Californians should reject utility bailout

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San Diego Union-Tribune

Term-limited California legislators often behave as if history began six years ago. But statehouse politicians who are being strong-armed this week by Gov. Gray Davis and Assembly Speaker Robert Hertzberg to support a $7 billion public bailout of Southern California Edison would be advised to dig deeper into California history before they vote.

Twice in the last 100 years, politicians have been swept in and out of office by precisely the conditions the governor is now creating for legislators — forcing them to choose between the people’s will and special interest patrons.

Reform Gov. Hiram Johnson was elected in 1910, along with a Legislature of reformers aligned with him, based on his pledge to break the power of the Southern Pacific Railroad over the statehouse. Johnson and his Progressives banished the allies of the railroad barons, cleaned up capital politics and gave Californians the ballot initiative process to counter the grip of special interests over future legislatures.

Proposition 13 in 1978 was sparked by legislative inaction over property tax relief under Democratic Gov. Jerry Brown. Young Republicans were swept in, and Brown’s career faltered.

The ratepayer revolt of 2001 has all the makings of another populist rebellion. Citizen groups like ours have pledged to invoke the ballot initiative in order to protect the public against the latest in an endless cascade of legislated disasters, beginning with deregulation’s unanimous passage in 1996.

First, Californians were taken to the cleaners by Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric. A provision approved by lawmakers (many of whom are still around) forced ratepayers to pay off more than $20 billion worth of the utilities’ pre-1996 bad debts.

Once the utilities were through feeding, it became the energy companies’ turn. They bought our power plants from the utilities — with the permission of state officials — and jacked up the price of electricity tenfold.

When the utilities could not supply power to the public last January, lawmakers opened the treasury doors, and the energy wholesalers walked out with $10 billion of taxpayer money in seven months, for which rates have been raised by an average of 50 percent so far.

Threatened with manufactured shortages and rolling blackouts, the Davis administration chose not to seize back the power plants and sell the power at cost, but to surrender to the thieves, signing long-term energy contracts negotiated by inexperienced individuals on the state payroll. The price tag for all the economic catastrophes: $100 billion or more, to be borne by ratepayers in the form of bonds our children will be paying.

Facing civil and criminal prosecutions, the wholesalers have fled with their loot. Now that the threat of blackouts has faded, Davis and Hertzberg hope the spotlight on Sacramento during these last three weeks of the legislative session will diminish as well. Then, through the lobbyist-infested midnight hearings and backroom deal-making for which the end-of-session period is notorious, they hope to please the utilities, the energy companies and Wall Street with a ratepayer bailout of Edison, followed by a similar deal for the two other utilities.

Inexperienced legislators may be more likely to bend to the governor’s and Edison‘s demands, but in so doing they will break the first rule of Sacramento politics — self-preservation. An angry public will keenly remember a $100 billion tab. The special interests and the politicians know, from their own polling, that it will be nearly impossible to defeat a proposition that cuts utility bills and restores reliable electricity service.

What lawmakers may not realize is the collateral impact of such ballot revolutions. The first lesson of many of the new legislators could be their last: on matters of indisputable public salience, protect the people, not the special interests.

This is a lesson Davis himself understood in 1988, when angry voters sponsored insurance reform Proposition 103. Davis campaigned for the measure, which prevailed despite the $80 million the insurance industry spent against it.

Rosenfield is founder and president and Court is executive director of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

Consumer Watchdog
Consumer Watchdog
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