February 28, 2001, 2:28 PM — AT THE HEART of California's power problems was the decision made in Sacramento in fall 1996 to deregulate the electric power utility industry. Four and a half years later, the chickens have come home to roost. The question is, Should anyone have foreseen the current disaster? InfoWorld sent Editor at Large Ephraim Schwartz to talk to the chief lobbyist for a company that was in the forefront of the deregulation efforts back then. Richard Hall, director of corporate government affairs at Intel, discusses what went wrong.
InfoWorld: Even before legislation was proposed, was Intel, along with other high-tech companies, lobbying for deregulation in the early and mid '90s?
Hall: We were one of many companies that were at the table all through the development legislation in '96. We were there, represented directly and through our lobbying association. But in September '96 we withdrew our support. We were the only company that did. We felt it was a flawed and incomplete piece of legislation.
InfoWorld: Flawed in what way?
Hall: It deregulated half of a market in a time of shortage. And if you had done that with bananas, you'd have a shortage of bananas. You see, the fundamental flaw, the central glaring flaw, is that the action deregulated wholesale prices while leaving retail prices regulated. PG&E pays a wholesale price for much of the power. They pay a market price and turn around and have to sell it at a controlled price. It is this severe imbalance. If all prices went to market, it would eliminate the rolling blackouts.
We also viewed the legislation as incomplete. It did not cover the entire California electrical infrastructure. It left out the municipal utilities, which provide about 20 percent to 25 percent of the state's power. We also felt for a number of technical reasons the legislation was rushed together in the last 10 days or so too quickly. It was a freight train rolling down the track.
InfoWorld: So, if Intel withdrew its support for the legislation as it was finally crafted, are you also hinting you knew that it would lead to the current problems?
Hall: I wish I could claim we foresaw the extreme difficulties. We did not. We were not geniuses who knew we were going to have rolling blackouts four and a half years later.
InfoWorld: Is it fair to say then that you no longer support deregulation?
Hall: It can work when crafted right. It's worked in airline and telecommunications industry. This deregulation model was incomplete and flawed.
InfoWorld: How might it have been different than the current situation?