California Governor Offers Steps on State Energy Policy

Published on

The New York Times

Gov. Gray Davis outlined his initial steps today to deal with California’s energy problems, but consumer advocates said he did little to provide a reasonable solution for them.

In a letter addressed to James Hoecker, chairman of the Federal Energy Regulatory Commission, Governor Davis asked the commission to order retroactive refunds to consumers after soaring wholesale electricity prices caused utility rates to skyrocket last summer, most notably in San Diego.

Last August, California was on the edge of a breakdown in its electricity supply when a heat wave nearly caused the state to run out of power, which led to rolling brownouts at homes and businesses. Electricity bills in San Diego almost tripled then, and consumers protested.

Today, Governor Davis, a Democrat, also asked the commission to lower its proposed ceilings on wholesale prices for the next three years. He added that he would consider requiring utility companies to keep their power plants, rather than having the option of selling them in a deregulated industry, to ensure a steady supply of affordable energy for the state.

It is not the first time such measures have been raised with the commission by Governor Davis, but the letter formalized his requests.

California officials and federal regulators have squared off in recent weeks, over how best to aid not only consumers, but also utility companies, which say they lost $6 billion this summer because of the spike in wholesale utility prices. That $6 billion is the difference between the price utility companies had to pay for electricity and the price they were allowed to charge consumers.

Two weeks ago, the Southern California Edison Company filed a request with the California Public Utilities Commission to raise electricity rates 9.9 percent starting in January to recoup the $2.6 billion that it had paid in higher wholesale electricity rates since May but that it was not allowed to pass on to consumers.

The recent trouble in California stems from a 1996 decision to deregulate the state’s utility industry. Since then, advocates and critics alike agree that the laws have created more turmoil than relief. As such, consumer groups are not waiting for the state government or the utility companies to fix the problem.

On Tuesday, the Santa Monica-based Foundation for Taxpayer and Consumer Rights, a nonprofit consumer advocacy group that more than a decade ago backed an unsuccessful measure to reduce California automobile insurance rates, announced it was drafting a ballot initiative to deal with the electricity problem.

The foundation is proposing several things, including refunds, a windfall tax on power generators and suppliers and creation of a public power agency to better manage the state’s electric power system. It also suggests prohibiting utilities from passing on the $6 billion shortfall.

Douglas Heller, a consumer advocate for the foundation, said Governor Davis needed to move beyond asking for relief from federal regulators and provide long-term, concrete solutions to address electricity price and supply issues.

“The governor should have outlined better how he plans to do that,” Mr. Heller said. “He is looking for patches to clean up an unsuccessfully deregulated market.”

Governor Davis did not attend a news conference regarding the letter in Sacramento because he was in Mexico for the inauguration of President Vicente Fox Quesada. But the governor’s press secretary, Steven Maviglio, said that today’s letter to regulators was just a first step.

Earlier this week, a two-page list of potential options for dealing with California’s electricity supply problems made its way among legislators, lobbyists and other interest groups in Sacramento. While the options were preliminary, they were much more restrictive than those offered by Mr. Davis today, and included the possibility of re-regulating markets.

The federal commission is working on a final order due in mid-December that will detail steps California must take to remedy its energy problems.

The utility companies, for their part, were wary about responding. The Pacific Gas and Electric Company issued a statement, but did not address the governor’s specific points. Southern California Edison declined to comment.

Still, the governor’s proposals were of little comfort to consumer advocates.

“In short, this is leftovers,” said Michael Shames, executive director of the Utility Consumers’ Action Network, based in San Diego. “To the extent that the letter was supposed to represent a bold new vision, it fails miserably. It reads as a state of what has been done this far and what noncontroversial actions are planned in the near future.”  


The New York Times
December 7, 2000

Because of an editing error, an article on Saturday about proposed remedies for California’s energy problems referred incorrectly to a 1988 action by the Foundation for Taxpayer and Consumer Rights, a group that is now drafting an initiative on electricity. The 1988 effort, a voter initiative to reduce automobile insurance rates, was approved, not rejected.


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.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases