Hearing on electric industry overhaul draws a crowd.

Company execs say PUC action could set precedent

The opening round of hearings on the California Public Utilities Commission's proposal to restructure the state's electricity industry filled a 514-seat room in the Los Angeles Convention Center last Tuesday (June 14) -- attracting folks from far beyond the state's borders.

"Whatever's going to happen here is going to filter East sooner or later," said a representative from the South Carolina Public Service Authority, the PUC's counterpart in Moncks Corner, S.C.

The proposal, first launched on April 20, sets a tentative timetable for customers to choose their electric service provider, thereby scrapping the present system which grants utilities geographic monopolies. It also calls for rates to be determined by performance rather than fixed (as they are now) as a mark-up on projected costs.

Since April, stated PUC President Daniel Fessler, the commission has received more than 80 counter proposals. It has also gotten feedback from the California Legislature, Federal Energy Regulatory Commission, Department of Energy and the U.S. Congress over jurisdictional concerns.

These concerns include jurisdiction over transmission pricing, policies for energy efficiency and renewable resources and how the restructuring itself is to be determined.

New York-based credit rating agency Standard & Poor's Corp. had concerns about the restructuring timetable and, as a result, placed California's major investor-owned electric utilities on its CreditWatch list.

The PUC had planned to adopt final rules by Aug. 14 and targeted Jan. 1, 1996, to give the first group of California customers -- large electric consumers -- the right to choose a provider. Ideally, all consumers were to have free choice by Jan. 1, 2002.

Due to the feedback it's gotten so far, the PUC has reconsidered delivering its August directive for restructuring, indicating that year-end 1994 may be more realistic. PUC-watchers told the Business Journal that a possible mid- to late-1995 deadline seems more likely.

The response has also caused the PUC to be more sensitive to the state's investor-owned electric utilities, whose counterproposals and comments have sought to buy time.

"Send something in writing if you believe the status quo is tenable," Fessler told a panel of power suppliers. Though none indicated any opposition to change, only to the means and the timing, Fessler later quipped that a good argument against would get him off their backs.

John Bryson, chief executive for Rosemead-based SCEcorp, which owns Southern California Edison, said he believes a wholesale market should be in place before free choice sets in.

To accomplish this, SCEcorp advocates the establishment of a clearinghouse, PoolCo, for buying and selling electricity.

PoolCo would be, Bryson explained to the commissioners, "a regional, privately owned company -- independent of all utilities and generation suppliers -- responsible for dispatching regional transmission and generation resources and providing non-discriminatory access to all generation suppliers."

Specifically, Bryson later told the Business Journal, every electricity supplier in the region and every buyer of bulk electricity would participate in the pool, submitting bids and offers for power. In this way, they effectively would determine a spot market price for electricity.

The region in question, he said, would ideally be six or seven Western states, though he believed the pool could function even if limited to California participants.

The power pool concept is not new to the state's electricity industry. Bryson said SCEcorp's take on the idea stems from the impressive workings of the New England Power Pool, which, he noted, serves as PoolCo's model.

The Holyoke, Mass.-based pool is a voluntary association of 98 public and investor-owned utilities which account for virtually all of the electric power production, purchases, sales and transmission in New England.

Formed in 1971, it is governed by a 10-member executive committee representing the seven largest investor-owned utilities in the region, Vermont-based utilities, smaller investor-owned utilities, and publicly owned municipal and cooperative utilities. It monitors and directs more than 300 generators and about 8,000 miles of transmission lines 24 hours a day, 365 days a year, according to New England pool officials.

It also supplies replacement power during unexpected shutdowns, accounts for transaction billing between member firms and aids in strategic planning. In comparison, said Bryson of the situation in the West, "today's wholesale markets are limited."

Dick Farman, chief executive of downtown L.A.-based Pacific Enterprises, which owns Southern California Gas Co., told the Business Journal that "the Bryson proposal to set up a pool has merit and should be explored by the commission."

Farman was invited to the hearing by the commissioners to outline the pitfalls experienced with gas industry deregulation in the 1980s and to offer some advice. He warned the PUC against the "perils of piecemeal reform" and urged the implementation of "reasonable rules that will allow traditional regulatory approaches to take a step back and get out of the way."