The Breaking of a Power Monopoly: Community Choice?

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The Breaking of a Power Monopoly: Community Choice?

Thursday, 20 March 2014 09:27
By Dina Rasor, Truthout | Solutions

Pacific Gas & Electric has had a monopoly on the energy needs of the northern two-thirds of California since 1905. But a new state government entity called Community Choice Aggregation promises to turn over most conventional wisdom of who has the power.

Pacific Gas & Electric (PG&E), as an energy utility, has had a monopoly on the energy needs of the northern two-thirds of California since 1905. As an investor-owned power company, it has amassed great wealth, assets and political power over the years. However, there is a new state government entity, called Community Choice Aggregation (CCA), that promises to turn over most conventional political wisdom of who has the power.

The first attempt to break PG&’s monopoly came in 1996, when Republican Gov. Pete Wilson pushed through a bill that loosened up the lucrative California energy market to the “Wild West” of a free market with few price regulations in the price of electricity sold to the state’s utilities. But it did not remove the restriction and cap on prices of what PG&E could charge to their retail customers for electricity. In 2000, drought and other problems put a strain on the California energy market. The notorious Enron Corporation artificially made the shortage worse by illegally shutting down their energy pipelines from Texas to California and manipulated markets to create an artificial power shortage in California. Enron began selling energy to a strapped PG&E at inflated prices but PG&E, by regulation, still had a regulatory cap restricting it from passing most of these energy costs to its customers. From April to December, energy rates increased an astounding 800 percent. Because PG&E was not able to require its customers to pay for most of this outrageous increase, its cash flow was drained quickly. PG&E was headed toward bankruptcy. The next year saw a series of infamous rolling blackouts, and the state had to step in and buy expensive power on the spot market because PG&E did not have the cash. The public did get stuck with paying for the state’s losses through taxes and the cost of PG&E’s bankruptcy that increased PG&E’s overhead and cost of doing business through higher electric bills. Billions of dollars were lost, with some estimates being as high as $45 billion.

After this ongoing trauma was inflicted on the state, PG&E emerged from bankruptcy with its monopoly intact. Many California communities were growing interested in renewable energy, but PG&E had gotten its rate of renewable energy only to less than 20 percent. In 2002, still smarting from the damage of the artificial market crisis, environmental and consumer groups looked for another way to try to infiltrate part of the PG&E’s power empire. This time, California legislators tried another route. They passed a law creating CCA. Communities now have the right to pool the citizens’ and businesses’ energy use in their cities or counties to purchase power for their aggregate unit. Communities such as cities and counties can also group together to form a larger CCA. CCAs are governmental agencies that generate income, similar to water districts.

How could these communities have their own power agencies compete with a powerful PG&E? To understand it, you need to think about PG&E having two monopolies. One is the ability to buy or make and sell electricity - that is, to sell electrons. The other is the infrastructure needed to deliver those electrons, through power towers and power lines, to your door. It would be ludicrous to think that a CCA could duplicate the infrastructure to deliver the electricity to your house or business. CCAs are just buying and/or generating the electrons. So PG&E still has a monopoly in delivering the electricity but the CCAs now have the ability to use PG&E’s power lines to compete and deliver electricity that has a higher percentage of renewable energy and perhaps even at a cheaper rate. ..................(more)

The complete piece is at: http://truth-out.org/opinion/item/22576-the-breaking-of-a-power-monopoly-community-choice