FTCR Calls on Governor to Exercise Market Power of His Own,

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Consumer Group Says Legislature Should Rule Out Consumer Rate Increases

Los Angeles — Governor Davis should immediately re-negotiate power contracts with energy suppliers and demand refunds in light of reports that the energy companies have overcharged Californians to the tune of $6.2 billion, said consumer advocates with the Foundation for Taxpayer and Consumer Rights (FTCR) at a news conference today.

“The Governor must stop using taxpayer money to pay ransom to the energy cartel,” said Harvey Rosenfield, consumer advocate with FTCR. “Governor Davis should stop playing victim and exercise some market power of his own. He should tell the generators if they don’t pay refunds and offer a reasonable price going forward, he will impose a windfall profits tax or, if necessary to prevent blackouts, seize their California plants.”

The $6.2 billion figure announced today by the state’s Independent System Operator (ISO) — the agency that runs the California power grid — confirms FTCR’s March 19th report that the energy crisis has been manufactured by energy companies as a result of the state’s deregulation scheme. (The report is available at The ISO filing, which covers energy sales between May 2000 and February 2001, uses very conservative numbers as a basis for their findings, according to FTCR, and may underestimate the refunds that are due by several billion dollars.

In recent weeks, Governor Davis has begun to sign, or agree to, long-term contracts with the many of the same companies that have allegedly gouged Californians. The contracts have been criticized for the reportedly high prices and excessive duration of the deals. Today’s report that these energy companies have abused their market power for the last 10 months should be grounds to throw out previous contracts and renegotiate new terms. Additionally, Governor Davis should immediately demand that the generators begin to sell power on the spot market at reasonable prices or their plants will be taken over by the state to be run on a not-for-profit basis, according to the consumer advocates.

Consumer rate increases are completely unjustified

Consumer advocates said that the findings of the ISO demonstrate that rate increases for consumers are completely unjustified and should be off the table in Sacramento. ” The Governor and Legislature should immediately cut off all talks of a ratepayer or taxpayer bailout,” said consumer advocate Douglas Heller.

Calling it a “$6.2 billion swindle,” the group called on lawmakers and the Governor to cease all discussions of consumer rate increases. Instead, elected officials should develop legislation to provide consumers with refunds for the recent 9% rate increases and much greater refunds for San Diego customers who overpaid for electricity last summer by upwards of 300%.

Throughout the deregulation debacle, PG&E and Edison have pressed for a massive ratepayer/taxpayer bailout of their company. These findings indicate that the utilities and the state, which has been paying the high electricity prices since mid-January when the Ca. Department of Water Resources took over the utilities’ energy purchases, should shift their demands toward the generators. The utilities should drop their “filed-rate doctrine” case against the state, which seeks to recover billions of dollars from ratepayers, and instead the companies should sue the generators for the billions of dollars PG&E, Edison and SDG&E claim to have lost in recent months.

PG&E and Edison have been pushing for a public bailout of their companies, because consumers are much easier targets than their out-of-state energy industry buddies,” said Heller. “The utilities must stop threatening the ratepayers and start going after the real crooks.”

FTCR pointed out that that under deregulation, PG&E and Edison were also charging the same outrageous prices for electricity, hoping that the Governor and Legislature would fall victim to their threats of bankruptcy and increase rates to cover the entire fiasco, including the utilities own price gouging behavior. It was also noted that, prior to the profiteering by the generators, the utilities, as a result the deregulation law, were allowed to overcharge consumers by approximately $21 billion.

“First the utilities profiteered, and then the big energy companies profiteered. This foolish deregulation scheme created the opportunity to gouge Californians,” said Heller. “Because of deregulation the power companies have been able to manipulate supplies, raise prices to unconscionable levels and generally cheat California out of billions of dollars.


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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