Utilities' Stranded Costs - Who Should Pay?
Regarding "Old Energy Deals, New Revolt" (April 6): The law opening up California's electricity market to competition was hardly a "backroom deal" as its critics claim. Instead, the law was approved unanimously in the state legislature after it had been debated by all stakeholders - including consumer, utility, regulatory, and business groups.
The story mentions correctly California's huge investment in alternative energy sources (such as wind and solar power) required under a 1978 federal law. The Public Utilities Regulatory Policies Act (PURPA) results in utilities paying above-market prices for power. But those investments were not chosen by utilities, they were mandated by law - and thus can hardly be considered unwise, as your story says consumers believe.
Stranded costs are much more than PURPA investments. They include investments in nuclear power, endorsed by four US presidents as the key to energy independence at a time of oil embargoes and mistaken predictions of natural-gas shortages.
These and other investments were made under the regulated monopoly system to help power our economy. Now that the rules of the game are being changed, is it fair to saddle the utilities with the price tag for those investments? We think not.
M. William Brier
Edison Electric Institute
Your article was correct in pointing out how little accurate information has reached the public on electric utility deregulation. But part of the confusion persists because "stranded assets," the investments that are not profitable to operate in a competitive environment, are still misunderstood.
The great majority of stranded assets are nuclear power plants, not the energy-efficiency, cogeneration, and renewable-energy investments that utilities were required to invest in for their perceived social good. While the government promoted civilian nuclear energy, it never required utilities to invest in nuclear power. Utility companies were misled by nuclear-power promoters, including nuclear power plant vendors and the Atomic Energy Commission, which promised that nuclear energy would be "too cheap to meter." This technological fantasy never came to pass. Instead, many nuclear plants became boondoggles with cost overruns in the billions of dollars.
The most important question regarding these stranded assets is whether past regulatory approval excuses the utilities' poor judgment with regard to nuclear power plants. California has saddled the public with the burden of these bad investment decisions. A more equitable policy would recognize that both utility companies and their regulators were to blame, and would place some of the costs with utility shareholders.
The bad news: sensationalism
Thank you, Daniel Schorr, for the column, "In Media Frenzy, Disaster Trumps Scandal" (March 27), which calls the bluff of the news media's insatiable appetite for scare stories that they dare refer to as "news." As a journalist, I recognize not only the temptation to focus on the bizarre, but also realize the power I have to shape an audience's consciousness by doing so.
A good cross section of my neighbors, co-workers, and acquaintances in our small town pace through life suspiciously, looking over their shoulders, frightened of people they do not know. Each tidbit of sensationalized journalism serves only to breed an uninformed, fear-based society in which spontaneity, adventure, and seeing the goodness in life are buried beneath paranoia and mistrust nurtured by the worst elements of modern media gone bad.
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