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Los Angeles Times

How surprising and disappointing it is that the state’s big consumer organizations–most of them leery of electricity deregulation from the start–have now been kept out of the discussions as deregulation falls into ever worse disaster and rate increases are arranged for millions of Californians.

When Gov. Gray Davis met with the utility executives this week, many of them the very people who pushed deregulation, he barred the consumer groups. So those fighting for the people who will pay the bills could say nothing about the marching orders being given the Public Utilities Commission.

No one is saying at this point how much the prices to consumers will eventually rise. It is worth noting, however, that this comes at a time when deregulated natural gas prices in the Southland have already soared, according to Sempra, the parent company of Southern California Gas, by 60%.

How many electricity price hikes will be added to those for gas?

An immediate 10% increase has been a figure bandied around by state officials, but that probably will not be the final amount.

Pacific Gas & Electric has asked for a 17% raise up North.

David Freeman, the general manager of the Los Angeles Department of Water and Power–which luckily for L.A. residents is not under the 1996 electricity deregulation bill and has no plans to raise rates–estimates that, in the next few years, average rates for Edison and PG&E will rise 25%.

But on Monday evening I was told by a knowledgeable person that what Edison really needs over time–to pay the charges of marketers under deregulation–is 40% more.

Utility officials have stated in increasingly blunt terms that unless they are allowed to pass through to consumers at least some of the prices charged them for the power they distribute, they will go bankrupt.

And security analysts warn that unless prices are allowed to rise, current shortfalls in electricity won’t be eased. Consumers must be encouraged to conserve, they say, and incentives provided to attract new investment in power generation.

Still, why weren’t the consumer groups even allowed at the table while the extent of the price increases was discussed?

The governor’s press secretary, Steve Maviglio, explains, “These are settlement talks over a lawsuit against the PUC by the utilities, and that’s why there’s not outside parties involved.”

I don’t think that’s a good enough excuse.

The most important consumer organizations–Harvey Rosenfield’s Foundation for Taxpayer and Consumer Rights, the Consumers Union, the Utility Reform Network and the Greenlining Institute–are activists, not always representative of all consumers by any means. But their dedication to ratepayers is evident.

Let’s listen to them now. Their views don’t command attention in Sacramento. All the more important, then, that they be heard here.

Rosenfield suggests, “The way the utilities will get 40% with the governor’s complicity will be to sneak it in in a surcharge, prorated over five to 10 years. . . . I don’t think they can get away politically with a 40% hike. They will hide it. . . .

“What they are doing is to force the ratepayers to pay for the deregulation mistake. . . . It’s the ratepayers who will pay to keep the utility shareholders happy. That’s the reason we were not invited.”

Harry Snyder of the Consumers Union is also angry.

“This is a settlement that the people of California will have to pay, and . . . the whole thing will get worse,” he said. “The old Democrats believed in welfare for the poor. The new Democrats believe in welfare for business. . . .

“What deregulation has proved,” Snyder said, “is that the marketplace will not work for electricity. . . . The state of California needs to own or control enough generating capacity to prevent price gouging. Second, there has to be an absolute bench-marking of price caps that guarantees the ratepayers will pay no more than the national average.”

Nettie Hoge, executive director of the Utility Reform Network, laments, “The utilities have been trying to keep us out of these meetings, because we know them well enough to know where they’re lying, and the public officials don’t. They’ve been spinning a cash flow problem into a catastrophe.”

John Gamboa, executive director of the Greenlining Institute, which once supported deregulation but now has proposed a lasting rate freeze for low income groups, says his organization couldn’t get into the Davis talks either, but did meet with Loretta Lynch, head of the PUC. “Scrooge had more compassion for Tiny Tim than she showed for the poor,” he remarked.

Davis press secretary Maviglio responded that the governor was uncomfortable at not having the consumers in the room, and would have liked to have them if he felt this could be done any other way.

But the overriding consideration is that he fears that if the utilities fall into bankruptcy, “this will then go into the hands of a judge,” Maviglio said.

In New Hampshire when that happened a decade ago in a nuclear power issue, the courts ordered 40% rate increases, he said.

Davis is trying to be “the consumer’s champion” in this ugly controversy, he insisted.

I asked Maviglio about the governor’s taking $ 464,000 in contributions from energy producers, marketers and utilities up to July 1, the latest reporting date. That’s reminiscent of 1996 when the Legislature unanimously adopted deregulation after big utility contributions.

“There’s no connection between a contribution and a policy,” he responded. “Just about everyone who’s pleased by something he’s done has also been displeased.”

That’s a facile answer so frequently given for politicians who accept big contributions. The consumer groups ought to be in the same room when Davis is settling secretly on rate increases for millions of Californians.

Consumer Watchdog
Consumer Watchdog
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