Cap & Trade will socialize your power bill

May 22, 2012

By Wayne Lusvardi

The mere mention of the words Cap and Trade in California and people just tune out because it sounds too complicated to understand.   While it is complicated, it is nevertheless understandable.

What we’re learning about the California’s Cap and Trade program is that it is ending up as a giant government program to socialize the extraordinarily high rates that will be added to your electricity, natural gas and water bills from shifting to 33 percent green power in California by 2020.

Plans are in the works to include some form of rebate in your water and power bills for the higher cost of green power.  But it will be politically determined who gets larger or smaller rebates.  According to a report by the think tank Next 10, low-income and low-volume energy users are insulated by law against any energy increases in their utility bills due to the high cost of Green Power.  So it will be the middle class that ends up bearing the higher costs for green power for lower-income communities.

By socialized electricity rates is not meant the placing of power companies under government ownership or control.   What is meant is the spreading of higher energy costs from rebates by a formula to be politically determined.  Assembly Bill 32, the Global Warming Solutions Act of 2006, did not nationalize or socialize the means of producing electric power.  But it will be socializing or spreading the higher cost of green power to the middle class.

Usurping Supermajority Democracy for Taxes?

But this raises an issue: Who brought to the voters a bill or ballot proposition to socialize electricity rates resulting from expensive green power?   Answer: No elected legislator has publicly stated that the intent of Cap and Trade was to socialize power rates.  But that is the apparent end result.

For any “tax, charge, levy, or tax allocation,” didn’t Proposition 26, passed in 2010,  require a two-thirds vote of the electorate?

The problem is that AB 32 was passed not by the people, but by a majority vote of the state legislature and signed by the governor in 2006.

AB 32 authorized the California Air Resources Board to adopt rules for what is called a Cap and Trade program at a later date.  Cap and Trade is a program that requires industrial and utilities to buy pollution credits in an auction.  The proceeds of that auction would be collected by CARB.

The Strategic Growth Council, authorized under AB 732, in 2008 would reallocate the proceeds of the Cap and Trade auctions to reduce high utility bills and fund anti-pollution projects.  The Strategic Growth Council was originally funded by $500,000 from Prop. 84 — the Water Bond Act of 2006.

CARB adopted the Cap and Trade portion of AB 32 on Dec. 17, 2010.

Usurping Democracy?

Law Date   Adopted What   Law Does How   Passed
AB   32: Global Warming Solutions Act 2006 Authorizes   shift to 33% green power and Cap and Trade emissions trading Majority   vote of state legislature & signed by governor
AB 732: Amend Public Resources   Code relating to environment and making appropriations therefor. Sept.   30, 2008


Authorizes   the Strategic Growth Council to coordinate air quality programs & award   financial assistance to meet goals of AB 32.    Used funds from Water Bond Act of 2006 to set up Strategic Growth   Council. Passed   in State Assembly by 60% vote 45 to 30; passed in State Senate by 57% vote 23   to 14.  Approved by Governor   Schwarzenegger Sept. 30, 2008
Prop.   26: Supermajority to Pass New Taxes and Fees Nov.   10, 2010 Requires   two-thirds supermajority vote in legislature for any new “taxes, levies,   charges, or revenue allocations” 52.5%   of voters
Cap   & Trade Portion of AB 32 adopted by California Air Resources Board (CARB) Dec.   17, 2010 Rules   for setting up an auction for trading pollution allowances Vote   of unelected members of CARB board of directors
AB 2404: Local Emissions Reduction   Fund Pending   in committee in State Assembly Requires   revenues collected from pollution allowances to be deposited with CARB for   further appropriation by Legislature. Only   majority vote required

But Prop. 26, limiting any new “taxes, charges, levies or tax allocations,” passed by a vote of 52.5 percent on Nov. 10, 2010.

So there has been no vote about either Green Power or Cap and Trade.

But does Prop. 26 restrict CARB and the Strategic Growth Council from collecting pollution taxes under the guise of an auction and then redistributing the proceeds to reduce the high cost of Green Power?

To answer this question, we contacted reputable legal experts. An agency which “implements” a fee under an existing law passed in 2006 does not probably require a supermajority vote under Prop 26.

Cap & Trade Energy Rebates Could Backfire

However, this may not mean that any piece of subsequent legislation adopted by the Legislature can go beyond the intent of AB 32 and Cap and Trade.  There are several bills in the legislature queuing up to tap Cap and Trade proceeds to fund “schools, hospitals, affordable housing,” etc.  Gov. Brown has also proposed tapping Cap and Trade funds to finance the California High-Speed Rail. Neither of these is likely to be considered a legal use of Cap and Trade funds at this time.

But what is being considered a legal use of the $6.25 to $12.5 billion per year in Cap and Trade taxes is energy rebates to “customers” and funding for a stimulus program of home energy efficiency projects. Ratepayers would get rebates to reduce the shock of high Green Power costs; or they would get home insulation grants or loans.

The California Energy Commission estimates 40 percent of the state’s housing stock already is energy efficient due to Title 24 Building Energy Efficiency regulations adopted in 1978 under AB 758.  The 60 percent of older housing, commercial and industrial building stock built prior to 1978 would be the likely target for Cap and Trade building energy improvement projects.

Assembly Bill 1103, authored by Assemblywomen Lori Saldana, D-San Diego, and passed in 2007, would require owners and operators of non-residential buildings to disclose a building’s energy performance ratings to any prospective buyers, tenants, or even lenders financing any building sale.  AB 1103 would assign “benchmark” energy ratings to buildings and would encourage building owners to “upload” their rating to the U.S. Environmental Protection Agency’s Energy Star Portfolio Manager each year.  Electric and gas utility companies would be required to upload all energy consumption data on each building into the same database.  There is no exemption provided in this bill for historical properties, churches or “as-is” real estate transactions.

The California Public Utilities Commission has been requiring regulated public utilities to offer home and commercial energy efficiency rebate programs since the oil embargo and resulting energy crisis of the mid-1970’s.   California’s Statewide Multi-family Housing Energy Efficiency Rebate Program completed retrofits on 330,437 apartment units alone from 2005 to 2006 at a cost of about $50 million.

According to the U.S. Census, there are 4,199,785 apartment units in California.  Almost 8 percent of those were retrofitted with energy efficiency improvements from just 2004 to 2006.  How California could suck up $6.25 to $12.5 billion per year in more building energy improvements, as recommended by the University of California, Berkeley and Next-10, is questionable.

Of the 18 spending options for Cap and Trade proceeds recommended by the think tank Next 10, five of them involve building energy efficiency improvements.  As already stated, these have been undertaken by public utilities for decades and would be redundant to their ongoing programs.

Offsetting general gund expenditures is probably legally excluded at this time.

The State Legislative Office has already recommended against using Cap and Trade taxes to fund high-speed rail.

Establishing a green bank could lead to a repeat of another bubble like the mortgage sub-prime loan program.

If energy bill rebates are implemented ratepayers may believe that energy costs are lower and use more energy.  Or ratepayers may believe that if they use more energy that they will receive more rebate.  Thus, Cap and Trade could backfire.

Sending monthly rebates to energy customers separately might raise public perception problems of why utility rates were raised in the first place and then absurdly rebated back to them.

In short, California evidently doesn’t yet know what to do with huge amount of taxes that will be collected from industries and utilities under Cap and Trade.  As with all complex public policies, there is still a large amount of uncertainty as to the outcome of California’s Cap and Trade program.  And the unintended negative consequences that could arise from such a program are a growing concern.


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  1. Rex The Wonder Dog!
    Rex The Wonder Dog! 22 May, 2012, 10:12

    Cap n Trade will be another disater, a tax grab.

    Reply this comment
  2. Stanley K.
    Stanley K. 22 May, 2012, 10:54

    Cap and trade, AB 32 —- all of it must be stopped.
    Thank you for the valuable information you’ve provided to us about this outrageous swindle.

    Reply this comment
  3. Ted Steele, Beet Framer
    Ted Steele, Beet Framer 22 May, 2012, 11:32

    We remain a natuion of morons— large subsidies to oil companies who are loading the upper atmosphere with carbon and a reluctance at embracing green in what was probably the smartest thing to ever come out of the republican party; cap n trade.


    Trolls discuss-

    Reply this comment
  4. Ulysses Uhaul
    Ulysses Uhaul 22 May, 2012, 12:11

    Ted will get his usual beating….poor soul!

    Reply this comment
  5. Ted Steele, Beet Framer
    Ted Steele, Beet Framer 22 May, 2012, 12:21

    Mr. Uhaul– I remain immune from the abuse out here….I always consider the sources……I enjoy spinning up the trolls and sometimes I learn a thing or two and of course I hope they are smart nough to learn from me, although some are not. But– God Bless them all!

    Reply this comment
  6. Ted Steele, Beet Framer
    Ted Steele, Beet Framer 22 May, 2012, 12:24

    The trolls hate it when they learn that RR invented cap and trade. They start with denial, then move smartly to anger and in time they try to distinquish cal and trade from taxes..(watch and see) …but in the end…..they have to accept that it seemed like a pretty good idea to the Gipper ™. They like to pick and choose what part of the Duke’s mythologhy they like depending on the pol weather…mmmmmmmmmmmmmmmmmmmmm…..I love this stuff.

    Reply this comment
  7. Ulysses Uhaul
    Ulysses Uhaul 22 May, 2012, 13:45

    No takers. Trolls wore out from deceiving us!

    Reply this comment
  8. Ronald Stein
    Ronald Stein 23 May, 2012, 08:59

    CARB’s Fuels Policies are Throwing California’s Economy Under the Bus

    In the last 20 years, Southern California’s population has doubled, but the air quality has gotten BETTER, not worse. New rules by government bureaucrats, however, are coming into play that will increase the costs of electricity, gasoline, roads, homes, services, you name it, for literally no significant betterment of air quality.

    Californians already pay among already the steepest prices in the nation for gasoline. A good deal of this is due to the state’s mandatory unique gasoline formula and combined taxes at the pump which are the country’s second highest.

    Cap and Trade, a cornerstone of AB 32, the California Global Warming Solutions Act. Projections place the cost of cap and trade at anywhere from 50 cents to one dollar per gallon added to the retail price of gasoline here just for the 37 million in CA, for a go-it-alone State that contributes less than 1% of the GHG’s being emitted into the worlds atmosphere, and billions in increased general energy costs.

    Under cover of AB 32, CARB is forcing billions of dollars in higher costs on our struggling economy to reduce greenhouse gas emissions associated with global warming.

    The problem is that California and its 37 million citizens contribute less than 1% of the world’s greenhouse gases. Solving a world GHG problem is not the responsibility of the few that live in California. Maybe China and India with 2.4 BILLION contributors may be, but not California’s 37 million.

    CARB touts California’s “leadership” in the war on climate change. The “leadership” premise is similar to crossing the street within the confines of the crosswalk and getting hit by a bus – you’re right, but “DEAD RIGHT!”

    Those who feel that spending billions to reduce greenhouse gases in a State that contributes less than 1% of the world’s GHG’s may be right, but they are dead right as it accelerates the exodus of businesses and jobs from California, and an unemployment rate that consistently remains among the highest in the country.

    With California transportation fuels already among the country’s most expensive and our gas taxes the second highest in the USA, it’s impossible to justify the imposition of billions in higher fuel costs just to retain the title of “leader” in greenhouse gas reductions.

    CARB would do well to get out of the crosswalk and stop throwing California’s economy further under the bus.

    Reply this comment
  9. Ulysses Uhaul
    Ulysses Uhaul 23 May, 2012, 14:21

    Your frozen chicken pot pie will be $7.37 on special. Those Hungary Man dinners like $8.89.

    Life is good!!!

    Reply this comment
  10. The Ted Steele System
    The Ted Steele System 24 May, 2012, 05:56

    mmmmmmmmmmm pot pie

    Reply this comment
  11. PJ
    PJ 28 May, 2012, 09:06

    Let’s not forget that we are already paying for “poor” people’s energy. Just got a note from the Gas Company that I will be surcharged to fund their aid program. We do for Edison already. No accounting of course is provided, so it could be going to their pensions and not poor people.

    Under the radar tax increases. This is redistribution, pure and simple. I was an idiot to pay my own way I guess.

    Reply this comment

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