The initiative would most affect
so-called electric service providers and the businesses they
supply. The service providers are private companies that
sell electricity directly to major businesses and
universities, which seek lower power costs than they
otherwise would receive from municipal or investor-owned
utilities such as Pacific Gas & Electric or Southern
California Edison.Specifically, Proposition 80 would
subject the private energy companies to regulation by the
California Public Utilities Commission and restrict the
ability of their major customers to switch from private
companies to municipal or investor-owned utilities. It also
seeks to increase use of renewable energy among all sellers
of electricity.
Opponents of the measure say the state's electricity
market is too complex for energy policy to be decided by
voters. A Field Poll released this week indicates that
voters may indeed be too confused by the measure to support
it. The survey found that just 24 percent of likely voters
favored Proposition 80, while 48 percent opposed it and 28
percent were undecided.
Even the state's nonpartisan legislative analyst's office
said it was impossible to determine Proposition 80's effect
on electricity rates.
The analyst's review said that in general the measure
would give some certainty to the market structure, which
might encourage investment in power plants, greater supply
of power and eventually lower rates.
But the measure also could lead to higher prices in the
future, the analyst concluded, because it would prohibit
commercial users from shopping around for cheaper power.
The initiative is opposed by energy companies that want
California to create a competitive electricity market.
The biggest donor to the opposition campaign is
Constellation Energy Group Inc., which has given $1.3
million to head off what company spokesman Larry McDonnell
called "wrongheaded public policy."
The company has several dozen direct-access customers in
California - the large commercial users who shop for the
best rates when buying electricity. But Constellation has
not been able to expand that business because of
restrictions on retail competition, McDonnell said.
The measure also would move up a requirement that
utilities get 20 percent of their power from renewable
resources, from 2017 to 2010. Nevertheless, several
renewable energy groups have opposed Proposition 80, saying
it's a bad idea to lock in an energy policy because the
industry can change quickly.
Laws passed by initiative can only be reversed by going
back to the voters. Limited changes can be made with a
two-thirds vote of the Legislature, but those changes cannot
go against the initiative's intent.
That could tie the hands of future lawmakers if the
electricity market changes substantially in the future, said
V. John White, executive director of the Center for Energy
Efficiency and Renewable Technology.
The same concern was expressed by the board of the
California Public Utilities Commission, the state agency
that regulates electricity. It voted in September to oppose
the measure.
The commission has spent three years crafting regulations
on renewable-energy standards and how utilities buy power.
Commissioners said the initiative would force them to start
over on these issues.
California's 1996 deregulation law was supposed to lower
electricity rates, which were among the highest in the
nation. The state-regulated utilities were allowed to sell
most of their power plants, and an independent agency was
created to manage the transmission grid. Retail rates were
frozen until the utilities paid off the debts incurred over
decades of building power plants and transmission systems.
The plan was built around the assumption that getting rid
of the utilities' monopoly would lead to competition,
driving down the price of electricity.
But while private energy companies bought the utilities'
power plants, they didn't build new plants to keep up with
California's growing demand for electricity.
That energy deficit was compounded by a drop in the
amount of hydroelectric power available from the Northwest
in 2000 and an increase in the price of natural gas, which
fuels most of California's power plants. Instead of having a
more competitive power market that drove down wholesale
prices, the energy shortage drove prices sky-high.
That left California vulnerable to market manipulation.
In 2001, the state suffered rolling blackouts and its
three largest utilities teetered on the brink of bankruptcy
after months of buying expensive wholesale electricity and
selling it at the capped retail rate.
Energy companies found to have overcharged the state
during the energy crisis have been ordered to repay
billions.
Direct access was a cornerstone of the 1996 deregulation
plan and remains a focus of Gov. Arnold Schwarzenegger's
energy policy.
During the energy crisis of 2000 and 2001, energy
companies passed on rising wholesale costs to their
customers, many of which fled back to the regulated
utilities.
The rates that public utilities could charge their
customers, however, were capped under the law. As wholesale
prices rose, they ran up billions in debt. Eventually, the
major utilities were allowed to raise consumer rates to pay
off the debts incurred during the energy crisis.
The Legislature later halted direct access when wholesale
prices dropped again and large customers tried to leave the
utilities. When those customers fled the utilities, that
left residential and small business customers stuck to pay
off the debt, said Mike Florio, an attorney with The Utility
Reform Network, a consumer advocacy group.
Schwarzenegger and Michael Peevey, the head of
California's Public Utilities Commission, which regulates
the industry, have made it clear that "they want to move
back toward deregulation over time, bringing back direct
access," Florio said. "That would be a disaster."
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