Tuesday, October 13, 1998
Prop. 9 may decrease energy costs
ELECTIONS: Elections ’98
By Hannah Miller
Daily Bruin Senior Staff
Energy deregulation, trumpeted by state legislators two years
ago in a pro-competition frenzy worthy of Adam Smith, may not have
worked as well as expected.
In theory, the legislation passed in 1996 should have lowered
prices by allowing competition in the energy-production market.
But consumer advocates – including the grandfather of consumer
protection, Ralph Nader – say that deregulation didn’t accomplish
that goal at all.
"We’re not better off," said Doug Heller of the Californians
Against Utility Taxes. "Deregulation has worked for big business,
but small businesses and consumers are still paying rates at 40 to
50 percent higher than the national average."
Such is the thought behind Proposition 9, which would cut
utility rates 20 percent, prevent utilities from passing off the
costs of expensive nuclear power, and – most controversially –
force the state to retract $6 billion in bonds.
Because of the anti-nuclear provisions, the measure has picked
up environmentalist supporters such as Friends of the Earth.
But it’s the last provision about bonds that has set off
alarms.
In opposing the proposition, the three major utility companies
have found themselves with some strange bedfellows, including the
L.A. County Board of Supervisors, police unions, and school
employees. They’re scared that legislators would carve that $6
billion right out of education and public-services spending.
"The state would incur a $5 billion debt, and that would all
fall on the state in one year,” said Peter Persey of the
University of California Students’ Association (UCSA). "Higher
education could get some major cuts."
Although state law prevents Sacramento from dipping into K-12
funding beyond a certain level, there are no equivalent protections
for higher education – which are always more vulnerable
post-election.
That won’t happen, argue the proposition’s supporters. The
measure specifically makes the utility companies responsible for
paying back that $6 billion. (The bonds were sold to cover the cost
of a 10 percent rate cut delivered with the original
deregulation.)
For local governments, another fear is the loss of utility
taxes. Utility taxes have become increasingly important after the
massive cut in property taxes mandated by Prop. 13 in 1972, and the
state legislative analyst estimates losses to state and local
governments in the tens of millions.
Supporters of the measure say that won’t happen at all. With
lower utility rates, they argue, consumers will have more money to
spend, and will make up for the difference through retail
taxes.
But all this haggling is largely over logistics. In fact,
opponents of the issue have failed to take on the main question
posed by the proposition: did deregulation work?
The logic of competition, argue the consumer groups, has been
betrayed by a legislature that was more interested in preserving
the system as is.
"The legislature cut a dirty deal with big business and the
utilities," said Heller, of CUT.
When legislators were debating deregulation, they agreed to a
utility request that protected the companies from the dangers of
the ‘free market.’
For the first three deregulated years, utilities could pass on
their losses to customers as ‘transition costs.’
"The companies got a $28 billion bailout," Heller said. "We
called it the Great Utility Heist of 1996."
Whereas larger corporations can contract with an independent
supplier for lower power rates, consumers and small businesses
usually don’t have that choice.
If passed on November 3, Proposition 9 will probably be
challenged in the courts by the Big Three: Southern California
Edison, Pacific Gas & Electric, and San Diego Gas &
Electric.
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