Legislature's plan for Edison will force utility into bankruptcy, says economist's report
Press Release
8.24.2001
 For Immediate Release: August 24, 2001
PLAN WILL PRESERVE, RATHER THAN END, STATE’S ROLE IN POWER PURCHASING San Francisco, CA – The California state government plan for dealing with Southern California Edison’s debts, despite intentions, will force the utility into bankruptcy, shift the responsibility to other creditors, and turn back the clock to the pitfalls of excessive government regulation and inefficiency in the energy sector, economist Benjamin Zycher warned today. Dr. Zycher is a senior fellow in economics at the California-based Pacific Research Institute (PRI), which today released Dr. Zycher’s “Memoranda of Inefficiency: Reflections on the Legislature’s Plan for Edison” (http://www.pacificresearch.org/). The report is part of a larger study on California’s energy market that will be released by the Institute this fall. “This measure will force Edison into bankruptcy and preserve, rather than end the state’s role in power purchases,” said Zycher. “Provisions of the Edison Memoranda of Understanding (MOU) will return California to an inefficient system of regulatory rate setting, politicize electricity rates, increase investment risks and capital costs, and damage consumer choice,” Zycher said. The economist faults California’s partial deregulation plan for the state’s current difficulties.
Dr. Zycher’s report outlines key policy principles, including:
Government must honor private contracts and refrain from efforts to impose losses upon particular market participants. Price controls must be resisted as perverse for the power sector and state economy as a whole. Direct access, the right of consumers to purchase service from any supplier they choose, must be preserved as an essential component of the competitive market. Preservation of policy neutrality among all subgroups of consumers, producers, and other market participants is essential for the long-term achievement of efficient outcomes.
“The Edison MOU will move California toward a more politicized electric power sector, with more rather than less governmental involvement,” said Zycher. “The long-term interests of California workers, consumers, and taxpayers, would be better served by policies relying on market forces,” Zycher said.
To interview Dr. Zycher, contact Dawn Dingwell at (415) 989-0833, ext. 136. A copy of the summary of Dr. Zycher’s forthcoming report is available at http://www.pacificresearch.org/.
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