- The Washington Times - Thursday, August 16, 2001

The U.S. Department of Energy last week announced it has formed a task force with the National Governors Association to make recommendations on key electricity policy issues.
The Task Force on Electricity Infrastructure will examine state policies and regional issues with a focus on sites for power plants and transmission lines, and on creating regional electricity markets. This will undoubtedly lead to discussions of President Bush's energy policy that recently passed the House. The impact of deregulation and the energy mess in California will surely be examined by the task force, but let's face it: California is not by any means the poster child for deregulation. The "California Experience" is more of a lesson in how not to deregulate.
When done right, deregulation allows consumers and businesses to thrive and save money. Deregulation and direct access hold the promise of allowing businesses, big and small, to buy their electricity directly from generators, a policy that can save companies tens of thousands of dollars each year. In any economy but particularly today's every penny counts.
Put simply, deregulation has gotten a bad rap. California's energy market hasn't thrived as a truly deregulated market does the understatement of the year, by far. And as we've learned by the very public soul-searching on the current crisis, California's market isn't really deregulated.
The hybrid market California created in 1996 forced the investor-owned utilities to sell off a portion of their generating capacity, but didn't allow them to enter into long-term contracts. It forced utilities to buy power on the more expensive spot market, but also set price caps on retail rates that prohibited the utilities from passing along the cost of the power purchased from wholesale generators.
Add to these deregulation regulations an increase in natural gas prices, increasing demand coupled with insufficient supply, a particularly warm and dry summer, an unusually cold California winter, and you've got a recipe for an energy crisis.
Considering all of these unusual circumstances, it's not fair to blame California's current situation on the ideals and objectives of true deregulation. Deregulation allows customers to chose their energy supplier. It allows customers to choose "green power" and other ways that not only save them money, but also can help protect the environment.
What's more, true deregulation creates a lucrative business environment for power generators and other businesses. Able to operate in a free market, energy companies are more likely to invest in building a secure energy infrastructure in the state.
Further, businesses in California, free to buy power directly from power generators, can better negotiate deals and choose the best energy supplier for their businesses. Businesses that know they can control costs and protect their bottom line are likely to look to deregulated states for business growth and expansion.
If our states are to provide American citizens with energy price and supply dependability, there is no choice but to begin identifying viable solutions that address the flaws in the deregulation effort and lure the energy industry back to the table. Working cooperatively, and not alienating companies willing to spend billions of dollars in our nation's crumbling infrastructure, really is the only way to resolve the crisis.

Karen Kerrigan is chairman of the Washington-based Small Business Survival Committee.

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