ELECTRIC UTILITY RESTRUCTURING
Background documents assembled by Chugach Consumers

NOTE: Inclusion here does not necessarily indicate agreement with the content or views expressed in the documents.  Chugach Consumers has selected these items as useful for understanding 1) the competitive and efficiency issues important to better functioning of our electric utility industry here in Alaska and 2) the crisis in California's electric utilities.

= KEY DOCUMENT (Most Important)

STOCK PRICE CHARTS:  PG&E   SC Edison   ReliantEn    compare to:  Fidelity Select Electric Utilities FSUTX ENERGY CRISIS ARCHIVES  Sacramento Bee  LA Times WSJ  (must be a paid subscriber)
LINKS GOOGLE Search: electric + industry + competition   
U.S. Energy Information Agency -- Electric Power Industry Restructuring and Deregulation
Public Utility Commission of Texas -- The latest state to restructure and deregulate 
FetchBooks Electric Utilities - Deregulation Books   
5/17/01 Davis Turns Up the Heat on Supplier - LA Times - DAN MORAIN and NANCY VOGEL - Power: Reliant Energy says escalating rhetoric might be leading toward seizure of a plant - After months of broadly vilifying California's energy suppliers, Gov. Gray Davis has launched a new offensive, taking aim at a single firm: Houston-based Reliant Energy, whose executives believe the governor may be building a case to confiscate the company's power plants.  
5/7/01

Texas May Face a Glut of Electricity, But It Won't Help in the Rest of U.S.- Wall Street Journal ALEXEI BARRIONUEVO and RUSSELL GOLD - Pride and Policy Make State a Magnet For Power Plants and an Island Unto Itself - While California struggles to keep its lights on and New York City braces for possible electricity shortages this summer, Texas utilities could soon face the opposite problem: a power glut...[An] independent attitude has extended in recent years to Texas' business-friendly approach to deregulating its power industry. Unlike California, with its stringent emissions and zoning rules, Texas has made it quick and easy for power companies to locate their plants almost anywhere they can find a place to hook up to the grid...The result: Texas' electricity-production capacity this summer is expected to exceed its peak power demand by 11,000 megawatts -- nearly enough to light up New York City. By the summer of 2002, the excess may be closer to 15,000 megawatts, enough to power 15 million homes. And with 27 new generating plants under construction, more than any other state, some power producers fear that overbuilding ultimately could send Texas' wholesale electricity prices into a tailspin. 

If generators don't get cold feet, Texas is on track to have a capacity surplus of 9% this summer and 11% by summer 2002, says Cambridge Energy Research Associates. That's in addition to the 15% surplus that most experts consider an adequate cushion. Some areas of the country, including parts of the Southeast, Upper Midwest, New York City and the West, are struggling with razor-thin capacity margins. After factoring in a similar 15% cushion, the West has an 8% capacity deficit and the Upper Midwest has a 4% deficit.  As a result, while electricity futures prices for summer are running at as much as $400 per megawatt hour in the Northwest and around $100 in the Northeast, Texas futures prices are averaging only $72 to $74 per megawatt hour.

4/7/01 Bankruptcy Filing by PG&E Pulls Plug on Governor, Legislators - LA Times - MIGUEL BUSTILLO et al. - Casualties: Plans to buy power lines and lure back alternative energy producers seem to be dead - Months of delicate planning by California's legislators to rescue the state from a deepening energy crisis collapsed into chaos and uncertainty Friday with the bankruptcy filing by Pacific Gas & Electric...California's financial well-being took a hit as well, as an influential bond rating service changed the state's rating from stable to negative. That could have long-term ramifications on its ability to borrow money for projects large and small.
4/6/01 Davis Acknowledges Need for Rate Hike - LA Times - DAN MORAIN - Electricity: In a statewide TV broadcast, he says the average would be 26.5%. For the first time, he calls situation a "crisis." - After spending months voicing opposition to rate hikes, Gov. Gray Davis acknowledged to a statewide television audience Thursday night the need for an electricity rate increase that would average 26.5%...Standard & Poor's cited a lack of action by Davis and state legislators, and said rate increases approved by the PUC will not be sufficient to pay all electricity costs. Banks and other creditors will run out of patience before long unless a settlement is reached to help the utilities pay past debts, Standard & Poor's said.
3/24/01 Hertzberg, Davis Aides See Big Rate Hikes Ahead - LA Times - DAN MORAIN - Assembly Speaker Bob Hertzberg [Dem-San Fernando] said for the first time Friday that he believes further electricity rate hikes are inevitable, and aides to Gov. Gray Davis softened their adamant opposition to the increases that utility officials have been demanding for months.  Top Davis administration officials, in a briefing to Hertzberg, said the state's cost for buying power could mount to $16 billion this year and that electricity rates may need to go up by 50%. In the extreme, rates could double..."The generators haven't taken their foot off our throat for a moment," state Treasurer Phil Angelides [Dem] said, "and they won't until we create a competitive marketplace. We're in a bad spot, but denying that and failing to bind it up quickly will only lead to worse results."  "The rates are going to be what they are going to be to keep the lights on," Angelides added.
3/24/01 California's Choices All Look Painful - NY Times - LAURA M. HOLSON - Two months ago, Gov. Gray Davis promised a speedy end to the crisis. But all the solutions proposed so far seem as fragile and tenuous as the grid itself.  Now a growing chorus of economists, business leaders and policy experts are saying what most agree that Mr. Davis will not utter: the state cannot spend its way out of this crisis, and politicians are delaying an inevitable, albeit unpopular, end raising retail electricity rates significantly. The desire to satisfy all parties is costly and has caused confusion and indecision.
3/23/01 Critics Say U.S. Energy Agency Is Weak in Oversight of Utilities - NY Times - JEFF GERTH and JOSEPH KAHN - Critics say that the agency began deregulation before it was ready or willing to make sure the markets worked effectively. They accuse it of showing favoritism to industry allowing companies, for example, to ignore requirements to file detailed reports of market transactions that are critical to proving accusations of market abuses.  Chugach Consumers comment:  Transparency is important; disclosure reports are necessary for regulators to identify excess market power problems. 
2/22/01 WHAT IF THE BUREAUCRACY DOES AS GOOD A JOB INCREASING POWER SUPPLY AS IT HAS IN RUNNING CALTRANS AND DMV? - San Jose Mercury News Opinion - by John Campbell - we can have the inefficiency and intrusiveness of a State Power Authority, which the governor is promoting, or the freedom and wonder of an open market.
1/29/01 Cheney to Lead Task Force on Energy - LA Times - ASSOCIATED PRESS - Energy:  President Bush, voicing alarm that California's energy crisis is spilling over its borders, directed Vice President Cheney and several Cabinet members to develop a plan for the federal government to "act boldly and swiftly."
1/29/01 Trading Floor Breathing Last Gasps in Failure of Deregulation - LA Times - ROBIN FIELDS 
1/28/01 Gas Cutoff Next Month, PG&E Warns-Utility describes a 'doomsday scenario' - San Francisco Chronicle - Hundreds of thousands of residents of cities including San Francisco, Sacramento and Santa Cruz are likely to have their natural gas cut off as early as mid-February, if federal or state authorities don't rescue PG&E from suppliers' refusal to provide gas, the utility warns.
1/24/01 Volatile Prices - CNBC Dow Jones Business Video (Windows Media) - Federal Energy Regulatory Commission Chairman Curt Hebert blames the problems in California on the state government and says they can't be fixed overnight.
1/23/01 Brown and Out in Beverly Hills - Wall Street Journal - Editorial - The comedy is almost too broad to bear. In the past month, the country's showcase state has come to look like a hapless banana republic.
1/23/01 Power and Profits - NY Times - PAUL KRUGMAN - Why didn't California deregulate the whole shebang?  The distribution of power...is still a "natural monopoly" you can't have multiple power lines running down each street...the enthusiasts for deregulation led state officials to believe that power would be so abundant that such technical details wouldn't matter.
1/23/01 Independent Generators Reshaping Power Industry - NY Times - RICHARD A. OPPEL Jr. - Independent generators and other backers of deregulation President Bush among them say that market forces, allowed to operate freely, will ensure an adequate supply of power. Along with many analysts, they attribute California's problems mostly to a badly designed deregulation law unique to the nation's biggest state that left the utilities victims of a marketplace that invited price spikes and volatility.  The pro-deregulation forces say, too, that none of the many investigations into suspected market manipulation during the crisis have conclusively fingered the generators, for all of Governor Davis's castigating them as "profiteers."
1/22/01

PETER BEHR - Washington Post - CALIF. POWER STRUGGLES SAP ELECTRIC PROGRAM - California's four-year-old electricity deregulation plan, the first in the nation, was the troubled product of sharply conflicting political ideologies in the state. It was born of conservative convictions in the benefits of unfettered competition. But it was ultimately laced with price caps and controls -- such as a requirement that power be bought when needed, not in advance -- demanded by lawmakers who did not trust the energy industry. The result was a Rube Goldberg structure -- half free-market, half regulation -- that new U.S. Treasury Secretary Paul H. O'Neill has called "lunacy."  By forcing the utilities to buy power at the last minute, at a time when power was scarce, the California system opened the way for huge price increases, said Frank A. Wolak, a Stanford University professor and chair of the Market Surveillance Committee. Imagine assembling a terminal full of airline travelers and auctioning off seats a half-hour before flight times, instead of accepting advance reservations at varying prices, Wolak said. That's what the California plan did.
1/22/01 H. JOSEF HEBERT - Sacramento Bee - BUSH TO NOMINATE FREE-MARKET ADVOCATE TO HEAD ENERGY COMMISSION - President Bush will nominate Curt Hebert, who has argued against federal involvement in the California electricity crisis, as chairman of the agency that regulates wholesale power markets...Hebert has argued forcefully in recent weeks against FERC imposing price controls on wholesale electricity sales into California.
1/22/01 DAN WALTERS - Sacramento Bee - WINNERS, LOSERS IN POWER MESS - Governor Gray Davis -- Davis is essentially a passive, reactive and self-protective politician, and his tendencies served him -- and the state -- poorly when the crisis first arose last summer...Why Davis was stiffed by his fellow Democrats in the Clinton administration is the subject of much political speculation. Loretta Lynch -- Legislators from both parties are ready to lynch the president of the state Public Utilities Commission for, they say, consistently refusing to cooperate and feeding them blatantly false accounts. Lynch, her critics say, appears to be more interested in protecting the PUC's sorry record on utility regulation -- its decrees caused many of the problems -- than in solving the crisis...the Legislature's chief auditor is ready to sue her to obtain information on the PUC's role.
1/21/01 MARK R. THIERMAN - Engineering News Record VIEWPOINT: PROJECT LABOR AGREEMENTS; BLAME UNIONS FOR BLACKOUTS - If politicians really want to solve California's current energy crisis, they must undo the artificial shortage created by unions and project labor agreements...Since the exclusion of nonunion constructors, powerplants have become more expensive to build and less likely to be built. Compared to nonunion work, union-only construction costs a 20% premium on average, even on jobs where nonunion contractors bid and the union contractor was low bidder.
1/21/01 DAN MORAIN and MARK Z. BARABAK - LA Times - WIDELY CRITICIZED IN CRISIS, [GOV.] DAVIS DEFENDS HIS CAUTION - Power:  Some say he has seemed unprepared for an emergency that could define his governorship - ...several lawmakers and others who have regular contact with [California Governor Gray] Davis say his circle of close advisors remains small, a habit he has kept throughout his 20-year public life...Electricity, however, is not a topic easily mastered, and many experts say that no one in his group knew much, if anything, about it before the crisis hit...One key advisor, Loretta Lynch, for example, is chairwoman of the California Public Utilities Commission, which regulates state utilities. She was a San Francisco trial lawyer with no energy background when Davis tapped her for the job. She defended Davis' go-slow approach. "The folks who brought us deregulation were theorists who had no experience in making a deregulated market work," Lynch said. "There was a lot of wishful thinking. . . We can't afford two failed theories."
1/20/01 NANCY VOGEL and DAN MORAIN - LA Times - STATE MAY FACE BILL OF $5 BILLION FOR POWER - In a staggering estimate of the potential cost to California taxpayers, officials said Friday that the state could spend as much as $5.4 billion in the next 90 days to avert rolling blackouts. 
1/19/01 JAMES STERNGOLD - NY Times - CALIFORNIA ENDURES A 2ND STRAIGHT DAY OF POWER BLACKOUTS - In Washington, Paul H. O'Neill, George W. Bush' choice to become treasury secretary, at his confirmation hearing described California's electricity program as "lunacy," in large measure because of the effort to keep retail prices down and avoid rate hikes. The state of California assumed that they could defeat economics," he said. Trying to hold retail electric prices down when supply is short "makes no sense," he said.
1/19/01 MIGUEL BUSTILLO et al. LA Times LAWMAKERS VOTE TO USE RESERVE FUND AS BUSH REJECTS POWER PRICE CAPS Electricity: Officials acknowledge the $400 million might never be recovered. Lights go out again in some areas and regulators say blackouts again possible today.
1/19/01 EVELYN NIEVES - NY Times - SAN FRANCISCO IS CONSIDERING ITS OWN UTILITY - A step backwards; all over the world governments are privatizing government-owned utilities!
1/18/01 REBECCA SMITH et al - Wall Street Journal - CALIFORNIA, HIT WITH SERIES OF BLACKOUTS, IS BELIEVED 62% SHORT OF POWER NEEDED
1/18/01 AMY CHANCE - Sacramento Bee - ENERGY FIRMS STICK IT TO US, A MAJORITY TELLS SURVEY - a very revealing survey!
1/18/01 JAMES STERNGOLD - NY Times - CALIFORNIA INITIATES BLACKOUTS TO SAVE POWER
1/17/01 PETER GOSSELIN - LA Times - STATE INCHES EVER CLOSER TO LOSING CONTROL (news analysis) - Legal experts and national credit rating agencies warned that if either or both of the companies went over the financial edge, California could end up at the mercy of a federal bankruptcy judge who could effectively mandate the kinds of consumer rate hikes and bailouts that Davis had pledged would never occur.
1/16/01 WILLIAM SAFIRE - Atlanta Journal and Constitution - DESPITE LIBERALS' PROTESTS, CAPITALISM DIDN'T CAUSE CALIFORNIA'S ENERGY CRISIS
1/16/01

EDITORIAL - Atlanta Journal and Constitution - BALANCE ESSENTIAL ON THE ENVIRONMENT - In the past decade, according to the Census 2000 figures released last month, California added more residents than any other state in the nation 4.1 million. Unfortunately, in that same decade, the state sacrificed intelligent growth on the altar of environmental extremism.   That decision helped produce the energy crisis that is gripping the state now, and is one that Georgia would do well to learn from as it faces an onslaught from some of the same forces. News reports have trumpeted the "failed deregulation" of California's electricity market. But as this page has noted, for a concept to be declared a failure it ought actually to be tried first.

1/16/01 JIM BEERS - Washington Times - POWER CRISIS SHOULD COME AS NO SURPRISE TO CALIFORNIANS - letter to the editor
1/15/01 EDITORIAL - Oil&Gas Journal - CALIFORNIA'S ENERGY CRISIS - "...California's crisis stems not from deregulation but from faulty and incomplete deregulation in a permitting climate hostile to energy supply.  Deregulation has worked in some of the other early starters, most successfully so far in Pennsylvania.
1/14/01 JAMES FLANIGAN - LA Times - TEXAS POWER SUPPLIERS SHUN BAD GUY LABEL - Firms say California ignored advice and failed to deal with the realities of a 'new' economy. The ISO system 'invites gaming,' one executive says.
1/14/01 STEVE BERRY & NICHOLAS RICCARDI - NY Times - GENERATORS ACTED TO KEEP PRICES HIGHER, STUDIES SHOW - 
1/13/01 JULIE FOSTER - WorldNetDaily - AMERICA THE POWERLESS - Flickering lights in the Golden State - Energy expert says 'deregulation' not to blame for electricity woes - 
1/12/01 BILL MANN - www.MotleyFool.com - FOOL ON THE HILL: UTILITY DANGERS IN CALIFORNIA - 
1/11/01 JERRY TAYLOR - National Review - DAVIS IN THE DOCK...ROSS CANCELS HIS VISIT - 
1/10/01 ASSOCIATED PRESS - NY Times - FERC CHIEF HOECKER RESIGNS - In recent weeks, Hoecker has been criticized by California officials for strongly opposing a cap on wholesale electricity flowing into the state. Californians have recently seen electricity prices soar...``As disappointing as it may seem to some, we cannot `price cap' California out of a supply shortage,'' Hoecker wrote in outlining his views on what should be done to address California's power problems.
1/10/01 ROBERT A. ROSENBLATT & RICHARD SIMON - LA Times - FEDERAL PACT WOULD GIVE UTILITIES MORE TIME TO PAY - Phil Gramm (R-Texas), said he would fight any effort to "take California politicians off the hook....As they suffer the consequences of their own feckless policies, political leaders in California blame power companies, deregulation and everyone but themselves, and the inevitable call is now being heard for a federal bail-out," he said. "I intend to do everything in my power to require those who valued environmental extremism and interstate protectionism more than common sense and market freedom to solve their electricity crisis without short-circuiting taxpayers in other states."
1/10/01 JIM YARDLEY - NY Times - TEXAS LEARNS IN CALIFORNIA HOW NOT TO DEREGULATE - 
1/9/01 PETER BEHR - Washington Post - TEXAS NEARS POWER DEREGULATION - 
1/4/01 JAMES STERNGOLD - NY Times - CALIFORNIA BOARD PROPOSES INCREASE IN ELECTRIC RATES - 
1/3/01 CHRIS KRAUL & MICHAEL HILTZIK - LA Times - BANKRUPTCY COULD SET OFF UNPREDICTABLE NEW PROBLEMS - 
12/30/00 CARRIE PEYTON - Sacramento Bee - UTILITY CRISIS GETTING WORSE: NATURAL GAS PRICES TO SOAR, PG&E SAYS
12/20/00 PBS - THE FIRST MEASURED CENTURY -  A great program! Excellent discussion of deregulation benefits in airlines (by Alfred Kahn). This is a tape worth getting!
12/09/00

 

NANCY VOGEL - LA Times - HOW STATE'S CONSUMERS LOST WITH ELECTRICITY DEREGULATION - The dramatic increases are the result of critical misjudgments by the California Public Utilities Commission and the state Legislature, the two main architects of the plan to open the market. Most serious were:
* A gross underestimation of demand as the state's economy came to life after years of recession and California's burgeoning computer-based businesses ate up electricity at rates unheard of in the old economy.
* A failure to anticipate that energy companies could easily exploit a mechanism designed to ensure the even flow of electricity. By holding back electricity and selling when the system was desperate, they could earn double the going rate.
* A faulty assumption that deregulation would prompt more competition right away: Hundreds of companies were expected to serve homeowners, but they didn't materialize.

No other state, in attempting to deregulate, did what California did: triggered a sweeping divestiture without making certain that the new owners would have to sell their electricity at a fixed price for a number of years.

3/3/98 CARRIE PEYTON - Sacramento Bee - UTILITIES BATTLING RELEASE OF ELECTRICITY DATA: PRIVATE FIRMS SAY IT'S LIKE REVEALING TRADE SECRETS - 
12/97 ML&P Customers ask for Chugach power  

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