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    A Times Editorial

    Shocks to the system

    California's disastrous power shortages should raise new concerns for the Florida officials eager to bring energy deregulation to this state.

    © St. Petersburg Times, published January 26, 2001


    California's power crisis should serve as a tutorial for Florida and other high-growth states. The blackouts cutting off power to homes, businesses and essential public services affirm the need for states and the federal government to remain vigilant as deregulation of the electric industry proceeds. President Bush's decision Tuesday to extend assistance to California for two more weeks acknowledges the problem has national impact and deserves federal attention.

    The severest blackouts were averted this week after power managers were able to buy surplus energy in Canada. Traffic lights functioned during the morning rush hours. But reserves on the power grid fell critically low, and demand threatened to intensify after eight paralyzing days. California Gov. Gray Davis and legislative leaders made progress this week on a broad-range plan to pump more juice into the grid, though the plan requires billions in new public spending and fast action on building new power plants.

    California made several mistakes in its rush to deregulate in 1996. Major utilities sold their power plants to wholesalers, then found themselves squeezed when wholesale rates rose much higher than the rate retailers are allowed to charge. California also built no major plants in the 1990s, despite increased demand for electricity caused by population growth and the spurt of the dot-com industry.

    Florida should slow down its own rush toward deregulation until the lessons of California's crisis are clear. A task force appointed by Gov. Jeb Bush will recommend this year whether and how to deregulate energy in Florida. Several broad concerns come immediately to mind in the wake of California's experiment. The state needs new energy plants for real competition to exist. Without increased capacity, consumers have no choice. Deregulation should not be a goal in itself, but a tool to expand choice, improve service and lower rates in the long run.

    The Energy 2020 Study Commission should endorse the principle that the public interest demands affordable and reliable access to electricity. States need to retain some oversight in a deregulated environment, to prevent price-gouging and service disruptions down the line, from wholesale suppliers to their utilities and customers. Power is the backbone of a functional society. To keep the system stable, states should require suppliers to pay into a reserve -- either cash or energy credits -- that could be drawn to cushion price shocks or increase capacity in a California-style emergency.

    The president's reluctance to help ignores the role the federal government should play in coordinating energy policy with the states. Though California's bail-out scheme may calm the markets, boost supply and stabilize rates in the short term, Washington has broad responsibilities in the high-growth coastal states. Defending the borders, promoting trade and protecting ships and aviation all depend on ready and affordable power. Drilling for natural gas, a major source of energy in the coming years, also sets a showdown in energy policy, notably in Florida, which might cause tension between the Bush brothers.

    Gov. Bush's commission should be addressing the breadth of the energy question -- including managing regional demand, limiting sprawl, protecting the environment and requiring conservation. We won't succeed merely by deregulating under any scheme or avoiding California's distinct mistakes.

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