Deregulation of California Electricity May Get Another Chance

Deregulation of California electricity may be on the table again as state officials begin investigating how this might play out after the initial attempt faltered.

Over two decades ago, California began opening up its market for delivering electric power. But in 2000 and 2001, the Western Energy Crisis hindered any chances of its progress.

In 1996, Assembly Bill 1890 was passed to set the stage for deregulation of California electricity. Under this legislation, California began to restructure the wholesale market for California electricity but left retail price controls as they were.

Market manipulations ensued, and several years later, in 2001, the California Power Exchange went bankrupt. This interfered with attempts to implement a retail market measure.

With consumer choice a huge consideration for just about any product or service imaginable in the current market, new attempts at successful deregulation of the market for electricity in California are being carefully examined.

However, in order to prevent market manipulation and to avoid any potential crises, the consideration of deregulating California electricity will not be taken lightly this time around, and more information will be gathered by the state before moving toward that model again.

In a joint statement made by the California Energy Commission and the California Public Utilities Commission on April 11, the organizations stated: “Unlike electricity restructuring efforts of the past, when policymakers made a set of conscious decisions to move to open market competition, this transition is being driven by a range of economic and technological trends.”

On May 19, the two agencies will come together to hold a public meeting in order to take a closer look at the challenges and opportunities that surround the electrical industry. The purpose of the meeting was identified as “to ensure that reliable and low-carbon electricity will be available to allow California consumers.”

As of late, one main factor has been changing the nature of the electricity industry, according to the CEC and CPUC. The quickly declining costs for renewable technologies and energy storage solutions are at the forefront driving changes in California electricity regulation.

It has been estimated that by the end of 2017, alternative sources of electricity, including direct access providers, community choice aggregators and rooftop solar devices will account for up to 40% of the electricity that investor-owned utility (IOU) customers will be consuming.

The meeting will review issues such as the current state of retail choice for electricity in California and will host panel discussions that will consider the perspectives of the IOUs and consumers of California electricity.

Experts in the national electricity markets will be invited to share their perspectives on the current state of retail choice in other geographical areas. They will also discuss the role technology plays in the shift toward deregulation of energy and will offer opinions of how the state can restructure California regulations and markets in order to meet its goals surrounding public policy.

At the current time, wholesale operations are under CAISO, the California ISO, that manages the majority of the power grid for the state. In 2009, CAISO was created to specifically avoid the type of market manipulation that ultimately led to the collapse of the California Power exchange.

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