Former Gov. Pete Wilson criticizes a proposed state purchase of transmission lines.
By Rick Reiff.
State officials are going down the wrong path in their attempt to address the state’s energy crisis, says former Gov. Pete Wilson.
“I see this as a way-station on the way to public power and that’s not the solution,” Wilson said. “There are a number of people who voted for deregulation, who now are publicly hankering for the good old days of strong, command-and-control regulation. They weren’t the good old days, they were the bad old days.”
Wilson said it was the high cost of electricity in the early 1990s,”the highest in the nation or almost the highest”,that prompted his administration and appointees on the Public Utilities Commission to champion what eventually became the now-maligned electricity deregulation law.
While agreeing the state needs to intervene for now to buy power that the utilities can’t afford, Wilson criticized the plan by the state’s Democratic leadership to set up a power authority and to purchase the utilities’ transmission grid.
“I have the feeling that they’re not the solution and that they carry a certain degree of risk, in fact perhaps high risk, for the state,” he said. “Transferring ownership of the grid or some portion of it to public ownership does not increase power.”
Some plan advocates argue that if the state owned the grid, it could wrest authority from the Federal Energy Regulatory Commission and better control prices and keep power in the state. Critics say that thinking is flawed; Wilson noted that any attempt to cap wholesale rates could scare away out-of-state producers and increase the risk of shortages.
“No one has ever repealed the law of supply and demand,” Wilson said. “They are in this difficulty now because (the law of supply and demand) has not been repealed, but it’s been ignored.”
Wilson made his comments last week in a phone interview from his office in Beverly Hills, where he is a managing director of venture capital firm Pacific Capital Group Inc.
Wilson avoided direct criticism of his successor, Gov. Gray Davis. But he defended deregulation, contending that the current leadership had plenty of time to fix its imperfections before the problems reached a crisis.
“If you ask, would I sign it again? The answer is yes,” Wilson said.
Wilson said the deregulation law that was passed unanimously by lawmakers in 1996 strayed in key ways from the system first envisioned by himself and other advocates:
“It contains some things which we didn’t ask for, didn’t necessarily think to be a wise idea, things that made it something less than a free-market mechanism. Nonetheless, I was determined that we would launch deregulation because I was convinced that it was in the interest of the state. So whatever its imperfections, I thought that future PUCs, future Legislatures, future administrations, would have the opportunity to recognize and deal with them.”
Wilson acknowledged that a provision in the law that forces the utilities to purchase all power on a daily spot market “was a mistake.” He said it was prompted by the PUC’s concern that the existing utilities could lock up supplies to keep out new competitors. In hindsight, the law could have permitted long-term contracts but limited their length, he said.
Wilson also expressed disappointment that deregulation has not reached the retail end of the business,particularly to homes and small businesses (see related story, this page). That part of deregulation was delayed for years so that that the utilities could recover, through fixed rates, so-called “stranded costs” of past investments in nuclear and alternative power.
“Ordinarily I’m not for bailouts, but in this case, because (the stranded costs) had been imposed on (utilities) by government actions of prior administrations that I was not much in sympathy with, I thought they had a fair claim to be rescued.”
Wilson bristled at critics who say there were almost no power plants built under his watch; he asserted that plant construction is one clear achievement of deregulation.
Wilson said that in the 1990s prior to deregulation, nine plants were built with a total generating capacity of less than 1,100 megawatts. Since deregulation took effect in 1998, the state has approved nine plants with a total capacity of 6,000 megawatts, of which five, or about 4,000 megawatts, are under construction. The state has been presented with plans for another 11 plants with 5,700 megawatts of capacity.
“Were it not for deregulation, I don’t think any of those would be in the stage that they are right now,” he said. n
