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Trend could be a shock for power structure

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© St. Petersburg Times, published January 12, 2001

Florida Power Corp. is warning us: If you have electric heat, your next bill is going to be higher because of the cold weather. A reasonable reaction might be: Duh! No kidding.

Yet the company stresses the obvious point for a reason. Experience proves that some customers do not grasp the firm connection between using more electricity and paying more.

Can you imagine, then, what kind of madhouse Florida will be if we ever have to face the kind of electricity crisis now going on in California?

Some of the highlights:

There is not enough juice to go around. There is an almost standing threat of rolling blackouts. The slightest blip of trouble -- yesterday, it was bad weather -- plunges the state into crisis.

California's electric companies are in deep financial trouble. The rates they charge customers are frozen by law. But their costs of buying power on the wholesale market are skyrocketing.

In some areas of the state where electric rates are allowed to float on the free market, customers are paying two to three times what they paid last year for the same amount of power.

This is the face of deregulation of the electric industry in California. It is of interest to us in Florida because our state, like the rest of the nation, is moving toward deregulation as well.

The old way, the way we still do it in Florida for now, is regulation. Each electric company has a monopoly over its territory. The state sets the company's rates and caps its profits.

The company has guaranteed customers for its power plants. No rival power plants are allowed. In return, society gets a guaranteed supply of electricity.

The new way is deregulation, either wholesale or retail, or both.

On the wholesale level, new companies, such as the aggressive Duke Energy of North Carolina, can build "merchant" power plants and sell their juice on the open market.

On the retail level of deregulation, customers are allowed to buy their power from any supplier that will sell it, sort of like the way we now choose a long distance telephone company. (The electricity would still come in over your local company's wire.)

Why deregulate at all? The theory is that free-market competition will keep prices low, benefitting the consumer and society in general. The free market is supposed to be better than clumsy old government regulation.

But then why are things so wrong in California?

There are several reasons. Some people argue that California did not deregulate enough. It was nutty to deregulate wholesale sales but freeze retail prices, crippling the electric companies. After all, price is exactly what regulates a free market.

On the other hand, a key assumption behind deregulation -- that a free market drives prices down -- might be wrong. There is evidence that suppliers in California have deliberately withheld electricity to jack up prices. Why sell cheap when you can sell dear? These mercenary suppliers have no moral duty to serve a monopoly area, the way the old-style companies did.

Here in Florida, Gov. Jeb Bush has appointed a task force called Florida's Energy 2020 Study Commission. The group will report on how Florida should proceed, although the final decision will be up to our Legislature.

"One thing in our favor is timing," says Terry Deason, a member of the state Public Service Commission, who served on the task force last fall. "Hopefully, we'll benefit from other people's mistakes."

Let's hope so. However, remember that the Legislature in recent years has more often sided with business than consumers. It considers "deregulation" and "privatization" to be holy words. Unless you live without electricity, or you have an army of gerbils hooked up to a generator out back, then you should stay tuned as this unfolds.

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