Cheap Prices Don’t Mean Much When You’re Sitting
in the Dark
By
Perry Baird
In
an old Three Stooges film, Curly, paraphrasing a popular poem, quips, “I shot
an arrow into the air; where it falls I do not care. . .I buy my arrows
wholesale! Nyuk, nyuk, nyuk!”
Moe
immediately administers the customary slap across the chops—brought on, I like
to imagine, by Curly’s screwy remark that a cheap price is the only thing that
matters to him when buying arrows.
Well,
surprise! Real life isn’t like a
Three Stooges movie; consumers count quality as much as price, particularly when
it comes to essential purchases such as electric energy.
Bob
Felts, board president of Central Wisconsin Electric Co-op, Iola, Wis., recently
summarized for an annual meeting crowd the most compelling consumer perspective
on the economics of electric deregulation: “When the power is off, the last
thing a consumer thinks about as he sits in the dark is the good deal he got on
his electric bill.”
Basic
reliability can mean so much more to consumers than a cheap price, Bob observed,
pointing to states such as California, where power shortages have been causing
rolling blackouts, and where the prospects for relief seem bleak, as higher
temperatures and accompanying higher power usage arrive.
Hoping
to lower rates consumers pay for electricity through a scheme of rate caps,
selling off generating plants, and promoting competition among power suppliers,
California sought to be one of the first states to restructure its electric
industry.
But
an obstacle loomed to California’s concept of free-market energy trading: no
new power plants or transmission projects had been built for a decade.
Utilities had been reluctant to spend money when it looked like they would be
required to compete for customers with other energy providers or when
deregulation laws might force them to unload new generating facilities.
The capability to generate and move power stagnated at the same time that
demand for electricity mushroomed.
So,
California—a state some experts calculate enjoys the world’s sixth-largest
economy—now has Third-World electric reliability. Ask California residents if they’d be willing to spend
a bit more on their electric bills these days to assure that their power
simply stays on. But then, they don’t presently have that choice.
Even
though real life isn’t like a Three Stooges movie, Moe was right about one
thing. A cheap price isn’t the
only thing that matters.
--Perry Baird is editor of Wisconsin Rural Electric Co-op News, published monthly for the Wisconsin Electric Cooperative Association, Madison, WI.
A Firsthand Report from Deregulation Country
Recently, I had the opportunity to visit San Diego, California. While there, I had the opportunity to attend a panel discussion consisting of several people from states where electric utility restructuring has already taken place. One of the panelists was the CEO of the Los Angeles Department of Water and Power, Mr. David Freeman.
Mr. Freeman told how, during the re-regulation in California, utilities transferred their generation assets to unregulated subsidiaries. Those subsidiaries then sold their power to out of state utilities, mainly in Oregon. The Oregon utilities then sold the power back to California during last summer’s high demand periods at prices 3-4 times the cost, with price increases passed on, hitting homeowners and small businesses especially hard. The State of California has since put some caps on the price increases, and some of the additional costs are sitting in accounts on the utilities’ books, awaiting approval by regulators to be billed to the customers.
I took a walk a few blocks from the hotel and visited a small convenience store. I took this photograph of a sign the store’s owner had placed near the doorway, with the heading "Electric bill rip-off." It further states, "This small store’s electric bill has soared 143% to over $2430.00. In order to survive, we must add a 5% surcharge to each sale to stay in business. I am extremely sorry but must do this to stay open. To put this in perspective, we would have to sell an additional 3600 candy bars just to cover the electric bill increase."
Similar notices were posted in other businesses. Even along the docks where the yachts were resting in their rented slots, there were notices to the owners of assessments to cover the additional costs for electricity hook-ups. Perhaps those that could afford the yachts in California didn’t mind the extra cost for electricity. However, from the general public’s uproar, I’d guess that California has a ways to go to get itself out of this mess.
- Mike Schaefer, Manager
