Editorial: Talk about a shock to the system

Monday, Aug. 7, 2000 | 9:30 a.m.

For good or ill, California is the nation's trendsetter, whether it's politics or the economy. So when the Golden State decided in 1996 to start down the path of deregulating its electric industry, other states, including Nevada, decided that they also should take steps that eventually would lead to them opening up their power markets to competition. The main reason the other states joined the California Deregulation Rush is that they didn't want to be left too far behind this economic colossus.

But California is receiving a rude awakening to electric deregulation. Not only has a low supply of power resulted in rolling blackouts in San Francisco, but prices also have skyrocketed since the retail market was gradually opened to competition. In fact, residential consumers in San Diego are so furious that many want to return to the "good old days" of government regulation.

Talk about a sea change in opinion. After all, it was generally accepted that the benefits of bringing new competitors into the retail selling of electricity had the potential to result in lower prices and innovative new products, as has occurred in the deregulation of long-distance phone service. What many forget, though, is that while the absence of regulation can lead to lower prices, the lack of government oversight also can result in higher prices since regulators aren't there to protect consumers.

The conventional wisdom is that increased demand for electricity and tight supplies have led to the spike in electric bills, which in San Diego has resulted in rates increasing by as much as 200 percent. In an effort to provide relief for San Diego residents, California utility regulators last week approved a modest rebate for customers. But the regulators' action doesn't seem to be quelling the public's anger, a development that Nevada officials should heed.

Competition is slated to begin Nov. 1 in Nevada, with the biggest customers going first and residential customers going last, likely in September 2001. Still, before that happens, Gov. Kenny Guinn must give his approval before this state starts deregulation. A rate freeze is supposed to aid Nevada consumers during the transition, but this only will be a temporary measure. The bottom line is that before the governor gives his blessing to this economic experiment, he should be painstakingly careful to ensure that the electric industry is ready -- unless, of course, Nevada wants to repeat California's unpleasant experience.