Just as Americans get used to paying $1.70 for gasoline there comes a new reason to rage: electric prices are on a vertical spike. In New York, the average bill jumped from $52 to $74 last month. California, caught in a heat wave and lacking adequate power plants, has it the worst. In Orange County, utilities have asked schools to cancel classes and warned neighborhoods they may face blackouts. In San Diego, police and fire stations may have to go dark.
It wasn’t supposed to be this way. In theory, deregulation should stoke competition and drive down prices, just as it did in the airline, trucking and long-distance-telephone markets. But in the electric industry, deregulation has uncoupled what were once full-service firms (like Con Edison) into two groups of companies. The first set generate power; the second act as middlemen that transmit it to customers. As demand for power has surged this summer, power plants have raised prices dramatically, and middlemen, no longer shackled by regulatory price ceilings, are passing them on to consumers. “People need to have a bad guy, but we are just the messenger now,” says a spokesman for San Diego Gas & Electric. Some experts say power plants are simply gouging customers (the Feds are investigating); power companies blame excessive demand and plant breakdowns for higher costs. While this summer’s debacle may cause the public to sour on deregulation, experts view it as a messy transition in a process that will ultimately bring lower prices. Until then, expect a shock when opening electric bills.
Cities are finding different ways to meet demand. San Francisco has tried bringing a floating power plant to its port, but so far it can’t get environmental permits. In New York, magazine publisher Conde Nast is using fuel cells and solar panels to power its air conditioning. For everyday consumers, relief may come as the political winds shift. California Gov. Gray Davis, who championed deregulation, is now calling for a cap on wholesale electric costs. Many other states, including Massachusetts, already have ceilings on consumer bills until the industry adjusts to deregulation. In states without those provisions, low-income folks face tough choices. “They’re wondering whether to sweat to death without the air conditioning on, or turn the AC on and go broke,” says Melissa Porter, a home-care provider in San Diego. The last one standing can turn out the lights.
