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POWER POINTS // Many wait and wonder

Published Jul. 6, 2006

With sky-high electric rates and a me-first attitude, no wonder California is about to lead the way in introducing competition to its electricity business.

The state last fall became the first in the country to pass a law that will end electric utility monopolies. All customers in the state would have the opportunity to choose their electricity producer no later than 2001.

A little perspective: Californians pay nearly 50 percent more than Floridians for electricity. California's move is touted as a way to save ratepayers up to 20 percent on their electric bills by 2003 - still high by Florida rates but a significant decline.

Pacific Gas & Electric, a big California utility, says residential and small business customers should see their rates drop from an average $65 a month to $58.50 in 1998 and then to $50 in 2003.

A recent survey in California found that 75 percent of electric customers could change suppliers if they were able to receive a 10 percent or more decrease in their electric bills.

Critics of the California plan say there's a catch. Ratepayers are subsidizing any decrease in electric rates because they must pay the interest on new state-backed, "rate reduction" bonds that will pay off unprofitable investments - including nuclear plants - by California's utilities.

"It's one of the biggest frauds ever perpetrated on California ratepayers," says Ed Maschke, executive director of the California Public Interest Research Group.

But as the first legislated attempt at power deregulation, California's plan will be watched by every other state and policymaker for tips on what to embrace, or avoid, in their own steps toward competition.