Deregulation affects city revenues

Over the past few weeks, the California System Operator, a nonprofit entity that provides 75 percent of the power to California, has declared multiple “Stage 2” emergencies. Rising temperatures have caused too many people to use too much electricity at the same time and power supply reserves ran under five percent.

However, aside from interruption that occurred after the big fires in 1993 and 1996, Steve Hansen, a Southern California Edison (SCE) company spokesperson, said that the City of Malibu has not experienced any major power outages.

“We’re keeping our fingers crossed,” he said.

During Stage 2, SCE activates its voluntary load curtailment program, under which large industrial, commercial and agricultural customers, as well as customers on SCE’s air conditioner cycling program, agree to have their power temporarily interrupted in exchange for reduced rates.

A number of people signed up for this voluntary curtailment program which was available in the late 1980s.

“In Stage 2 emergencies nobody is affected by power outages unless they signed an agreement,” said Hansen.

But aside from supply shortages, the electricity industry has undergone other changes that may have an undesirable impact on customers in the future.

A rate freeze, imposed since deregulation of the electricity industry began, has resulted in lower revenue for the City of Malibu.

Since deregulation, electricity customers in California and other states are among the first to choose the company that generates their electricity and provides them with customer service.

Initially, deregulation was thought to be a positive change that would save customers money. But these thoughts may have changed recently since some companies pay more to purchase the power they need than they earn from customers who still benefit from the freeze.

This freeze will last until 2002. The power exchange rates have averaged about 16 cents per kilowatt hour for the past few weeks while customers continue to pay 5.9 cents per kilowatt hour.

While other counties, such as San Diego which lifted the rate freeze, suffer from skyrocketing electricity costs, the current rate freeze in L.A. county continues to keep electricity costs lower for customers, at least for a while.

A preliminary quarterly tax revenue report for the Malibu indicates that the utility users’ tax revenues have dropped sharply since deregulation began in 1999. The city estimates that revenues will continue to drop in the next few years unless the cost goes up in the meantime.

Only a few companies such as DWP and Burbank and Glendale power authorities are not bound by the deregulation rules. Unlike Edison, they have made a profit during this summer because they generated more electricity than they needed and could sell the surplus to those who were in need.

The Malibu Times is the first newspaper in Malibu, serving the community since 1946.

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