Reopening the energy market

California utility regulators forged ahead Thursday with a controversial plan that could clear the way for another try at deregulating the state’s electricity market -- a concept last tested in the years leading up to the devastating 2000-01 energy crisis.

State law prohibits the Public Utilities Commission from reinstating competition between the state’s major utilities and unregulated power providers before 2015. But the commission decided to look for what Commission President Michael Peevey called “proactive ways” to do that earlier, giving customers of Southern California Edison and other investor-owned utilities the ability to shop for power deals.

The decision drew sharp rebukes from a consumer advocate group and others who fear another regulatory debacle that would leave California vulnerable to blackouts and the market manipulation schemes employed by Enron Corp. during the crisis.

“Why would we invite Enron and its ilk back to California?” said Mark Toney, executive director at the Utility Reform Network in San Francisco. “States throughout the U.S. are pulling the plug on deregulation in the face of skyrocketing prices and widespread consumer dissatisfaction. Yet, despite the billions of dollars in losses California suffered the first time, the CPUC is poised to unleash the dangers of deregulation on the public once again.”

During the electricity market meltdown, the state Department of Water Resources stepped in to supply power and fix prices through long-term contracts. State lawmakers halted competition among energy providers at least until the state got out of the power business -- that means 2015, when the last of the long-term deals expires.

A coalition of big power users and energy providers called the Alliance for Retail Energy Markets asked the commission to reestablish what’s known as direct access, the technical term for opening up the market and allowing customers to pick their electricity providers.

California’s energy crisis wasn’t caused by direct access, the coalition contended, and the state law that prohibited its return should no longer apply. Members said direct access would spur technical innovation and inject competition into a market dominated by large monopolies.

Peevey said the state could bring back deregulation sooner than 2015 if the water resources agency canceled, renegotiated or handed off its remaining long-term contracts to utilities in the state. To that end, Peevey said the commission “can and should evaluate the merits of ways to extricate DWR from its current role as supplier of energy.”

Norm Plotkin, executive director of the Sacramento-based alliance, said he understood that the commission wanted to move very cautiously.

“We support their move,” he said, “and are ready to roll up our sleeves and do the hard work that needs to be done.”

State Assemblyman Lloyd Levine (D-Van Nuys) isn’t convinced.

“I’m very concerned. I have yet to see an area where direct access actually works for an extended period of time in the real world,” he said. “I look at energy as a necessary commodity, and it should be regulated as such.”

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elizabeth.douglass@latimes.com