Deregulation. That word will dominate the utilities industry in 1998, when California electricity providers will be able to compete in an open market for the first time much the way long-distance phone companies have been able to compete freely since the late 1980s.

But that doesn’t mean all businesses and residents will be able to start shopping for the best electricity deal when deregulation comes into effect some time next year. (Deregulation was originally scheduled to begin Jan. 1, but computer problems have pushed back the start date indefinitely.)

The open market will not apply to the large number of business and residential customers who are served by one of the Los Angeles area’s municipal utilities, such as the L.A. Department of Water and Power. These utilities have a two-year grace period during which they can decide whether or not to open their territories to competition.

L.A.’s DWP is preparing for deregulation by eliminating 2,000 positions, as well as selling off surplus property such as helicopters and excess land. The cutbacks are needed, according to DWP General Manager S. David Freeman, in order to reduce the department’s debt estimated at about $7 billion and therefore give it the ability to be competitive.

Other municipal utilities are preparing to compete as well. Pasadena Water and Power, for example, cut its staff by nearly a third and is reducing the amount of revenue it is transferring to the city of Pasadena’s general fund.

Utility users who are not in a municipal utility’s territory will see some cuts in their electric bills. Under 1996 legislation that made deregulation a reality, investor-owned utilities are required to give a 10 percent cut in electrical rates to all small-business and residential customers.

Among the companies required to cut rates is Southern California Edison. But even with the 10 percent cut, the rates for customers of Edison and other investor-owned utilities tend to be higher than the rates for municipal utility customers.

Another industry that will be affected by deregulation in 1998, as it has for the last two years, is telecommunications.

Ever since passage of the Telecommunications Act of 1996, local phone companies wanting to break into the long-distance business have had to meet certain requirements in order to get approval from the Federal Communications Commission.

In 1998, several companies that do business in California are expected to get that FCC approval, the most likely being Bell Atlantic Corp. and SBC Communications Inc., which operates in California under Southwestern Bell Telephone.

One issue sure to inspire argument in 1998 is the San Diego County Water Authority’s struggle to buy water from farmers in the Imperial Valley. The water must be shipped through the L.A.-based Metropolitan Water District’s aqueducts to reach San Diego.

The MWD is reluctant to allow the plan, however, because it could chip away at the MWD’s power to control the region’s water supply and could lead other member agencies to seek a degree of independence.

Daniel Taub

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