PG&E Buying Spot In State Constitution

JUNE 7, 2010

By KATY GRIMES

With PG&E spending $43 million on radio, television and print ads promoting Proposition 16, all-the-while insisting that the funding comes only from the shareholders and not ratepayers, one cannot help but ask that if rates are high enough for PG&E to fund a record spending political campaign, what exactly is at stake and could this campaign have the opposite effect than the one PG&E is looking for?

Proposition 16, the initiative backed by Pacific Gas & Electric (PG&E), will require cities and towns that want to establish public power to get a two-thirds super-majority of voters, while PG&E is given the protection of California’s Constitution. Opponents of the measure say that PG&E is attempting to buy a spot in California’s constitution.

At a recent company meeting, PG&E Senior Vice President Greg Pruett told employees that ratepayers should have the right to vote on whether they want power provided by local municipalities, and that the vote for approval of a utility should require the same two-thirds super-majority that cities need to sell an existing municipal power system. Pruitt believes that the proposition’s passage would make it easier to defeat all future attempts by cities and counties, as well as special districts, to steal away business from PG&E.

According to the California Public Utilities Commission (CPUC), PG&E’s rates are set by the CPUC to provide capital for the purpose of investing in needed infrastructure. The CPUC regulates privately owned electric, natural gas, telecommunications, water, railroad, rail transit, and passenger transportation companies.

PG&E is highly criticized not only because of the $43 million campaign ($35 million was budgeted, but PG&E upped the ante recently), but because of the title of the ballot measure called the “Taxpayer Right To Vote.” Many critics say that it appears to be more about squashing any future competition. Why? If too many cities and towns join the public power market, PG&E would lose substantial market share, according to The Utility Reform Network (TURN). PG&E is trying to do away with all future competition via Proposition 16, so says TURN.

PG&E spokesman Andrew Sovall has been quoted in the press warning the public that electricity “is a complex business.” And he argued that Prop. 16 was merely “giving consumers and voters a choice.”

John Geesman, Co-chair of the American Council on Renewable Energy and former Executive Director of the California Energy Commission, wrote a guest editorial for the newsletter California Energy Circuit, and explained what Proposition 16 will actually do to California: “Under existing law, most local governments can annex new areas for the expansion of electricity service with the approval of a simple majority of the voters in the area to be annexed. Proposition 16 would embed in the state constitution — meaning that it can only be changed by another statewide election — the requirement that the approval come from two-thirds of the voters in the territory being served and two-thirds of the voters in the territory to be served. A similar requirement would be written into the constitution for the formation of any new publicly owned electric utility.”

Jeff Shields with the South San Joaquin Irrigation District (SSJID) believes that competition is the only way to keep utility rates down, even when run by a municipality.

In recent testimony, Shields was asked to summarize his conclusions in the 2011 PG&E rate phase application. Shields said PG&E is seeking an increase of $888 million over 2011 authorized revenues from electric customers. This amount represents a 7 percent increase over PG&E’s currently authorized electric revenue requirements. Referencing the increase Shields said, “it is outrageous in light of the state of the economy in Northern and Central California as a whole.”

Shields is also critical of PG&E’s campaign in opposition to competitive alternatives and said in testimony that “it exemplifies its misplaced priority on the interests of its shareholders over those of its ratepayers. The $35 million that PG&E has reportedly spent to qualify and promote a ballot proposition to revise the California constitution in order to protect its monopoly and the interests of its shareholders clearly demonstrates both its misplaced priorities and misuse of the revenues it collects from the state’s ratepayers.”

Shields’ recommendations to the CPUC include:

• CPUC carefully evaluate PG&E’s GRC application to ensure that ratepayers are not forced to pay for costs that provide more benefit to shareholders than to ratepayers;
• PG&E be required to conduct all reasonable cost-cutting, including reductions in shareholder returns and executive compensation, before requesting additional funding from ratepayers during a period when many ratepayers are still dealing with the effects of the recession;
• PG&E should not be permitted to recover any of the costs of its anti-competitive activities or initiatives in opposing CCA or municipalization from its ratepayers.

The testimony also included PG&E’s justification for seeking a rate increase — PG&E stated that the rate increase would “not only provide the ability for PG&E to provide its customers with the level of service they expect, but it will also help to stimulate California’s economy.”

The CPUC is holding public participation hearings on setting future rates. Upcoming meetings are Monday, June 7, 2010 in Oakland, Wednesday, June 9, 2010 in Woodland, Thursday, June 10, 2010 in Red Bluff, Monday, June 14, 2010 in San Jose, Tuesday, June 15, 2010 in Salinas, and Tuesday, June 15, 2010 in San Luis Obispo. More information can be found here.