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03.31.10

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Phaedra
CONSUMER ALERT: This PG&E-funded mailer, targeting Marin County households, warns of the dire consequences to consumers should the utility lose its North Bay monopoly.

Power Mad

Orwell fans take note: PG&E's war on public utilities goes to ballot as the 'Right to Vote Act'

By Kylie Mendonca


A Trojan horse of an amendment is slated for California's June 8 ballot. Proposition 16, the "Taxpayers Right to Vote Act," as it's been dubbed by its corporate sponsor, has a proud, democratic ring to it. But this initiative has nothing to do with any existing right to vote. In fact, many local politicians say Prop. 16's sole purpose is to eliminate consumer choice and cripple local governments seeking alternative energy sources.

The Taxpayers Right to Vote Act is really about energy and who owns the right to sell energy to the public. If it passes, opponents say, Californians would be tied to just a handful of energy companies, and their dominance in existing and new markets would essentially be written into the state constitution. Though three investor-owned utility companies would benefit from this arrangement, so far there has been just one contributor to the Yes on 16 campaign. Since the beginning of this year, Pacific Gas and Electric Company—PG&E—has donated more than $25 million to the cause and pledged as much as $10 million more. A spokesman for PG&E declined to discuss the initiative, merely confirming that its board of directors had approved the expenditure.

Former California energy commissioner and current co-chair of the American Council on Renewable Energy John Geesman has become one of the most vocal opponents of the initiative. He calls Prop. 16 a "tapeworm."

"There is no precedent for this," Geesman says. "What you have is a single utility company trying to write, into the constitution, a business advantage. I was surprised when I heard PG&E was circulating a petition for signatures. But I never thought it would go through."

California's initiative process has been around since 1911, established as a powerful tool for the masses to wield against corporate bullying or political indifference. It was used sparingly until the last two decades when the number of new laws exploded. In part, this has to do with a change in politicking style. Now anyone with money who wants to get an initiative on the ballot can hire a small army to get signatures. California's constitution has grown comically large, and many believe that the process has been hijacked.

Prop. 16, which has also been called the "New Two-Thirds Vote Requirement For Local Public Electricity Providers" by Attorney General Jerry Brown, is a response to an increasing number of local governments that are interested in procuring energy for their communities. Several cities in Marin County, for example, have created the Marin Energy Authority to run a public utility called Marin Clean Energy. MCE contracts with energy generators directly to sell power to Marin residents. The process by which municipalities form these coalitions is called Community Choice Aggregation, or CCA.

Of course, the customers that MCE will service were not previously without power. Like most people in California, they bought energy from PG&E. That utility will still be the company delivering power through the grid; they just won't be selling it anymore. In essence, Marin County has become a competitor of PG&E. Such a parry is not taken lightly.

If Prop. 16 passes, it would amend the state constitution to require a two-thirds approval (rather han a simple majority) by local voters before a CCA could provide electricity to any new customers if there was any public money or debt involved. It would require the same two-thirds approval by any community that a CCA wanted to expand into, whether or not public money or bonds were involved. In its assessment of the initiative, the independent Legislative Analyst's Office said the voter-approval requirements could deter communities from pursuing CCA at all. District 3 senator Mark Leno has called it "a stake in the heart of CCA."

Proponents of the measure say the electricity business is risky, and voters should be able to vote when public money is being leveraged. Opponents say Prop. 16 is just a thinly veiled manipulation of the initiative process, and that it would constitutionally guarantee a monopoly for companies like PG&E.

Regardless of the outcome in June, PG&E's involvement with Prop. 16 has brought forth an almost cathartic release of grievances against the company, shining a blinding light on what many call a broken initiative process. Already there is a lawsuit with allegations of campaigns carried out in bad faith going back more than 60 years, and soon, according to a Prop. 16 spokesperson, the media blitz will begin.

Community Choice Aggregation was a direct result of the California energy crisis/Enron scandal that crippled the state around the turn of the millennium. PG&E, still recovering from filing bankruptcy in 2001, publicly supported the legislation that created CCA—they were even included in the drafting of the bill.

After the '90s energy deregulation led to rolling blackouts, price surges 10 times higher here than other parts of the country and the eventual crash of our energy markets, California lawmakers decided to take back control. In 2002, they passed AB 117, removing barriers for local communities to manage their own energy needs and allowing whole groups of cities or towns to come together and contract to produce their own energy. It was not explicitly spelled out in the legislation that municipally owned utilities would pursue renewable energy sources, but it seems obvious now. In the Bay Area, CCA has become synonymous with "green" energy. PG&E, along with other for-profit utilities, was considered a partner in the effort to diversify energy in the state, and written into the bill was a clause that PG&E and others would "cooperate fully" with any CCA. Many lawmakers are pointing to that clause now, asking what happened.

In a Dec. 22, 2009 letter to PG&E's chairman and CEO Peter Darbee, eight state senators called PG&E's support of Prop. 16 "misguided" and possibly illegal, stating that "if PG&E has recanted its support of CCA, it has an obligation to seek those revisions in the legislature. To use the initiative process to pursue PG&E's self-interests and avoid engaging your partners in the AB 117 agreement calls into question your company's integrity."

Sen. Leno was among the letter signers. He says, "I fundamentally believe that this is an attempt by a single corporation to amend the state constitution, and that is a sinister abuse of our initiative process."

PG&E did not publicly respond to the letter, but days later it made another $3 million donation to the Yes on 16 campaign. The utility estimates it will spend a total of $35 million in ads.

On March 18, a group of six publicly owned utilities and the city and county of San Francisco filed suit to disqualify Prop. 16 from the June ballot, claiming that it contains "false and misleading" information, both on the ballot and in the initial petition to qualify for the ballot. In the suit, the districts take turns airing their grievance against the utility, which serves most of California, from Bakersfield to near the Oregon border. Specifically, the suit is critical of the initiative for omitting PG&E's name from the measure.

Yes on 16 spokesperson Robin Swanson, however, says that the suit is a perfect example of why it needs to pass, because citizens are routinely being left out of the conversation. "Our opponents," she says, "would rather file a lawsuit behind closed doors to stop people from voting than talk to voters in the open forum of the statewide election.

"I think this is exactly what the initiative process should be used for," she continues. "To constitutionally require votes when a local government wants to spend local money to go into the risky retail electric business."

There are certainly risks involved with starting an energy company. In December, the Marin County Civil Grand Jury released a report, "Marin Clean Energy: Pull the Plug," which was highly critical of the Marin Energy Authority, particularly regarding the debt incurred. Marin Energy Authority has borrowed more than $2 million from the county, a private bank and, somewhat unusually, a small group of Marin residents. But so far, its MCE subsidiary is just contracting energy from outside generators. If there is real risk involved in this plan, it's when the MCE starts building power plants and generating its own energy. MCE has yet to supply any power to residents or collect money to start repaying its debt, but it expects to start providing energy to a small group as early as May this year.

Marin County Supervisor and chair of Marin Energy Authority, Charles McGlashan, says that PG&E has been anything but supportive of the new utility. He claims that PG&E has intentionally misled residents about the cost of Marin's energy, attempted to scare senior citizens and personally attacked politicians who support the new utility. Much of this intimidation was done through a watchdog group, called the Marin Common Sense Coalition, a group that PG&E is a member of and whose board is comprised of high-ranking PG&E employees and consultants. The Common Sense Coalition did not respond to numerous requests for an interview. Perhaps it's simply been too busy.

"They have sent out nine mailings to every home in Marin," McGlashan says. "Including mine."

In February, Marin Energy Authority sent a complaint to California's Public Utilities Commission, alleging misconduct by PG&E, including threats to refuse energy delivery to MCE customers. The PUC did come down on PG&E for offering a vehicle to opt out of the MCE and keep PG&E service, but McGlashan says that's not enough.

"The [PUC] needs to step up and enforce the law," he charges. It's unclear what action the PUC could take against PG&E. The PUC regulates the company's energy rates, resetting them every three years at a level that provides money for infrastructure improvements, operating costs, profits for shareholders and a rather generous $9 million package for the CEO. Ratepayers are the sole source of income for the utility.

PG&E's generous support of the Yes on 16 campaign, the Marin Common Sense Coalition and its umbrella organization, the Coalition for Reliable and Affordable Energy—a group that spent more than $9 million opposing a green-energy feasibility study in San Francisco two years ago—has led many to wonder if PG&E's rates are set too high.

"The PUC sets rates at a level that allows them to raise money for infrastructure improvements," John Geesman says. "Not to create a $35 million slush fund."

PG&E claims the money came from shareholders. In February, the utility notified its shareholders that the board of directors had authorized spending as much as $35 million on Prop. 16, and that the value of shares would drop by 6 to 9 cents as a result. Shareholders, including CalPERS—the retirement fund for 1.6 million state employees, which is severely underfunded—were not given an opportunity to vote on the expenditure.

"PG&E wants to have all the people voting," Geesman says. "Shouldn't their shareholders get a chance to vote?" 

All of this wrangling would not be so objectionable if it didn't detract from a larger issue: the move toward more stable, renewable and greener energy sources. This year, PG&E did not meet the state-sponsored goal to have 20 percent of its energy coming from renewable sources by 2010. A spokesman for the company said it would meet that goal by 2013. By contrast, MCE will contract a minimum 25 percent renewable energy in the first year of operation.

What's more, opponents of PG&E say they have faced personal attacks for speaking up. Sen. Leno, for example, charges that PG&E funded his opponent in 2008 after he supported a feasibility study on green energy. PG&E created an independent expenditure committee to oppose him, calling the $50,000 trust the "protect our children" fund. McGlashan, too, says that PG&E is already bankrolling two Marin campaigns to unseat him and a colleague who voted in favor of creating the MEA.

"It's really sobered me," McGlashan says. "I feel really disillusioned that people don't all have the same level of respect."

He adds hopefully, "We're working on a county-wide effort to ban plastic bags."

Good thing PG&E's not in that business.


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