Colorado's relatively cheap power supply, a by-product of the state's plentiful coal reserves, has caught the eye of utilities in California. The power market there has been thrown open to competition, and dozens of would-be electrical suppliers are scouring the Western states, looking for cheap electricity to sell to buyers up and down the West Coast. One aggressive new utility known as New Energy Ventures recently scored a deal to supply hundreds of Ralph's grocery stores in Southern California with cheap power from Montana. Since electricity in California costs roughly twice as much as in other parts of the West--largely because of a disastrous investment in nuclear power--suppliers who can get their hands on cheaper power have the potential to make huge profits off the vast California market.
"They're out looking for power; that's the name of the game here," says Paul Klein, spokesman for Southern California Edison, which serves millions of people in the Los Angeles area.
This buying and selling of power over huge geographical distances would once have been impossible. While the technical capacity to move electricity around the nation's western power grid has long been in place, strict regulation of state utilities has, up to now, made it difficult to buy and sell electricity across state lines. In exchange for state-sanctioned monopoly status, utilities like Public Service Company of Colorado have been expected to focus on supplying the local market with reasonably priced power. Today in Colorado, everything from rates to the opening of new power plants still has to be approved by the Public Utilities Commission.
But a major political push by a well-funded lobby has now called into question the utility status quo. Under the banner of competition and the free market, a coalition that includes some of the biggest companies in Colorado is pushing to open up Colorado's power market to out-of-state utilities. In an important political shift, Public Service Company has also thrown its support behind utility deregulation, and the company now says it would be interested in selling power to other states. PSC will support a bill in the next session of the state legislature that would allow it to market power in places like California.
Earlier this year, Public Service merged with a Texas utility, Amarillo-based Southwestern Public Service, to form a new parent company known as New Century Energies. The two utilities made it clear the merger was in preparation for a deregulated electric industry and said they were combining so they could compete more effectively in the power industry's brave new world.
And at the national level, Colorado congressman Dan Schaefer has become the leading advocate of utility "reform." Schaefer has been beating the drum for power restructuring from Washington to California, and his outspoken stance has allowed him to tap into a mother lode of political contributions from energy interests.
Although boosters say that breaking up Colorado's monopoly power supply will benefit all Coloradans by bringing lower costs to consumers, consumer groups and rural electric providers question that claim. They say deregulation will benefit large commercial users with the clout to negotiate bargain rates, while homeowners and small businesses will see their electric bills rise--and watch the low-priced power they once took for granted flow to California.
"If you're deregulated, do you want to sell power to California for fourteen cents per kilowatt hour or to Colorado customers for seven cents?" asks Ken Reif, director of the Colorado Office of Consumer Counsel. "That to me indicates costs would go up here and down there. California is the black hole--it just sucks up power."
Reif says big companies are pushing for the right to buy blocks of power wherever they can find it--a practice often called "retail wheeling"--because they know they can get a volume discount from suppliers that could save them substantial amounts of money. However, if large local users like Conoco or King Soopers are allowed to opt out of the Public Service Company grid, Reif predicts that rates will rise for homeowners and small businesses. That's because those remaining in the power system will have to pay more to make up for the contribution of large customers that have been allowed to drop out.
"Who's going to make up the difference?" Reif asks. "Customers like residential customers that don't have any bargaining power. There will be winners and losers in a deregulated market between big customers and small customers, urban customers and rural customers."
Those pushing for power deregulation contend that the same market forces that have reduced the cost of long-distance phone service and airplane tickets can work magic on Colorado's power system. Now that many formerly regulated industries like trucking and telephones have been opened up to the marketplace, they vow to make power the next industry where suppliers will have to compete for consumer dollars.