Fessler Assesses Deregulation Fallout, Proposes Chucking Public Protections

In his first public appearance in a decade addressing California's disastrous deregulation experiment, Dan Fessler, considered the patriarch of deregulation, acknowledged he made mistakes when pushing for the creation of California's energy restructuring law. But that has not deterred his support for a free market. "It wasn't supposed to turn out like this?with California consumers doomed to perhaps 20 years of high-priced electricity procured by a state government now accused of having acted in haste to achieve long-term waste," said Fessler, chair of the California Public Utilities Commission from 1991 to 1996, during a September 25 conference organized by Law Seminars International. The best way for the state to extricate itself from energy market hell, according to Fessler, involves questioning the underlying assumption that the business entails a duty to serve customers. Fessler took blame for not opposing the provision in AB 1890, the 1996 deregulation law, that instead of creating one entity to place energy bids created two?the California Power Exchange and the California Independent System Operator?which allowed for market gaming. He added that AB 1890's other flaws include its failure to include demand-response provisions that would provide price information to ratepayers to motivate them to adjust their energy consumption, thus lowering their bills and reducing peak demand. In spite of deregulation's fallout, Fessler questioned the public-interest obligation on the electricity business, which was placed in the California Constitution in 1912 by Governor Hiram Johnson. "If we can live with discrimination based on the ability to pay in virtually every other sector of our economy, why should energy or water be different?" Fessler asked. He believes that the obligation to provide electricity and water should kick in only for domestic consumption and fire protection, or in other instances where citizens have no access to these necessities. Once the obligation to serve is pared down, the follow-up question becomes what role government should play in protecting those remaining interests and which agencies should carry out that role. Fessler advocates having a regional energy market because of California's dependence on power imports. "I am calling for institutions of governmental authority that are regional in scope roughly equated with the major components of transmission," he said. A diametrically opposed view was presented by Senator Joe Dunn (D-Santa Ana), who considers lawmakers' duty to protect the obligation to serve inherently incompatible with energy companies' profit motives. "I want to drive a stake through the heart of deregulation," Dunn stated. If efforts to undo AB 1890 fail, he will consider challenging the law in court on grounds that it violates the state constitutional provision stating that public utilities are bound by an obligation to serve. Dunn said he hopes to meld his bill, SB 888, which attempted to erase much of AB 1890 but failed passage, with an unsuccessful Assembly bill by Keith Richman (R-Northridge) that would revive direct access. Dunn has pushed for creation of a joint Senate-Assembly working group but has been blocked by the chair of the Assembly Utilities and Commerce Committee. After three years of work, Dunn's Committee to Investigate Price Manipulation of the Wholesale Energy Market was folded into the Senate Energy Committee. In spite of the mounds of subpoenas and testimonies and hours of cross-examination generated by the investigation, Dunn is not planning to release a report summarizing its findings.

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Fessler Assesses Deregulation Fallout, Proposes Chucking Public Protections

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