Frontlines

Fortnightly Magazine - October 1 1996
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Labor Day found me trudging around in one of those "big box" discount stores, looking for a sale on a new refrigerator. Out West, California lawmakers spent the holiday putting together their own discount plan (em this one promising rate cuts for the state's residential electric consumers, funded by "rate reduction bonds" backed by a state-owned bank for economic development.

Either way you cut it, the holiday proved worthy of its name. I wore myself out looking and still don't have my refrigerator. And in California, organized labor largely got its way from the state legislature, winning several concessions in the new bill (Assembly Bill 1890) designed to save jobs: 1) stranded-cost status for lost jobs, 2) preservation of overly strict standards for reliability to keep marginal plants running, and 3) a clause to force buyers of divested fossil plants to retain the former utility for several years to operate the plant.

The nub of the deal lay in a questionable trade that allocates a larger-than-logical share of costs for stranded generation assets to small commercial and residential customers, in exchange for publicly funded rate discounts promised down the road. Utilities as hidden tax collectors? In California, at least, the government will serve as a hidden collector of utility bills, embedded in state tax rates.

Stranded Costs (Where the Deal Was Cut)

"The legislation gives clear direction. [It reduces] everybody's downside risk."

That opinion comes from Jan Smutny-Jones, executive director of the Independent Energy Producers Association, the voice of competitive generation in California. He praises the state legislature for its enormous investment in the bill.

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