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.
My conservative Republican neighbor, US Congressman Duncan Hunter, summed up San Diego's discovery: "It's as if the hospital administrator, five minutes before your scheduled life-or-death operation, suddenly tripled the cost of the oxygen. It's not scarcity, it's not cost of production, it's control of a vital necessity at the moment you need it." Hunter had seen his individualistic, entrepreneurial, small-business constituents brought to their knees by the price gouging. And virtually every other public official in the county–in both parties, at every level of government–came together to support my calls in Congress for a municipal utility district, a return to regulated rates and refunds of a year's criminal overcharges. Even the San Diego Union-Tribune, the staunchly conservative, pro-free market flagship newspaper of the Copley Press, consistently editorialized against the wholesale power industry, in support of price controls and more federal regulation. It too supported public power and criticized the Bush Administration on numerous occasions for its failure to respond to California's crisis.
Various cities in San Diego County have tentatively explored setting up their own municipal utilities. But there is general consensus that a countywide district would be most viable. And, under the real threat of a grassroots petition movement to put a MUD on the ballot, the five conservative Republicans on the County Board of Supervisors have pledged to secure state legislation to authorize the district. Once a formal MUD structure is in place, a variety of options are available, from community co-op power purchasing to full ownership of generation and distribution capacity. I have advocated MUD ownership of enough power (say, 1,000 megawatts out of the 3,000 we use daily) to give the community leverage over the market. We would not need–and thus would not face future political opposition to–a complete takeover of transmission and distribution lines. And the MUD would provide leadership for conservation and renewable energy development. We are now actively planning the San Diego Community Power Project, designed to be completely environmentally friendly and to offer electricity at the previous regulated rates. The public once would have winced at the $400 million price tag–but that's what we paid in overcharges in just two months last summer.
Many obstacles remain to securing local control. But the remarkable political consensus has held, and I believe that San Diego will soon be generating its own power. The national movement toward electricity deregulation has abruptly slowed in the wake of California's disaster. If San Diego can emerge from the crisis with a new vision for our energy future, the nation will have gained a truly progressive alternative.