D.C. Energy Deal Said to Include $10 Billion Bailout of Utilities

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Consumer Advocates Set Out Four Requirements To Ensure Ratepayer Protection

Los Angeles– The “deal” announced last night by Governor Davis after days of meetings with federal officials and utility company executives will force California ratepayers to spend an extra $10 billion to bail out Edison and PG&E from the effects of deregulation unless the Legislature protects the public, or the public reverses the deal through an initiative or referendum.

As part of the two-pronged energy deal, the state will function as the utilities’ bank and purchase energy from power generators at a fixed, long-term price. (The price and length of the contracts, if determined, have not yet been disclosed.) The state will then sell the energy to the utilities for distribution to customers. As the deal has been reported, ratepayers will be locked into the frozen rate for a number of years.

The Foundation for Taxpayer and Consumer Rights (FTCR) outlined four requirements that the California Legislature must meet to ensure that this deal does not force the taxpayers or ratepayers of the state to pick up the tab for the deregulation fiasco:

  1. The utilities must sell the electricity they generate from their own plants directly to core utility customers — homeowners, renters and small businesses — at a price set by the Public Utilities Commission (PUC) and based on the real costs of producing that power plus a limited profit for the utilities. This is estimated at slightly more than 3 cents/kWh. The energy supplied under the long-term contracts can be sold to large business and industrial power users at the higher contract price.
  2. The duration of the long-term contracts that the state enters into with private generators must be limited to ensure that these businesses are not locked into prices that may seem reasonable now but become excessive towards the end of the contract.
  3. By purchasing the power for the utilities, the taxpayers of California are making a short-term loan to the utilities. That loan should repaid with market rate interest or stock in the company or in exchange for utility assets, such as the transmission system or power plants.
  4. The Legislature should order the PUC to regulate rates to ensure that Edison and PG&E cannot collect excess charges from ratepayers that would allow them to pay down the debts they incurred as a result of deregulation.

Ratepayers Urged to Sign Petition

The consumer advocates called on the public to join in a petition to state lawmakers to prevent a ratepayer bailout.

“The Legislature must protect ratepayers against having to bailout the utilities once more. If our elected officials do not protect us, ratepayers will be forced to undo the deal at the ballot box through an initiative or referendum,” the advocates said.

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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