Kelly Rossman McKinney: Return to energy regulation
Editor's note: This column was corrected on June 26 to remove reference to U.S. Attorney General Loretta E. Lynch, who is not the same Lynch who led California Public Utilities Commission.
As the debate surrounding Michigan's energy future heats up, retail marketers and deregulation advocates continue pushing empty promises of lower rates and improved reliability to Michigan lawmakers. But, as Santayana said, "Those who forget the past are doomed to repeat it."
That's why I'm calling your attention to an editorial in Friday's San Francisco Chronicle written by Loretta Lynch, who was formerly California's Public Utilities Commission chair. Lynch points out that California's failed four-year experiment with electric deregulation left Californians overpaying more than $20 billion for power in 2000 and 2001 alone. In fact, California residents will continue to pay those additional costs on their utility bills until 2022 — more than two decades after suspending deregulation
Retail marketers — most notably Enron — defrauded the California market by artificially clogging transmission lines and withholding capacity, among many strategies designed to game the system. Lynch describes the damaging effect this had on California:
"Now we know that energy traders such as Enron and others were playing games with the California economy. They created energy shortages by withholding electricity and gas from our homes and businesses, artificially driving up prices and then taking bets on just how much the price would rise. When the withholding games caused a blackout, California's energy prices rocketed into the stratosphere. The energy marketers made billions of dollars. Our economy staggered."
Rising electricity costs threatened businesses and schools, not just with outrageous bills, but with forced closings on random days due to unexpected rolling blackouts.
One blackout sent 18,000 high school students home in the middle of the day.
Before Enron's ultimate bankruptcy, the exploiters traveled the country lobbying other state governments to pass deregulation legislation, taking advantage of the markets they created, including our neighboring state of Illinois.
Although Enron is gone, defeated by fraud and unethical practices, out-of-state marketers looking to make big money in deregulated states still exist. In Illinois, where Enron successfully pushed for deregulation, Exelon is currently pushing a market-based plan that would increase electricity bills by $300 million a year.
While lobbying Illinois lawmakers for guarantees, Exelon and its subsidiary Constellation, are also making tracks here in Michigan, attempting to push their flawed plan on Michigan lawmakers.
California and Illinois offer cautionary tales when it comes to the disasters of electric deregulation. Michigan legislators would be wise to take heed.
While Californians are still hoping to recover billions they were swindled out of decades ago, Michigan is poised to take positive action, returning Michigan to responsible regulation and keeping these retail marketers out of our state and away from our pocketbooks.
As critical power plants go offline due to old age and EPA regulations — helping to create a three gigawatt shortfall that will take effect in Spring 2016 — Michigan must take control of our future and pass reasonable regulation to ensure the continuation of reliable, affordable and clean energy.
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Kelly Rossman McKinney is a political consultant and chief executive of Truscott Rossman, a Lansing based public relations firm.