Energy Deregulation: Business as Usual

Since the first murmurs about energy deregulation, I’ve been asking everyone I know “So what are you going to do?” By and large, the answer is the same. From radicals to conservatives, people answer, “Um, we don’t know, so nothing. We’ll stick with PGE until we figure it all out.” It’s hopelessly complicated, but even if you manage to make sense of it all, there really isn’t much choice. Energy deregulation does not discourage energy use, and moves us father from a system that would give people control over energy generation: public ownership of utilities. Deregulation is a fraud because it appears to offer choice in the market, but no matter who you choose, nothing is likely to change.

California was the first state to offer all electric customers a “choice” of power companies. The way you’ve purchased electricity in the past was through the highly regulated privately held monopoly of Pacific Gas and Electric. It is exactly because they were a monopoly that they were so highly regulated. Prices were somewhat controlled, safety issues were somewhat considered, and the government had some say in the way power was generated. At PGE profits (and there were and still are high profits) went to shareholders.

Despite well-packaged claims to the contrary, deregulation was explicitly designed to benefit business. At least in the short term, the average rate payer won’t be benefiting much from it. Just for starters, the Public Utilities Commission has allowed an $80 million add-on to rates so utilities can “educate” rate payers about the restructuring! This came in the form of ads, billboards, and colorful refrigerator magnets with witty slogans. They said things like “knowledge is power” but neglected to provide you with any information.

And that heralded 10% rate reduction? It is really a hidden tax since utilities will borrow money to make up for the lower rates and then make citizens pay the loan off over 10 years, adding about $7 a month to your bill. What it has meant for my house’s bill — a $20 savings for our 10% rate reduction, and a $28 charge (called the Competition Transition Charge or CTC) to subsidize the 10% mandated savings — thereby increasing our monthly bill by $8. Yes, a rate cut that is smaller than the charges added to pay for it. The added CTC charge will continue until at least March 2002. After that all bets are off. It could continue to “cover the ongoing costs associated with opening the electric utility industry to competition,” or it could disappear entirely.

The electric utility industry is divided into three parts — generation, transmission, and distribution. The only part being opened to competition is generation, which currently accounts for only 20-25% of your monthly bill. PGE will still hold a regulated monopoly over the transmission and distribution.

What is Green-E?

Traditional PGE power is generated by a mix of coal, nuclear, large hydro, and natural gas. Under deregulation, renewable, “Green-E” power, with its own cheerful Green-E logo, is available for a higher rate. Renewable energy is defined to include biomass, geothermal, small-scale hydroelectric, wind power and solar. Biomass refers to plants and organic matter which are burned or converted into fuel, then used to produce electricity. Geothermal power uses huge wells which pipe steam and hot water trapped underground to the surface to make electricity. If you stay with PGE while trying to figure out who the best company to switch to is, you are still getting their same old non-renewable mix, and you’re still adding to the pockets of PGE shareholders.

Will Choosing Green-E Make a Difference?

No one can filter which electrons will be delivered directly to your home: all the power gets mixed together. The propaganda of the clean producers tries to imply that more, better, cleaner power plants will be built if only you choose the higher rate and switch to them. Unfortunately, there is no reason to believe this will happen. A few socially conscious people may be willing to pay higher rates, but industry, the largest user of power, will mostly continue to use the cheapest, and least environmentally sensitive, power production.

Converting a regulated, privately-held company to multiple privately-held companies all competing with each other does not change the amount of power people use or the ways in which it is produced.

Under deregulation, the same electrical needs of Californians will be met by many competing companies, each with their own marketing budgets, bureaucracy and overhead. This competition is unlikely to drive costs down since it creates lots of new costs. A 1970 Federal Power Commission report indicated that publicly owned power is 40% cheaper than privately run. The Green-E’s sing of the salvation that deregulation is for them (I’m sure they mean to say the environment). They say it is their only chance to compete, that the marketplace will eventually work itself out so that they are the winners. Rather than hold out for that day, we should demand municipal 100% green power now.

Capitalism forces people, and corporations, to become brutal in order to survive. It takes our brightest thinkers and co-ops their skills to helping capital accumulate more capital, not necessarily cleaning up the environment or coming up with new ideas on energy generation and use. What can sell gets developed. What can’t sell gets repressed. Deregulation places its hopes in the power of the market rather than the power of the people. The prevailing attitude seems to be that society works efficiently only when personal profit is involved. But certain things (like health care, mass transit, clean water) should not be required to make a profit in the marketplace. “Why should rich corporations have the right to deprive families of electricity, of gas to cook with, or fuel to heat their homes. These are life’s necessities, like food, air, water. They should not be the private property of corporations, which use them to hold us hostage to the dark, to the cold, until we pay their price,” (Zinn, 1975). Electricity, in a modern industrial society, is a basic need, not a product you either buy or don’t buy at the market. Such basic needs should be publicly controlled.

The Future According to the Green-E’s

“Each time you buy an eco-product or service, you send a message to businesses about the kinds of goods and services you prefer. You create a demand for cleaner energy. That’s the power of the marketplace.”” The above reflects Green-E, eco-capitalist propaganda. Regardless of the product, it’s impossible to improve the environment through consumption. Ultimately, the best way to save the environment is to reduce human resource use: to consume less, not more. Using Green-E power can play a part because it means fewer non-renewable resources are used to meet people’s power needs. But when Green-E has to exist in a market, its providers are motivated to get you to use more power, not less.

The new power companies believe there will be lots of fabulous new clean power-generating technologies developed. It is true that green technology development has been stifled — except for a brief period during the Carter administration’s oil crisis — in favor of nuclear and fossil fuel power sources. But by depending on the market, and thus a tiny number of “green” consumers who can afford to pay more for their electricity, investment in green power-generating technology will continue to be starved. The best way to promote green power technology is simply to require it. A system which depends on the market serves another goal: enriching shareholders and taking the political pressure to go green off of the majority of the electrical industry.

Who will choose Green-E Anyhow?

In 1993, a power utilities company in Colorado surveyed residents about the potential demand for Green-E. 75% responded that they were interested in renewable energy, but of these people, only 10% actually signed a contract with a Green-E pro
vider because it would increase their bill by $2 a month. How many are going to switch when the increase for choosing renewable power in CA is at least $10/month?

If we were to ever take the real costs into consideration, green energy would win. But because we don’t consider the environmental and human damages in the cost of producing power, the historical investment in conventional power sources makes it cheaper to produce. Deregulation moves us further away from considering these hidden costs, because short-term profits are now the only reasons for energy providers to continue conducting business. Employee and environmental safety in the current deregulation scheme don’t enter the picture unless they increase profits. No one is quite sure what the added danger will be if plants sacrifice safety for profit. And there is no reason to believe that they won’t do so now that regulation has loosened.

Green power is good for capitalism. In an effort to get new “power brokers,” one web site advertises to potential green energy providers: “large users will get better prices while individuals make up the difference.” No surprise there — volume discounts for people and companies who use lots and lots of power. The only thing encouraged is more power use, and therefore more profits.

A Historical Perspective

Prior to deregulation, long-distance telephone calls were so expensive that people timed their calls, limited themselves to only a few minutes, and called only on special occasions. Fax machines and wireless phones were virtually non-existent. With a competitive market, people are buying more than ever just to stay in touch. And all the while they think they have a choice between one global mega-corporation and another. You can buy whatever brand of laundry detergent you want, but pretty much they are all owned by the same company. With increasing globalization, rather than one regulated monopoly, we lean towards a system with a few large companies and a competition that only serves to increase demand and drive up shareholder profits. Our long-term global goal should be to consume less, but capitalism doesn’t work that way. And it won’t work that way by opening up energy to competition either. Already some new power companies are demanding you purchase a new, fancy meter. Stay tuned — their hopes are to become mega-corporations that provide you with your power, internet connection, cable television, and probably anything else they could sell you.

Who’s winning in the Open Market

“With deregulation, the opportunity to make money is outstanding” hails a re-seller. The electric utility industry is a $215 billion market. The information about new power generating companies on the web indicates a pyramid scheme. Some companies are acting as middlemen — buying power on the wholesale market, then turning around and selling it on the retail market to business and residential customers for a large profit. Some purchase energy from a variety of local generation facilities while others are out-of-state electric utilities nudging in on the California market.

But buyer beware: although there are over 200 newly registered electric service providers approved by the CA Public Utilities Commission, many are already listed as “suspended” or “revoked”. For only $150, anyone can register with the Public Utilities Commission as a provider/reseller and reap the benefits of privately owned power, but it requires huge amounts of start-up capital to maintain overhead and build infrastructure while waiting for new customers to sign up .

The independent Utility Reform Network (TURN) in San Francisco (415-929-8876) publishes an excellent newspaper on energy deregulation. They have a brochure which answers commonly-asked questions and which alerts citizens of their rights. They are also drafting a ballot initiative to make restructuring more fair to individual customers. According to a Utility Consumers Action Network (UCAN) report, only 23 of 132 companies they surveyed offered competitively-priced electric services to small businesses and residential customers. 20% of these companies registered with CPUC are not providing service at all, simply are part of a multi-level marketing scheme. 34% were “difficult to contact and did not return phone calls.” You can see how UCAN rated the companies at

And the winners are…

When I spoke with the UCAN survey providers in mid-July, I asked about the 23 companies that they claimed were offering competitive services. By that point there were even fewer choices. They recommend the following companies:

Non-renewable power

Commonwealth Energy Corp., Tustin, CA 92780, 1-800-225-4367 (can save you an addition 2-5%)

Friendly Power, 1-888-5POWER5

Renewable Green-E power

Clean ‘n Green, San Jose, CA, 1-888-425-3361 (locally-produced wind power)

Green Mountain, S. Burlington, VT, 1-888-246-6730 (excellent customer service and bonus gifts)

Earth Source 100, 1-888-334-7664

PG&E 100 if you are not easy with change but wanting Green-E.>

With reservation, our house is opting for the local Clean n’ Green. We are sucking up the extra cost of renewable energy and offsetting this by lowering our energy consumption.