LEADERSHIP NEEDED IN ALLEVIATE CRISIS.

Byline: GEORGE RUNNER  Commentary

Surely, four years ago, no one predicted that the recently implemented deregulation of the electric system would cause the current problems the state is experiencing. Skyrocketing wholesale electric prices, too few available power plants to meet the state's electrical needs and the state's economic growth are all factors that have contributed to California's current electricity crisis. While fingers are being pointed in every direction, real solutions are being ignored. Rather, consumers are being forced to bear the brunt of this mess and it's simply not fair.

In 1996, the Legislature enacted, and Gov. Pete Wilson signed, Assembly Bill 1890 that established a system that regulated the power industry differently. What has become known as deregulation actually restructured the system in such a way as to regulate the electric industry in a supposedly more competitive fashion. One of the bill's main intentions was to reduce the cost of electricity in the state, which had grown to nearly 50 percent above the national average. The thought was that increasing the choices consumers had in purchasing electricity would spur competition, thereby improving services and reducing costs.

However, California's economic landscape has since substantially changed and the restructured electrical system has failed to keep up with the pace. Environmental regulations have slowed, and at times even halted the construction of more power generators that have been needed to meet the increasing electricity demand. California's robust economy has led to more people and businesses settling here, thus using more electricity. Last summer, consumers began feeling the heat of the burgeoning demand and shortage of supply when electricity demand far exceeded the state's capacity. Rolling blackouts have continued to threaten businesses and households well into the winter. While wholesale energy prices surged, the market became volatile and utility companies struggled to remain solvent. Lenders have become nervous about incoming utility companies' money, sending shareholders abandoning ship, further strapping the electrical industry.

On the verge of bankruptcy, the utility companies turned to the California Public Utility Commission. As a result, the CPUC decided to increase consumer rates by an average of 10 percent. This means future electric bills will include significant increases. Consumers will have to pay for this failed experiment. Where is the fairness in that?

In their panic, the CPUC along with the utility companies, neglected to recognize alternative solutions to this problem - solutions that don't mean money out of your pocket nor returning to pre-restructuring of the electric system. First, we need to fast-track the process in which new energy producing plants can be approved for construction. Over the past decade, not one single power plant has been constructed and a majority of existing plants are reaching 40 and 50 years old. More power plants in the state would significantly increase power generations, eliminating future threats of power outages. Secondly, more providers and sellers of power should be allowed in the market to increase the pool of providers. Finally, a federal cap should be placed on wholesalers as to the amount they can charge for electricity. This would help prevent future wholesale costs of electricity from ballooning.

These solutions do not force hardworking Californians to help utility companies climb out of their financial hole. And even though the decision has already been made to increase electric rates, there is still a way to provide consumers relief. With California's anticipated $8 billion surplus, the state has the capacity to return some of the additional costs that will soon be forced on consumers. Once the utilities regain stability, the state should use a portion of the surplus and return it to consumers in the form of reduced utility rates tacked directly onto their bill. This is the most sensible and fair solution to California's electricity crisis.

There is no simple way for California to fix the problems adversely caused by deregulation. But there are ways - ones that don't financially penalize consumers. However, it will take decisive leadership and swift corrective action to alleviate the threats of rolling blackouts. This is not a time for casting blame. Nor is it a time to hastily come to decisions - especially decisions that will cost hardworking Californians millions of dollars. I am confident that the Legislature will work together to solve and overcome this crisis soon and I assure you that I will continue to work to ensure no decision is made that unfairly affects consumers.