California Utility Essay, Research Paper

Chris Parker

482.004

Dr. Singer

In 1996 deregulation allowed California utility companies to sell power plants and collect over 19 billion dollars in ratepayer subsidies. The money was used to purchase plants in other countries, reward executives with huge pay raises and buy back stock. A handful of unregulated companies withheld power, causing shortages to boost wholesale prices.

Deregulation led many consumers to believe that open markets would bring in an array of choices and lower prices. Consumers will have to settle for a single power provider at higher prices. Rates are nearly 150 percent higher than last spring. Power companies are exploiting the market for their own advantage. Some companies have jacked rates up to 200 percent than offer a deal at a 50 percent hike. Utility companies promised to modernize the electricity market and reduce business and residential bills. The California public utilities commission is caving in to pressure to make the investor owned utilities look good on Wall Street. Utilities are to use their markups to pay investors for stranded assets incurred during regulation. Utility companies lobbied to pass a law that suited their needs, and now the situation has changed it is trying it again. In 1998 big utility companies lobbied Proposition #9 buy paying a local consumer reporter 106,000 dollars to create a campaign. Proposition #9 would decrease electric bills and promote modernization of the industry. Also, many agency boards are stacked with officials with ties to energy companies, creating conflicts of interest. A member of Public Utilities Commission is being sued for an overseas investment. Taxpayers are paying for his legal bills. The investment was in a company his commission regulated.

A recent study has found incriminating information on the California utility industry. Plant operators would skip maintenance routines. These errors would cause machines to break down and force power cut back. The plants would have sudden shutdowns with no justifiable reason. Shutdowns were calculated to shrink the amount of power available driving up the price. They would hold back power until the state is desperate and vulnerable. They could sell power at super high rates. They sold power to other states. Selling to other states allowed for an increase in wholesale prices.

The California utility companies had planned to make a large amount of profit off of deregulation. These companies are now going bankrupt and looking for a way out. They acted socially irresponsible in many ways. They escalated the market causing higher prices and a shortage of electricity. The industry was aging and needed modernization. Companies invested money in other countries and states ignoring California’s problem. Companies used regulatory officials and others illegally to benefit themselves and not their customers. Companies used fraudulent tactics to cause prices to rise. The utility industry will need a major redesign in the future to repair consumer confidence.