Ratepayer Revolt: Former San Diego Mayor Joins FTCR Demanding Price Freeze and Repeal of Deregulation

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Legislative Leaders Agree

With electricity prices up 240% in San Diego under deregulation, consumer advocate Harvey Rosenfield, President of the Foundation for Taxpayer and Consumer Rights, and former San Diego Mayor Maureen O’Connor called for an immediate freeze and utility rate rollback for beleaguered San Diego ratepayers and the repeal of the 1996 utility deregulation law.

California Senate President Pro Tem John Burton immediately agreed to hold hearings on repealing the legislation, with the surprising support of State Sen. Steve Peace, the architect of the deregulation plan once called a “model” for the nation.

Rosenfield said, “Deregulation of utilities was the most monumental, colossal mistake ever committed by public officials. We warned it would be a disaster and sponsored a ballot measure in 1998, Prop.9, to try to protect people from it. But the utility companies spent $50 million and Prop. 9 was defeated. San Diego is the first area to be fully deregulated, and look what has happened.”

O’Connor noted the threat to the public health an safety — hot weather has caused deaths in other states — and said, “God forbid that something should happen to people in this city because we didn’t act fast enough.”

Call for State of Emergency

Ratepayers of San Diego Gas & Electric have witnessed their bills double from roughly $40 per month in May to over $100 per month in June, the first month of deregulation. The price of electricity went up 240% in that period. Meanwhile, the profits of utility and energy companies rose 200% in the second quarter, and it was noted that the president of the parent company of SDG&E got a 79% pay raise in 1998.

At a crowded downtown San Diego news conference, the advocates listed three critical actions:

  • The San Diego City Council should hold a special meeting to declare a state of emergency caused by unaffordable utility rates, and call upon Governor Gray Davis to support the state of emergency.
  • The City Council should reverse the position unilaterally taken by the San Diego City Attorney on a proposed freeze and possibly rollback utility rates to May’s pre-crisis levels.
  • The Council should pass a resolution urging the Legislature to repeal the 1996 deregulation law .

Group Announces Key Legislators in Support

At the Thursday morning news conference, O’Connor and Rosenfield announced that both Senate President Pro Tem Burton (D-San Francisco), and, surprisingly, Sen. Steve Peace (D-San Diego), were in accord with the principles. Peace was the architect of the 1996 deregulation law and, until recently, an ardent supporter of it.

1996 Legislation Led to $50 Million Ballot Battle

San Diego ratepayers are the first in California to experience the effect of deregulation, which took effect in June. It won’t kick in for two more years in other parts of the state.

The 1996 deregulation legislation was approved unanimously by state legislators with little understanding of its complex provisions. Under the plan, ratepayers were forced to pay higher rates for four years in order to pay off $28 billion in bad debts of the state’s three utilities — San Diego Gas & Electric, Pacific Gas & Electric and Southern California Edison — before the free market would kick in. To disguise the bailout, legislators then imposed a 10% rate “reduction” for four years, financed by bonds ratepayers would have to repay for ten years. This plan was hailed by the utility industry as a model for the nation, and, indeed, more than twenty states have followed California.

But in 1998, four groups joined to challenge the portion of the deregulation plan that required ratepayers to pay off $28 billion in bad debts. Prop 9 would have forced the utility companies to pay their own debts and end the financing of the phony rate reduction. It was backed by Californians for Utility Taxes (CUT), a project of FTCR, TURN, a San Francisco based advocacy group, Consumers Union and Public Media Center, a non-profit communications agency that put in over $1 million to get the measure on the ballot.

Utility companies spent $50 million against the ballot measure, relying largely on TV commercials facing former consumer reporter David Horowitz, urging people to vote no because, he said, Prop. 9 would lead to “higher taxes and higher utility rates.” Several environmental groups — Natural Resources Defense Council and Environmental Defense — also joined the utilities in supporting the bailout.

San Diegans the First Victims of “Unregulated Monopoly”

Deregulation was supposed to offer competition and lower prices. But there has been no competition for residential and small business ratepayers.

And because ratepayers paid off SDG&E‘s debts early, they are the first to experience the full effects of deregulation.

“San Diego used to have a regulated monopoly. We were promised deregulation would offer lower prices. Instead, we got the worst of all worlds: an unregulated monopoly,” said Rosenfield.

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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