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Oregon has its own electric deregulation plan that will go into effect Oct. 1, but Oregon bureaucrats and lawmakers disagree on how it will affect ratepayers and utilities. They even disagree on what to call it. "Call it restructuring, reshaping or redesigning," Public Utility Commission (PUC) Chairman Ron Eachus testified last month before the legislature. "But do not call it deregulation in the same breath as California." But Congressman Peter DeFazio (D-Springfield) didn't hold his breath in calling for the repeal of Oregon's deregulation bill, SB 1149. "Because the lights have gone out in California and all the clocks are flashing '12:00,' I'm here to issue a wake up call 4 deregulation is a failure," DeFazio said at a press conference with State Sen. Tony Corcoran (D-Cottage Grove) and State Rep. Bob Ackerman (D-Eugene). "The Northwest is already in a state of emergency," DeFazio says. "If Oregon deregulates this fall, it could have catastrophic consequences for our entire region." Eachus disagrees that the Oregon and California versions of deregulation have much in common. "It sounds to me a lot like [DeFazio] should be running for governor of California rather than Oregon," Eachus told The Oregonian.
Unlikely Opponents While Eachus and CUB duke it out with deregulation's critics, those who may have the most to gain appear happy to stand back and watch their potential rivals go at each other. Associated Oregon Industries (AOI) was the leading force behind deregulation. Corcoran says SB 1149 was named after 1149 Court St., the address of the state's most powerful lobbying group. But AOI lobbyist Julie Brandis shies away from attacking DeFazio's motivation for calling for the bill's repeal. "That would just get me in trouble." PGE, the state's largest private utility, also pushed hard for the bill. "We will go where our customers want to go," says spokesman Mark Fryburg. "That's all I can say." Eachus has a lot more to say. "There's a core group of people in Lane County raising a whole bunch of scary problems" about deregulation, Eachus says of DeFazio, Ackerman and Corcoran. "Too bad they don't know anything about what's going on in Oregon." Senate Bill 1149 "is not going to makes rates go up," Eachus claims. To say otherwise, "is a disservice and a little bit of demagoguery." CUB Director Bob Jenks joins in accusing opponents of attacking 1149 "to make political hay" and fit Oregon's bill into their "political model" that deregulation is bad. DeFazio says Eachus isn't a consumer advocate and is leading the support for deregulation in Oregon. "Most people sort of look to Eachus and say don't worry, it will be fine." But DeFazio says Eachus may be supporting deregulation because he's up for reappointment and doesn't want opposition from Republican legislators. Messing with deregulation in a state that enjoys cheap public hydropower doesn't make sense, DeFazio says. "Regulation served us well for 70 years," he says. "The whole thing begs the question, why should Oregon go there?" Corcoran says its "ludicrous" to argue DeFazio and Ackerman don't know what they're talking about. He notes that their experience working on power issues in the public interest dates back 20 years. Corcoran attributes Eachus' and Jenks' support for 1149 to "pride of ownership" in the bill they worked so long to pass. Eachus "is moving from being a consumer advocate to a bureaucrat," he says.
But Eachus says Oregon has a better plan. "It's in no way a California look alike," he says. "I don't see any similarities at all." Eachus says Oregon's "cautious" plan exempts public utilities like EWEB, doesn't apply to smaller residential and commercial customers, doesn't require that utilities sell their generation assets or buy power on the spot market, and will provide all consumers the option of staying with utility rates regulated by the PUC. Big industrial users will have the option of leaving their utility to buy power on the open market. Jenks says one of the big benefits of 1149 that CUB fought to win was the inclusion of a 3 percent surcharge on electricity bills that will raise $40 million a year to support energy conservation, renewable power, and school and low-income weatherization. "They got a 3 percent sales tax," DeFazio says. "I don't consider that some sort of a grand victory." DeFazio says consumers will pay the 3 percent tacked onto their bills rather than utilities paying it out of their profits. "Most people got sold a real bill of goods last session," says Ackerman. The 3 percent was used as a way to "buy off the liberals to get the deregulation," he says. "They've sold out for a very cheap price and bought into a very bad idea," DeFazio agrees. Corcoran has introduced a bill to repeal 1149 while still requiring the 3 percent payment for conservation and renewables. But Jenks says he doubts Corcoran's bill will pass. Supporting deregulation for big industrial users was "part of the deal" in the legislature to get the 3 percent. The business lobby "wouldn't have supported it otherwise."
Breaks for Biz A large customer can also save 54 percent of the fee by hiring a consultant to say there is no available conservation project at the factory with a payback of 10 years or less. Ë Eachus says the state will monitor the reductions in the charge to prevent abuse. But he admits that the conservation credit could end up as a subsidy because "there's no way to tell" if the factory would have done the conservation work anyway. Jenks says with energy prices high, many industrial users will do conservation projects even without the credit. While deregulation holds few benefits, it has many risks for small customers, critics charge. "Oregon deregulation places an unfair burden on residential and commercial ratepayers," Ackerman says. With industrial users free to shop around, utilities will be forced to compete for industrial contracts, Ackerman explains. The utilities will be forced to offer industry lower rates. The costs of the lower rates will be passed on to smaller customers, he says. "The residential ratepayers are going to have to make up the shortfall." "Rep. Ackerman has got it all wrong," says Eachus. "There is no cost shift." Eachus says that if an industrial user leaves a utility, the utility can sell the surplus power on the market. "Their revenue won't necessarily go down." Jenks says that in the current market where surplus power can be sold at high prices, "there's an advantage to losing load." But if the volatile energy market shifts again, back to the low prices just a couple years ago, a utility could lose money by losing a big customer. Ackerman says a utility that fails to compete for its industrial users will be a big problem. "These folks can't go broke, something's got to give." In California, utilities that misjudged the deregulated market have neared bankruptcy and have pressed regulators for huge residential rate increases and taxpayer bailouts. Jenks says the big industrial users want deregulation because they don't think the utilities are competitive. "They think they can buy power better than the utilities. They think [utilities] are fat, lazy monopolies that are incompetent." Ackerman says he's concerned that utilities won't be able to hedge their power prices by buying long term electricity purchase contracts that are now much cheaper than the spot market. The utilities could run the risk that they would buy a long-term contract to help serve a big industrial user and then have that user switch to a different power provider. The utility would be stuck with the contract, which it might have to resell on the market at a loss if power prices fell. The disincentives for utilities to buy long term contracts have been criticized as a major contribution to the failure of California's deregulation rules. AOI's Brandis says Oregon's deregulation rules do include adequate protection. Big users are charged a "Power Acquisition Adjustment" to share the risk of long term contracts with the utilities, she says. But Jenks says the law might have to be changed to do a better job at encouraging long-term contracts. PGE spokesman Mark Fryburg says the utility agrees there's a problem. With big users able to come and go, "how do we forecast the load that we have to buy?" Fryburg says the long-term contracts are very important in controlling rates and "we're looking to the legislature right now" for a change in the law to address the issue. Eachus, Jenks and Brandis say a big benefit of 1149 is that it will encourage investment in new generating capacity in the state which will increase power supply and reduce rates. The rules will make it clear to corporations that new wholesale generators will have access to serving big industrial users, according to Eachus. But critics argue that the power corporations are making huge profits by reducing generation and creating artificial shortages. "Where's the incentive for these people to create excess generation?" Corcoran asks.
Manipulating the Market Ackerman says he's also concerned that Section 6 of 1149 allows the PUC to require utilities to divest from their generating capacity. "That's exactly what happened in California" and was a major cause of their disaster, Ackerman says. He says he'll push a bill to repeal the provision. Ackerman says he's introduced a bill that would use tax-free state revenue bonds to build more power generation plants for Oregon residents. The bonds would be repaid by selling power from the plants within the state. Jenks says Ackerman's idea is "interesting. It could help." What won't help is deregulation, DeFazio says. Oregon should take a clue from its neighbors, he says. "The Washington and Idaho legislatures have said hell no, we're not going there." Ackerman says he's amazed at the lack of studies of the potential effects of the deregulation bill in Oregon. "I haven't seen anything that provides any economic justification. It's all so hypothetical." There are hearings now in the Legislature on the bill, but "you're only getting a dog and pony show from the deregulator's standpoint," says Ackerman. Corcoran says Eachus "will basically tell you I'm full of shit, that DeFazio's full of shit, that Ackerman's full of shit." Corcoran admits that Eachus does know a lot more than he does about the intricacies of Oregon's deregulation plan. But, Corcoran says, "I do know what deregulating a monopoly is." In the end, what some fear could become one of the biggest public policy blunders in Oregon history may come down to trust. Jenks says, "It comes down to: Do you believe that Ron Eachus and the PUC can regulate?"
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