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Montana Viewpoint

A POWERFUL PROBLEM

January 21, 2001

With the passage of electrical deregulation the “Law of Unintended Consequences” has been brought into play in a way that we in Montana have never before seen, and God willing, we will never see again. The Law of Unintended Consequences is a sort of Murphy’s Law…“Whatever can go wrong, will.” It usually occurs when we think we have all the bases of our decisions covered but don’t, or when we put our faith in the flip of a coin to decide our fate, and hope for the best.

This was all brought home in Spades this past Saturday when I attended the Wheeler Conference on Electrical Deregulation in Helena. In short, in some states, such as California and Montana, where electrical deregulation has been passed by the Legislature, all hell is breaking loose. Random power outages occur in California, the price of electricity and natural gas go sky high, factories close, and people lose their jobs. That’s the good news. The bad news is that it seems that absolutely no one has the slightest idea of how to fix the problem. The conference featured excellent speakers, but the most interesting to me were Diane Jacob, a San Diego, California County Supervisor, and Robert Julian, an electrical power consultant to San Diego County, who lives in Belgrade, Montana.

San Diego County is ground zero for power problems, and Jacob is leading the citizen revolt against the power companies. San Diego citizens have seen their electric rates go from 3 cents a Kilowatt-Hour in June of 1999 to 27 cents this month. People can’t and won’t pay their power bills, and utility companies claim they are going bankrupt because they can’t pay the high price of wholesale power, and won’t the state please help them. Meanwhile, the folks who produce electricity in California are seeing profits go up as much as 923% from a year ago. Yeah, that’s not a typo; 923%. Of course, that’s on the high end, the low end is a measly 31%. The telling point is this: Jacob is a Republican on a completely Republican Board of Supervisors which has privatized county government right and left for the past decade. She is now advocating total government control of electrical production and transmission in San Diego County. In summary, she calls herself a pro-business, anti-obscene profit Republican. She has researched the issue, and doesn’t buy the argument that it’s a supply and demand problem. It’s a corporate greed problem. Julian, the Montana guy who advises San Diego County, by and large agrees with her. He pointed out that this is an immensely complicated issue that even people who are experts don’t really understand.

So why all this talk about those guys down there? Because it’s our problem, too. When you read about Smurfit-Stone laying off workers, or Montana industries closing, it’s because of electrical deregulation causing high (up to 32 times the normal rate) electricity prices. Citizens in Montana still enjoy regulation, but many big businesses asked the Legislature to let them buy electricity at deregulated prices. The price went down for a while, but when it went up, it soared, and that’s because of the interplay between what’s going on in deregulated California and deregulated Montana.

Basically, those businesses have to pay whatever price for electricity the supplier wants, or shut down. Small businesses and homes are protected by a price cap for two more years. When that cap comes off, your electric bill will double if you are a Montana Power Company customer. Rates will also increase for co-op customers, but less dramatically. That’s the conservative view. No one at the conference believed that we would ever again see low electric rates in the next ten years, and they couldn’t see beyond that. I’m talking about people who work for the industry and people who work for the government making that prediction. It’s beyond serious.

So, what’s the Legislature going to do about it? Not much more than damage control and hope things get better. There are bills in to repeal deregulation, but I’ll bet you dollars to doughnuts they die a quick death. The folks who brought you deregulation are sticking by their guns, and saying things will work out fine. Well, they said that in California, too. I had one question for Supervisor Jacob: “do you trust the people who got you into this mess to get you out of it?” She shook her head so hard, I thought it would come off.

This is serious stuff, more serious than anything we’ve seen before, and I’ll be devoting a lot of my columns to it. The people who warned against deregulation are not gloating. They’re angry, but more dedicated to fixing the problem than assigning blame. Supervisor Jacob is pointing fingers. If we don’t, she says, we won’t learn from experience.

Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620

jim@jimelliott.org