JUICE: Proposition 16, Preserving Monopoly Power

By Published On: May 28, 2010

By Mike Peevey The California Public Utilities Commission was created nearly 100 years ago as a constitutional agency to protect consumers from the abuses of monopoly power. Having observed first-hand the undue influence of Sacramento’s hordes of railroad and other lobbyists in the State Capitol, Governor Hiram Johnson placed the Railroad Commission, as it was originally named, in relatively distant San Francisco. Over these many years the renamed Public Utilities Commission has regulated first the monopoly railroads in the 1910s and 1920s, and now California’s electricity, gas, and telecom companies. In doing so it has controlled the monopoly power of the utilities and protected the public. Yet today, on the June 2010 statewide ballot, voters are faced with an initiative sponsored and paid for solely by one company, Pacific Gas & Electric. Proposition 16 seeks to enshrine in our state’s constitution the same kind of monopoly power that Governor Hiram Johnson successfully fought a century ago. Although Proposition 16 is officially titled, “Imposes New Two-Thirds Voter Approval Requirement for Local Electricity Providers,” PG&E, in its $44 million advertising campaign, misleadingly calls it the “Taxpayers Right to Vote.” Pure and simple, Proposition 16 is a clever, brazen, buzzword-driven effort by one company to manipulate the California Constitution to protect its current monopoly. If enacted by a simple majority of the voters, it would require local governments to obtain the approval of two-thirds of their voters before providing electricity service to new customers or expanding such service to new territories. It would also require the same two-thirds vote to provide electricity service through a community choice program. It would thwart or end programs now underway in San Francisco, Marin County, and the San Joaquin Valley, and make any growth of local utilities, such as those in Los Angeles, Anaheim, Glendale, Burbank, and Pasadena almost impossible. In fact, that is the purpose of the proposition, though couched in appealing “Right to Vote” language in a barrage of television ads. Shareholders of electric utilities are entitled to a fair return on their invested capital. The Public Utilities Commission’s responsibility is to set electricity rates just high enough to cover the cost of providing electricity service, plus a reasonable profit. For the CPUC to do its job most effectively we need yardsticks to measure the utilities’ performance. Proposition 16 would make our job much harder by eliminating any possible “comparables”. California’s diverse and dynamic publicly owned utilities are not just competitors; they also provide working examples of alternative approaches to meeting customer energy needs. Proposition 16 would remove this incentive for electric utilities to be creative and innovative. Finally, there is something fundamentally wrong with the idea that one company, spending $44 million can, by majority vote of the electorate, seek and obtain a two-thirds vote protection in our State Constitution. The purpose of the Constitution is to protect our sacred rights as citizens. It is not to protect the narrow private interests of a particular utility company. In the interests of good government, fairness, and equity, Proposition 16 should be soundly defeated. -- Mike Peevey is the California Public Utilities Commission president. A similar opinion piece first appeared in the San Jose Mercury News May 23. Edited By:

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