A Chance to Override Legislative Cowardice

Say someone forced you to give him all the cash in your wallet and then made you borrow $10 back. Would you call that a rebate? That’s what the utility companies claim it is, defending the “10% rate reduction” now appearing on electricity bills. In fact, it’s a rip-off perpetrated by Sacramento politicians to conceal an even greater heist: a $28-billion tax slapped on our utility bills to bail out three private utilities.

Proposition 9 will short-circuit this dirty deal, approved by state lawmakers in 1996 as part of legislation deregulating electric utility companies.

Utility rates are the kind of issue that ordinarily paralyzes the Legislature. For years, Californians have been forced to buy electricity from the state’s three giant monopolies--Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric. These companies’ greed, mismanagement and foolish investments in nuclear and other uneconomical power plants pushed the cost of electricity to 50% above the national average. State bureaucrats did little to protect ratepayers from the utilities’ 2,000% cost overruns and price gouging.

Deregulation was supposed to change all that by giving consumers and businesses the right to choose among competing electricity suppliers offering lower prices. But the California utilities feared the free market; with those money-losing plants on their books, they would have to lower rates dramatically to compete with more efficient energy companies. Desperate to protect their guaranteed monopoly profits, the utilities spent more than $3 million on campaign contributions and lobbying, and tens of millions more to ensure the support of other organizations. The result demolished competition in the state and renewed the monopoly for the big three companies.

The Legislature’s “deregulation” plan requires homeowners, renters and small businesses to pay off every penny of the utilities’ money-losing investment, a total of $28 billion over the next four years. The bail-out tax, which was never approved by the voters, appears cryptically on utility bills as CTC--Competitive Transition Charge. It represents up to 57% of the price we pay for electricity. This massive infusion of corporate welfare allows Edison, PG&E; and SDG&E; to lower rates for their large commercial customers. Thus the support of the business-backed California Taxpayers Assn., a major Sacramento player, was bought by satisfying the demands of its biggest members, albeit at the expense of the smaller businesses it represents.

Other groups compromised their principles and sold out their membership in similar fashion. The support of union leaders was secured by promising that ratepayer money would be spent to retrain workers who lose their jobs because of deregulation. Everybody got something in the deal, except residential and small business ratepayers.

That worried the politicians. To hide the bailout, utility lobbyists suggested a “10% rate reduction.” However, the utilities didn’t want to pay for the cut. So the Legislature authorized the utilities to sell $6 billion in rate reduction bonds, which consumers and small businesses are required to repay with interest over the next 10 years. The fine print on your utility bill reveals that another mysterious charge, the “trust transfer account,” is the mechanism by which you must repay the rate reduction bonds each month. Political fig leaf in place, legislators unanimously rubber-stamped the deal. The entire scheme took three weeks to enact.

In California, however, the voters have the last word. Placed on the ballot by citizen groups and volunteers, Proposition 9 simply prohibits the utilities from taxing us to pay for billions of dollars in obsolete and inefficient power plants or for a phony rate reduction. By cutting the unjustified subsidies that stifle competition, Proposition 9 will lower electricity rates for every Californian by between 24% and 37%, according to an analysis by the California Energy Commission.

The initiative process is much maligned these days; it’s often a tool of ambitious politicians and corporate interests. But as a referendum on the work of an arrogant and corrupt political establishment, Proposition 9 is exactly what the initiative process is for.