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Independent electricity firms wither

Thousands of customers handed back to utilities as companies end operations

By Ben Fox Associated Press

SAN DIEGO - Some wanted to support renewable energy sources such as solar power. Others sought cheaper rates. Some just didn't like the state's three utility companies.

Whatever their motives, most of the more than 200,000 Californians who signed with independent electricity companies are being switched back to their old utilities as the state's experiment with retail power competition comes to a messy end.

"It has effectively been killed in its youth," said Michael Shames, executive director of the Utility Consumers' Action Network in San Diego.

Meanwhile, California remained at a Stage 3 power alert for the 27th straight day on Sunday. Power reserves remained low but no rolling blackouts were reported.

Most independent electric companies began halting their California operations in recent weeks, unable to pass the skyrocketing wholesale price of power on to consumers. Then Gov. Gray Davis suspended any expansion of retail competition as part of an emergency power law.

The corporate retreat, which includes at least one company that sold power over the Internet and another that managed to serve 7 percent of the city of Palm Springs, is seen as another element of the state's failed deregulation effort.

For years, California consumers could only buy their power from three utilities Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric. But in 1998, regulators authorized independent firms to sell energy.

The experiment unraveled as wholesale energy prices began to skyrocket last summer. The government froze the utilities' rates but not those of independent firms.

That turned out to be a hard lesson for Yvonne Gaston, a retired teacher from El Cajon. She signed up with Green Mountain Energy Co. of Austin, Texas, because she liked the company's use of renewable energy.

But her last bill climbed to nearly $600 as she paid 26 cents per kilowatt hour while her neighbors with SDG&E service were charged the capped rate of 6.5 cents.

"They should have told me I was going to get this huge, horrible bill," said Gaston, 60. "I feel like it was a betrayal."

Last month, Gaston dropped her Green Mountain service, just before the company switched most of its customers back to their original utility.

California's experiment with independent providers had started out with great expectations.

The independents had expected 150,000 customers a month would switch from Southern California Edison, said Denise Grant, director of the utility's division that works with retailers.

"There was a lot of eagerness and ambition about the potential for the market in California," she said.

When the state market opened, some 300 companies signaled interest. But only about three dozen energy service providers, or ESPs, actually went through the cumbersome process to get permits.

Those who did then had the challenge of persuading consumers to make the switch to an unknown entity. While ESPs were assigned large blocks of customers when Pennsylvania deregulated its market, companies in California had to go out and find them. Green Mountain, for one, set up booths at swap meets and grocery stores.

In the end, the switch was made by fewer than 225,000 Californians, or less than 2 percent of the state.

By comparison, Edison, the state's largest utility, has 4.3 million customers.

Commonwealth Energy Corp. of Tustin retains about 70,000 accounts because, early on, it purchased long-term wholesale power contracts that assured it some price stability, spokesman Roy Reeves said.

But most of the other ESPs have dropped out of the market, at least temporarily, including,, and New West Energy. Green Mountain's customer base has dropped from 60,000 clients to about 8,000 who had long-term service contracts.

"We're back to a monopoly," Green Mountain spokesman Rick Counihan said.

-- Martin Thompson (, February 12, 2001

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