California was the first to deregulate its power market and is seen as having botched it by rushing through the legislation and its implementation and by catering overly to entrenched utilities. As demand outstrips supply and as fossil fuel prices sky-rocket (San Diego's prices tripled), regulators and the power industry are employing desperate measures to calm the market chaos.
In late November, State Senator Steve Pearce proposed a $2 billion reserve to buffer consumers against electricity price hikes, while California's largest utility, Pacific Gas & Electric (PG&E), asked for permission to raise residential prices by one-sixth, to more than $63 monthly for the next five years. The utility further warns that $100 monthly bills are in sight.
Ironically, Pearce was a co-author of the 1996 deregulation bill, which many critics say disadvantages both consumers and new independent power suppliers, including those who sell wind power, in order to protect utilities.
In response to their mismanagement of deregulation, state regulators are now capping prices for all power -- brown or green -- at $0.065/kWh, retroactive to June 1 and until the end of 2003. This temporary relief -- customers could face the prospect of paying the difference between the capped price and market rate in the future -- disadvantages the green power deals being offered now at around eight cents a kilowatt hour (main story). It is also unpopular with the hard pressed utilities: Southern California Edison is suing state regulators, accusing them of refusing to permit an increase in retail rates.
The green power rates are about a third lower than those offered by San Diego Gas & Electric (SDG&E), whose prices have been the most volatile. Such volatility, however, is avoidable, according to Green Mountain western area president Julie Blunden. "If electricity providers are willing and able to buy forward contracts, they can offer fair, competitive fixed prices to consumers," she says. "That's just what we've done. We have been able to purchase electricity at a rate cheaper than what SDG&E currently pays, and pass a fixed rate along to our customers."
In the midst of the furore, there may be a silver lining for green power marketers. The interest shown in green power by San Diego customers is tripling the sales rate of Green Mountain Energy's green power product. "San Diego customers have become more educated about deregulation and they know what to look for," says the company's Karen Woodbury.