A viewpoint by Thomas D. Elias: If consumers are dunned, how about ownership?

February 13, 2001

Chutzpah — Shameless audacity, impudence. (Webster's New World Dictionary)

The old Yiddish word might as well have been coined specifically to describe the architects of this state's electricity crisis. Not only have they already cost consumers billions of dollars — when they originally made pious promises to save those same customers money — but now they propose to use still more billions of consumer and taxpayer dollars to solve the problems they created.

Steve Peace, the Democratic assemblyman from El Cajon, may not easily recognize himself when he hears the Yiddish word, but he should, for it perfectly describes his actions and attitudes of the last four years.

The same for Pacific Gas & Electric and Southern California Edison. They led a $90 million 1998 campaign to defeat Proposition 9, which would have rolled back the electricity deregulation plan Peace pushed through the Legislature.


Also for politicians like Gov. Gray Davis, who keeps calling on federal regulators to mandate rebates for electric customers victimized by the deregulation plan and the subsequent defeat of Proposition 9, neither of which drew any discernible interest from him before the onset of crisis.

Peace last month was the first to propose reserving $2 million of California's expected 2000-2001 budget surplus to help pay for solutions to the state's electric power crisis. Now Davis and the Legislature may want to spend even more. In effect, whatever money they spend will come from electric customers, since taxpayers and electric customers are almost always one and the same. Different checks, same book. So much for the Davis pledge of "no new rate hikes."

Peace was the prime author of the bill that led to today's crisis of price and supply. Back in 1996, he piloted electricity deregulation through the Legislature with only the most cursory of public hearings, another example of the harm that can be done by last-minute lawmaking.

His bills passed almost unanimously.

"The (Democratic) leadership was behind it, and I didn't know much about it, so I just took their word that this was a good thing and went along," conceded Democratic state Sen. Liz Figueroa of Alameda County. Her ignorance and complicity were typical in the Legislature.

The same for the big utilities. They've made their nut, selling off so-called "stranded assets" — operating power plants — to non-regulated companies and putting themselves in the position of having to purchase power at piratical prices from plants they built and once owned. Much of the about $20 billion they cleared during the first two years of deregulation was relayed to their parent companies, shells created largely to shield the real assets of the utilities in case of bankruptcy.

The utilities pushed the Peace effort that set up this situation — actually helped write the law. They fought mightily to prevent Proposition 9 from reversing it; they promised that defeat for Proposition 9 would mean a 10 percent rate decrease for customers.

Instead, some consumers saw their bills double last summer, with the prospect of the same happening to many more in the next year. And what do the utilities propose as the next action in this situation? Further rate increases beyond the average 10 percent they received in early January, plus major-league taxpayer spending. There's no hint of a willingness to pay for their grievous errors and miscalculations. They, too, issue videos denying responsibility.

Now Peace, Davis and the big utilities want to tap the consumers again to pay for their past mistakes and non-involvement. Float revenue bonds, they suggest in their most recent proposal, and repay debits the utilities have run up in the last few months. Dun the customers to repay the bonds via a 10-year extension of the "temporary" 10 percent average rate increase imposed in early January.

In return, they say, give the state stock options in the utilities. Wait a minute here. It's the ratepayers, the customers, who would pay for this bailout, which is just what it would be no matter even if Davis says it is "not a bailout." Why give the state anything? How about giving the options instead to electric customers based on the size of their bills and the closing price of the utility stocks at the time such an arrangement takes effect?

That would avoid government ownership of utilities, which offends many Californians, and give the ratepayers something for their money.

"It's a fine idea, as long as you give them enough stock to make up for what they're paying," said Douglas Heller of the Foundation for Taxpayer and Consumer Rights.

This is one deal Davis might accept. He's plainly worried voters may start blaming him for the mess. He didn't create it, but he didn't do anything to stop it. He wants no consequences for him. Legislators and utility companies did create the mess, and they want no consequences, either.

Every party here wants someone else to pay for their errors. If that's not the very definition of chutzpah — and irresponsibility — nothing is.

There is an equitable way out, one that would give stock ownership to even the smallest and poorest of electric customers. But only if Davis, the Legislature and the utility companies open their eyes to it.

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