Our view: Legislative paralysis dooms consumers to power chaos

Another year is ticking by without a coherent energy policy in Sacramento, a point that was punctuated last week by talk from high officials that blackouts are unlikely, but possible, this summer.

The top energy adviser to Gov. Arnold Schwarzenegger told a Senate committee that an unusually hot summer may force Southern California into severe conservation measures —— including rolling blackouts —— because energy-hungry air conditioners would push demand dangerously close to exhausting the region's supply of electricity. What is certain is that consumers will again pay the nation's highest electricity bills.

It is an old song, one that began with the very real rolling blackouts that struck the entire state in early 2001. Yet here we are, fully four years later, rowing the same leaky boat.

California's electricity industry was patched with emergency legislation in 2001 that shoved regulated utilities back into the business of providing power for their customers. But the laws left about a third of the state's supply in the hands of the same private energy firms that had withheld generating capacity to push up prices and gouge consumers during the power crisis. Later that year, the Enron collapse sparked a credit crisis that halted construction of new power plants.

Now the state's consumers remain at the mercy of a twilight system that is neither fully regulated nor wisely deregulated, neither a centrally planned utility industry nor a free market where competitors vie for business. The sad and inevitable result is that consumers are getting the worst of both worlds: We pay the high prices of regulated power without the reliability, and we endure the tumult of a market-based system without the efficiency and low costs.

Schwarzenegger promised to fix this mess with an energy policy. He missed several self-imposed deadlines, and still he has presented no comprehensive plan. After dropping some hints about reviving deregulation, the Republican governor retreated under withering opposition from Democrats who control the Legislature. Instead, the governor used appointments to the state's regulatory commission to force utilities into beefing up reserves.

The ad-hoc policy will protect against blackouts for a few years after some new generators are built, but there is much evidence that utilities are overpaying for the sudden buildup. Exhibit A can be found in southwest Escondido, where an unregulated sister company of San Diego Gas & Electric Co. is building a power plant. Instead of the company bearing the risk that its electricity will be needed, SDG&E's customers have already agreed to buy the plant at a premium price. A similar plant is being built in Otay Mesa by a private energy company —— secured by a long-term contract with the utility that transfers most of the risk to local consumers.

On the surface, San Diego County's brave new energy future looks a lot like the central planning that ran California's electricity grid for a century. Indeed, the region will have far more power than it needs once the two new plants are completed (by summer 2006 in Escondido; maybe 2008 in Otay Mesa).

However, the reality goes to the heart of Sacramento's failure to fix its deregulation mess: San Diego County's other two non-nuclear power plants, in Carlsbad and Chula Vista, are more than 30 years old and nearly worn out. They are running only because consumers pay premium prices that allow them to operate with efficiencies that are horrendous by modern standards. When the new plants come online, power prices should logically fall with the region awash in surplus supplies of local electricity. But low prices would force the owners of the old plants to shut them down, thus ensuring a new round of blackouts and driving prices back up.

Schwarzenegger has said his vision of California's energy future involves private energy firms competing with local utilities to ensure that neither can gouge consumers. What he has delivered is precisely the opposite: Legislative paralysis and halfhearted initiatives have left consumers at the mercy of both regulated and unregulated energy firms alike.