Justice:

Utility Deregulation

Deregulation of the electric power industry is creating a few big winners (electric utilities and large industrial customers) and many losers (residential consumers, utility workers, and the environment). Just ask consumers in San Diego, who have seen their electric bills double or more, upon implementation of deregulation this year.

The idea of deregulation is to let consumers shop for electricity from any generator, not just the utility that controls their electric lines.

But the utilities have argued that such competition would unfairly disadvantage them, since they are burdened with massive investment in uneconomic nuclear power. They have successfully lobbied many state legislatures to have consumers pick up the price of their "stranded cost" nuclear investments, and some other costs -- a utility bailout that may ultimately total more than $200 billion.

Deregulation has encouraged the utilities to downsize, costing more than 150,000 utility workers their jobs. These layoffs and other cost-cutting measures affect the safety and reliability of electric service. Blackouts in New York City and Chicago during the summer of 1999 were the direct result of cost-cutting that laid off thousands of workers and delayed maintenance on power lines and transformers. On hot summer days, when demand for electricity peaks, poorly maintained power lines and transformers over-heat and fail. With fewer workers and spare parts, it takes longer to restore service.

Deregulation is also putting low-income households at risk of service cutoffs. Prior to deregulation, most states had cut-off protections for low-income households, so they could keep using electricity during extremely hot or cold weather. Low-income households could get electricity service from utilities companies - who had a legal, regulated monopoly - even if they had poor credit histories. State deregulation laws are undermining many of these basic consumer protections. Minority and low-income neighborhoods now face the prospect of electricity redlining. Electricity suppliers may attempt to sell deceptive contracts with low base rates that will increase sharply at times of peak demand. Recent events in California show that deregulation can leave consumers vulnerable to outrageous swings in prices.

Meanwhile, the 500 coal-fired power plants that have "grandfathered" exemptions from provisions of the federal Clean Air Act are able to thrive under deregulation. Since the grandfathered plants are not required to use modern technologies to reduce pollution, they can produce electricity more cheaply. By causing a scramble for the cheapest power, deregulation enables the old coal plants to run even longer, annually producing 750,000 tons of smog-forming nitrogen oxides and nearly 300 million tons of carbon dioxide beyond the amounts produced in 1992, according to the 1998 U.S. PIRG report Lethal Loophole.

Consumers, workers, and the environment must be protected from the ravages of deregulation. "Stranded cost" bailouts must end. All power plants must meet strict pollution standards. Sufficient funds must be allocated for universal service, low-income, energy efficiency and renewable energy programs. And consumers must have the right to band together for group energy buying and to have notices placed in utility bills to invite consumers to join democratically governed Consumer Utility Boards.