Monday, May 31, 2010

Never Underestimate the Voter's Sense of Smell

PG&E's panicked infusion of an extra $11 million into its floundering Yes On 16 propaganda machine may trigger a familiar domino-falling, death watch process.  Titillated by even the remote prospect of political upset, and with no public polls to provide guidance, the forensic teams are starting to gather.  How could a utility with unlimited access to its customers' pocketbooks -- spending $46.1 million as of May 27, 84% above the low end of the original budget it reported to shareholders, vs. $77,000 expended by the No on 16 side -- possibly lose?

What has gone wrong?  Why wasn't the original $25 - 35 million arsenal -- widely condemned by editorial boards across the state as obscenely excessive -- sufficient?  In February, PG&E took the unprecedented step of disclosing to shareholders that Prop. 16 would cost 6 to 9 cents per share in earnings -- a ploy to reinforce the fiction that the campaign war chest was "shareholder money" despite every dime having been collected from customers.  The 84% cost overrun is something one associates with PG&E power plant construction budgets, not political battles with Lilliputians who have already been outspent 325 to 1.  Will taking that ratio up to 600 to 1 really make any difference?

Oddly, as of May 31, none of the $11 million Prop. 16 budget overrun has been reported in 8-K filings with the federal Securities and Exchange Commission -- even though the arithmetic has changed to nearly 12 cents a share!  Maybe it's close enough to Election Day to drop the "shareholder money" pretense.  Maybe not.  

Memo to the PG&E Law Department:  you guys still awake?  Memo to the PG&E PR Department:  ditto.

If the Prop. 16 skunk goes down, the postmortems will be voluminous.  The almost universal denunciations from what remains of the traditional mainstream media will be justly credited.  Some seers will perceive a promising reinvigoration of democracy from the blogosphere and social media.  The spontaneous uprising of an ideologically and geographically diverse opposition, in the absence of any visible semblance of an organized campaign, will perplex the pundits.

And that Abraham Lincoln tautology about how many of the people you can fool how much of the time will have been upended.  

However, not every voter reads newspapers or blogs.  Facebook and YouTube have a finite reach. 

But everybody breathes.  While difficult to measure empirically, PG&E's Prop. 16 effort has emitted an undeniable stench, wafting through California's televisions, radios, and mailboxes, and building up to nauseating levels.  The first rule of human interaction -- apparently lost on PG&E's political consultants -- is pay attention to the nostrils.

And all the money in the world won't mask a certain stink.

Nine years of coddled, post-bankruptcy existence in the regulatory recovery room has bred a smell of hubris in the PG&E executive suite.  A small cadre of obsequious yes-men and -women, who have survived endless purges, surrounds CEO Peter Darbee.  Their primary function seems to be maintaining a bubble around the Leader.  Combined with an almost pathological fear of his customers preferring to flee to other competitors, Darbee has relied on a primitive application of George Orwell to selectively redefine his own reality.  

Nowhere was this better on display than at the May 12  annual shareholders meeting.  Darbee's freakish oration, preserved for posterity on video here at the PG&E web site, goes a long way toward explaining the philosophy that produced Prop. 16.  Ironically, since Prop. 16 is the first instance in California history that any regulated utility has ever attempted to place its own language into the State Constitution, he made no effort to offer a rationale for doing so -- in fact, no mention of Prop. 16 was made in any of the presentations to shareholders -- and he declined to answer three separate, increasingly pointed questions on the ballot measure from the floor.

The PG&E CEO is obviously quite taken with Orwell's concept of "doublethink,"  defined in the book, 1984, as "the power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them," the ability "to tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient, and then, when it becomes necessary again, to draw it back from oblivion for just so long as it is needed, to deny the existence of objective reality and all the while to take account of the reality which one denies."

What follows is a verbatim transcript of portions of his remarks (3:50 to 12:15 on the video tape):

What I'd like to do is explain the strategy of the Company, the common sense strategy that we developed nearly five years ago when we set out to define a new vision for PG&E and the strategy that would support that vision.

It's a strategy that's driven by values, values of the Company like accountability, open and honest communication, respect, and inclusion.  And together with our values, the strategies guide our actions.  Now it's important, given the strategy that we have, to reaffirm it on a regular basis and explain how it reinforces, and to reinforce the strategy that we have, the common sense strategy.
You know, what's truly remarkable is the strategy we developed more than five years ago is even more relevant and more appropriate given the business environment that we face today.  Given that the economy is depressed, and given how business has conducted itself in America over the last several years, America's trust and respect for business has been eroded over the past couple of years.

In the wake of the financial crisis and the economic downturn, there's a challenge for business today.  Americans want to see business doing a number of things.  Specifically, focusing on the longer term rather than the short term.  Americans are looking for transparency and honesty.  Americans are looking for accountability.  They want management to step up and take accountability for its actions.  And they want managers to be responsible for the way their business impacts society and the environment.  And, of course, at the same time, in addition to these lofty ideals, they want to make sure that business is demonstrating competence and providing quality products and services.
We've recognized that customers come first and if you ever lose sight of serving the customer, you've lost your bearings.  We've put an emphasis on operational excellence, so that we continually improve the products and services that we deliver our customers.  We've constructed a strategy that is built on accountability, integrity, and open and honest communication.  And finally, we have a strategy that's focused on the environment and the community.
... but beyond that we need to have a culture of accountability.  Accountability really comes down to one thing:  that is, for each member of the Company, each employee, to ask themselves, "what more can I do, what more can our team do, to better serve our customers -- better, faster, and more cost-effectively?"  So that's something that we're trying to, to communicate, and involve our employees in, saying, "I may not be in generation, or I may be at the nuclear power plant, or I may be up in Redding, but I stand ready to serve our customers and ask 'what more can I do?'"

The next element of the strategy is to have constructive relationships with our regulators and our policymakers.  So how do we do that?  Well the first part of any constructive relationship is to listen and to listen to people deeply, to treat them with respect, to attempt to conduct oneself with humility, to be responsive to the questions that regulators and policymakers might have, and to do so in a timely fashion.  And then when we're answering the questions and concerns of the regulators and policymakers, to do so with data.  With facts.  With good quality analysis.  And then, the conclusions and recommendations that we have should follow from that a, from that data and that analysis.  But underpinning the overall strategy with respect to regulators and with regard to our policymakers is to pursue win/win collaborative solutions -- to understand what their objectives are and to understand what our objectives are and find the win/win solutions in that.

Now I have to say that we're not going to agree with our regulators and policymakers each and every time.  There will be times when we have a different point of view.  But that's only going to happen after we've tried and tried again to find that common ground.  And most of the time when it happens, it will be because we have the same objectives in mind, but we have a different view on how to achieve those objectives.

And so Darbee's Prop. 16 spend-a-thon grows in intensity.  This week it was the full-page ads in newspapers throughout the state, showcasing the various "rent-a-friend" endorsements an ample budget can procure -- an escort service approach held in low esteem among dating adults, but a strategy someone has persuaded Darbee can build political credibility.  

This just in from Pyongyang -- Darbee's horse-choking 2009 $10.6 million compensation package (74% above the median for large energy utility CEOs, according to the Wall Street Journal's annual compensation survey, and 8% more than Goldman Sachs paid its CEO in 2009) was approved by the shareholder "non-binding advisory vote" :   251,040,122 to 10,214,679, with 3,831,599 abstaining.

Only our sense of smell protects us from the abyss. 

(Photo credit:  Darbee, Genesis Photo Agency) 

Here comes the Video Cavalry!  10 Short Films that will  rock the vote!  Just click here!


Sunday, May 23, 2010

LA County Republicans Ain't Buying -- Demise of Prop. 16 Among Conservative, Pro-Market Voters

In an unmistakable signal that PG&E's mass hypnotism strategy isn't working, the Republican Party of Los Angeles County voted last week to oppose the "Taxpayers Right to Vote Act" -- an "ugly" misnomer, in the words of the San Diego Union Tribune, which "ranks right up there with the most deceptive political advertising slogans of all time -- and that covers a lot of deception." 

The Ventura County Star can see the buzzards starting to circle:
On Friday, the company kicked in another $6.5 million to the campaign, bringing its total costs to date to $44 million. Clearly, the company's internal polling must be showing that the initiative is in serious trouble. It could be that the cynical idea that they could promote this little deceit as "taxpayer's right to vote act" just isn't working out the way it had hoped.

Southern California Republicans are ground zero for PG&E's saturation television advertising.  Aimed at an electorate which the San Francisco utility assumes will be dominated by drooling wingnuts and slobbering knuckledraggers, the campaign aims at repeating the taxpayer rights mantra over and over enough times so voters forget that competition drives down prices and customer choice is the cornerstone of capitalism.

A spontaneous groundswell against Prop. 16 appears to be erupting within the Southern California target audience.  In recent days, the San Diego County Taxpayers Association, the Pasadena Chamber of Commerce, the Orange County Association of Realtors, the South Orange County Regional Chamber of Commerce, and the Santa Clarita Valley Chamber of Commerce, have all independently -- there being effectively no organized campaign against 16 -- thrown off the trance.  They join the earlier apostates at the San Diego Regional Chamber of Commerce and the Greater Riverside Chamber of Commerce.  

The significance of these developments lies in their location outside PG&E's service territory.  The preposterous claims in the Yes on 16 advertising are the region's only mass exposure to the issue.  And the body politic's low-profile autoimmune system may be forcefully rejecting the toxins.  (Which is not to slight the opposition just announced by the Napa County Republican Central Committee or the Central Solano Citizen/Taxpayer Group, but their prior exposure to PG&E as customers may have influenced their judgment.)

How did the dark suits at PG&E headquarters ever think they could get away with it?

Maybe it's the protected status which government regulation extends to the species, but something about the investor-owned utility industry pushes its worst actors to a relentless drive for political advantage.

How else to describe PG&E's lunge -- relying on what the Los Angeles Times calls "commercials and glossy mailers so misleading they could have been written by the Iranian information ministry" -- for Constitutional lock-in of its monopoly position? 

The core falsehood in Prop. 16 is so deviously ingrained that it even eluded the Department of Justice staff that forced PG&E's fraudulent "Taxpayers Right to Vote Act" to be officially retitled the "New Two-Thirds Vote Requirement for Local Electricity Providers."

The operative fraction is one-third, not two-thirds!  What Prop. 16 would actually accomplish, if passed, is to reduce the electoral "magic number" to 33% plus one vote whenever the question of competition for incumbent for-profit utilities is put to the voters.  That's the vote total required to block any consideration of alternative supply arrangements.  Current California law, and some two and a half millennia of democratic conviction, focuses on 50% plus one vote.

In basketball terms, Prop. 16's concealed purpose is to lower the incumbent for-profit utility's basket to 6'8" while raising the basket for the forces of competition to 13'4".  That's the effect of Prop. 16's "new two-thirds vote requirement" for electricity choice elections, taking the monopoly defender's target down to 33% plus one vote and pushing the competition advocate's target up to 66.67%.  

Add in the incumbent for-profit's willingness to spend whatever it takes to defend its franchise, and the prohibition on local governments from spending anything to campaign, and you start to see why the San Francisco Chronicle -- ordinarily a staunch editorial supporter of PG&E -- concluded, "Prop. 16 does not level the playing field.  It devastates it."

On the other hand, by PG&E's calculation, if you jimmy the rules and lower the basket rim far enough,  then even a lead-footed, behemoth for-profit utility can dunk the ball.

A prime motive of  Prop. 16's continuous, mind-numbing repetition of the "taxpayer right to vote" slogan -- the measure has absolutely nothing to do with taxes! -- is the perversion of this 1/3 - 2/3 hierarchy.  Wrapping its competition-restricting, monopoly-preserving stink bomb in the fabric of taxpayer protection, Prop. 16 tries to evoke the two-thirds majority requirement for new taxes or general obligation bonded indebtedness.

But Prop. 16 would -- if passed -- flip the rationale for a two-thirds majority precisely upside down.  Votes on new taxes, bonded indebtedness, the state budget, even appropriations bills in the Legislature, all require a two-thirds majority for one simple reason:  to create an enduring bias against increased spending.  Very simply, if you want to increase public expenditures, you had better have a super-majority consensus for doing so.

Prop. 16 puts the super-majority onus on efforts to save money.  Saving money has historically been the primary argument made by those local governments which have persuaded their citizenry to get into the electricity business, and California's municipal utilities generally experience a 15 - 30% (sometimes more) cost savings compared to investor-owned utilities -- primarily due to the ability to issue tax-free debt, the absence of dividend payments, and greatly reduced executive compensation.

Of course, any claim by government about starting a new enterprise in order to save money ought to be greeted with considerable skepticism.  But current voting requirements have proven to be a reliable screen against unrealistic projections and bureaucratic wishful thinking.  Among the 48 municipal utilities dispersed across the entire California landscape, there is not one single example of a white elephant.  Nor any history of taxpayer bailout.  Or bankruptcy.

The state's three investor-owned utilities, on the other hand, all received taxpayer bailouts in the 2001 electricity market meltdown when Governor Gray Davis had state government procuring electricity for them.  PG&E, of course, put itself into bankruptcy after ring-fencing as many of its assets as possible to escape the jurisdiction of the court -- a strategy designed and carried out by then CFO and current CEO, Peter Darbee, mastermind of Proposition 16.

What kind of delusional thinking filches $44 million collected from its customers to bet the company's reputation on hired consultants' ability to stampede the voters?  Thanks to federal securities laws, which carry criminal penalties for intentional misrepresentation of material facts, we have Darbee's now notorious confessional remarks to investors at a March 1 Wall Street conference:
"... one of the thoughts was we're aiming towards a June election and that it was a more favorable time to do it than as opposed to a November election ... it also occurred to us that people aren't very pleased with the job that government is doing these days in general, you know, across the board ... that was a second factor that drove it to us.  And the idea was to diminish, you know, rather than year after year different communities coming in as this or that and putting this up for a vote ... we thought that this was a way that we could sort of diminish that level ...
"So it was really a decision about could we greatly diminish this activity for all going forward rather than spending $10 - 15 million a year of your money to invest in this.  The answer was yes.  The June timeframe looked ideal and in the context everything that is happening with government today -- the dysfunctionality of it -- we concluded that it was a very ideal time." 
A far cry from the "taxpayers right to vote" nostrum PG&E is spending $44 million to inject into the political bloodstream.   

(Photo credit:  Darbee, Genesis Photo Agency)

Here comes the Video Cavalry!  10 Short Films that will  rock the vote!  Just click here!

Sunday, May 16, 2010

Prop. 16 Drafting Error Would Spew Pestilence Across 48 Real Estate Markets in California

If the Taliban set out to poison California's frail 2010 real estate market, it would be hard to come up with a better plan than simultaneously disrupting the electricity hook-ups of home buyers and new businesses in 48 different communities.

That's the likely outcome if Proposition 16 is adopted by the voters on June 8, due to sloppy drafting of the "grandfather clause" intended to exempt new customers within existing municipal utility service territories. 

Does it make any sense to subject every new customer account -- every home purchaser, every new or relocated business -- to a public election requiring a two-thirds majority approval before electricity can be turned on? 

To qualify for exemption from Prop. 16's election requirement, a municipal utility has to be the "sole provider" within its service territory.  Unfortunately, there doesn't seem to be a single one of the state's utilities that meets that standard -- no surprise, given the spread of solar systems, cogeneration projects, and direct access contracts, not to mention legacy accounts still served by for-profit utilities.

The result -- a viral infestation in each of these 48 communities, which include Los Angeles, Anaheim, Burbank, Cerritos, Glendale, Modesto, Moreno Valley, Pasadena, Rancho Cucamonga, Riverside, Sacramento, Santa Clara and a host of others.  

So it's no surprise that among the first organizations to oppose Prop. 16 was the California Association of Realtors.  Ditto for the California Manufacturers & Technology Association.  

More puzzling is the devil-may-care attitude brandished by a couple of the country club cronies PG&E CEO Peter Darbee has recruited as spokesmen for Prop. 16.  Both are nominally "CEOs" of their own organizations, but they're drawn more from the brandy-and-cigars class of political string-pullers than the type of  businessman who's ever had to meet a payroll or sell a product or service.

Darbee's been quarantined by his political consultants from talking about Prop. 16 ever since his spectacularly off-message admissions at an investor conference that, rather than promote voting on electricity choices, the true purpose of the initiative is to "diminish this activity for all going forward."  

Consequently, those "official spokesman" duties which have not been subsumed by repetitive bromides from the  anonymous actress in the tv spots have fallen to Allen Zaremberg of the State Chamber of Commerce and Jim Wunderman from the Bay Area Council.

Zaremberg, a lawyer and longtime Sacramento operative has addressed the draftsmanship controversy in several newspaper columns.  The sum total of his legal assessment (with editorial rejoinders in bold):
  • "Proposition 16 specifically exempts situations where publicly owned utilities extend service to new customers located within their exclusive geographic territories" (yes, but to qualify the utility needs to be a "sole provider")
  • "This is confirmed by the nonpartisan Legislative Analyst's analysis of Proposition 16" (but the Legislative Analyst doesn't perform a legal analysis)
  • "and by the measure's own findings and declarations" (which aren't put into the State Constitution, and can't override the "sole provider" restriction which Prop. 16 would insert in the Constitution). 
  • "Moreover, the opponents' argument is based on an absurd, almost laughable, interpretation that no court would ever accept" (generally, this line of reasoning is rarely tried even on television shows about lawyers).
Wunderman's lame response in a recent radio debate was nothing short of astonishing, given that his organization bills itself as comprised of "the CEO or top executive" from "more than 275 of the largest employers" in the Bay AreaHe participated in Public Radio's Forum program, moderated by the respected host of the California Report, Scott Shafer.  Confronted by Shafer -- at 33:45 on the above audio link -- about the real estate meltdown scenario attributed to  Prop. 16's sloppy drafting, Wunderman (a former chief-of-staff in the San Francisco Mayor's office) was cavalier:
Mr. Wunderman:  "Well, I've heard the discussion about it and it's a dispute and a, a lot times once these measures -- you know, assuming that the measure were to pass -- there will be some litigation in these areas to clarify what intent was and, and so forth.  So, you know, what tends to happen in these campaigns is you get into the law of unintended consequences and no matter what -- where an initiative comes, comes from -- the opposition says that there's some fatal flaw in the document on page 39 and, you know, if you read the fine print"
Scott Shafer, Forum moderator "and sometimes there is."
Mr. Wunderman:  "and sometimes there is and so I, you know, we didn't write this measure and I, you know, I can't speak to that."
Wunderman probably would have been wise to consult some of the Bay Area Council's Silicon Valley members before agreeing to saddle up as a spokesman for Prop. 16.  The technology industry is the cornerstone of the Bay Area economy and gets much of its electricity from the municipal utility operated by the City of Santa Clara, appropriately named Silicon Valley Power.  Despite (or perhaps because of) providing business customers with electricity 24 - 35% cheaper than PG&E (and residential customers 46% cheaper), Silicon Valley Power would be decimated by Prop. 16.

As the San Jose Business Journal reported about Prop. 16:
"We don't think it's needed, and we're concerned it could negatively impact the sustainability of Silicon Valley Power," said Steve Van Dorn, president of the Santa Clara Chamber of Commerce.  "We have received several legal opinions that if it passed, the addition of a large office building in our city would require us to get a two-thirds vote to provide it with electrical power."
It could affect the city's ability to provide power for business expansions, including those being pursued by Yahoo Inc. and Nvidia Corp., Van Dorn said.  He said he's surprised at the state chamber's support of the measure and has written a letter to its officials seeking an explanation.
"I don't understand it," Van Dorn said.  "It doesn't match the chamber's prior positions on supporting the free market.  We've had great success in our city with public power, and Prop. 16 will jeopardize it."
As Californians seem to be discovering, there is a long list of compelling reasons to vote NO on Prop. 16.  Dodging the widely distributed dose of economic ebola virus embedded in its dimwitted drafting must surely rank near the top.

(Photo credit:  Darbee, Genesis Photo Agency)

Here comes the Video Cavalry!  10 Short Films that will  rock the vote!  Just click here!

Sunday, May 9, 2010

Prop. 16 Limits on Competition Would Erect "a Constitutional Iron Curtain" to Lock in Customers

Leave it to the Bakersfield Californian, hometown newspaper of blue collar philosophers Merle Haggard and the late Buck Owens, to find the phrase which succinctly captures the full scope of Prop. 16's sinister rewrite of the rules governing for-profit utilities in California:

"... a yes vote will establish a constitutional iron curtain ..."

The Bay Area Center for Voting Research in 2005 ranked Bakersfield the eighth most conservative city in America (and number one in California), and it has been the epicenter of Northern California's ratepayer revolt against PG&E in 2009-10Local residents have been pushed into a combative stance by two separate and sustained utility disinformation campaigns -- both premised on assuming that customers are idiots -- which recently imploded.

The first was the fiasco surrounding so-called "smart meters" which prompted sudden exponential increases in monthly bills for some customers.  Initially the utility insisted the customers didn't know what they were talking about.  Then it said that the old, "dumb meters" had run slow and produced bills that were too low.  Two weeks ago it acknowledged that some 43,000 of the new meters are malfunctioning and generating erroneous bills.

The second was the continuously shifting explanation of local rates.  After prolonged complaints, the utility's spokesman admitted to County Supervisors that Bakersfield rates are unfairly high and subsidize more politically influential parts of the state -- prompting the Board to immediately vote to put a municipalization measure on the ballot.  Then PG&E took out full-page newspaper ads and sent a SVP from headquarters to deny the previous admission, saying it was all just a big misunderstanding and that Kern County customers actually benefit from a lower average rate (and nearly twice the proportion of CARE program recipients) than the rest of the PG&E service territory.  Now the utility has decided it wants to raise everybody else's rates by an average of 14% in order to reduce the top tier rates common in Bakersfield by 40%.

In the words of the Bakersfield Californian editorial eviscerating Prop. 16:
Pacific Gas & Electric Co. is looking for a few million suckers, betting a fortune that we're too thick-headed to know a rip-off when we see it.
Even though every nickel for the $35 million Prop. 16 propaganda effort has come from PG&E, the impact of hardwiring draconian restrictions on competition into the State Constitution -- where they can only be changed by another ballot measure -- will be felt by every user of electricity in California whether currently served by PG&E or not.

Prop. 16 tries to erect an insurmountable barrier to customer choice in every for-profit electric utility service territory in the State.  While the 24/7saturation advertising emphasizes the "taxpayers right to vote,"  the measure has nothing to do with taxes and is focused much more on altering existing voting rights than creating any new ones.  Claiming to treat customer choice of an electricity provider the same as bonded indebtedness -- the measure has nothing to do with bonds, either -- Prop. 16 would establish a 2/3's majority vote requirement before any community could entertain a competitive provider.

And the Prop. 16 proponents are even deceptive about the 2/3's requirement -- the real significance of the rule change is to reduce the threshold a for-profit utility needs to achieve to fend off competition.  If Prop. 16 wins, the magic number will be 33% of the voters, considerably below the 50% + 1 required by existing voting requirements. 

For utility companies which have always displayed a spend-whatever-it-takes philosophy in previous customer choice elections, arrayed against local governments prohibited by law from spending anything on campaigning, this reduction of the "win" target to 33% would be an historic windfall.  For those trying to use competition to bring downward pressure on electricity rates, the message would be equally clear:  why bother?

As PG&E's $10.6 million CEO Peter Darbee has acknowledged, sponsoring Prop. 16 "... was really a decision about could we greatly diminish this activity for all going forward ..."

A preference for private enterprise over government agencies strikes many as a cornerstone of America's economic success.  It would be a serious mistake, however, to confuse regulated for-profit electric utilities with private enterprise.  Like FNMA and FHLMC, they are effectively arms of the government -- arguably even more so, with their captive customers and guaranteed 11.35 - 11.45% returns on invested capital.  Their top executives get to dress up and pretend to be real businessmen (few women ascend), and compensate themselves richly as part of the charade, but in truth they are lobbyists and fixers whose primary task is to manipulate the regulatory environment.

And one doesn't have to feast at the Karl Marx feedbag to recognize the deterrent effect that even the threat of municipal utilities (or any other competition) can have on the endless cycle of cost overruns and rate increases that surrounds California's regulated utilities.   As Franklin Delano Roosevelt himself said in 1932,
I might call the right of the people to own and operate their own utility something like this:  a 'birch rod' in the cupboard to be taken out and used only when the 'child' gets beyond the point where a mere scolding does no good.
If the mere threat of turning to a competitor carries the benefit of restraining the for-profit utility's rate increases, by what warped logic would customers agree to make that threat less credible?  Why impose the super-majority requirement traditionally used to discourage higher taxes for efforts designed to encourage lower rates?  How stupid do they think we are?

Pretty stupid.  On May 12,  Peter Darbee will slither out of his San Francisco lair in the Spear Tower at One Market (an actual address, surpassing the literary imaginations of either Tom Wolfe or Charles Dickens), climb into his limo and head across the Bay Bridge to the annual PG&E shareholders meeting in San Ramon.  Uppermost in his mind will be whether he has snookered enough shareholder votes to avoid embarrassment over his bloated 2009 compensation -- 74% above the Wall Street Journal's median for large energy utility CEOs, and 8% more than Goldman Sachs paid its CEO, fercrineoutloud. 

But uncertainty about the outcome of Prop. 16 -- an even bigger hoodwinking, with much more at stake -- will be hard for Darbee to keep from his thoughts.  As he recites to himself the customers-are-morons catechism he learned during his 5-year apprenticeship at Goldman Sachs,  he just might ask his driver to play an old Buck Owens song on the car stereo system, an anthem to the kind of people Darbee once vowed to never denigrate as simply "ratepayers:"

Hey you don't know me, but you don't like me
You say you care less how I feel
But how many of you that sit and judge me
Have ever walked the streets of Bakersfield? 

(Photo credit:  Darbee, Genesis Photo Agency) 


Sunday, May 2, 2010

San Diego Chamber of Commerce Votes 79-2 to Oppose Prop. 16: Is PG&E's Whopper Indigestible?

A stunning series of lopsided setbacks for Proposition 16 as PG&E wended its way through various subcommittees of the San Diego Regional Chamber of Commerce -- losing 22-0, 12-0, and 20-1 -- which culminated with a 25-1 smackdown at the full Board, raises the question all big budget media campaigns dread:

what if the dogs won't eat the dogfood?

Political consultants will tell you that every election is determined by the swing voter -- those who don't bring firm, pre-existing convictions to their voting choice but instead are subject to persuasion.  In the Proposition 16 election, that effectively means Southern California -- that majority of the state which has no previous relationship with PG&E and is expected to form its final opinion on the basis of political advertising.

There's probably no better test case than San Diego County, as geographically distant and culturally remote as possible from the repeated political wars PG&E has fought within its Northern California service territory since the 1920s. The nearest municipal utility is 97 miles away in Anaheim, so the public vs. private power issue gets no traction. And the San Diego Regional Chamber of Commerce is precisely the business-oriented, moderately conservative jury pool for which PG&E has designed its deceptive government-bashing, taxpayer-protecting, right-to-vote hogwash.

Which makes the results so startling.  Over a period of 6 weeks, the San Diego Regional Chamber had both sides make 5 - 7 minute presentations at each of three committee meetings and a full Board session, sometimes in person and sometimes by speaker phone.  After the presentations, a 10 - 15 minute question-and-answer session would follow.  The advocates were asked to leave the room while the committee or Board deliberated.  While this was a more sustained and participatory process than any other civic organization has yet conducted, it was hardly a replay of the Lincoln-Douglas debates.  

The results are remarkable for their unrelenting consistency across each session.   The undeniable conclusion erupting from the experience is the ease with which Proposition 16 disembowels itself when subjected to even modest discussion.  That's got to make Peter Darbee wonder just exactly what he's bought with his $35 million campaign war chest.  

The notes written up for the April 22 Board meeting by the Regional Chamber staff provide a pretty good road map for the intrinsic flaws in Proposition 16, which Darbee apparently failed to fully think through before launching his political missile:

ENERGY & WATER COMMITTEE -- March 11, 2010:  Oppose Prop. 16 (22 - 0, 4 abstentions)
Committee Questions and Discussion
  • Is this fight between San Francisco and others to join the Sacramento Municipal Utility District (SMUD)?  Why should the rest of the State care?
    • Several committee members stated that this issue could spill over to other municipalities because Prop. 16 is written broadly to apply to all public power systems.  Ms. Alpert (representing the "Yes" campaign -- ed.) said that the measure puts in place uniform procedures. 
  • Committee members asked Ms. Alpert regarding Mr. Geesman's (representing the "No" campaign -- ed.) statement that Prop. 16 contains a serious drafting error in the "grandfather clause."  Ms. Alpert responded that the Legislative Analyst report does not support that statement.
  • Has SDG&E taken a position on Prop. 16?  San Diego Gas & Electric and The Gas Company have taken a neutral position on this ballot initiative; Southern California Edison has also taken a neutral position.
  • Committee members also voiced concerns that prices would increase if the measure passes since PG&E would eliminate any competition. 
Overall, committee members agreed with the arguments in opposition.  A motion was made, and seconded, to oppose Proposition 16.  The motion passed 22-0-4.

LEGISLATIVE & SMALL BUSINESS ADVISORY COMMITTEE -- April 2, 2010:  Oppose Prop. 16 (12 - 0, 1 abstention)
Committee Discussion
Committee members were concerned with the large amount of money PG&E is spending to pass the measure and saw that to be a "red flag" and a disservice to consumers.  After discussion, the committee agreed that it should support the Energy & Water Committee's recommendation to OPPOSE Prop. 16.  A motion was made to that effect, seconded, and passed 12-0-1.
 PUBLIC POLICY COMMITTEE -- April 20, 2010:  Oppose Prop. 16 (22 - 0, 6 abstentions)
Committee Discussion 
Committee members voiced a series of concerns with the measure: 
  • PG&E's sole, high dollar amount funding raises a "red flag."  It is a blatant attempt by PG&E to "buy" the passing of this measure.
  • Rates could increase if the measure passes since PG&E would eliminate any competition.
  • Why is a 2/3 vote needed?  Had this requirement been applied to large public facilities here in San Diego, we would have never been able to build the Convention Center expansion.  Ms. Alpert responded that the 2/3 voting requirement is a legitimate requirement for these types of issues because of the need to get into long-term financial obligations.
  • A representative from SDG&E, representing SDG&E on the Public Policy Committee, commented that SDG&E is neutral on this issue.
After discussion, a motion was made, and seconded, to oppose Prop. 16.  One member, voting in opposition to the motion, said that normally the Chamber would not generally support public entities competing against private business.  The motion passed 20-1-6. 

The Regional Chamber staff has not released a write-up of the full Board's April 22 deliberations, but the 25 - 1 vote to oppose Prop. 16 (with 1 abstention) speaks for itself.   Over a period of six weeks, in four separate deliberations, a broad cross-section of the civic-minded elements of the San Diego business community voted 79 - 2 (with 12 abstentions) to repudiate PG&E's adventure in political overreach.

Similar signs of revulsion from the Southern California swing voter:  the rejection of Prop. 16 by the Orange County Association of Realtors, and the spontaneous outpouring of disgust registered in published comments when the Orange County Register's "OC Watchdog:  Your Tax Dollars At Work" dissected Prop. 16.

One has to wonder what Darbee's shareholders, meeting on May 12 to vote on his corpulent compensation package, will make of this fiasco.