Consumer Groups’ Proposal for Electricity Re-Regulation

California’s core electricity customers — homeowners, renters and small business ratepayers — need to be protected from the turbulence of the wholesale energy market. These core customers are the chief victims of deregulation. The Small Consumer Rate Protection Act (SB 18X by Senator Martha Escutia) will ensure that California’s electricity system will be reliable and affordable to the individual and small business ratepayers in the state.

PG&E and Edison produce or own through contract approximately 60% of the state’s electricity.

Pacific Gas and Electric (PG&E) and Southern California Edison (SCE) chose to sell off many of their power plants in recent years when out-of-state power companies offered to pay much more than book value for these assets. However, the utilities retained approximately 20,000 to 25,000 megawatts of generation capacity. That is, PG&E and SCE still own or contract for approximately half of the state’s electricity production (chiefly hydroelectric, nuclear and coal-fired plants).

Under the Small Consumer Rate Protection Proposal:

• The utilities will sell the electricity they produce to California’s core customers. This law would require the utilities to sell their energy to the state’s small consumers at a regulated rate based on the cost of producing power at their own plants plus a reasonable profit.

  Small “core” consumers are defined as ratepayers who never use more than 500 Kilowatts of power at one time. That includes all residences and all businesses except for approximately 5,200 large industrial consumers and an estimated 1,200-1,500 large farms.
  

• Large energy consumers will buy electricity in the market.
  
  The large energy consumers — the non-core customers — have the market power and sophistication to enter into long term contracts with power generators. Under deregulation many of the state’s largest users signed such contracts. Non-core consumers that choose not to buy directly in the market, can buy energy through the utility at market price. The utility will procure the electricity on the market and supply it to the large consumers.

The “core” consumers use about 67% of the power produced for California, meaning that all but 7% of the power needed to serve small customers is produced or owned by PG&E or Edison. Therefore, the small consumers will have minimal exposure to the unregulated and volatile power market.