[BETA] Fortnightly

California's CTC:

Light-handed or Light-headed?Customers didn't buy power on lay-away. So why should the CPUC exact interest?

In a recent dream, the Governor of California called to ask if I would accept an appointment to serve on the California Public Utilities Commission (CPUC). Of course I thanked him and said I was extremely flattered by the offer. However, I inquired, didn't he have an opening on the parole board or air resources board? You see, I know entirely too much about the thankless work of the CPUC. Frankly, I would rather take a cut in pay and face convicted felons or contaminated air.

The nearly impossible job of a CPUC commissioner is to understand highly complex technical issues as well as the underlying policies, and to manipulate both in a manner that advances California's political, business, and social agendas. The result? Somebody is always upset. No CPUC case illustrates this better than the current debate over the competition transition charge (CTC).

The dilemma for the regulator/ policymaker is where to draw the line. In its December 20, 1995, decision, the CPUC said that all customers taking utility service on or after that date would be responsible for a "nonbypassable" CTC. But what about customers who close shop and leave the state? What about customers who go out of business entirely? What about new customers for whose loads the utility hasn't invested a dime? What about

customers who spent years and millions of dollars planning and constructing facilities to generate their own electricity, and may be caught holding the CTC bag because of a fluke of regulatory timing? What about customers who purchased more efficient refrigerators that weren't delivered until December 21? Should they be liable for the increment of electricity demand they no longer need, or pay a CTC for costs they didn't induce?

There is one thing we ought to learn from history: Whenever people tamper with markets, distortions occur. If we are to create a truly competitive electric generation market in California, at some point we must step back and let market forces work.

As much they would like to make everyone happy, the CPUC commissioners can't keep people (and businesses) from pursuing options aligned with their self-interest. Nor can they protect utility shareholders from normal market risks. Try as they might to draw a line in the sand, the CPUC will see that line continuously eroded by forces beyond their control. I hope the CPUC will consider this light-handed option: Apply the CTC to the distribution charge based on actual kilowatts delivered by the utility company, not on some historical benchmark.

The CPUC must reject the notion of an "obligation to buy," and acknowledge that people should not be penalized for exercising choice. Like parents coming to terms with the notion that they can't control their children's lives forever, the CPUC will, hopefully, embrace utility restructuring as a process of "letting go." In the end, I believe our economy will be better off because customers rather than policymakers will make the choices. t

Nancy I. Day, is vice president-customer