For the last 15 years, our company has been engaged in the manufacture of steam turbine generators. These generators produce extremely low cost (<2 cents/kWh) electric power. They are able to achieve these low costs by operating at an efficiency of 80 percent or higher; that is, for every 10 additional units of fuel burned, our generators produce eight units of electric power. By comparison, the ''regulated'' U.S. electricity system produces power at 33-percent efficiency -- and has been ''locked'' into this efficiency since the mid-1950s. Efficiency has two enormous benefits for our customers. One, since less fuel is purchased to produce the same volume of electricity, the electricity can be produced more cheaply, thereby reducing our customers' electric bills. Two, since less fuel is burned in the process of making power, less pollution is released into the environment -- fewer greenhouse gases, fewer local air pollutants, etc.

Why does deregulation matter? Because deregulation will (and indeed, already is) creating opportunities for companies and technologies like ours that provide more cost-effective sources of electric power. These new sources will not come overnight, but you can be sure that they will come. The regulated United States power industry has always had its rates set by regional rate boards. These boards review utilities' costs each year, provide them with an ''acceptable'' level of profit on top of those costs and decree the resulting number to be next year's electricity prices. Mr. Balzar is absolutely right to note that this system encouraged an extraordinarily reliable system. There was a strong incentive for utilities to provide as much capacity as was necessary for their customers, since the rate boards effectively guaranteed that they would make a profit on those investments. At the same time, the utilities had no incentive to reduce their cost to produce power, since to do so would effectively reduce their profits. By extension, they therefore had no incentive to reduce their customer's cost of power, or to allow anyone but themselves to generate power.

The actual history of every industry that has gone through deregulation has been that prices have fallen overall, but have also become more volatile. Electricity markets will be no different. At the same time that prices have fallen, new products have been introduced that revolutionized the market. Recall that when the telephone industry began to deregulate, AT&T warned that there would be system-wide failures if any phone other than an AT&T phone were plugged into the network. Today, these claims are laughable in light of cordless phones, cell phones and Internet phones, not to mention new fiberoptic and cellular networks. Given the freedom to compete in a deregulated market, new players will introduce a comparable range of new products and technologies into the electricity marketplace.

So why the crisis in California? Not because of deregulation, but because of an absence of deregulation. The system that existed prior to ''deregulation'' in California -- and indeed, still exists in most of the country -- was like a grocery store network that was owned by the fishing industry. Access to the market (sales of food to grocery store customers, or the electricity distribution ''wires'') was wholly controlled by the people who manufactured the finished product (the fishermen, or the power generators). California legislators rightfully recognized that this system is inherently non-competitive, since the generators -- the fishermen -- had a vested interest in preventing access to the distribution system -- the grocery stores -- to anyone but themselves. Not only did this system prevent competition in the market (e.g., lower fish prices), but it also eliminated any opportunities for providers of new products, be they steam turbines, solar panels, or broccoli to enter the market.

The utilities were thus broken up into generation and distribution companies. What has been called deregulation in California was actually only the deregulation of the markets by which generators sold power to the distributors. Recognizing that power prices would become more volatile, these legislators then took the further step of not deregulating the only market that matters -- the market within which consumers bought power from these distribution companies. These legislators acted with the best of intentions -- they truly believed that the market would be better off if ''protected'' from market forces. However, this cannot truly be considered deregulation. By extension of the metaphor above, this would be comparable to ''deregulating'' the grocery industry by deregulating the market for fishing licenses.

When the California generators' price of power went up, the distributors were prohibited from passing this cost increase along to their customers. As growth in the utilities' expenses has outpaced growth in their revenues, we have seen PG&E declare bankruptcy, we have seen small generators (who were dependent on the now cash-starved utilities to pay their bills) shut down, and we have seen rolling brown-outs as the utilities have lacked the financial ability to keep the power flowing. This situation will sadly get worse before it gets better. Our weather in New England notwithstanding, it has been an extremely dry winter in the Pacific Northwest, and the hydropower that forms such a large part of the western power grid will therefore not be available to anywhere near its normal capacity. Furthermore, California regulators remain unwilling to embrace full-scale deregulation. Our own experience in the generator business suggests that nothing spurs electricity users to reduce their power consumption (or to embrace efficiency) like rising electricity costs.

My suspicion is that like the California regulators, Mr. Balzar has an inherent distrust of the strength of a competitive marketplace. He is entitled to those opinions, but The Recorder does its readers a disservice by endorsing his views.