January 8 Vote on Multi-Year Electric Utility Procurement Dwarfs Recent $8 Billion Bailout of PG&E
On January 8 the California Public Utilities Commission will follow up its recent $ 8 Billion ratepayer bailout of Pacific Gas & Electric by voting on a new “framework” to entrust PG&E with buying Northern California ratepayers’ electricity once again. After over $16 Billion in total bailouts billed to PG&E’s customers since 1998, the CPUC’s new electric utility procurement “framework” would put ratepayers on the hook for new long-term power purchase contracts that PG&E and the other electric monopolies negotiate.
Smelling a disaster, the San Francisco Board of Supervisors unanimously passed a resolution shortly before the CPUC’s December 18 meeting asking the Commissioners not to put the City’s ratepayers on the hook for any new multi-year PG&E contracts. After this was followed by the Marin County Board of Supervisors, Los Angeles County and ten Los Angeles area cities (representing over 10 Million residents), the CPUC responded by limiting the procurement authorization to one year - 2004.
Yet CPUC President Michael Peevey has scheduled a new five-year utility procurement “framework” for a vote a week from Thursday without explaining its urgency. When the CPUC approved PG&Es’ second major bailout in December, Commissioner Peevey claimed that forcing ratepayers to pay PG&E’s creditors would “bring an end to California’s Energy Crisis.” Yet the new framework being rushed to a vote next week may expose ratepayers to yet another round of bailouts should power markets destabilize again in the next five years - and Peevey’s plan already includes provisions for a “non-bypassable surcharge” to be imposed on customers who seek to escape their utility. If approved, California ratepayers may face a new kind of semi-regulated captivity and face exposure to a third round of$ multi-billion bailouts in coming years.
Unfortunately, this outcome is not merely possible but likely. The long-term power contracts that PG&E would sign on its customers’ credit line consists of virtually all natural gas-fired generation. If you have not already heard, everyone from Federal Reserve Chairman Alan Greenspan to Bush Administration Energy Czar Spencer Abraham have predicted a prolonged natural gas crisis starting later this year. Should this happen, the price of natural gas-fired electricity will rise dramatically. Guess who will pay for the difference under Peevey’s new framework? That’s right - you will.
San Francisco leaders have other plans. Under a new “Community Choice” law approved by the state legislature and former Governor Gray Davis in 2002, San Francisco leaders are now seeking to break away from PG&E power procurement to find an independent electric service provider, and to invest San Franciscans' energy dollars in solar power, wind power, energy efficiency and conservation technologies that will permanently reduce their exposure to volatile energy markets. Combined with voter-approved Proposition H of 2001, the City has the authority to finance these new investments with revenue bonds in a manner that will not increase electric rates, while putting in place permanent infrastructure to make San Francisco truly energy independent. After the City's Local Agency Formation Commission received promising results from a commissioned study on the opportunities for Community Choice last year, Local Power and Supervisor Tom Ammiano prepared an implementation ordinance for the Board of Supervisors to move forward, and more recently City Attorney Dennis Herrera has expressed his support for implementing Community Choice Aggregation in the City.
Finally, San Francisco and other California cities have found a way out of the Energy Crisis that has been proven in other states. Yet the CPUC appears more eager to hand a monopoly back to California’s bailed-out electric utilities, fast-tracking both monopoly bailouts and the new electric procurement “framework” while waiting until very recently to even begin working on regulations for municipalities to implement the Community Choice law. This must stop immediately. The CPUC does not have authority to choose which laws of the legislature to enforce, and must not proceed with an electric utility procurement framework until the regulations are completed that would allow municipalities to leave electric procurement . San Francisco and other California cities will not stand aside while the right of their ratepayers to find independent electric service providers is blocked by regulators.
It is critical that consumer, environmental, public power and even business advocates mobilize in opposition to Peevey’s electric procurement “framework.” The stakes of next week’s decision will have a massive impact not only on ratepayers but on the environment and the future of California’s economy.
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Founder and Director of Local Power, Paul Fenn is author of California's Community Choice law, AB117 or Chapter 838 of 2002, which allows municipalities to switch their communities to alternative energy providers - as well as author of San Francisco's 2001 voter-approved "Solar Bond" or "H Bond" authority, and a plan to use H Bonds and Community Choice aggregation to take 1/4 of San Francisco's electricity load off-grid by 2012 with solar power, wind power, conservation and energy efficiency technologies. Mr. Fenn is also author of new state "Solar Networking" legislation, Senate 697, sponsored by Pomona Senator Nell Soto. Local Power is based in Oakland, California and may be found at www.local.org
Copyright 2004 by Local Power.