Peter Darbee's Dog of an Initiative: 3 Tapeworms Eating Away at the Internal Logic of Prop. 16

On February 25, I had the privilege of testifying on Proposition 16 before the joint hearing of the California Senate Energy, Utilities and Telecommunications Committee and the California Assembly Utilities and Commerce Committee.  This is what I said:

Thank you for the opportunity to be heard in opposition to Proposition 16.  I delivered my first legislative testimony to your predecessor committees in 1975.  In the ensuing 35 years, beside spending two decades in the bond markets, I served as Executive Director of the California Energy Commission when Jerry Brown was Governor; as the Chairman of the California Power Exchange during our disastrous experience with incompetent market regulation; as a Board member of the CalISO when Governor Davis asserted the State's authority over that body; and as the attorney member of the California Energy Commission from 2002 to 2008.  I'm proud to say we licensed 26 power plants and one transmission line during my most recent tenure at the CEC.

I'm retired now, but spend much of my volunteer time as the Co-Chair of the American Council on Renewable Energy, prodding governments around the world to re-calibrate their energy policies in order to accelerate the pace of technological change.

Never, in all of that time or in any of those venues, have I seen political activity by a regulated utility so far outside the bounds of acceptable conduct as PG&E's sole sponsorship of the Constitutional Amendment politely referred to as Proposition 16.

I am mindful of the contempt for the legislative process, reliance on deceptive wording, and resort to strong-arm tactics that are manifest in PG&E's campaign.  But today I want to take Proposition 16 at face value, and focus your attention on three tapeworms that eat away at the internal logic of the measure itself.

Tapeworm #1 is the elimination of customer choice.  Who among us in today's economy doesn't recognize that fewer choices mean higher prices?  That's true of any commodity.  Yet Proposition 16 actually wants to restrict the ability of electricity consumers to buy from anyone other than for-profit monopolies.  Has California ever faced a greater need to bring competitive pressures downward on the price of electricity?  But PG&E wants to lock its monopoly advantage into the State Constitution.

Tapeworm #2 is the mystery of where all this campaign money is coming from.  PG&E says it will spend up to $35 million, and insists all of that money will come from its shareholders.  You and I know that every nickel that passes through PG&E's books comes from its captive customers -- its regulated utility is the only business PG&E has!  The CPUC determines what PG&E's cost of capital should be in order to provide for investment in needed infrastructure.  But it sure doesn't set that rate at a level calculated to provide a $35 million slush fund for sole-sponsored political adventurism.  It ought to be illegal to take ratepayer money and use it politically against ratepayer interests.  If PG&E's making an excessive return, it ought to give the money back.

Tapeworm #3 is a serious drafting error in the "grandfather clause" of Proposition 16.  The authors attempted to exempt existing municipal utilities operating within their current territories, but they used an outmoded and unworkable "sole provider" definition.  That means that within the existing 48 munis, every new connection -- every new home buyer, every new business -- would be subject to an election requiring the approval of two-thirds of the voters.  That's the kind of drafting mistake the legislative committee process is designed to prevent.

Three tapeworms are enough to kill even the meanest dog, and you ought to do what you can to put this mongrel down.  Your colleagues in the Senate who signed onto the Steinberg letter in December had it right.  PG&E should acknowledge its mistake, abandon its campaign, and bring whatever grievance it thinks it has back to the Legislature for further consideration.