Suppliers lobby California lawmakers for direct access for consumers

The California Public Utilities Commission is scheduled to set a date formally ending retail choice for California consumers at its June 14 meeting, despite behind-the-scene maneuvering to keep choice alive for big power consumers.

Large California electricity users and marketers have mounted a lobbying campaign in the legislature to keep direct access alive as an option. Sources said it has become a pivotal negotiating point in California Gov. Gray Davis’s efforts to win Republican support for his proposed bailout of Southern California Edison Co.

Davis ushered in the end of retail choice for electricity consumers when he signed a bill Feb. 1 that authorized the state to buy power on behalf of Pacific Gas & Electric Co. and Southern California Edison. The retail choice provision was added as amendment to the legislation. But it also left it up to the California PUC to set a date suspending the right of retail customers to select and use an alternative energy supplier.

Davis appears willing to give suppliers and big businesses what they want in exchange for supporting his proposal to keep Southern California Edison, Rosemead, Calif., out of bankruptcy protection, sources said. He and the utility signed a memorandum of understanding under which the state would buy the company’s transmission assets in exchange for various concessions on the part of Southern California Edison.

But the deal also required various actions by the PUC and the California legislature. It also had deadlines under which certain actions were supposed to take place.

So far little has happened. Earlier this week, the Alliance for Retail Energy Markets complained the PUC seemed ready to scuttle chances for achieving progress on either front by moving ahead to set a date to end competition.

“There’s no point for the PUC to support an order when it might be superseded by legislation,” said Tracy Fairchild, a spokeswoman for the marketing organization whose members include Shell Energy Services, a unit of Shell Oil Co.; Enron Energy Services, a unit of Enron Corp.; both of Houston; GreenMountain Energy Co., Austin, Tex.; Commonwealth Energy Corp., White Rock, BC, and Strategic Energy LLC, an affiliate of Kansas City Power & Light Co., Kansas City, Mo.

Opt out provision
It isn’t clear if PUC Commissioner Carl Wood has the support of other commissioners to set the date, Fairchild said. The commission also regularly postpones and pulls items off the agenda at the last minute if there is no consensus. But with a just-enacted rate increase that relies heavily on big business to carry the extra load the commission may not be amenable to giving large consumers an opt out provision.

Suppliers have been lining up support wherever they can find it. Earlier this year, Vincent Viola, chairman of the New York Mercantile Exchange, weighed in on behalf of California suppliers and large retail customers.

In a letter to Gray, he argued releasing medium and large commercial and industrial buyers from the obligation of using state-supplied power would free billions of dollars of state capital from the risks of volatile energy markets. “It seems that medium and large businesses have been deemed unable to negotiate fair and reliable supply contracts on their own behalf,” he said.

He noted if industrials and medium sized businesses were allowed to pick up a supplier, the role of the state would be rolled back to cover the less than 50% of the market that includes homeowners and small business owners. Viola also touted the use financial market instruments to protect against unexpected energy price moves, rather than locking in prices under potentially high-priced fixed contracts.

While retail electric deregulation is in trouble in many parts of the country, big business is managing to keep its option alive. Nevada recently all but rescinded its deregulation law that would have given all classes of customers the right to choose a supplier and ordered incumbent Sierra Pacific Resources, Reno, to halt the sale of its power plants. But users of one megawatt or more of electricity were exempted from the law at the last minute and can still buy from suppliers other than the regulated utility units of Sierra Pacific Resources.

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