DEREGULATING ELECTRIC POWER : Powerful Questions : Concerns Raised for Suppliers of Alternative Forms of Energy

The dramatic overhaul proposed Wednesday for California’s electric power system sparked concern that providers of renewable energy will be priced out of the newly deregulated marketplace.

For the past decade, California has taken major steps toward ensuring that the state’s three big investor-owned utilities buy a certain portion of their power from alternative sources, including power derived from the sun, wind, water and subterranean steam.

But some environmentalists said the plan laid out by the California Public Utilities Commission--in which businesses and consumers would be able to choose their own power sources within eight years--would create a market dominated by whatever firms can make electricity most cheaply.

That would hurt renewable energy firms, which are smaller than the major utilities and often can’t sell their power at as low a price, critics said.

“This is unleveling the playing field between renewable systems and conventional systems,” said David Goldstein, co-director of energy programs for the Natural Resources Defense Council.

But PUC Commissioner P. Gregory Conlon noted that under the new proposals, Californians would be able to choose renewable energy as their source for electricity. He predicted that many would, even if it cost more.

“I think people in California would be receptive to that,” Conlon said.

He also said some renewable energy firms, notably those providing wind-based power, are increasingly able to sell electricity as cheaply as the big utilities, which rely on oil and gas to generate power.

“These alternative-energy providers need to be cost-competitive, and some of them feel they already are,” Conlon said.

Whatever the PUC does, Goldstein said, it would be unfair for consumers to pay more just because they chose to buy renewable power.

“Why should people with a conscience pay more for electricity than those that don’t have one?” he asked. “The whole concept of environmental regulation is that these are shared costs, because they benefit everybody” by creating less pollution.

Conlon said he is seeking comments on an option that was not part of the formal PUC proposal: placing a surcharge on all Californians’ electric bills that would subsidize renewable energy firms and keep them in business. Such a step would require legislation, he said.

Oil was once the dominant source for California’s electric power, but that changed after the Middle East oil shocks of the 1970s. State officials responded with a unique policy that ultimately required utilities to buy a certain portion of their power from alternative sources.

Southern California Edison Co., for instance, today buys 16% of the electricity it sells from outside renewable power firms; it generates an additional 6% from its own renewable efforts, namely hydroelectricity.

Vikram Budhraja, an Edison vice president for planning and technology, said many of Edison’s contracts with renewable power suppliers extend past the year 2010. “We expect them to continue,” he said, regardless of the PUC’s new proposals.

But Budhraja reiterated earlier Edison statements that the utility currently has no need to buy additional power from the outside. If Californians get to start choosing their own sources of electricity, he added, “our portfolio (of alternative energy purchases) would get wound down.”

Tom Graff, a lawyer for the Environmental Defense Fund, said more competition in the utility business, “in the long run, is likely to be positive for both the economy and the environment.” But he too said alternative energy firms “could be at risk in a deregulated” market if consumers opt only for the lowest price.

“It’s one thing to go to a local grocer and buy a head of lettuce that’s free of pesticides,” Graff said. “But electricity is kind of a generic product. You’re not getting a better type of electricity from your renewable resource, even though you may feel better about how it’s generated.”

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