BIGGEST USERS OF POWER IN FOR PLEASANT SHOCK : DEREGULATION TO LOWER COST OF ELECTRICITY.

Byline: Gregory J. Wilcox Daily News Staff Writer

At Calabasas-based Tekelec, 140 workers consume an average of $13,500 a month in electricity making systems that diagnose problems with telecommunications equipment.

Scott Gardner, the company's new facilities manager, is hoping those costs will be coming down, thanks to the coming deregulation of the state's $20 billion power industry.

Tekelec, a customer of Southern California Edison, is among thousands of companies and individual consumers that will be able to comparison shop for electricity starting Jan. 1, 1998.

``There are a number of things we could probably do in regard to saving in this area,'' Gardner said. ``(Deregulation) will afford us an opportunity to invest more capital in research and development facilities here should we choose to do that and it would increase the potential for us to sock away capital.''

The new electricity bazaar was created by a landmark bill breaking the monopolistic hold investor-owned utilities now enjoy over the power generation segment of the industry. It passed in the final frantic hours of California's 1996 legislative session.

The bill, AB 1890 sponsored by Assemblyman Mickey Conroy, R-Orange, chairman of the Assembly Utilities and Commerce Committee, received unanimous support in both legislative houses and is touted as containing perks for all customer classes.

The goal is to eventually give California residential and business customers the cheapest power in the country. Currently, it's about 50 percent higher than the national average.

``We've tried to put something in it for everybody and we wanted to ensure that residential customers and small commercial users would also benefit from restructuring,'' said John Larrea, the committee's principal consultant.

The bill's provisions apply to California's three utility monopolies - Rosemead-based Edison, San Francisco-based Pacific Gas & Electric and San Diego Gas & Electric, which have about 70 percent of the state's electric customers.

Municipally owned systems, such as Los Angeles' Department of Water and Power, would not be directly affected.

Edison, which serves 4.1 million customers, supported the industry bust-up even though it is losing its monopolistic grip.

``This bill ensures a timely and fair transition to a competitive electricity market,'' said company Chairman and Chief Executive Officer John Bryson. ``It will help lower rates for millions of consumers and provides a fair opportunity for utilities to compete to serve customers in a restructured energy marketplace.''

DWP's residential customers now pay about 15 percent less for power than Edison's users. But though not covered in the deregulation measure, DWP customers could benefit because the city-run provider will have access to a more robust and competitive power market.

DWP says it wants to be a player in that market. Its executives are seeking to get measures on the ballot that would allow the agency to:

Offer services outside the city limits.

Remove management jobs from civil service.

Gain flexibility in arranging its outside debt financing.

In each case, the Los Angeles utility is trying to make itself more competitive with power generators looking to tap into its 1.5 million customers.

Meanwhile, residential and business customers still must help utilities defray nearly $30 billion for money-losing investments such as nuclear power plants, an issue known as ``stranded costs.''

Utility industry analyst Dan Rudakas at EVEREN Securities in Chicago, said that the legislation is a better plan than what had been proposed by the California Public Utilities Commission.

``What the commission (initially) proposed was very good for the largest industrial customers and was basically bad for everybody else,'' he said. ``This brings on competition in a more orderly manner and with some confidence on the part of the financial markets. It's better for investors and it's better for the utilities' customers.''

Consumer groups grudgingly praise the plan for its rate reduction for residential and small-business customers. But they think that bigger industrial customers should pick up a bigger share of the stranded costs.

``It's probably the biggest bailout since the savings and loans. It allows the utilities to collect between $25 billion and $30 billion in uneconomic investments that they would not be able to recover in a competitive market,'' said Mike Florio, lead attorney at Toward Utility Rate Normalization, the San Francisco-based consumer advocacy group.

He notes that residential customers use 33 percent of the power generated but are paying for 40 percent of the stranded costs.

Michael Shames, executive director of the Utility Consumers Action Network in San Diego, agrees that the biggest power users will benefit the most.

``This is corporate welfare, no doubt about it. Whether this will trickle down to small users remains to be seen,'' he said.

Aside from cost, deregulation could spur other changes. Industry observers say it could eventually give rise to one-stop shopping for electric, cable television and telephone services.

Shames said it would be possible to attach a device to electric meters that would allow them to be read by cable or phone lines. That way, one company could essentially provide all three services.

``I don't think this is too far down the road,'' he said.

Whether that's a positive development remains to be seen. For now, most electric customers are just hoping for rate relief.

At Whittaker Corp., an aerospace manufacturer in Simi Valley, officials are taking a wait-and-see attitude toward the breakup.

The company spends about $41,000 a month on electricity at its manufacturing facility.

``If it lowers costs it would be a benefit,'' said Whittaker facilities manager Jim Schultz. ``But it may be a waiting game.''

POWER TO THE PEOPLE

Here's a snapshot of what deregulation will bring:

Residential customers will receive a 10 percent reduction in the power bills beginning in January 1998.

Rates for commercial and industrial users will be frozen between 1998 and 2001 as deregulation is phased in.

Electricity will be sold via a power exchange where supply and demand factors will determine price. Buying groups of residential, business and industrial customers - or a combination of all three - could be formed to earn price breaks for quantity purchases.

Utilities would still own the transmission facilities but the power grid would be controlled by what is known as an Independent System Operator to ensure open access to the power supply and reduce the risk of outages.

Transmission costs will be regulated by the federal government.

CAPTION(S):

Box, Photo

Box: POWER TO THE PEOPLE (See text)

Photo: (Color) Bob Martinez checks the power lines on a pole along Highway 118 in Moorpark.

Andy Holzman/Special to the Daily News