A very interesting experiment in buying energy that we should all watch.
Daniel Weintraub: Cheap green energy lures S.F. back to open market
Published 12:00 am PDT Sunday, June 17, 2007
Six years after a poorly written law and market manipulation caused a meltdown of California's electricity industry and halted the state's experiment with competition, it is coming back, in the strangest of places.
The city and county of San Francisco, thinking it can get its electricity greener and cheaper, are moving closer to declaring its independence from Pacific Gas & Electric and instead producing some of its own power while buying the rest in the private market.
San Francisco would not become a utility. PG&E would still deliver the electricity and handle the billing. But the city would take over the job of finding most of the power needed for its residents and businesses.
And if it works in San Francisco, the idea could take off across the state, peeling customers away from the monopolies that once controlled every aspect of California's electricity industry.
That was the original idea behind an ill-fated 1996 law that restructured the industry. Local governments, associations and private companies were supposed to jump into a newly created retail market and compete for customers, driving costs down with innovation and efficiencies.
But the retail market never really got off the ground. Although private energy marketers did a fairly robust business signing up large customers, residential users were left behind. That turned out to be one reason the experiment failed. With most retail customers locked into the monopoly utilities, there was little consequence in the market when private generators started jacking up prices. Eventually, the crisis forced one major utility into bankruptcy and another to the brink.
That economic disaster led many on the left to distrust the idea of competition in the electricity industry. Even now, Democrats in the Legislature are skeptical of letting more big companies leave the embrace of the utilities to buy power in an open market.
Yet San Francisco, a liberal bastion, is eager to jump into that world.
The Board of Supervisors voted last week to move toward what is known as "community choice aggregation" -- under which the government will gather residents in a purchasing cooperative to exercise their buying power. The city will likely contract with private energy companies to build and run its new electricity supply.
And lest conservatives think this is another move toward socialism in San Francisco, there is this important caveat: The city won't be able to force its residents into this arrangement. Homeowners or business owners who don't want to be a part of the city's effort will be free to opt out and remain with PG&E.
