Taxpayers Exposed for Tens of Billions More
Legislation authorizing $13.4 billion in bonds for the purchase of electricity fails to address the principal threat to the state of California: the ability of the energy generators to raise prices far beyond today’s extortionate levels, citizen advocates said today. Indeed, nothing in the legislation will protect the General Fund against further billion-dollar incursions if, as consumer advocates suspect, state electricity purchases this summer exceed the proceeds of the bonds.
“The Governor’s entire plan is based on the generosity of the energy companies whose insatiable greed has boosted prices to ten times what they were a year ago, and who will no doubt view the bond issue as another blank check,” said the citizen advocates with the Foundation for Taxpayer and Consumer Rights (FTCR). “Unless they are stopped or backed off, the state will have spent the entire proceeds of the $13.4 billion bond issue long before the bonds are issued. The state will then be forced to spend billions more of General Fund money. What is the point of repaying the General Fund at this time, if it’s going to be plundered again later?”
State electricity purchases are estimated at $8 billion since January, when the private utilities refused to buy power citing their financial health. In requesting $13.4 billion in bonds, Governor Davis projected average summer spot market prices of $195 per mWh, with an estimated cost of $435/mWh for the expensive super peak power. According to Bloomberg News, yesterday’s price reached $500 mWh.
“This is the height of fiscal irresponsibility and will damage California for a generation. Which is worse: power blackouts or a blackout on schools and teachers, road construction, and other essential government services, all of which will be eradicated by repeated multi-billion dollar incursions into the General Fund?” said FTCR advocates.
According to FTCR, the bond legislation, SB 31X, should be amended to cap the state’s electricity purchases to a total of no more than the amount of the bonds, and specify that the State of California will, through a windfall profits tax, prosecution of the companies and/or seizure of the plants, ensure that taxpayers and ratepayers are fully reimbursed for all overcharges.
“We need to put a spending limit on the taxpayer’s credit card that is being used to buy electricity at wildly inflated prices,” FTCR said. “Then we need to tell the generators that they must issue refunds and reduce rates to fair profit levels, or we will use every measure of the state’s sovereign authority to lower rates ourselves.”