State Should Get Refunds or Seize Plants, Advocates Say

Monthly utility bills will skyrocket by 160%, or an average of $96/month, if the Governor’s plan to pay the wholesale energy companies $23 billion over the next two years is put into effect, consumer advocates said today. If the Governor seeks to reduce these monthly prices by borrowing the money through bonds, the total cost to ratepayers will rise to over $40 billion and would seriously impair the state of California’s credit-worthiness, the non-profit, non-partisan Foundation for Taxpayer and Consumer Rights said.

Today’s announcement by the PUC of a rate increase to cover an as yet undetermined amount or portion of state electricity purchases underscores that we can no longer afford to pay blackout blackmail payments to the energy companies.

Harvey Rosenfield of FTCR called for immediate refunds from the energy and utility companies that have used deregulation to overcharge ratepayers by at least $30 billion through January 2000 and would reap another $19 billion in overcharges for 2001 through 2002.

“Deregulation is a license to steal,” Rosenfield said. “The utilities took $20 billion for ratepayers in exchange for the statutory promise of a 20% reduction once deregulation kicked in next year. Not only are they reneging on the reduction, but now we’re being told we’ll have to pay the profiteering out-of-state energy companies 145% more for electricity this year and next. Eighty-three cents of every dollar we’re paying the energy wholesalers is overcharge. This is unacceptable. The state must demand the utilities (and their shell-game playing ‘holding companies’) return the $20 billion they took from us. And the state should give the energy companies seven days in which to refund overcharges and reduce rates to fair profit levels, or seize their power plants.”

Consumer advocates said that public officials will not be able to spread the state power purchases over many years, because covering just two years of power purchases would overextend the state’s bonding capacity and would be fiscally irresponsible.

“This is high noon for Gov. Davis. Our state’s economy cannot be permitted to be held hostage to companies behaving like outlaws in the Wild West. We simply cannot afford to pay their ransom any longer. State officials must use all their emergency authority to protect us. Failure to do so will lead to a fearsome ratepayer revolt at the ballot box.” Rosenfield concluded.

Under the Governor’s proposal, approximately 10 million ratepayers, who are served by the state’s investor-owned utilities (and in part by the Cal. Department of Water resources under emergency legislation, AB 1X), will be forced to pay an additional $23 billion for power purchases during the next two years. That will require additional payments averaging $2300 per ratepayer, or $96 per month, for two years. This extra $96/month, or approximately $0.19/kwh extra for wholesale power that cost an average of $0.033/kwh in 1999, means that 83 cents of every dollar used to pay for the “net shortfall” of electricity will be to cover the price of market manipulation and profiteering, according to FTCR.