San Diego Sees the Light

No one would have expected ultraconservative San Diego to be the cradle of a revolution against privatization. Nixon's "lucky city," it was one of the few places in California actually carried by George W. Bush. But as a result of the electricity deregulation plan passed by the state legislature in 1996, San Diego County became the first area in California to be completely deregulated--that is, subject to the "market" for both wholesale and retail rates.

The results were immediate, unexpected and, for many, devastating. Within thirty days, monthly electricity bills, both residential and business, doubled. In sixty days, they tripled. A commodity that produced steady profits when selling for 4 cents a kilowatt-hour zoomed to $4 a kilowatt-hour. Dozens of small businesses folded. Those on fixed incomes panicked. Fear, then outrage, engulfed the community. A true populist revolt erupted. Urban workers, suburban professionals and small-business people burned their utility bills at protest rallies. School boards and city councils voted not to pay their bills.

The state legislature responded to the San Diego revolution with a temporary cap on retail rates, but local progressive forces (led by the Coalition for Affordable Public Power) developed a long-range solution--the formation of a municipal utility district (MUD) to provide local control of the increasingly dysfunctional electricity market. Although some 2,000 communities across America today control their own electricity supply, and the City of Los Angeles generates and distributes electricity for its 3.8 million citizens, such a proposal could scarcely have been imagined in San Diego before the crisis. In fact, no new municipal utility has been formed in California for over half a century. Yet almost instantly San Diego was ready for such a "radical step." Three million people in the county "got it" all at once: This wasn't a free market at work but a manipulated market that threatened their future. This was not primarily a "supply and demand" crisis, nor one caused by wacko environmentalists, but one brought about by greedy marketers and wholesalers who withheld supply and took plants offline to drive up prices. Deregulation had put the whole economy at risk.

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