With apologies to The Mamas & The Papas, who were "California
dreamin on a winters day" some 35 years ago, most of the dreaming done
nowadays about California is of the nightmare variety. A nightmare wrought
specifically by legislators and utility executives who, in retrospect, made the wrong
decision at seemingly every turn in deregulating that states power industry in the
mid-90s. And when you add in some bad luck on the weather front a hotter than
usual summer in 00 and a colder than usual winter in 01 youve got
a state undergoing the nations most serious energy crisis since the two OPEC-induced
oil crises in 1973 and 79.
Its a crisis that saw San Diego-area residents pay electric bills last
summer that were two to three times what they had previously paid.
Its a crisis that has two huge utilities teetering on the edge of
bankruptcy as of press time (and either Southern California Edison or Pacific Gas and
Electric, or both, may well have filed for bankruptcy protection by the time you read
Its a crisis that has seen rating agencies downgrade the financial ratings
of both utilities, to the point where the bonds of both are rated below investment grade,
and fall into the status of junk bonds.
Its a crisis that resulted in rolling blackouts in mid-January, cutting
off power to everything from ATMs to traffic signals to homes and businesses.
Its a crisis that has seen the unprecedented action of the governor and
legislature declaring the need to step in and purchase wholesale electricity for the
states residents and deliver it to them through existing utilities.
And its a crisis that results, in large measure, from the states failure
to address the supply end of the equation, even as demand was growing aggressively
over the last few years due to a booming economy that included power-hungry dot-com
companies. According to the January 16, 2001, edition of The Wall Street Journal,
over the past eight years demand for electricity in the state has grown by 25 percent,
while supply has grown by only 6 percent. Clearly, its a case of near-stagnant
supply meeting rapidly growing demand, and in any competitive market situation where that
happens, prices go up. Compounding this problem have been increases in natural gas prices,
and the previously mentioned weather extremes and ill-planned deregulation policies by the
legislature and the states utilities.
So will Californias unfortunate experience be replayed in other states,
particularly Virginia? In a word, no. There are other states having varying
degrees of success with electric utility deregulation, and certainly no problems of the
sort, much less the magnitude, of those being experienced in California. In those states
including Pennsylvania, Wisconsin and Texas a lot of attention was paid to increasing
the supply of electricity, in order to avoid the kinds of problems going on in California.
And in the Old Dominion, Virginias lawmakers wisely built in protections,
both for consumers (rate caps) and utilities (recovery of stranded costs incurred in
building existing power plants), and also built in a long timeframe that will see
competition begin in 2002, be complete by 2004, yet have the rate caps in place until as
late as 2007. Because of the prudent, conservative nature of Virginias lawmakers
and the strong voice that Virginias electric cooperatives exercised in
pushing for protections for the proverbial "little guy" as the legislation was
being considered and passed in 1999 the California experience with electric
deregulation will not be repeated in Virginia.
And on the subject of supply, the cooperative that supplies most of Virginias
local cooperatives with all their power needs Old Dominion Electric Cooperative
hopes to build two natural gas-fired power stations, one in Louisa County and one
in Fauquier County, in order to meet the growing demand for power among electric
cooperative consumer-owners. These plants would run on the hottest and coldest days of
the year, when demand for electricity typically goes up. Such planning is part of your
cooperatives ongoing effort to supply you with the most reliable, environmentally
responsible power at the lowest price possible.
After all, this has been your cooperatives central focus for 65 years. And
please be assured that it will be your cooperatives abiding commitment to you as
competition among electric suppliers comes to the Commonwealth beginning next year.