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Nader comments on California electric deregulation

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  • ChasMauch@aol.com
    Here is a copy of Ralph Nader s comments on the California situation, which adds a little extra fuel to the debate. I have attached a summary of the report
    Message 1 of 1 , Feb 1, 2001
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      Here is a copy of Ralph Nader's comments on the California situation, which
      adds a little extra fuel to the debate. I have attached a summary of the
      report mentioned (below).
      Charlie Mauch

      Nader speaks out against utility bailout

      Mercury News Washington Bureau

      WASHINGTON -- Veteran consumer advocate Ralph Nader weighed in
      on the California electricity crisis Tuesday, publicly opposing
      any bailout of the state's troubled utilities and warning of a
      ratepayer revolt if the Legislature increases consumer rates to
      rescue the companies.

      Nader, who lost his Green Party bid for the presidency in
      November, also promised to lend his support to any initiatives
      in the 2002 election that would re-regulate the state's energy

      He favors proposals to have California go directly into the
      power business itself, buying the generating and distributing
      facilities of Pacific Gas & Electric and Southern California
      Edison and selling power in a market watched by a full-time
      Citizens Utility Board. The idea has been advocated by state
      Treasurer Phil Angelides and David Freeman, general manager of
      the Los Angeles Department of Water and Power, which the city
      owns and operates.

      Nader also called for California to develop a long-range energy
      policy that stresses efficient appliances and the use of solar
      and wind power.

      ``I think there's going to be a ratepayer revolt if the bailout
      transfers itself into 20, 30, 50, 70 percent rate increases,''
      Nader said, warning that many elected officials could be voted
      out of office in 2002. ``If the Legislature passes the wrong
      type of bill, it's going to be called a term-limits bill, and
      there's likely to be even some recall attempts before the 2002

      The legislation being considered in Sacramento to have the state
      buy what amounts to stock options in PG&E and Southern
      California Edison will force Californians to ``transfer
      unimaginable amounts of dollars to these insatiable corporations
      and the unstable, avaricious speculative bazaar that is now
      inflicting itself on the people of California,'' Nader said.

      Nader had been relatively quiet on one of the biggest consumer
      issues in the nation in decades. In late December, he held a
      brief news conference during Public Utilities Commission
      hearings in San Francisco on the issue.

      But he spoke out Tuesday in hopes of influencing state
      legislators in Sacramento, who are considering bills to resolve
      the crisis. He was joined by a representative of the consumer
      advocacy group Public Citizen, which he founded, in lambasting
      the utilities and energy companies nationwide for creating the
      problems in California.

      Wenonah Hauter, director of the group's Critical Mass Energy and
      Environment Program, released a report titled ``It's Greed
      Stupid! Debunking the Ten Myths of Utility Deregulation.'' Among
      the misconceptions are that California's environmental standards
      have slowed power plant construction, that electricity
      deregulation has worked well elsewhere and that California's
      crisis can best be resolved by state, not federal actions, she

      ``Proponents of deregulation have developed a litany of excuses
      for why deregulation is failing in California,'' Hauter said.
      ``And they refuse to admit that a speculative market for a
      life-sustaining commodity like electricity that everyone needs,
      is both inefficient and it doesn't benefit small consumers,
      residential consumers or small businesses.''

      Nader said the state's utilities helped create the 1996
      deregulation plan and profited from it by receiving billions of
      dollars to help pay off so-called stranded costs for investments
      in things such as nuclear power plants that would no longer be
      profitable without regulation.

      ``This is such an outrageous situation of corporate rapacity,''
      he said, arguing that utilities made money off deregulation and
      ``now they're going to go for another round to get themselves
      out of a mess that they created.''

      Nader also was critical of both the Clinton and Bush
      administrations for not capping wholesale power prices
      throughout the West. California Gov. Gray Davis has pushed
      unsuccessfully for such a cap from federal regulators. Several
      members of Congress from California, including Democratic Sens.
      Barbara Boxer and Dianne Feinstein, also have pushed for such
      caps, but Nader said the state's congressional delegation was
      not working hard enough to put pressure on the White House.

      Contact Jim Puzzanghera at jpuzzanghera@...

      Jan. 30, 2001

      It’s Greed, Stupid!
      Debunking the 10 Myths of Utility Deregulation

      WASHINGTON, D.C. – Proponents of deregulation have developed a repertoire of
      excuses for why electricity deregulation is failing miserably. Rather than
      admitting that a speculative market for a life-sustaining commodity such as
      electricity does not work, they have cultivated such myths as, "California
      just didn’t deregulate enough."
      In fact, if the retail price for electricity was completely deregulated as
      the industry suggests, the average consumer’s electric bill would be $600,
      rather than the approximately $55 charged before deregulation, according to
      Public Citizen’s calculations.
      This is just one of ten myths debunked by a Public Citizen report released
      . The report examines in detail arguments that deregulation proponents
      are making and explains why these contentions are false.
      "Already, consumers and small businesses have been hijacked because
      California’s deregulation law, which has allowed so-called ‘free market’
      forces to reign in California’s electricity market, has allowed power
      suppliers to rake in billions in excess profits," Public Citizen President
      Joan Claybrook said.
      By both exerting market power and manipulating the next day’s spot market for
      electricity, these suppliers keep electricity supplies low and prices high,
      for instance by employing unscheduled power plant closings. They have created
      a crisis in California that may drive the state into a recession and has done
      nothing to ensure that consumers have affordable, reliable electricity.
      In keeping with their long-range business plans to dramatically expand sales,
      power suppliers blame the current problems on too few power plants. Their
      solution is to repeal power plant and transmission line siting laws and to
      suspend environmental regulations that protect people’s health, so that they
      can engage in a building frenzy.
      "If the power suppliers selling electricity in California have their way and
      retail prices for this important commodity are left to the vagaries of the
      market, the average consumer could be paying 12 times more for electricity
      than they were before deregulation," said Wenonah Hauter, director of Public
      Citizen’s Critical Mass Energy and Environment Program
      The myths include:
      Prices are high because California’s strict environmental standards have
      slowed power plant construction
      . In fact, there is currently more than enough
      capacity to meet maximum demands. Power demand during four of the past six
      months in California was lower than during the same period in 1999. However,
      power producers under deregulation have strong incentives not to run plants
      at full capacity or to shut them down altogether to manipulate prices. Even
      so, since April 1999, the state’s Energy Commission has approved nine major
      new power plant projects, six of which are under construction.
      The purpose of deregulation was to lower costs for consumers
      . To the
      contrary, deregulation has resulted in higher prices for consumers. Even if
      long-term contracts are entered into with suppliers, as is being discussed by
      state officials, consumers will still be paying an average of three times
      more for the price of electricity than they would have under sensible
      Deregulation is good for the environment.
      Market forces driving deregulation
      will only encourage cost-cutting measures that will result in more pollution.
      In fact, deregulation creates incentives to produce power from the cheapest
      source — dirty coal plants. Suppliers want to continue operating these older
      plants as long as possible, because it costs less than building new, more
      efficient plants. (The new plants being proposed would run in addition to
      existing plants.) Deregulation thus provides no incentive for conservation,
      which produces no profits for power producers.
      California’s energy crisis is best resolved through state, not federal,
      Under the deregulation law, California’s utilities sold most of
      their fossil fuel power plants to out-of-state power wholesalers who are
      profiting at the expense of consumers. To remedy this situation requires
      federal action. The best short-term solution for the crisis would be for the
      federal government to impose cost-based rates on these power suppliers, who
      now are charging utilities outrageous prices and far more than utilities are
      permitted to charge consumers. The federal government is the sole entity with
      the power to do this. This action would give California time to thoughtfully
      restructure its electric industry.
      California’s utilities are close to bankruptcy and need to be bailed out.
      fact, the utilities’ parent companies have spent billions on buying other
      assets in recent months. They should be forced to sell off these assets
      before having the state – and therefore, the taxpayers – assume the burden
      and future risk for utility debts.

      Electricity deregulation is working in other states.

      In other states that
      have deregulated, like Pennsylvania, the temporary protections that made
      deregulation legislation politically viable for passage are still in effect.
      Pennsylvania’s utilities have a regulated rate for electricity that new
      suppliers must beat to be competitive. Over the next few years, as these
      protections are sunset, we will see many states follow in California’s
      footsteps if deregulation is not canceled. ###

      Read More About Electricity Deregulation
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