Woes in California prompt suggestion that New Mexico slow down deregulation

ALBUQUERQUE, N.M. - Spiking electricity prices in California after deregulation there are prompting calls for New Mexico to slow down in plans to deregulate the power market.

Attorney General Patricia Madrid and others have asked state regulators to delay voting on a preliminary order that would begin the deregulation process in January 2002.

State Sen. Michael Sanchez, a Democrat who sponsored New Mexico's law to open the market to competition, said he expects a meeting sometime in December to decide whether a delay or additional legislation is needed.

Sanchez said he believes the New Mexico law ''protects us a lot better than they were in California.''

Many Californians blamed that state's deregulation when their electric bills doubled and tripled over the summer.

California Gov. Gray Davis said the industry was ''unconscionably profiteering.'' Carl Wood, a member of California's Public Utilities Commission, urged other states to use caution in following California's lead.

''I would advise other states to take a careful look at experiences chalked up in California and other states,'' he said. ''We have been the guinea pig, and guinea pigs don't fare well.''

Paul Turner, an assistant professor of economics at New Mexico State University in Las Cruces, asked, ''Given the experiment that has gone awry in California, why do we expect anything else here?''

But Jeff Sterba, president of New Mexico's largest electric and gas utility, Public Service Co. of New Mexico, wants deregulation to go ahead as planned in January 2002.

''Do I believe New Mexico can avoid making the same mistakes?'' he asked. ''... The answer is absolutely yes.''

Electricity prices will increase and decrease, but not to the extent as in California, he said.

San Diego Gas and Electric Co., with 1.2 million customers in San Diego and southern Orange County, was the first utility in the nation to buy power on the open market under a 1996 California law deregulating the industry.

Wood said prices were stable in 1999, the first summer San Diego customers operated under the open market. But this summer, the utility faced spikes in wholesale energy costs and passed those along to customers. An average household bill jumped from $55 in May to $102 in July.

The California commission and the Federal Energy Regulatory Commission are investigating what caused the soaring prices.

A recent FERC report blamed high prices on a combination of hot weather, more electricity being exported from the West with no change in importing and the West's greater reliance on electricity from sources other than hydropower. A preliminary investigation by a California Power Exchange panel reached similar conclusions, and found the market structure let power sellers sell at higher prices than they might have otherwise.

New Mexico's law does not set up anything similar to the power exchange set up under California law. It also does not require utilities to sell their generating plants, as California's does.

There's still no guarantee New Mexico consumers won't fall prey to the marketplace at some point, said John Curl, state Public Regulation Commission utility division director. PNM can sell much of its power outside the state, and has successfully done so for years.

The ability to sell power elsewhere will pressure prices here to go up, Curl said. New Mexico also is hooked into the same power grid as California. So if prices are high there, electricity bills in New Mexico will go up as well, he said.


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