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Industry News

Architect of California's Dereg Blames FERC for Woes

The California lawmaker who played a major role in crafting legislation that deregulated the state's electric power industry and then chaired the joint legislative committee that guided the measure to unanimous approval in both houses of the Legislature now blames the Federal Energy Regulatory Commission for the state's electricity problems.

State Sen. Steve Peace, a Southern California Democrat, notes that FERC's members are from the South and the agency's inaction could cause a backlash against that region.

In a telephone interview with CBS Market Watch, Peace said "California will strike back. It is regional economic warfare. It is the modern equivalent of the Civil War."

Some observers may feel Peace is attempting to deflect criticism from himself. After all, it was he who played the major role in creating the deregulation scheme that everyone now realizes is responsible for the mess California's electric industry has got into.

Because of term limits, Peace is due to step down at the end of the current session. He has been considered a possible candidate for California Secretary of State in 2002, but if he is seen as the man behind rolling blackouts and rising electric rates, his election to any office would seem unlikely.

So, Peace is blaming FERC, and not his own legislation.

"Everything FERC has done has turned to s---, to put it in a technical term," Peace told CBS Market Watch. "Everything is an extension of FERC's decisions. What we were right about and what FERC was wrong about, was that the market would stabilize itself," he ranted on. "We went through two years of operation with very good success."

From April 1, 1998, when deregulation went into effect in California, until May of 2000, when high wholesale electricity prices began to be passed through to San Diego consumers, the problems with Peace's legislation went unnoticed.

Well, almost unnoticed. In August 1998, an electricity supply and demand study prepared by the California Energy Commission for the state's Independent System Operator showed that the state could run short of power in 1999 -- but probably wouldn't. In a story published Aug. 20, 1998, EnergyOnline Daily News asked "Will State Have Enough Power?" We were less than optimistic. "Maybe, Maybe Not," was our view.

Peace even thinks FERC should have saved him from himself when he was drawing up the California deregulation plan. "If there was something unique and bad about it, why did FERC approve it in the first place?" he asked.

Maybe it was all those Southerners itching to get even with the high-falutin' weirdoes on the Left Coast.

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