Electric reform cause for concern

Colorado Springs - Colorado Rep. Dan Schaefer, chairman of the House Commerce subcommittee on energy and power and a leading advocate of reforming federal policy to drive a fast-track approach to give consumers a choice in electric power providers, said last week "There is no reason not to (deregulate electricity) when the status quo hurts all consumers." The benefits, according to Schaefer, would be lower average power prices; real savings from new efficiencies; new technologies and more innovation; and greater reliability.

Others assembled at the El Pomar Forum, a quarterly leadership roundtable convened by the Center for the New West, were skeptical, including many electric power stakeholders: utility executives, regulators, analysts and community leaders. Many agreed with the reform objectives: more freedom for power providers and more choices for all consumers -- not just large industrial power users.

But there are problems. One is higher consumer prices for many Westerners. Most Western states outside of California now top the list of "cheap" power states (4 to 7 cents per kilowatt hour) while power in many Eastern and New England states is priced at more than 10 cents. According to Senate Energy committee chairman Frank Murkowski, R-Alaska, that means that cheap power will migrate to higher prices, raising the costs for consumers in low-cost states like Oregon, Washington, Idaho, Montana, Wyoming, Nebraska, the Dakotas, Colorado and Utah. That's what "lower average prices" mean: While the price comes down for many, it goes up for some -- most of whom live in the Western U.S. outside of California.

Another problem is government-induced bankruptcy. Data presented by Ron McMahan, president of Resource Data International, a Boulder-based energy information firm, clearly showed that an ill-conceived master plan by Congress could push important segments of America's electric power industry over a financial cliff. Reason: An industry with about $210 billion in annual revenues could, under some fast-track "reform" plans, get stuck with more than $200 billion in investments that would be "stranded" (i.e., unrecoverable) because of new government policies. Result: A lot of unnecessary bankruptcies among the nation's 3,050 electric utilities, many of which serve sparsely populated areas of the West and South.

These failures would be unnecessary because market-oriented reforms initiated by state governments (e.g., in high-cost states like California and New Hampshire) are already moving the industry toward more consumer choice -- but at a more realistic pace that reflects the unique circumstances of local areas. Without some breathing room, we could see a replay of the government-induced savings and loan collapse that started in the 1980s and was bailed out by taxpayers in the 1990s.

But Congress is likely to slow things down. Reason: Fifteen of the 20 members of the Senate Energy committee, which must approve new reforms, are from the West. Many consumers in their states are served by cooperatives and public power agencies that would be harmed by precipitous reforms. Indeed, many of their constituents live in the small towns and rural areas adversely affected by "reforms" in the airline, railroad and telecommunications industries.

As Colorado rural development council director Flo Raitano said, "Changing the way small towns and rural areas get electric power is not something to plunge into and work out the details later. Been there; done that. Let's see the details up front." That view is also likely to prevail in Congress, where members from the South and West will require a "Politician, do no harm" kind of Hippocratic oath from those who would impose a new grand design on a basic industry.