Decades After Enron Debacle, Electricity Deregulation Is Back

(Bloomberg) -- Almost two decades ago, rolling blackouts and soaring power prices across California killed a nationwide movement to deregulate electricity markets and end the monopoly of traditional utilities.

Now deregulation is back in two of the most populous U.S. states. And utilities are girding for a fight.

In Florida, a proposed ballot measure would end monopolies held by NextEra Energy Inc. and Duke Energy Corp., allowing residents to pick their own power providers. And in Virginia, groups from both ends of the political spectrum are pressing lawmakers to break Dominion Energy Inc.’s hold on the state.

The outcomes will reverberate through power markets across the U.S. While states including New York and Texas undertook some form of deregulation years ago, more than a dozen others still have monopoly utilities. Success in Florida or Virginia could give new life to a movement that flourished in the late 1990s until Enron Corp. and the California energy crisis rendered it politically toxic.

“There aren’t a lot of people who love their electric utilities,” said Katie Bays, co-founder of the consulting firm Sandhill Strategy. “There’s just an acceptance for a long period of time, until something happens.”

The efforts face formidable challenges in both states, where utilities have significant political clout. Opponents of both measures argue they would lead to higher prices for consumers. And in Florida, the state’s attorney general, backed by leaders of the state house and senate, has asked the state Supreme Court to block the measure from the ballot altogether.

Last year, Nevada voters rejected a ballot measure backed by casino owner Sheldon Adelson to allow customers to choose their own electricity provider.

Supporters are nonetheless pressing forward, arguing that deregulation promotes innovation and lower prices -- while cutting the influence that utilities wield over state governments.

“It’s time that our 20th Century markets are dragged kicking and screaming -- and we’re under no illusions that they will kick and scream -- into the 21st Century,” Ken Cuccinelli, a former Virginia attorney general and prominent conservative, said at the kickoff event in May for the coalition leading the effort in his state. He left the group after President Donald Trump tapped him to become acting director of U.S. Citizenship and Immigration Services.

On the other side of the political divide, former Democratic Vice President Al Gore is backing the effort in Virginia, too. “For too long, big energy companies have stacked the deck against consumers,” Gore said in a July 15 Tweet. “I stand with this broad transpartisan coalition of citizens fighting monopolies for competitive markets.”

Utilities counter that California’s experience, in which Enron and other bad actors manipulated a complex and poorly understood market, shows deregulation’s dangers. They also say states that have tried it tend to have higher customer bills, not lower.

“Deregulation isn’t the way forward for Virginia’s energy future,” a Dominion spokeswoman, Samantha Moore, said in an email. “Californians left with skyrocketing electric bills and in the dark from rolling blackouts following deregulation proved that all too well.”

Deregulation boomed in the U.S. from about 1995 through 2002, as states ended or eroded monopolies for electricity, natural gas or both. While the details differed from state to state, the overarching idea was to overhaul systems in which a single company owned all power plants in a given region and controlled the local grid, leaving consumers with no choices.

Sunshine State

In Florida, the deregulation push is being led by a group named Citizens for Energy Choices. It says it’s collected more than 40% of the 766,200 signatures required to put the measure on the ballot in 2020, according to its website. A key player in the effort is Infinite Energy Inc., a Gainesville-based company that supplies natural gas in Florida but not electricity.

“I just want people to have a choice,” said Rich Blaser, Infinite Energy’s co-chief executive officer.

In addition to creating a competitive market, the measure would make it easier for Florida homeowners to install solar panels, supporters say. But the state’s Attorney General, Ashley Moody, said in a court filing that it would also block utilities from owning power plants and force 75% of the state’s residents to find new electricity providers.

The Supreme Court has scheduled an Aug. 28 hearing for oral arguments. Business groups ranging from the Florida Chamber of Commerce to the state Association of Realtors also oppose the initiative. One of NextEra’s two utilities in the state, Florida Power & Light Co., said it would upend an electric system that has lower prices than the national average.

“A proposal that raises so many unanswered questions will have a difficult time making it to the ballot,” Chris McGrath, a Florida Power & Light spokesman, said in an email.“If it does, we believe voters will recognize its fundamental flaws.”

To contact the reporter on this story: David R. Baker in San Francisco at dbaker116@bloomberg.net

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Joe Ryan, Reg Gale

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