Off Peak
February 1, 2001
Who Lost Deregulation?
California Sen. Steve Peace says it wasn't him, and he has the video to prove it.
Sen. Steve Peace is widely seen as the architect of Assembly Bill 1890, California's key law on electric restructuring. Yet long before that bill was introduced, the Cal PUC had started the ball rolling, by mapping out a vision of a competitive electricity market in its 1994 "Blue Book"-a sort of manifesto for change in the utility industry.
Peace tells this story in a 10-minute video posted to his website in December. By identifying common myths about electric competition, and debunking each in turn, Peace attempts to set the record straight, and remind voters that his legislation came only after the horse was out of the barn. Excerpts follow.
Myth 1: The state Legislature deregulated electricity in California in 1996. That simply is not true. The California Public Utilities Commission filed its restructuring plan with the Federal Energy Regulatory Commission, or FERC, a year earlier, in December 1995. FERC ultimately approved these filings, and the PUC-not the Legislature-subsequently ordered California's utilities to sell a portion of their power plants.
Myth 2: Peace was the "architect of deregulation." Ironically, if anything, the opposite is the case. Footage of Peace speaking at a restructuring hearing, August 1996: "It has never been my view that this is a good idea. … I think the large customers are going to be sorry they ever asked for this. … I think they've been sold a bill of goods by the Enrons and the other big energy producers in the country. I think their political clout in Washington produced an environment that drives this train. …"
Myth 3: The Legislature had latitude in crafting the restructuring statutes. A letter from then-Gov. Pete Wilson to the chair of FERC made it clear that the Legislature was working within very narrow parameters. He wrote, "I will necessarily oppose any legislation which seeks to alter the decision's basic framework or timeline." …
Myth 4: The Legislature could have maintained the status quo. Peace in the August 1996 hearing: "It doesn't appear we have the option to keep things as they are. … If we don't vote, that's not the way things stay."
Myth 5: AB 1890 was rushed through the Legislature. On the contrary, after almost four years of hearings and workshops at the PUC, the proposal took more than a year to work its way through the legislative process. …
Myth 6: AB 1890 was bad legislation. Not so. AB 1890 did make the PUC plan more friendly to small consumers, and preserved historic investments in energy efficiency. The consumer advocacy groups concurred. …
Myth 7: The Legislature could have defused last summer's crisis. The root problem was the wholesale market, which was outside state jurisdiction and regulation. Therefore the problem could not be corrected in Sacramento; the Legislature can not control a wholesale market run amuck. In fact, without the limited protections implemented by AB 1890, the gouging of ratepayers would have been worse. …
Myth 8: FERC has no power to order rebates. [In FERC hearings, Peace] reminded commissioners that FERC has statutory responsibility to discipline a wholesale electricity market that has gone haywire or has been manipulated. Peace in footage from November FERC hearing: "That's what the law says, and until you can get Congress to change the federal law, this commission has a legal responsibility to assure that prices are just and reasonable-a legal responsibility which I am confident the courts will enforce."
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