Electricity-Regulation Initiative Shadows California Politicians’ Bailout Plan

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San Jose Mercury News

Behind every energy decision by California politicians looms a consumer group’s threat to short-circuit a quick-fix legislative solution by putting the deregulation issue before voters in 2002.

Regardless of whether the coalition spearheaded by consumer activist Harvey Rosenfield makes good on the threat, the specter of a ballot initiative seeking to re-regulate electricity is overshadowing backroom discussions in Sacramento and boardroom conferences at energy companies and their industrial customers.

“We’re nervous,” said Tom Williams, a spokesman for Duke Energy, one of largest suppliers of electricity to the state. “If things don’t stabilize, nobody will invest in California.”

Worried that a ballot measure in either March or November 2002 could discourage or slow new plant construction — as well as help sweep incumbents out of office — lawmakers are looking at ways to “Harvey-proof” a multibillion dollar bailout of the state’s failing utilities, legislative sources said.

One option being considered is to work out a bailout deal in conjunction with the settlement of the utilities’ federal lawsuits. The utilities have filed suit seeking permission to retroactively lift a cap on retail rates that was imposed as part of the state’s 1996 deregulation law and pass on about $ 12 billion in debt to consumers.

If this strategy worked, legislative sources said, a judge could issue a federal consent decree that could not be overturned by a state initiative.

“It would be an incredibly cowardly act to hide behind a consent decree and people of California would see right through it and hold politicians accountable,” said Bill Magavern, a legislative representative for the Sierra Club, a member of the coalition supporting the initiative.

Other members include Consumers Union, publisher of Consumer Reports; Rosenfield’s Foundation for Taxpayer and Consumer Rights; and The Utility Reform Network (TURN), all of whom have demonstrated a willingness to go to the polls before.

But Republican strategist Dan Schnur said an initiative would make incumbents in both parties more vulnerable.

“It’s much easier for legislators and the governor to protect themselves against a single challenger than against a populist-fueled rebellion,” Schnur said.

Bracing for the worst, businesses already have begun weighing whether to put a competing initiative on the ballot, Schnur said.

“I assumed the minute Mr. Rosenfield showed up that there was going to be an initiative,” said Jan Smutny-Jones, a spokesman for the Independent Energy Producers Association. “We’ve already begun an education campaign about how the industry works and how power gets to you.”

Wednesday, another organization, the Silicon Valley Manufacturing Group, announced an e-mail education program targeted at more than 4 million employees from state agencies and the private sector, including the California Manufacturing and Technology Association, a prime mover behind the 1996 deregulation law.

The program is intended to promote conservation, but Justin Bradley, energy director for the Silicon Valley group, did not rule out using the private sector portion of the network to fight an anti-deregulation initiative.

“We’re communicating, we’re not waiting to see if there’s an initiative at all,” Bradley said.

The mere possibility is making a difference in the negotiations, said Senate President Pro Tem John Burton, D-San Francisco.

“The threat of an initiative serves as a regulator on utilities and generators from going too far,” in rejecting a reasonable resolution, Burton said.

The utilities, including Pacific Gas & Electric, which serves Northern California, declined to comment.

But other lawmakers said they are ignoring the threat.

“I don’t legislate based on public opinion polls or the threat of an initiative,” said Assemblyman Rod Wright, D-Los Angeles, chairman of the lower house’s Energy Committee and who will not be running for reelection because of term limits.

Rosenfield has put other measures on the ballot, including Proposition 9 to roll back electricity rates, defeated by the voters by a 3-to-1 margin in 1998; Proposition 186, single-payer health insurance, defeated 3-to-1 in 1994; and Proposition 103, which passed in 1988 and reduced auto insurance rates for some consumers but fell short of reforming the industry.

The utilities spent about $ 45 million to defeat Proposition 9; supporters, $ 150,000.

Saying voters are more aware of the energy issue now than they were in 1998, Rosenfield filed papers in November establishing a campaign committee called the Campaign for the Protection of Ratepayers. To qualify an initiative for the March 2002 primary, advocates must collect 419,260 signatures by Aug. 17, 2001; for the November 2002 ballot, when Gov. Gray Davis is up for reelection, they have until April 19, 2002.

Rosenfield said legislators and the governor could avoid an initiative by maintaining the current rate freeze, which is virtually impossible in the long run under most proposals. He also said lawmakers should refuse to rescue the utilities unless the state gets something of value in return, such as the transmission lines, an idea that is being considered on both sides of the aisle.

“Anything they don’t do, we’re going to do, and anything they do wrong, we’re going to undo,” Rosenfield vowed.

It is unclear what an initiative would say since it would have to satisfy all the groups in the coalition. The most far-reaching agenda is being pushed by Rosenfield’s group, which wants to essentially abolish deregulation by creating a public power authority with the power to seize existing plants if companies refuse to sell them.

Many politicians in both parties oppose public power on the scale necessary to serve the utilities’ roughly 9 million customers, partly because of the cost involved in buying and building plants. Even the Los Angeles municipal power agency, the largest of about three dozen cities, towns and rural districts that provide electricity in the state, serves only 1.4 million customers.

“I’m a car dealer and there’s nothing that keeps your prices down like competition with a lower price,” said Assemblyman John Campbell, R-Irvine, who serves on the energy committee. “Think of how the state runs DMV.”

Rosenfield said the initiative would probably set up a less monolithic system by allowing cities to control energy locally.

Mark DiCamillo, director of the Field Poll, said two-thirds of Californians think the legislature is better equipped than voters to decide highly technical or legal policy matters, such as deregulation, according to a 1999 survey.

But DiCamillo said voters have also approved initiatives simply to send a message to lawmakers that they are angry or outraged, even if they expect the measure to be thrown out by the courts. Proposition 187, the anti-immigration measure that passed overwhelmingly in 1994 is a prime example.

But voters would be less likely to approve the coalition’s initiative if the lights stay on and the rates increase only slightly rather than double or triple as they did in San Diego last summer, experts say.

Politicians are hoping that public ire will fade by next March, the earliest an initiative could be put on the ballot, said Bob Mulholland, a campaign adviser to the Democratic Party.

“There are no instant Internet initiatives,” he said, “thankfully.”

Consumer Watchdog
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