California Flips a Switch

Letting the nation's most populous state continue to go dark with rolling blackouts has not been the brightest idea. Now with summer heat bearing down on it, California has finally seen the light. Its utilities commission is likely to boost electric rates by up to 46 percent.

That higher cost will pinch many people's budgets, but it's the only way to force Californians to conserve and to avoid paying billions more in taxpayers' money to buy power.

Too bad this rate hike didn't come sooner. But state officials have been worried about a political backlash if they passed on the real costs of electricity caused by a bungled deregulation of the industry.

Fortunately, the new rate structure will provide market incentives for consumers to either conserve or switch to alternate energy sources. Consumers who use less than a standard amount will pay less.

For three months, the state has made emergency purchases of power, spending nearly $3 billion, with the prospect of buying at least half the state's power this summer. A rate hike now will help the state find buyers for a multibillion-dollar bond issue in May that will finance the costs of buying long-term power.

The two main electric utilities, which faced bankruptcy, will also be forced to live with their debts, balancing out the burden.

Using markets to spur both electricity supply and energy conservation was the original idea behind deregulating the industry in many states. But California only went half way in 1996, and didn't create incentives for more supply.

Raising rates will make up for that mistake and help balance supply and demand in the electricity market.

(c) Copyright 2001. The Christian Science Monitor

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