California Electric Woes May Impact Nation

Jan. 19 -- There is a saying going around the energy industry these days that the story behind California’s current crisis is a tale akin to the Titanic.

"It was designed never to have sunk and here it is sinking," said Michael Shames, executive director and co-founder of Utility Consumers' Action Network (UCAN), a non-profit consumer watchdog group based in San Diego.

And it's a dilemma that could sweep the nation.

State energy experts across the nation are now taking a closer look at California — which was supposed to be the leader for deregulation of the electric energy industry when it moved to partial market deregulation four years ago.

They say what is happening in California could potentially happen elsewhere if the right conditions exist. Now, industry experts say, the more than two dozen states moving toward deregulation will be looking more closely at California, not as a model, but to learn what not to do.

"For some, it says that deregulation doesn't work," said Adrian Moore, an executive director with the Reason Public Policy Institute, a policy research center in Los Angeles, Calif. "For others, it is an example of how you can mess up a really good idea."

The lessons from California, experts say, are important for other states, including Texas, New York and Ohio, which are also undergoing deregulation. In some cases, states have changed their approach after seeing California's crisis begin to unfold in recent weeks.

Pennsylvania and Texas, for instance, took the same general approach as California in its deregulation of their electric utilities, but "without all the micromanagement and rules and created a market where exchanges could occur voluntarily," Moore said.

In Pennsylvania, considered by many to be the most successful deregulation effort thus far, open competition has brought 130 different utility suppliers to the state, including the environmentally friendly "green power" that did not thrive before deregulation.

Lessons from California’s Deregulation Blues