Utility Crisis in San Diego Will Spread to Entire State, Consumer Groups Demand Repeal of 1996 Deregulation Law

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Emergency Measures Offered, Including Rate Rollback

Saying that the 1996 law which “deregulated” electric utilities has caused utility bills to more than double in San Diego, three California consumer organizations today called on the Governor and the California Legislature to repeal deregulation and institute an immediate rate freeze and rollback.

The groups (Consumers Union, the Foundation for Taxpayer and Consumer Rights, and TURN), which cosponsored a 1998 ballot measure to reduce electricity rates under deregulation, warned elected officials that the rate crisis would spread to other regions,
jeopardizing jeopardize public health and safety and the stability of California’s economy.

“Mistakes were made and consumers aren’t going to pay for them,” the groups said. “We need to put a lid on the damage being suffered by the consumers of San Diego now and prevent a similar crisis from hitting the whole state next year.”

Emergency Measures

The advocacy groups called on the Governor and elected officials to pass a “Ratepayer Relief Act,” which would repeal deregulation, reinstituting controls over the price of energy charged by utility companies and power producers and returning control of this economic and human necessity to the public.

Immediate emergency measures include a rate rollback in San Diego to pre-deregulation levels and maintaining a freeze on rates in other regions, where deregulation is scheduled to take effect as early as next summer.

San Diego Declares State of Emergency

San Diego is the first region to experience full “deregulation.” The average utility bill there doubled last month, and is expected to double again this month. The deregulated “market price” for electricity prices rose from 3 cents per kWh to more than 20 cents per kWh, while profits of the utility and energy companies are soaring.

On Tuesday, County and City officials declared a state of emergency and joined former San Diego Mayor Maureen O’Connor and consumer advocates in a resolution calling for rate rollbacks and hearings to repeal deregulation.

Groups Warn Politicians Against “Pay Now, Pay Later” Schemes

The advocacy groups warned state officials that the public would not tolerate quick-fixes, now being proposed by the utility companies and some elected officials, in which rate hikes would be pushed off into the future and paid on an installment plan. They also said that if utility and energy companies threaten to withhold power the state should use its powers of eminent domain.

“These unregulated power companies think they have us over a barrel. But if they threaten to punish the people of California by withholding power supplies, state officials must be prepared to protect the public health and safety. We cannot permit these companies to hold our lives and economy hostage.”

Deregulation Law A Failed Experiment

Spending millions in campaign contributions, California utility companies convinced state legislators to deregulate the electric utility system in 1996.. Under the plan, which was approved unanimously, rates would be frozen for up to four years, during which time residential and small business ratepayers were required to pay off the utilities’ billions of dollars in “stranded assets” — debts from dirty, non-economic power plants. In the meantime, competition was supposed to begin, leading to lower prices.

The law became the model for similar efforts nationwide (twenty- five states have deregulated electricity) as well as preemptive federal legislation, a portion of which will be the subject of congressional hearings shortly.

However, the promised competition never materialized. Less than 2% of residential ratepayers are served by competing providers. “The politicians gave up the protection of regulation relying on the promise of a market that never existed. And that’s why the consumers in San Diego are paying skyrocketing electric bills. San Diego ratepayers are being forced to subsidize a failed experiment.”

The only challenge to the deregulation plan was the decision of Consumers Union, FTCR, Public Media Center and TURN to challenge it through a 1998 ballot measure that would have reduced the amount of the bailout of the utility companies, lowering rates by 26%, according to a California Energy Commission study. But the utility companies spent $50 million on their campaign against Proposition 9, as well as millions more in donations to non-profit, community, environmental and low-income organizations which then opposed the measure. It was defeated in November 1998.


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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