Consumer Group Gives Governor, Legislature Requirements for Restructured Electric System

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Will Go to Ballot if Reform Is Not Adopted in State House

Read FTCR’s Complete Statement

Read the Initiative Concept Draft

Sacramento–Consumer advocates are drafting a ballot initiative to protect California consumers and small businesses against higher electricity bills and to restore a safe and reliable electricity system in the state, they said today in a press conference at the Capitol. They submitted the concept draft of the proposal to the Governor and Legislature today, urging them to make the enactment of these ratepayer protections a chief priority of the upcoming legislative session.

In a statement of principles issued today, advocates said they would focus on a publicly-owned and controlled electricity system. And they warned elected officials against another bailout of the utility companies at the expense of taxpayers and consumers. According to Harvey Rosenfield, President of the Foundation for Taxpayer and Consumer Rights (FTCR), the group seeks to end the “disastrous experiment of entrusting the health, safety and economic well-being of California consumers and small businesses to profit-driven energy corporations.”

In San Diego, the first region of the state to confront unregulated energy prices, electricity bills increased by 300% this summer, devastating local residents and small businesses as well as schools and hospitals. The advocates contend that ratepayers throughout the state will be victimized by the same kind of price gouging and market manipulation that has been blamed for the San Diego debacle if the legislature does not end the failed deregulation experiment. Additionally, they pointed out, the Governor should immediately reject utility companies’ proposals to create a credit card scheme that forces consumers into the unregulated energy market but spreads out payments, with interest, over five years.

FTCR’s Key Points of Reform

  • Requires refunds to San Diego customers (and customers of other regions that may subsequently experience deregulation) of excessive electricity charges through a windfall profits tax on profiteering power generators;

  • Requires oversight of electricity rates by the Public Utilities Commission (PUC);

  • Institutes an integrated resource planning process to address future energy needs;

  • Creates a state power authority to ensure the fulfillment California’s energy needs, promote conservation, and construct and operate power plants, transmission and distribution facilities;

  • Facilitates the authority of local and state government to exercise the power of eminent domain if necessary; and

  • Creates strong accountability mechanisms for state agencies.

Legislature Warned on Role

The advocates expressed doubt concerning whether state officials were willing to defy the powerful energy lobbies — a prerequisite to solving the problem. And they warned elected officials against another bailout of the utility companies at the expense of taxpayers and consumers.

“The 1996 deregulation law, which the utility companies themselves wrote, is clear on this point: once the residential and small business ratepayers of California paid off the billions of dollars in so-called ‘stranded assets’ held by the utility companies, the utility bailout was over,” said Douglas Heller, a consumer advocate with FTCR. “Changing this provision of the law is not on the table, in any way, shape or form. Any effort by the legislature to force the ratepayers to pay even one cent more to cover the greed and stupidity of the utility companies in this disaster of their own making will conclude our participation in the legislative process.”

Call for Public Process, Moratorium on Campaign Contributions

To maintain public confidence in the integrity of the government, the organization asked the Governor and legislators to refuse any campaign contributions from utility or power companies during the consideration of legislative proposals. Between the months of July and September, the groups noted, utilities and other private power companies spent more than $1.2 million dollars lobbying the Legislature and paid an additional $225,000 in campaign contributions to politicians.

“Elected officials created this mess four years ago, and it is the job of Governor Davis and the Legislature to fix it,” said Rosenfield. “The problem is that, historically, the politicians are more concerned about protecting the interests of their campaign contributors than protecting the public interest. And that seems to be what’s happening now: all we’ve heard so far is that the Governor and legislators want to make the ratepayers pay $6 billion more, in a credit card scheme, to bail out the utilities again.”

The advocates also said they would participate in energy reform discussions only if the process was open to full public scrutiny. FTCR has respectfully refused the invitation of Assemblyman Rod Wright to participate in a private, closed-door meeting with energy companies at the California Chamber of Commerce. Mr. Rosenfield noted that a lack of sufficient public process in 1996 was partly to blame for the deregulation fiasco faced by the state today.


Statement of Harvey Rosenfield & Douglas Heller

Foundation for Taxpayer and Consumer Rights

Sacramento, California


A few days ago, the private utility corporations told the people of California not to turn on their holiday lights next month. Meanwhile, with winter only weeks away, the state-created but industry-controlled agencies that govern our power system have repeatedly issued brownout warnings that we used to expect only in mid-summer. That’s on top of a year in which utility bills in San Diego tripled, and PG&E, Edison and SDG&E have announced they want to break the law they wrote and charge us an additional $5-6 billion — roughly $200 for every ratepayer in the state — to bail them out of a problem that they created

This is intolerable and outrageous. We are in this situation because four years ago, elected officials here in Sacramento, awash in over $22.5 million in lobbying expenses alone by utility companies, power companies and giant industrial users of energy, foolishly gave our utility system away to private companies. The 1996 law ripped open our wallets, forced us to pay over $17 billion to cover the utilities’ mismanagement (according to a recent report by The Utility Reform Network, or TURN), and, in the name of a “free market” that does not now and never will exist, laid us bare to the thieves in the energy industry that have pillaged us with brazen impunity.

And the worst is yet to come. Unchecked, the energy companies will suck billions of dollars out of our economy in unjustified charges, for which they will reap massive windfall profits. And if the utility companies are allowed to get away with their plans to force ratepayers to bail them out yet again — even though their post-deregulation profits are in the billions of dollars, fueled in part by sales of energy through their own affiliates — the impact upon California will be catastrophic. California’s booming economy will be the first casualty.

Deregulation of electricity was a disastrous mistake. It must be fixed, to protect our health, safety, our economy and the environment. When we say fixed, we do not mean a superficial fix that protects politicians and the utility companies by postponing the day of reckoning till some future date, as occurred last summer. Fixed means restructuring California’s utility system to protect ratepayers and restore a reliable and affordable electricity system in the state. Fixed means that we end the foolish experiment in entrusting the profit-driven, private oligopolistic energy companies with our survival.

We would like to see the state’s political leadership — Governor Davis and the Legislature — fix this mess. That is their job, after all. But there is ample reason to question whether they will do the right thing. It is true that, as a result of term limits, many of the legislators who voted to deregulate the utilities are no longer in the Legislature. And it is clear that some of those who voted for AB 1890 did so upon the urging of the bill’s cheerleaders, with little or no understanding of what they were doing — a mistake not likely to be made again.

However, history shows that whenever elected officials must choose between the interests of the private utility/power companies and protecting the public interest, they will choose to protect the utility and energy companies. That is how we got into this mess. Whether the public officials currently in office are willing to do so — especially in the midst of a ratepayer revolt — remains an open question.

The attached “Initiative Concept Draft” reflects our aims and goals — refunds for ratepayers, a windfall profits tax to protect consumers and our economy, government oversight of electricity prices, establishment of public power in the state, emergency authority to take over certain facilities, and, in case our public officials have forgotten, a restatement of existing law: no more bailouts for the utility companies.

We welcome — we urge — the Governor and the Legislature to adopt these principles. If they do, we are ready to work closely with them. But we will not participate in a process that is dominated by the utility and power companies. That is why today we call for a moratorium on power company campaign contributions to public officials. We do not see how the utility companies — which claim to be so broke they may declare bankruptcy — can afford to give the $1,232,505.60 in ratepayer money that they gave to elected officials and company lobbyists in the third quarter of this year, according to FPPC reports. But we, in any case, urge elected officials to cease accepting money from any of the interested utility and power companies, and their front groups, like the Chamber of Commerce, while the deliberations are underway. To fail to do so will cause the public to doubt the integrity of the legislative process, fatally undermining the outcome, and rightly so.

We also will not participate in any behind-closed-doors legislative negotiations or discussions. For example, we received an invitation last week from Mr. Rod Wright, the Chair of the Assembly Utilities Committee, inviting us and other unspecified groups, to a private, no-reporters-allowed meeting to discuss possible legislation. As we wrote in the attached letter respectfully declining this invitation, we have nothing against private discussions on public policy, but we believe that the process of developing legislative proposals to fix this disaster should occur before the full scrutiny of those who are most affected — the public. The 1996 deregulation law was the product of a three-week legislative ramrod featuring back-room meetings, late-night hearings, payoffs for various participants and other shenanigans. That process was designed to evade the news media and misrepresent the merits of the proposal, and it worked. We will never legitimize such a process with our presence.

Nor will we permit paid front groups, like the Planning and Conservation League or the Greenlining Institute, to fool the public, as they did two years ago in opposing Prop. 9, after collecting $915,000 and $530,000, respectively, from utility companies, according to state-mandated disclosure reports.

Finally, we must emphasize that our purpose is to restore a reliable and affordable electricity system. The utility companies, on the other hand, are primarily interested only in changing current law so that they can foist another $5-6 billion worth of unjust prices on the beleaguered ratepayers of this state. The 1996 law, which the utility companies themselves wrote, is clear on this point: once the residential and small business ratepayers of California paid off the billions of dollars in “stranded assets” held by the utility companies, the utility bailout was over. Changing this provision of the law is not on the table, in any way, shape or form. Any effort by the legislature to force the ratepayers to pay even one cent more to cover the greed and stupidity of the utility companies in this disaster of their own making will conclude our participation in the legislative process.

To that end, we have begun drafting a ballot measure for 2002 that will give the people the ability to protect themselves if our elected officials won’t. We have today filed with the Secretary of State papers to establish a campaign committee, known as Californians for the Protection of Ratepayers, which will sponsor the initiative. Unlike 1998, when public awareness of the looming catastrophe was limited, we think that come 2002, we will need to raise no more than $7 million to pass the measure — no matter what the energy companies spend. We have two years to raise the necessary resources, and we are going to start now.

Ratepayer Protection Act

Initiative Concept Draft

Section 1. Emergency Protection

  • Requires refunds to San Diego Gas and Electric customers (and other ratepayers who pay excessive rates to “deregulated” utilities) of excessive electricity rates through a windfall profits tax on power companies that sold energy to deregulated utilities at unjust and unreasonable prices.
  • No back billing of Edison or PG&E consumers for any energy procurement costs above the legal frozen rate.
  • Determination of energy rates and refunds will consider profits of utilities’ corporate affiliates and full amount of “competition transition charges” collected from ratepayers during rate freeze period.
  • Public Utilities Commission (PUC) will be authorized to oversee all transactions, the terms of which must be publicly disclosed

Section 2. Consumer Price Protection

  • PUC will oversee electric rates on a cost of service basis.
  • PUC will be authorized to establish thresholds for excessive energy prices that will be used to determine the windfall profits tax levied against power companies that gouge consumers.

Section 3. Energy Planning and Public Power

  • PUC and Ca. Energy Commission will institute integrated resource planning to determine California’s energy needs.
  • The state will create a public power agency with the mandate to meet California’s energy demand in a reliable, affordable, efficient and environmentally sound manner.
  • The agency will be authorized to build, own and operate, as well as purchase, power plants and transmission and distribution assets.
  • The agency will be authorized to auction the right to build power plants to, or contract with, private generators that will sell energy on a cost-of-service basis to the utility distribution companies.
  • Facilitates the authority of local and state government to exercise the power of eminent domain to take over generation, transmission and distribution assets if necessary.
      Section 4. Public Accountability

      • California will establish a statewide Citizen Utility Board to protect the interests of consumers.
      • PUC will be restructured to foster public accountability of Commissioners.
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