Governor Davis in Secret Negotiations with Utilities

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FTCR Warns Governor Davis Against Bailout 2

“Giveaway Gray” Poised to Add $4 Billion to Ratepayers’ Bills;

$150 per household

Read FTCR’s letter to Governor Davis.

Recent reports indicate that Governor Davis has authorized a massive ratepayer bailout of the state’s major electric utilities. According to the San Francisco Chronicle, Davis has ordered private meetings between the California Public Utilities Commission and both PG&E and Edison to work out a deal in which the utilities can back bill consumers approximately $150 each for the failure of electricity deregulation.

“Governor Davis is prepared to take billions of dollars from ratepayers and hand it to the utility companies that created this energy crisis,” said Doug Heller, a consumer advocate with the Foundation for Taxpayer and Consumer Rights (FTCR). “The governor might as well wrap this deal in holiday paper and put it under the state’s unlit Christmas tree, because it is a huge gift to the utilities.”

Governor Davis wants ratepayers to pick up a $4 billion tab, which FTCR believes to be unwarranted and illegal. The state’s deregulation law, which was chiefly written by PG&E and Edison, froze electric rates for a transition period during which the utilities would be able to keep any overcharges collected from consumers due to the frozen rate and would have to take as a loss any so-called “under-collection.” Prior to the price spikes of this summer, PG&E collected an estimated $8.3 billion by selling consumers electricity at a price frozen high above actual energy prices, according to recent report by TURN. Edison collected an excess of $9.3 billion from consumers between spring 1998 and summer 2000

In five previous decisions, the PUC has rejected the utilities’ request for the bailout reputedly ordered by Governor Davis. Recently, however, PG&E and Edison have suggested that if the companies are not bailed out by the state’s ratepayers the utilities may go bankrupt. FTCR has criticized this threat and called for the ouster of Edison CEO John Bryson, who has fomented the speculation that the utilities might soon become insolvent through a television ad campaign.

FTCR notes that, in addition to ignoring the much larger over-collections garnered in recent years by the utilities, the companies’ “under-collection” in recent months is dramatically overstated. The alleged $8 billion shortfall does not account for the fact that Edison and PG&E have produced and sold approximately 65% to 75% of the energy that the companies have purchased at the Power Exchange in recent weeks and months.

“The utilities’ have issued empty threats of bankruptcy to provide the cover Governor Davis needs for his outrageous response, which blames the ratepayers and small businesses who are the only true victims of this crisis. Giveaway Gray will deserve nothing less than the wrath of the voters if he forces consumers to pay for this mess,” concluded Heller.


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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