TO CHANGE ELECTRIC UTILITY REGULATION
NOTES FROM FORUM OCTOBER 14, 1994

Donna Silvestri, CPUC: The impetus for the CPUC proposal is to lower the electrical rates in California so we can keep businesses here, and to provide consumers with a choice of electrical suppliers. It would continue to protect the environment and ensure public safety. Consumers would be able to purchase their electricity directly from those who generate it. Beginning January 1, 1996, the largest consumers will be first brought into the new system; all the rest would be phased in by 2002. Rate making would be performance based, so there would be an incentive for how well different options perform. There will be evidentiary hearings in San Francisco in December and three hearings in January in the Los Angeles area. All proceedings will be on Internet, and hearing dates will also be available on CompuServe. Written comments are welcome. It is important for people to participate in the proceedings. The PUC is interested in incorporating the ideas from the public in the proposal. It will only be as successful as the public makes it. For more information call 310-869-0803.

Gary Shoonyan, Edison: Edison believes public policy objectives should continue in a restructured industry. However, prior to initiating direct access, different approaches need to be put into place. There are several options to consider:

* Expand market-based approaches

Control emissions through Clean Air Act and RECLAIM

Shareholder funded energy and environmental efficiency and productivity

Pricing flexibility

Regulatory reform

* Continue utility specific efforts

Federal mandated low-emission vehicles

Low income ratepayer assistance

Minority & women owned businesses

Customer assistance

* Establish a statewide consortium funded by all ratepayers in proportion to energy use; a surcharge would be unavoidable, and would support:

Sustained development of renewable technologies

Universal research and development

Energy efficiency market transformation

Rebates, as applicable

Building/appliance efficiency standards

Universal EV efforts

* Initiate green pricing proposal to procure renewable generation beyond levels pursued under consortium direction.

Glen Sheeran, Inland Container: Why should we change the current system? Because:

* Our rates are the highest in the country because we've designed inefficiencies in the system (electric supply contracts in excess of current market supply costs, expensive nuclear power plants, largest utilities in the country, social programs). We could save over $6 billion per year if California met the same standards as the thirty most efficient utility companies nationwide. This could be accomplished by having utilities held accountable based on market based competition.

* Political will. Residential rates are climbing at a very steep pace. If they continue to climb, it will be unacceptable to rate payers.

* Technology has improved. Renewables, such as wind, co-generation, are now more competitive than refurbishing old power plants.

The Federal Energy Regulatory Commission (FERC) is deregulating the wholesale electrical production market to promote competition and open access to transmission rights. The question CA faces is whether state policies support and enhance what FERC is doing on the wholesale level in terms of deregulation and promoting competition by continuing that effort to the retail consumer.

Audrie Krause - Toward Utility Rate Normalization (TURN): The CPUC maintains that their proposal will lower rates and customers because of competition. However, rates are high because they set them high - the proposal won't change that. The CPUC can change rates if they want to.

The proposal will mean that large companies will be able to buy electricity from the cheapest sources, like dirty coal mines. Since they would be looking for the best price, environmental consequences would not be a consideration.

With the larger customers gone, the smaller customers that would still buy from the utility companies (before 2002) will end up paying more for the overall cost of generating electricity.

Performance-based rate-making could mean market/consumer abuse; safety and reliability could suffer. Market competition, by itself does not ensure against fraud and abuse.

TURN's alternative is a proposal for community access to competitive electricity, in which local government entities would establish Consumer Owned Utilities to represent the buying power of the whole community to negotiate competitive deals for all residential and business customers within a geographic area

Rich Ferguson, Sierra Club: The following principles were developed by a coalition of environmental and consumer groups as guidelines for the development of competition in the electric service industry to protect the public interest:

* Equity between customer classes

The PUC proposal says it will share the costs between all classes, but the way the proposal is structured, it seems the residential customers will not share in the benefits of the large industrial customers, because they will be phased in later, and it is harder for small customers to do.

* Environmental equity of social costs and benefits

The PUC proposal does not explain how it will protect the environment. If the market provides cheap but dirty electricity, what safeguards are there?

* Cost effective energy conservation

The PUC proposal does not make conservation a priority; the utility incentive programs for conservation are specifically targeted for removal in the proposal.

* Utility performance standards

The PUC proposal does not decouple utility profits from energy sales. Performance based rate making should not incentivize creating more power. Who delivers the energy should not make money by generating more.