San Diego Union-Tribune

Page A-9

16-Feb-2001 Friday

 Deregulation can work, other markets report |
  House energy panel urged to monitor wholesale power


WASHINGTON -- Officials from several states that have deregulated their power markets assured lawmakers yesterday that they have avoided the pitfalls that led to chaos in California's deregulated market.

Unlike California, the other states -- Pennsylvania, Maryland, Ohio and Illinois -- have taken steps to ensure that electricity supplies will meet or exceed demand, the officials told the House Commerce subcommittee on energy and air quality.

But some of them also warned that the market for wholesale power -- which has hit California with sky-high prices -- is not functioning as well as it should and presents a threat to all deregulated markets.

The subcommittee hearing was the latest in a series of congressional dissections of California's power woes. The panel has wrestled with deregulation issues for several years, and some lawmakers who favor the policy fear California's failed experiment could slow or halt moves toward open power markets nationwide.

Under deregulation, electricity markets that were once tightly controlled by state regulators are more or less thrown open to competition, ideally offering a choice of power providers and lower prices to consumers.

California's experience was held up as an anomaly at the hearing: the product of a flawed state law that distorted the market.

"My message to this committee today is competition can work," said John M. Quain, chairman of the Pennsylvania Public Utility Commission. "There is simply no substitute for good old-fashioned American competition if you get the fundamentals right."

Since Pennsylvania deregulated its power market in 1997, electricity rates there have tumbled, saving consumers nearly $3 billion, Quain said.

The key to successful deregulation, Quain and the other officials said, is ensuring adequate electricity supplies through power plant construction, long-term supply contracts and careful monitoring of the market.

California, by contrast, allowed power demand to far outstrip supplies, required utilities to sell most of their power plants and forbade long-term contracting.

Some officials warned of problems in the wholesale power market that they said federal regulators must address.

"Probably the greatest impediment we have to the development of a good retail market in any state is the lack of a substantial -- vibrant, if you will -- wholesale market, which includes transmission. Electricity simply does not move as it should between regions," said Alan R. Schriber, chairman of the Ohio Public Utilities Commission.

Michael J. Travieso, the state consumer advocate for Maryland, said the Federal Energy Regulatory Commission needs to address price gouging by power suppliers.

"Our message is to pay attention to the wholesale market," he told the committee.

Carl Wood, a member of the California Public Utilities Commission who also testified at the hearing, acknowledged the flaws in California's deregulation law but also blamed the federal regulatory commission for failing to protect consumers.

"Beggar-thy-neighbor withholding of (wholesale power) generation and sales has replaced the regional cooperation that worked for years," Wood said.