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Learning Our Lessons From California

This article, provided by the Oregon Rural Electric Cooperative Association (ORECA), describes the effects of deregulation of the electric utility industry.

Since deregulation, the State of California has made headlines with power supply shortages and price spikes for electricity. A megawatt hour that sold for $50 just a few years ago went as high as $522.55 on the spot wholesale market last summer. In general, wholesale electricity prices have risen tenfold in the past year. This cost is being passed on to some California consumers through higher rates, surcharges and assessment fees on their utility bills. California’s flawed deregulation plan and the power supply shortage has, and will continue to, influence the rates of all utilities in the Pacific Northwest.

What exactly happened in California? The idea of deregulation is that wholesalers of energy would compete to supply utilities with power. This competition, in turn, would bring the price down. In California, utilities have been forced to compete for power that’s in scarce supply, driving the cost up as a result. California deregulated on the assumption that demand for electricity would be gradual. California overlooked their economic development efforts and the resulting high tech boom. Demand for power tripled in a much shorter time than anticipated, and supply was not available. Secretary of Energy Bill Richardson stepped in and mandated that the Bonneville Power Administration (BPA) sell power to California. This action, coupled with other significant factors is having a devastating affect on the price of BPA power–the primary power supplier for Oregon’s co-ops.

The Western Governors’ Association believes that California isn’t alone in dealing with energy supply and pricing issues. Indeed, the governors held an emergency meeting on December 20th in Denver, Colorado to address these same concerns. As a result of that meeting, the governors have asked the Federal Energy Regulatory Commission to investigate what happened to cause such shortages and price spikes. The governors are developing an immediate action plan to increase the supply and availability of electricity. In the interim, they have developed an aggressive conservation strategy and are asking all western state governments to take part starting January 1, 2001. You will be hearing much more from Oregon’s Governor Kitzhaber in the coming months about electricity issues.

Oregon consumers have one simple question on their mind: "How do we prevent this from happening here?" We may not be able to. However, for the customers of Oregon’s electric cooperatives, they do know that their locally controlled co-op will make decisions about power supply and delivery that are in the best interests of their customers. For these customers, the answer is simple–protect local control.

Past articles have touched on the importance of local control. Local control means that you, as a member of a consumer-owned utility, have the right to elect a board of directors from your community to set rates, policies and procedures for your co-op. In contrast, private power companies are regulated at the state level by the Public Utility Commission (PUC).

In the wake of what’s happened in California, local control is more important than ever to the future of Oregon co-ops. All decisions about your co-op are made by people who actually live in your community. Your neighbors make the decisions–not a PUC Commissioner or a bureaucrat in Washington, D.C.

Second, local control means controlled operation and maintenance costs. If we lose local control, we have no say in added regulation mandated by the PUC or other outsiders. More regulation means added costs paid by you through your co-op.

Finally, local control means full disclosure to you, the consumer. In California, no one seemed to know what was going on until it was too late. The end result is going to be that consumers will pay more to bail out companies, a government and a regulatory commission that made bad decisions. As a co-op member, you have the right to participate in the decision-making process by attending co-op board meetings and annual meetings, or contacting a director or the Salem Electric office.

With the start of the Oregon State Legislative Session, we need to make sure our legislators understand how important local control is to the continued success of Oregon co-ops. Local control may be up for discussion by policy makers and industry experts alike. We need to ask our legislators to protect local control for co-ops whenever the topic arises. Check the ORECA website at www.oreca.org for updated information on electricity restructuring discussions throughout the 2001 Legislative Session.

Over the past two years, Oregon’s consumer-owned utilities have organized a grass roots network called Power of Community. Our grass roots movement was designed to build a coalition of support to maintain local control of Oregon’s co-ops by their locally-elected governing boards.

More than 5,000 of you have signed up to participate in the program. First and foremost, we thank you for your support! Now, we are asking you to contact your legislators with a positive message about local control.

If you are a Power of Community member, you should receive a letter from ORECA sometime this month. We need you to contact your state legislators about the importance of local control. Please plan to participate in this exercise and contact your elected representatives. It only takes a few minutes to do so; and the results of your effort could ensure that local control is around for years to come.

If you are not a Power of Community member, please take a minute to fill out the form below and mail it to the address provided. Or, you may sign up on-line by visiting our website at www.oreca.org and clicking on the Power of Community icon.

If states continue to deregulate and the electric utility industry changes, we will see some backlash from the power supply markets in price and availability. However, if we protect local control, your co-op will do everything possible to minimize the effects of these changes on you–the customer.






 

February 2001 

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