Consumer advocate eyes ballot initiative on deregulation

Published on

Associated Press

A consumer group, outraged at spiraling electric bills, is crafting a ballot initiative to let the public run California’s flawed electricity system unless politicians protect ratepayers from price spikes.

Harvey Rosenfield of the Santa Monica-based Foundation for Taxpayer and Consumer Rights said Tuesday the initiative would reregulate California’s electrical utilities. It would place them under the authority of a citizens’ review board and set up a public agency to operate the state’s power grid.

Utilities denounced the plan, saying it would create a new bureaucracy but do little to develop energy supplies.

Rosenfield, who authored a landmark 1988 ballot initiative that shook the state’s insurance industry, also called for a moratorium on utilities’ campaign contributions to politicians until a deregulation-reform plan is approved.

From July to September, utilities and private power companies spent $1.2 million on lobbying and $250,000 on campaign donations to politicians, according to Rosenfield’s group.

Rosenfield’s proposal – he estimated it could cost $7 million to qualify it for the ballot – came just days after California’s two largest investor-owned utilities, facing more than $5 billion in losses since May from increases in wholesale electricity costs, sought court permission to recoup those losses from ratepayers.

The utilities “have now all anounced that they intend to force the people of California to pay an additional $5 billion or $6 billion, roughly $200 for every taxpayer in the state to bail them out of a problem that they themselves created,” Rosenfield said.

California’s 1996 deregulation law was intended to lower rates by boosting competition in the electricity market. It required investor-owned utility monopolies to sell off assets, including power plants, and buy electricity on the open market by March 2002.

Until the assets are sold, the utilities operate under a rate freeze. After the assets are divested, the rate freeze cap comes off and the utilities can charge their ratepayers market prices.

San Diego Gas and Electric Co., with 1.2 million customers, was the first, in July 1999, to complete the transition to deregulation.

When wholesale electricity prices, driven by rising demand and strapped supplies, soared this year, SDG&E passed on the increases to its cutomers. Bills there doubled, then tripled, sparking a political outcry and state and federal investigations.

Pacific Gas and Electric Co. and Southern California Edison Co, which have 9.7 million customers between them, still operate under a rate freeze but they are trying in the courts and the Public Utilities Commission to remove it. The two utilities are unable to pass their costs on to their customers.

Rosenfield’s proposed ballot initiative also would require refunds to consumers in San Diego and levy a windfall profits tax on power companies that sold energy to utilities at “unjust and unreasonable prices.”

It would also set up a public agency with authority to build, own and operate power plants, transmission lines and distribution assets.

“At first glance, he appears to be making some positive points, such as the refunds to San Diego customers,” said PG&E spokesman Ron Low.

“But we don’t think setting up a new bureacracy is going to help solve the problems. What we’ve advocating is for all parties to work together. Deregulation can work if all parties – the regulators, the out-of-state generators, the consumer groups, the utilities – work together appropriately,” Low said.

Sen. James Brulte, R-Rancho Cucamonga, one of the authors of the 1996 deregulation law, also was critical of Rosenfield’s proposal.

“With very few exceptions, when you allow a commodity to be sold on the market the price of that commodity drops,” he said. “The problem that existed in California (this) year is the market was not competitive,” Brulte said.

If Rosenfield decides to go forward, he will have 150 days to gather signatures to qualify his measure. A statutory initiative would require 419,260 signatures of registered voters. An amendment to the constitution would require 670,816 signatures.

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