Choice can be good for consumers. It can even be empowering. It often leads to lower prices and more freedom to select products that suit one’s needs and lifestyle. But when it comes to the electricity that powers our lives and economy, the situation is more complicated.
In the late 1990s, California deregulated the electric industry, allowing residential and business customers to choose their power supplier. In 2000 and 2001, the new system collapsed. Californians were hit with high costs and power outages.
More so than ever customers are again leaving utilities and finding other ways to procure electricity. They’re getting it from rooftop solar panels, local agencies known as Community Choice Aggregators or from private electric re-sellers called direct access providers. Large industrial customers are buying power directly from dedicated generators – sometimes a distant wind farm or solar plant.
Fewer customers are getting power from the traditional large utilities. Central decision-making that we depend on to keep the electric grid reliable and affordable for everyone has been splintering, with no protection if new providers fail and strand customers.
These changes have been occurring in the background while California continues to advance its ambitious clean energy and innovation policies in a state economy that is the sixth largest in the world.
The last time California deregulated electricity, it did so with a plan, however flawed. Now, electricity is being deregulated de facto, through dozens of decisions and legislative actions, without a clear or coordinated plan. If California policy makers are not careful, we could drift slowly back into another predicament like the energy crisis of 2001.
The California Public Utilities Commission is charged with regulating the state’s investor owned utilities and – to a limited extent – other energy providers. Our primary job is to make sure California has adequate supplies of safe, affordable, reliable, and low-carbon electricity. That’s why the Commission last year launched the Customer Choice Project, a deliberative process to examine how our regulatory framework must adapt to the new reality of greater consumer choice.
The result of this effort is the Green Book – a report produced by our Policy and Planning Division entitled, “California Customer Choice: An Evaluation of Regulatory Framework Options for an Evolving Electricity Market.”
How do we plan for today so Californians can turn on their lights tomorrow?
How will we ensure that increasing fragmentation of suppliers and buyers adds up to meet our ambitious clean energy goals?
How will we make sure that different players are meeting their responsibilities to provide energy resources needed for consumers and to sustain the grid?
How do we ensure consumer protections to avoid a repeat of what we saw during the deregulation of the energy and telecom sectors?
What preparations should we make for customers who might become stranded without service if their electric provider fails, as many did in the previous California deregulation?
What is the best way for a fair, affordable and durable transition?
While there are trends developing today similar to those that led to the energy crisis, the point of the Green Book is to start addressing these issues before there’s a crisis. The Green Book asks questions that need to be answered for competition to thrive and to ensure it benefits all Californians.
In the weeks ahead, the commissioners will hold a public meeting to seek input from the players driving the transformation of our retail electricity market. Consulting with these stakeholders, our partner agencies and the Legislature, we will work collaboratively to address these challenges on the horizon.
Michael Picker is president of the California Public Utilities Commission. Reach him at Michael.Picker@cpuc.ca.gov.