Contra Costa Times, Walnut Creek, Calif., business leader profile column
Contra Costa Times, Walnut Creek, Calif. --Jul. 25
Jul. 25--TURN CHIEF FEARS CONSUMER POWER LOSS: The Utility Reform Network sees itself as a barking watchdog on behalf of California's utility customers. The San Francisco-based nonprofit strives to ensure that energy and telecommunications customers pay what it considers fair rates, that utilities get no more than they deserve, and that consumer rights are protected.
TURN worked to minimize the consumer impact of the 2000-2001 energy crisis,
lobbying for legislation that limited the extent of rate hikes on average
consumers, and publicly railing against what it saw as the unfair or
inappropriate actions of the utilities, the California Public Utilities
Commission (CPUC) and Sacramento throughout.
More recently, it was a vocal advocate for the Consumer Bill of Rights,
passed in May by the CPUC, which protects wireless and telecommunications
customers from deceptive marketing practices and gives them a longer period of
time to test out new service.
The organization is keeping a close eye on SBC Communications' ongoing
attempts at deregulation and is gearing up for its next regulatory battle, as
the issue of direct access has reared its head in state legislation proposed by
Assembly Speaker Fabian Núñez (D-Los Angeles). Direct access allows consumers
and businesses to choose their own electricity provider and was, in TURN's view,
a key culprit in the energy crisis.
Bob Finkelstein, who became TURN's executive director last November, recently
spoke with the Times about various issues facing utility consumers.
QUESTION: PG&E recently announced it would raise its residential rates to
defray the costs of businesses, which it says are bearing the brunt of the rate
increases following the energy crisis. What is TURN's attitude toward that
decision?
ANSWER: It's twofold. The primary effort there ought to be figuring out a way
to get rates lower for all California consumers, be they residents or
businesses. PG&E unfortunately seems to have lost sight of that and wants to
play a game of pitting one customer group against another. Second, while we
understand PG&E's desire to lower rates, doing it on the back of residential
customers, increasing their rates by upward of 20 percent, is just flat wrong.
Q: TURN railed against the PG&E bankruptcy settlement late last year.
What were your major problems with it?
A: There was a crisis in California's energy markets not because of a lack of
supply but because of a bunch of greed by unregulated players in the market.
PG&E took the risk in that market and was suddenly in a position where they
were going to sustain big losses. The bankruptcy settlement was just a bailout
of the utility, pure and simple.
Q: What impact will that have on California's consumers?
A: $9 billion. And that is all money that could be much better used for
California's economy if it went somewhere other than PG&E's pockets.
Q: Some would say that PG&E provides a critical service to California,
and that the bailout was necessary to ensure the company stayed in business and
the lights stayed on. I take it you disagree with that assessment?
A: That's true within limits. Let's take a step back. What got PG&E into
this position was this failed effort at deregulation. Certainly we're hopeful
that everyone will learn the lesson that this is an industry that shouldn't
experiment with deregulation. We agree, this is a critical part of the state
economy providing an essential service that all consumers rely upon. And that's
precisely why these new efforts toward another round of deregulation ought to
have consumers up in arms.
Q: Is public power the best solution in your view?
A: It's hard to imagine anybody doing it worse than PG&E in some regards.
That said, I think there are a number of communities that have expressed some
interest in taking over at least some of the utility function, and it will be
very interesting to see how they do. I would hope that once they prove
successful, other communities would get real interested in doing it too.
Q: Switching to the telecommunications arena, TURN was a big proponent of a
Consumer Bill of Rights. One version recently passed, but it wasn't as
far-reaching as another version on the table. Do you think the legislation that
passed came up short, and if so, where?
A: The one thing that really jumps out at me is it didn't include a proposal
to say the company doesn't have the right to just change the terms of the
contract in the middle of the contract. Or at the very least if they change
those terms, providing a meaningful opportunity to get out of the contract. I
know that when I signed up for cellular service, I made a two-year commitment,
and the notion that the carrier could say, "Oh, by the way, there are
changes we're making in your plan," while I'm still bound to the plan,
seems patently absurd.
Q: Some argue that the energy crisis of 2000-2001 wasn't the result of
deregulation, but the fact that it was only half-deregulated; retail rates were
locked in while wholesale rates soared.
A: (Laughs) The upshot of that argument is we should have been socked with
high rates earlier than we were, and I'm not sure I see a whole lot of relief to
California consumers in saying that you should have paid more earlier. It seems
like a pretty crummy way of solving the problem.
We have this market for what is an absolutely essential service in today's
economy; let's make sure it's provided at reasonable rates to all consumers. For
75 years, we've achieved that by very firmly regulating this industry. For the
five years we stopped, the roof got blown off.
Q: Your job obviously is to work on behalf of consumer interests, but I'm
curious about where you think the lines should be drawn between consumer needs
and business needs. How do we protect consumer rights while protecting the
necessary incentive for businesses to provide services in the first place?
A: If we go back to the long-standing regulatory model, the utility makes
investments and to the extent those investments are deemed reasonable by public
utility commissions, they earn an authorized rate of return on that investment.
The same pressures have been in place for 75 years, and PG&E was doing fine
until 1996. They seem to be doing fine once again, now that we're back on this
model. I will agree with you there is some amount of tension there, but I think
it's a tension that utilities have been able to live with and thrive under.
Q: And what about the wireless companies who say the Consumer Bill of Rights
is going to cost them millions to comply with, which they'll be forced to pass
onto consumers?
A: I think they're trying to create this parade of horrors that simply won't
turn out to be the case. If you look at what the commission adopted we're not
talking about anything that major in terms of costs to the company. If their
business plan is premised on ripping off consumers and they're going to lose
millions because we're closing those opportunities, I tend to think the consumer
is better off and the state is better off.
Q: With the electricity crisis fading in the background, the PG&E
bankruptcy over, and the Telecommunications Bill or Rights in place, what do you
see as TURN's biggest looming battles?
A: On the energy side, I see this renewed interest in some level of retail
competition, this willingness on the part of the Public Utilities Commission and
a number of legislators to forget all of the lessons of the last few years and
say let's do it again. We come at them with logic, and it feels like they're
coming back at us with religion. This religion that customer choice is a good
thing; therefore no matter what, we ought to create more opportunities for
consumer choice.
Q: But consumer choice is a pretty well-founded free-market principle, and
some would say that it works in a lot of industries. I don't know if you agree,
but why specifically doesn't it work in energy?
A: To build new energy supply, with a few notable exceptions, it's going to
take hundreds of millions if not billions in investment, and the new supply
isn't going to be available for three or four years and it's 10 more years to
recover that investment. These unregulated markets we've seen think in one- to
three-year cycles tops, and it's that mismatch that just can never be bridged.
Q: What are the upcoming battles in telecommunications?
A: SBC, formerly known as Pacific Bell, formerly known as any number of
things before they moved to Texas, is trying its darndest to become an
unregulated monopoly. On the one hand, they say, "We've got all this
competition; you don't need to deregulate us." On the other hand, they seem
to be doing everything in their means to squash competition. There's a real
danger if the Legislature buys into that, that you'll see SBC declared virtually
unregulated even while they control 90 percent of the local phone market.
Q: But isn't there some threat to SBC as a result of emerging technologies? A
business I used to work for recently switched to voice over Internet service,
and when I recently moved, I considered not signing up for a land line and using
a cell phone only.
A: Do you know what that does for 911 service? If you dial 911 on your
cellular phone, there's no telling where it will go. So there is a huge public
safety concern with people abandoning their land lines.
I do acknowledge that there is some loss of business to the utility, but by
the same token, all of these things are nibbling around the edges, and you've
still got SBC out there as the 600-pound gorilla. And if you were to deregulate
them now or anytime in the future, I'd hate to think of what they could do with
that presence in the market.
Q: What could they do?
A: What would happen is they would find ways to jack up local phone rates,
and we'd see just how limited those other opportunities are. There is a core of
California consumers who don't have access over their cable lines or can't
afford it, don't have computer technology to get voice over the Internet, and
can't afford a cell phone. I fear we would see local phone service prices
increase and the most vulnerable population suffering the brunt of it.
James Temple covers consumer issues and the retail industry. Reach him at
925-977-8534 or jtemple@cctimes.com.
BOB FINKELSTEIN
--Age: 44
--Title: Executive director, The Utility Reform Network (TURN)
--Location: San Francisco
--Career: Finkelstein became executive director of TURN in November 2003. He
joined the consumer advocacy organization in 1992 as a staff attorney.
Previously, he was staff attorney for Legal Services of Northern California in
Sacramento and for DNA-People's Legal Services of the Navajo Nation in Chinle,
Ariz.
--Education: Finkelstein received his bachelor's degree from UC Santa Cruz
and his J.D. from Northeastern University School of Law.
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