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Controversial electricity initiative ignites charges of PG&E power play Gary Walker | Mon, May 17 2010 02:00 PM

California, cradle of the ballot initiative, referendum and recall process that began under reformist Gov. Hiram Johnson in the 1920s, offers a plethora of measures on which to vote every two years.

Some, like the landmark property tax measure Proposition 13 in 1978, have left a deep imprint on property owners as well as county and municipal budgets throughout the state.

Others, such as the anti-immigrant initiative of 1994, Proposition 187, were struck down by an appellate court and gave rise to a new generation of Latinos generally more inclined to vote Democratic and against the state Republican Party, which largely supported the ill-fated measure.

Next month, another potentially divisive proposition will be offered to the electorate that could determine a new threshold for cities that may want to pursue their own independent electric power entities.

Proposition 16, known as the Taxpayers Right to Vote Act, would require a two-thirds vote of the electorate before local governments could engage in the retail power business.

Current law allows cities to form utilities or community choice aggregations programs, a system that allows cities and counties to aggregate or accumulate buying power of individual customers within a defined jurisdiction in order to secure alternative energy supply contracts.

Approval of the ballot measure would trigger an amendment to the state constitution to include the two-thirds requirement.

As of May 2, San Francisco-
based Pacific Gas & Electric Co., Proposition 16’s primary sponsor, had spent $34.5 million dollars in support of the controversial initiative. The campaign has also hired a high-powered Sacramento public relations agency, Larsen Cazanis, a slew of political consultants and blanketed network and cable television with daily advertisements for more than a month.

The idea of establishing a local power entity is not a novel one. Fifteen years ago, such an endeavor was underway in Culver City.

Convinced that he and others could devise a plan to create a municipal electricity entity that would allow residents to eventually pay a lower tariff, then Culver City Mayor Albert Vera initiated a campaign to establish a local power company.

“We wanted to lower the people’s burden on paying very high electricity rates,” Vera explained recently during an interview in his office at Sorrento Market. “This proposition is designed to stop cities from creating their own electric and power companies so that PG&E can continue their monopoly.”

Culver City’s plan to create a city-run electricity company began to generate momentum throughout the region after Vera convinced other cities to join a group called the South Bay Cities Consortium, which consisted of approximately 10 Westside and South Bay municipalities formed to lobby for a 25% discount on electricity rates.

City officials also hired an outside consulting firm to do an analysis on how cost-effective it would be to have its own utility company. In its analysis, energy consultant R.W. Beck found it would cost the city approximately $24 million in the mid-1990s to buy the distribution system of Southern California Edison, the utility that provides electricity to Culver City.

Edison disputed that figure, contending at the time their network was valued at as much as $100 million.

According to Beck’s estimate, Culver City would have needed to issue nearly $85 million in bonds to cover the costs of a takeover from Edison. But the study also found that a city-owned electric company could generate more revenue for the city than what it collected from Edison in franchise fees, which at the time was approximately $600,000 a year.

“We were on our way to owning our own electricity company,” Vera recalled.

Proponents of the initiative include the California Chamber of Commerce and the California Taxpayers Association.

Edison is remaining neutral on Prop. 16.

“Southern California Edison is not taking a position on the initiative, but encourages Californians to vote to express their views on all important ballot measures,” said Laurie Bartlett, a company spokeswoman.

The Yes on Prop. 16 campaign contends the ballot measure is about allowing the electorate the ability to decide how local elected leaders use taxpayer funds.

“Our opponents like to frame this as PG&E trying to stifle competition,” said Robin Swanson, a campaign spokeswoman. “We think people should be allowed to vote. A two-thirds vote is not a high bar.”

Other supporters of the ballot initiative echo those sentiments. They say during a time when a good deal of the population is concerned with shrinking financial resources and a perception of wasteful government spending, it is critical that voters weigh in on important local matters.

“In tough economic times like these, local voters have every right to have the final say on an issue as important as who provides them with local electric service and how much it will cost,” Teresa Casazza and Hunter Stern of the California Taxpayers Association and the Green Jobs Coalition, respectively, said in a joint statement.

While there is no declared formal opposition against Proposition 16, several municipalities, newspaper editorial boards and consumer organizations have denounced it. More than 20 public utilities and local governments have issued positions against Proposition 16.

“The most important thing to remember about Proposition 16 is that it was written and bankrolled by Pacific Gas and Electric Co. for the benefit of PG& E,” Los Angeles Times political columnist George Skelton wrote in his Capitol Journal last month.

“There’d be nothing wrong with that, necessarily, if its customers also benefited. But Prop. 16 seeks to lock them into the private utility’s grasp without any realistic opportunity of escaping to an electricity provider with cheaper rates.”

Vera, who vigorously opposes the proposition, which he says will weaken local governments, questions why Prop. 16’s proponents are asking for a two-thirds vote.

“Why aren’t they asking for a simple majority?” he asked. “If they were so sure that they could convince the people that they have good intentions, they wouldn’t ask for a two-thirds vote.”

Dr. James Boulgarides was on the Culver City council with Vera when the city was exploring the creation of its municipal utility.

“We saw that utility companies are like monopolies,” Boulgaridies said. “They don’t like competition. That’s what this proposition is all about.”

While there was support for establishing a municipal electricity utility in Culver City, not everyone thought it was a good idea 15 years ago.

“People are afraid that the city can’t run its own utility efficiently, yet Albert is like a bulldog when he gets an idea in his head,” former Culver City Councilman Ed Little, now a board member of the West Basin Municipal Water District, told the Times in a 1994 article.

Vera believes the public should be wary of Proposition 16 because it will take away a government’s ability to promote the best interests of its constituents.

“This is one of the most important propositions in recent history in California,” Vera said. “If this passes, it can harm governments’ abilities to do what the people elected them to do.”

Next week: The vote to establish Culver City’s own electricity utility.

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