The California legislature has entertained a few different bills this year that would reinstate direct access for some electricity consumers. And it is quashing all of them, and choosing instead to reinstate more traditional, top-down, no-incentives-in-sight cost-based regulation (through SB 888).
The latest effort to reintroduce consumer direct access is AB 428, which proposes a “core/non-core” split between customers, and allows consumers to choose to opt out of core service and contract with an energy provider directly and independently, on mutually beneficial terms. Yesterday the California Senate’s Energy, Utilities and Communication Committee rejected the bill by a 3-2 vote. The quote from the Chair of the committee, Debra Bowen, sums up the the control and manage mindset:
Senate Energy, Utilities and Communications Chairwoman Debra Bowen, who voted against the measure, said she was concerned about the “vagueness of the PUC’s charge” in crafting implementation of the bill. Ms. Bowen said she preferred the now-deleted language in SB 888 that required the legislature to approve any direct access proposal by the commission.
“I do believe there is a role for the private sector in competition, but given how critical each decision is and the fit of various (parts) together, I’d really like to see the entire package before it takes effect, and I was comfortable doing that in SB 888,” Ms. Bowen said.
Granted, vagueness can be a problem. But requiring layers of approval? Wanting to know in advance how the parts are going to fit together? Senator Bowen and her compatriots have an unrealistically high requirement for certainty and ex ante knowledge of outcome. They also continue to want to regulate both inputs and outcomes, which is also unrealistic. This requirement is likely to doom California to a static and stagnant electricity industry, to the detriment of its residents and businesses. Except for the utilities, who are part and parcel of the control and manage mindset:
But the ability of customers to change their minds on whether to choose a provider after three years would make it difficult for utilities to plan ahead, said Gary Schoonyan, director of regulatory policy and affairs for Edison International (NYSE:EIX – News) unit Southern California Edison. He also disputed supporters’ arguments that reinstating direct access would encourage generators to build power plants in the state, and that service providers would sign contracts for their output.
“I don’t believe energy service providers will be signing ten-plus year contracts with generators, or that customers will sign them with providers. We don’t see new infrastructure being built as a result of this bill,” Mr. Schoonyan said.
Again, the quest for certainty and stability through putting the brakes on customers. I become less and less sanguine about California’s energy future. The various direct access bills are all as legalistic as you would expect, but at least they would provide some measure of choice and competition in an environment desperate for it.
My earlier comments on SB 888’s attempt to re-regulate California’s electricity industry are in this post from 8 May.