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Los Angeles Times

A consumer advocacy group announced a proposed ballot initiative Tuesday that would allow a takeover of the multibillion-dollar electricity industry in California by the state government.

The plan, offered as a solution to the current crisis in electrical energy and the threat of higher rates next year, calls for reregulation of the industry and a windfall profits tax on excessive utility rates.

It also would prohibit companies from charging customers for energy procurement costs that exceed a certain level, a practice known as back-billing.

Harvey Rosenfield, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, outlined his proposed 2002 initiative at a news conference.

Using a familiar pressure tactic, the activist said he was offering the program to Gov. Gray Davis and the Legislature. But, indicating that he believed they would reject it, Rosenfield said he intends to take the plan to the voters as an initiative.

In making the apparent take-it-or-leave-it offer, he told reporters, “We do not compromise.”

Rosenfield, a critic of the controversial deregulation law enacted by legislators and then-Gov. Pete Wilson in 1996, said Davis and current lawmakers must correct the mess immediately.

“It’s their job to fix it, but there is ample reason to question whether they will do the right thing,” he said. He noted that the well-heeled energy industry is among the most politically influential in California.

Steve Maviglio, Davis’ chief spokesman, said the governor “has not ruled Rosenfield’s proposal in or ruled it out. He’s working hard with all parties to fashion an appropriate solution.”

Deregulation, which was championed by the utilities, temporarily put the brakes on electricity rates. But unexpectedly last summer, the unregulated system seemed to go haywire in San Diego and southern Orange counties, where some rates surged by 300%.

Even as California approaches winter, energy shortage alerts have emerged as a new cold weather phenomenon.

“Our purpose is to restore a reliable and affordable electricity system in California,” Rosenfield said. He alleged that the utility industry wants the deregulation rules rewritten so they “can foist another $ 5 billion to $ 6 billion in unjustified charges on the beleaguered ratepayers.”

“If the Legislature does not act appropriately, we have begun drafting a ballot initiative,” said Rosenfield, estimating that he could raise $ 7 million in campaign funds from labor, consumers, environmentalists and small businesses.

Rosenfield was the architect of the successful Proposition 103 insurance reform law in 1988. He also wrote Proposition 9, a utilities overhaul program that went down to easy defeat in 1998.

Meanwhile, electricity utilities say they too are victims of deregulation. Among other things, they note that in spite of California’s growth, no new power plants have been built in years. They also argue that the law forces them to buy energy on a costly daily market rather than authorizing long-term contracts that would stabilize rates.

Jan Smutny-Jones, executive director of the California Independent Energy Producers, a trade association of private power plant owners, conceded that the deregulation law needs to be changed but cautioned against wholesale revisions.

“Use tweezers rather than a chain saw to fix those things,” Smutny-Jones said. “Trying to go backward to reregulation is going to raise a level of political and regulatory instability in California that will really destroy the business climate here.”

Under Rosenfield’s plan, which he said would take a few years to implement, a new state agency would be created to buy, “build, own and operate” private power plants as well as transmission and distribution systems. The agency would also contract with private operators to sell the energy on a cost of service basis.

Additionally, local and state governments would be given greater condemnation powers to “take over generation, transmission and distribution of assets, if necessary,” the proposal says.

Consumer Watchdog
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