By Laura Brown

Californians may be able to breathe a sigh of relief regarding rolling blackouts, but the cost of power and who will pay for it remain problems that must be resolved, Dr. James Bushnell told the Morning Forum audience Sept. 18.

Bushnell, research director at the University of California Energy Institute and a lecturer at UC Berkeley’s Haas Business School, said that “getting through the summer was crucial.” Unusually cool weather and consumer conservation combined to get California through the summer months without an interruption in the power supply. Enough power generation capacity is coming online in the future to avoid the threat of continuing blackouts.

“The fighting now is over where the money comes from,” Bushnell said. He noted that the state had spent the entire budget surplus on power by midyear and committed $43 billion to purchase electricity over the next 20 years. Bushnell, who is an advisor to the California ISO and a member of the California Power Exchange Market Monitoring Committee, said the lack of competition in electricity has cost Californians approximately $6 billion - the equivalent of the cost of the Loma Prieta earthquake.

Little attention was paid to the electricity markets previously because they were regulated, Bushnell said, but the electricity industry is as large as the entire petroleum industry, and 10 times the size of the long-distance telephone industry.

In past years, the government allowed energy companies, such as PG&E, exclusive rights to provide electricity in return for their agreement to be regulated by a government body, such as the Public Utilities Commission. The regulators allowed the utility to recoup all of their costs, plus a profit, from consumers. “There was no incentive to minimize costs,” Bushnell said.

Californians paid 11 cents per kilowatt-hour of electricity, while neighboring Oregonians paid 4 1/2 cents for the same kilowatt-hour.

Large industrial customers wanted deregulation, thinking it would cut their costs. However, “rates were higher in California because of bad investment decisions. You can’t cut those costs by deregulation, although you can move them around a bit,” Bushnell said. The deregulation plan was drawn up largely by electric industry insiders and enacted by the California legislature with the now well-known flaws that resulted in the current crisis, Bushnell said. He predicted that the state would be in the electricity business along with PG&E and Southern California Edison, with customers paying a surcharge to cover the bills run up by the utilities in 2000.

The Morning Forum is a members-only lecture series held at the United Methodist Church of Los Altos. Membership is closed for this year. To get on a waiting list, write to: Morning Forum, P.O. Box 274, Los Altos 94023-0274.