Report Proposes Energy Market Remedy -- California Capitol Hill Bulletin -- Volume 10, Bulletin 1 -- January 9, 2003

A new report released by the Bay Area Economic Forum proposes an integrated energy policy for California in a quest to address the myriad problems associated with the state's 2000-2001 power crisis. Californians pay some of the highest energy costs in the nation, which the report attributes to inadequate investment by generators, and the lack of comprehensive strategy with respect to the state's power market future.

The authors propose a comprehensive framework that focuses on lowering the cost and generating more choices to consumers, promoting reliability and environmental maintenance, and creating regulatory efficiency. The first step that this new policy directive envisions is the development of a well-functioning and competitive wholesale market, and a consequent linking of wholesale and retail markets through pricing structures that reflect the real costs of power based on time of use. The report advocates restoring and maintaining the financial solvency of the state's utilities and promoting the mission of investor-owned utilities as that of common carrier distributors, which in turn can be encouraged by performance-based incentives for their distribution systems.

With respect to consumers, the report proposes increasing choices of retail providers and plan options, which translate into improved service and lower prices. In addition, the report also suggests simplifying transmission rates and encouraging regional resource sharing, minimizing the cost of the long-term power contracts, and creating accountable state agencies responsible to monitoring the energy market. The report also emphasizes increased levels of investment if the new integrated energy policy is to be successfully implemented, and warns that "without continued, timely investment in new generation capacity and related infrastructure and concerted conservation efforts, the state could face more power shortages." For more information about this report, visit http://www.bayeconfor.org .

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