Nader comments on California electric deregulation
- 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).
Nader speaks out against utility bailout
BY JIM PUZZANGHERA
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@...
It’s Greed, Stupid!WASHINGTON, D.C. – Proponents of deregulation have developed a repertoire of
Debunking the 10 Myths of Utility Deregulation
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
today. 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,
actions. 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. In
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. ###