State electricity takeover may be put on ballot

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San Diego Union-Tribune

SACRAMENTO — An influential consumer advocate is drafting a voter initiative that would replace California’s troubled move into a deregulated electrical market with a state-owned power system.

Harvey Rosenfield, a protege of Ralph Nader, said the initiative also would impose a windfall profits tax on power companies to give San Diego Gas & Electric Co. ratepayers a refund of more than $500 million in excess bills paid last summer.

The sweeping proposal, which goes beyond re-regulation and a simple return to the previous rate-control system, comes as Gov. Gray Davis prepares to send his long-awaited proposal for fixing deregulation to federal regulators Friday.

Davis warned last month that a federal failure to control wholesale electricity prices could lead to an initiative that would end deregulation in California.

Rosenfield, whose 1988 initiative rolled back automobile insurance rates, sprinkled his announcement with the unrestrained rhetoric that marked his previous initiative battles.

“The 1996 (deregulation) law ripped open our wallets, forced us to pay over $17 billion to utility companies that they did not deserve and, in the name of a free market that does not now and never will exist, laid us bare to the thieves in the energy industry,” Rosenfield said. “And the worst is yet to come.”

A spokesman for a group that represents 50 power producers, including Enron and Duke Power, said private firms plan to spend $10 billion to $15 billion on new generating and power facilities in California.

“My concern is that an initiative would undermine that process and might cause people to decide to build the plants elsewhere,” said Jan Smutny-Jones, executive director of the California Independent Energy Producers.

Smutny-Jones said rates can be lowered in California with a three-point plan: more generation and distribution facilities, the use of long-term contracts by utilities to obtain low rates, and giving consumers more choices for their energy purchases.

Rosenfield, who heads the Foundation for Taxpayer and Consumer Rights in Santa Monica, was the author of Proposition 103, approved by voters 12 years ago, that rolled back insurance rates and created the elected office of state insurance commissioner.

He has formed a new committee, Californians for the Protection of Ratepayers, and said he plans to raise $7 million to place an initiative on the ballot in 2002 and mount a campaign for its passage.

Rosenfield said that given the level of ratepayer outrage over deregulation, he is confident his initiative would be approved by voters, even if the power industry spends a record $100 million to $150 million to defeat it.

At this point, Rosenfield and his group have not yet worked out a detailed plan or cost estimate for creating a state-run power system. He said the plan would keep electricity rates low during the transition to a public power system, probably taking four or five years.

He said the state already has a number of city-owned power systems, including the Los Angeles Department of Water and Power. He also mentioned two large federally owned power systems, the Bonneville Power Administration in the Northwest and the Tennessee Valley Authority.

Michael Shames, executive director of the San Diego-based Utility Consumers’ Action Network, said the proposals by Rosenfield could be the basis for uniting the state’s major consumer groups for the first time in years.

“We think it is premature to be raising initiative language,” Shames said. “That said, it would appear that there are a lot of similarities between the Rosenfield set of principles and the conceptual proposals that have been advanced informally by UCAN over the past two months.”

The governor has said he believes deregulation can work if some corrections are made. But a spokesman said yesterday that Davis is not ruling out a move toward a state-owned power system.

“As the ballot initiative proponents pointed out, the governor inherited this problem and he is working hard with all parties to fashion an appropriate solution,” said Steve Maviglio, Davis’ press secretary.

Last week, state Sen. Steve Peace, D-El Cajon, said Senate Democratic leaders want to create a $2 billion energy reserve that would allow the state to pursue a number of options, including building or buying power plants.

The chairwoman of the Senate Energy Committee said yesterday that there are other ways to accomplish the advantages of a publicly owned power system, including locking in rates. But, she said, the Legislature may consider moving toward a state-owned system.

“It’s possible,” said Sen. Debra Bowen, D-Marina del Rey. “But until we see what decision the Federal Energy Regulatory Commission reaches (expected Dec. 13), it’s premature.”

Rosenfield said he will not go forward with the initiative if the governor and the Legislature enact major reform. But he laid down a number of tight conditions and urged elected officials to stop taking campaign contributions from power companies.

Rosenfield wants all energy reform negotiations to be held in public. He said he turned down an invitation from the Assembly utilities chairman, Rod Wright of Los Angeles, to a private meeting at the California Chamber of Commerce.

Rates paid by SDG&E customers soared last summer when the utility became the first to emerge from regulation. Legislation lowered rates for SDG&E customers, but bills may go up in several years to pay off the utility’s losses.

Two utilities still under regulation, Pacific Gas & Electric and Southern California Edison, have lost $6 billion because the high prices they pay for electricity cannot be passed along to their customers. Rosenfield opposes a move to allow the utilities to bill ratepayers for their losses.

Staff writer Craig D. Rose contributed to this report.

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