prices to the state's electricity market. In addition, Schwarzenegger is exploring reorganizing the state agencies that govern energy.

The governor's stance won praise from most quarters as a good start on a complex and difficult matter.

Once state regulators clear the way for utilities to use long-term contracts, it will give private producers and investors the confidence they seek to build more power plants, said Jan Smutny-Jones, the executive director of the trade group Independent Energy Producers.

But the governor's backing of direct access for large customers irked some Democrats and consumer advocates. The state froze direct access during the height of the energy crisis, and currently 15 per cent of California's energy load is from direct access customers.

Bob Finkelstein, executive director of The Utility Reform Network, said lawmakers promised consumers would be better off when the state first attempted to deregulate the energy market in the late 1990s. In the end, consumers got hit with a 40 per cent increase in rates.

"The promises made at the outset of these debates don't mean anything," Finkelstein said.

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