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)

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