Colorado Electricity Advisory Panel votes against electric deregulation
Panel recommends Legislature open regulations on electric industry
November 11, 1999
The deregulation of the electric industry in Colorado didn’t get as much support as proponents needed. A study completed by the Colorado Electricity Advisory Panel showed the pros and cons of deregulation, but in the end, a majority of panel members voted against the plan.
The Electricity Advisory Panel, consisting of Colorado residents from various business interests, was charged with researching deregulation for the state.
Deregulating the market would give retail electric customers the opportunity to select an electric supplier a choice proponents say would drive prices down and opponents say would drive prices up.
In the final vote, 17 panel members were opposed to deregulation and 12 were in favor. Though a majority, the result was not the two-thirds majority needed to reflect a solid recommendation. Panel members elected to submit a report to the Colorado Legislature outlining the stance of the majority, the minority and one from the middle ground, reflecting the combined opinion of proponents and opponents.
As mandated in the 1998 Senate Bill 152, the final report will be presented to legislators and reviewed. A decision will be made whether legislators favor creating a bill allowing for a deregulated market.
Moffat County Commissioner Joe Janosec, a member of the panel, expects a bill to be introduced in the 2000 legislative session.
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“We’ll just have to wait and see what they do with it,” he said.
Janosec voted against deregulation to protect rural electric customers which he said would see higher prices in a deregulated market. If a bill is introduced for deregulation, he plans to be part of a group that offers to testify before a legislative committee to stop the passage of any bill.
Another Moffat County representative on the panel, Charles McCulloh, voted in favor of deregulation. He is an employee of Senaca Mine and was unavailable for comment.
Sen. Dave Wattenburg, R-Walden, was the chairman of the panel and also voted against deregulation.
Over a 15-month period, the panel of 29 people met more than 30 times. To establish conclusions, they met with experts, commissioned studies and held public comment meetings.
After considering various forms of input, each panel member cast a vote on whether restructuring is in the best interest of Colorado electricity consumers and the state as a whole.
The group hired Stone and Webster as its energy consultant. The consultant made a computer model on the future of energy prices in Colorado in a deregulated market. Test scenarios showed rates were likely to go up as much as 29 percent more than under the existing system.
And rural communities could see even higher increases.
“The predicted rate impacts will be disproportionate with low income, fixed income, rural, residential and small business consumers suffering rate increases greater than the Stone and Webster projections,” the report stated.
Those in favor of deregulation say the model is based on “untested and unrealistic assumptions” and argue that in the 23 states where the electric market is deregulated, prices fell from 5 percent to 15 percent.
“Theoretical models and hypothetical projections are simply no match for the real world fact that customer choice is generating consumer savings in every region of the country,” deregulation proponents stated in their report.
Despite conflicting evidence, Janosec still argues deregulation is not in the best interests of rural Colorado. Because Colorado has some of the lowest electric rates in the nation, he said there is not really any place for rates to go but up, and said deregulation only lowers rates in states that had a high rate to start.
“It would be darn tough to get (electricity) any cheaper than we are now,” he said.
Proponents of the change are representatives from big businesses in the industry, Janosec said, so he was not surprised by their stance. Large electric suppliers such as Public Service Company of Colorado stand to corner the electric market if deregulated, increasing revenue and driving small, rural electric providers out of business, he said.
“It’s a pretty foregone conclusion that the big companies would get the break price wise and someone’s got to pay for that,” Janosec said.
Other study findings dealt with the economic impact of deregulation. An economic consultant hired for the group found that projected rate increases under restructuring would hurt the state economy and could cause the loss of 29,000 jobs as companies enter mergers, asset sales and downsizing.
“Retail restructuring would expose consumers to many cost, reliability and services risks not inherent in the regulated electric industry,” the report states. “Efforts to address (those concerns) could cost electric consumers more money and result in more regulation.”
Janosec said public opinion speaks for itself. Of the 200 polled in public meetings, about 80 percent opposed restructuring, 10 percent supported it and 10 percent was undecided.
Proponents said the merits of competition far outweigh any drawbacks that might occur, and the claim that competition would increase utility bills has been proven wrong time and again in the real world of consumer experience.
“It is time to move ahead to harness the power of competition,” the report stated.
Those who created a middle ground report voiced concern for the impact of deregulation on low-income families, saying they would fall through the cracks of a deregulated market as larger companies begin providing service to rural areas. The fear is larger companies are sometimes far from the consumers they supply and difficult to communicate with. Those large companies also have more severe penalties for late payments and lack the customer service smaller companies provide.
That lack of local control is another reason Janosec said he was opposed to deregulation.
The panel recommended the Legislature consider the impacts to low-income families and implement safeguards if it chooses to deregulate the market.
Janosec summed his argument up with the old saying, “if it ain’t broke, don’t fix it.”