$28 Billion Bailout of Utility Companies Draws National Attention

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Consumer and Environmental Groups Blast Faulty Electricity Deregulation

SAN FRANCISCO, CA –David Brower, a founder of the modern environmental movement and the first Executive Director of the Sierra Club, joined consumer advocates around the country in calling for an end to ratepayer bailouts of private utility companies. Over 100 consumer and environmental organizations joined with Ralph Nader, in press conferences in 20 states and Washington D.C., to decry the utility companies’ attempts throughout the nation to pass billions of dollars of bad investments onto electric utility consumers. The “Californians against Utility Taxes” (CUT) initiative is the California consumer groups’ response to the bailout tax and phony rate reduction passed by California legislators in 1996.

“If there is one thing that we have learned over the years, it’s that California sets the political trends. We have the chance to stop a nationwide rip-off with this one initiative,” said initiative proponent Harvey Rosenfield, author of insurance reform Prop 103. “The CUT initiative pulls the plug on the greed of the big utility companies,” he said.

Sponsors and supporters of the CUT initiative warned of the dangers of California’s deregulation. Under California’s deregulation legislation, all consumers are required to pay the costs of utility companies’ mismanagement and mistakes, which currently represent close to 40% of the average consumer’s monthly bill. Consequently, would-be competitors are unable to offer significant savings to small, residential consumers. According to Nettie Hoge, Executive Director of TURN, “The legislature promised us a competitive solution and a choice of electric suppliers but consumers got neither.”

Over 700,000 Californians signed the petition demanding a vote on the consumer-backed CUT initiative. The initiative guarantees consumers a 20% reduction in electric rates and bars the utilities from charging consumers for that reduction. The initiative is expected to be qualified for the November ballot by the Secretary of State on Thursday, June 25. It is sponsored by Californians against Utility Taxes (CUT), the Utility Reform Network (TURN) and supported by Consumers Union and the Oaks Project, the volunteer-based civic group responsible for spearheading the initiative signature drive.

The initiative prevents the utility companies from shifting the cost of their bad investments in inefficient nuclear power over to consumers. These bad investments have resulted in billions of dollars of cost overruns. Other payoffs of unsound investments are also barred. The initiative includes provisions to protect consumers from abusive marketing practices and invasion of their privacy by electric service providers.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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