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>Date: Fri, 25 Aug 2000 08:13:50 -0800
>From: Cheryl Weisenmiller <clweisenmiller@lbl.gov>
>Organization: Lawrence Berkeley National Laboratory
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>To: "Weisenmiller, Robert" <rbw@mrwassoc.com>
>Subject: Do not read until after your coffee
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>http://www.nytimes.com/yr/mo/day/oped/25pala.html
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>August 25, 2000
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>States Deregulate Energy at Their Peril
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>By GREGORY PALAST
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>ECONIC, N. Y. -- While reporters ogled celebrities at Barbra Streisand's
>bungalow during the Democratic Convention in Los Angeles, there was a real
>display of populism 100 miles to the south in San Diego. There politicians
>have enrolled two million citizens in a scary economic experiment. This
>year, San Diego became the first city in California to experience the end
>of state regulation of electricity prices.
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>When California's lawmakers voted to bring the miracle of market
>competition to electricity, they wrote into the law that homeowners' bills
>would fall "by at least 20 percent." In fact, bills jumped 124 percent
>this August over last. Rather than repudiate this mad market experiment,
>the federal government and 24 other states, New York included, have rushed
>to imitate California's lead.
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>Actually, Californians were lucky. Every hour of every day, San Diego Gas
>and Electric, the local utility, must now buy its electricity at a state
>auction known as a power pool. On the first hot day this summer, during
>the noonday heat, the companies that produce the power, newly deregulated,
>cranked up their bids to $9,999 per megawatt hour. That's about 5,000
>percent more than the once-controlled price of $20, but it could have been
>worse. According to those inside the secretive auction agency, sellers
>assumed the pool's computers could handle only four-digit bids. In fact,
>the computers could have accepted bids for seven figures and bankrupted a
>chunk of the state in a day.
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>One can trace California's electricity market plague largely to a single
>source, Daniel Fessler. In the early 1990's, Mr. Fessler, then president
>of the state's Public Utilities Commission, developed an infatuation with
>one of Margaret Thatcher's free-market ventures: the troubled
>England-Wales Power Pool.
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>How strange. Britons pay about 70 percent more for electricity than
>Americans. That's hardly a surprise, as each day around tea time, when
>England's usage peaks, a small clique of power plant owners take over the
>electricity auction, bidding up prices by 200 to 2,000 percent.
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>In the United States, utilities vowed they would play no such tricks if
>California removed the limits on profits that have been at the core of
>regulation policy for the past 100 years. The promise lasted several
>months, during which time five giant international electricity sellers --
>all new to California -- imported the techniques they'd learned in
>Britain: "stacking," "cramming," "phantom scheduling" and other maneuvers
>designed to manipulate the bidding process and in a single month produce
>profits once permitted for an entire year.
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>The deregulation bug is now winging eastward. New York City, for example,
>has succumbed to 43 percent average increases in Con Edison bills.
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>But in San Diego, something extraordinary happened. This month, thousands
>joined an unprecedented consumers' boycott. The power companies can send
>out their bloated bills, but the tanned masses won't pay. Refuseniks
>include the Council of Churches, the school district and -- without a hint
>of shame -- Steve Peace, a state senator who sponsored the deregulation law.
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>The electricity fiasco should be a godsend for Al Gore's campaign. After
>all, it was Mr. Fessler and his fellow Republicans who threw California's
>consumers to the meager mercies of the marketplace. And Gov. George W.
>Bush pushed through deregulation in Texas, which is widely expected to
>produce hefty returns for a former business partner, Sam Wyly, owner of
>GreenMountain.com, a power seller.
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>But while Mr. Gore spoke out in Los Angeles against "powerful forces," on
>this subject he's in a difficult position. Despite recent warnings from
>federal regulators about the California situation, the Clinton-Gore
>administration has promoted California-style deregulation as a model for
>the nation.
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>Someone's ready to feel California's pain, and it may not be good news for
>Mr. Gore. During the Democrats' big show, Ralph Nader went to San Diego to
>remind boycotters that he was founding father of the Utility Consumer
>Action Network, the 46,000-member local group leading the anti-corporate
>uprising.
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>Electricity is the first big United States industry formerly under the
>tight control of states to be opened up to international operators and
>their free market rules. For the first time, Americans feel the bite of
>real globalization, and don't like it one bit.
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>Gregory Palast is a columnist at The Observer of London and the author of
>a forthcoming book, "Democratic
>Regulation."<http://ea.nytimes.com/cgi-bin/email>
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