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Energy exec: Public needs a costly lesson By Dale Kasler Bee Staff Writer (Published Feb. 4, 2001)

Want to get Californians to conserve energy? Then jack up their utility bills. Especially at peak times, when electricity costs the most. Brutal but simple, such a solution would go a long way toward remedying California's electricity shortage, a lack of power that's sure to get worse during the long hot summer of 2001, says Kenneth Lay, chief executive of Houston-based energy conglomerate Enron Corp.

Lay said the rising cost of energy is one of the main reasons the U.S. economy has slowed -- and that the situation could get far worse if California doesn't get hold of its electricity situation.

In an interview last week with The Bee, Lay said Californians so far have had little reason to conserve electricity. Their bills, while higher than a year ago, don't fully reflect the rising costs of electricity.

"In the whole West, the market has become very tight," said Lay, one of the energy industry's most influential executives. "Price signals need to be allowed ... for people to understand there is a shortage."

He said it's ironic California's rates haven't gone up as sharply as those in several other states, when some of those other states have suffered rate increases because they're shipping power to California. Nevertheless, Californians still pay more for electricity than many of their neighbors, he acknowledged.

State energy officials said raising electricity prices too sharply could devastate small businesses and put people out of work.

And it would only encourage power sellers to keep prices artificially high, said Claudia Chandler, an assistant director of the California Energy Commission.

Chandler said wholesale electricity prices are so out of whack that if they had been passed along in full to consumers last month, her December PG&E bill would have risen from $133 to $650.

Although they come from opposite sides of the energy debate, Chandler and Lay both say electricity use could be curbed if California installed more "real-time meters" so that customers could be charged more at peak usage times, when electricity is at its most expensive.

Enron has a vested interested, of course, in seeing California's rates rise. It sells electricity to the state's two stricken utility giants, and is in the same boat as other wholesale suppliers: It has generated profits from California but wonders if it will be able to collect the money it's owed.

Its fourth quarter profits jumped 32 percent to $1.3 billion, although the company doesn't spell out how much of the bounty came from California.

Lay's comments, however, echo those of other economists who believe California ratepayers will make significant changes in their energy-consuming habits only if faced with major increases.

His statements came as the Legislature, having passed a bill to buy electric power for years to come, began turning its attention to the billions of dollars the utilities owe to wholesale suppliers. The power-purchasing legislation includes rate increases for heavy users, and the debt-remedy legislation might include rate increases for all, according to Wall Street analysts who have discussed the matter with legislative leaders.

Staff writer Carrie Peyton contributed to this report.

-- Martin Thompson (, February 05, 2001

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