Bailout Terms Being Negotiated;Deregulation Déjà Vu: Discussions Recall 1996 Fiasco

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Initiative Seems to be Only Option to Protect Ratepayers

Consumer advocates now believe that a utility reform ballot initiative is inevitable because private and public dialogue about the current energy crisis revolve around how much ratepayers will pay rather than how to protect ratepayers from any rate hikes. Consumer advocates with the Foundation for Taxpayer and Consumer Rights (FTCR) said that there is no justification for a consumer rate increase, and the group will not participate in any discussions in which a bailout of the utilities is on the table. The group also said that six days allotted by the PUC to review the companies’ financial status does not provide enough time to conduct a genuine audit.

“In 1996, the Legislature handed the utilities the largest bailout in state history as a result of private negotiations that did not bring to light the real dangers and costs of deregulation,” said Doug Heller, consumer advocate with FTCR. “Now that deregulation has blown up in our face, the utilities want to fashion another bailout through private negotiations in which they hand out meaningless concessions to some groups in exchange for massive rate hikes for all ratepayers. We will not participate in such a giveaway.”

FTCR highlighted recent posturing by the utilities and Wall Street that demonstrate that they are “crying wolf:”

  • Edison, after threatening to declare bankruptcy today without an infusion of cash from an immediate rate hike, has not filed for bankruptcy.

  • Standard and Poors, the Wall Street firm that promised the utilities’ credit rating would be slashed to junk bond status without an immediate rate increase, did not downgrade the companies./
      “The utilities and Wall Street cried wolf, but there was no wolf at the door,” said Heller. “Instead of punishing this reckless behavior, discussions still revolve around a bailout, which means it is likely that an initiative will be the only way to protect consumers from unwarranted rate increases.”

      Unless the Process Slows Down, Audits Will Be Insufficient

      Yesterday, California called the bluff of Edison and PG&E by ordering audits of the companies’ finances and not providing the utilities with the immediate infusion of cash that they said was required to avert bankruptcy. An independent and thorough review of Edison International and PG&E, however, cannot be completed in the week (between Christmas and New Year’s) allotted by the PUC and the governor. Unless Governor Davis slows the process down dramatically, consumer advocates have little faith that the audits will portray an accurate picture of these companies.

      “You cannot audit two $30 billion corporations in six days is like trying to stop a runaway train with a matador’s cape,” said Heller.

      FTCR stated that the energy crisis could be solved without increasing rates for residential consumers. According to the Foundation:

      • Governor Davis should immediately bring on-line all power plants that are unnecessarily off-line to ensure the reliability of the electricity system;

      • The Governor, Legislature and PUC should implement a short term electricity plan that requires the utilities to sell all the electricity that they generate to residential consumers on a cost-of-service basis, which requires no rate increase above present rates;

      • Public officials should develop long term plans to implement a public power system for California that will protect ratepayers from the public safety and economic nightmare that deregulation has created.


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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