Consumer Groups Oppose Power Bond

Consumer groups, trying to reopen debate over deregulation of the electric industry, on Wednesday announced their opposition to a huge bond measure that would permit utilities to accelerate the repayment of debt from nuclear power plants and other facilities by residential ratepayers.

Most consumer groups were neutral or muted in their opposition to the massive legislation carried by Sen. Steve Peace (D-El Cajon) and signed into law by Gov. Pete Wilson last year to deregulate the electric power industry.

A key part of last year’s legislation permitted utilities to sell bonds worth about $9 billion to pay off debts on the San Onofre and Diablo Canyon nuclear power plants and other money-losing facilities.

Details of the bonds are still being worked on by the California Public Utilities Commission, and consumer groups, including Consumers Union and TURN, The Utility Reform Network, now say they oppose the bonding authority. They warn that ratepayers could have their electricity shut off if they refuse to pay the 30% to 40% of their bill devoted to the bad debt.

“We should have opposed the [original] bill,” said Nettie Hoge of TURN, which took no position on it.

The immediate focus of the consumer advocates’ ire was new legislation by Peace and Assemblyman Steve Kuykendall (R-Rancho Palos Verdes) that retools the bonding authority and guarantees that ratepayers would be liable for the bond debt.

Peace, calling the legislation “totally technical,” said the measures would “make sure we get a AAA rating” by bond-rating firms such as Moody’s Investors Service. Peace said that would reduce long-term interest costs and shave $80 million from the price tag of the bonds, with the savings going to consumers.

Ratepayers have been paying off nuclear and other utility debt all along as part of their monthly bills, though the bills don’t specify it, backers of deregulation say. The bonds would speed up the pay-down to 10 years, saving significant interest costs.

Given that last year’s legislation won approval without a dissenting vote, this year’s bills, AB 360 and SB 477, which implement what the new law calls for, stand a good chance of winning approval. The measures are backed by the private utilities and other influential groups, such as the California Manufacturers Assn.

“Of course, there’s a cost to the bonds, but the costs are far outweighed by the reductions themselves,” said Mark Timmerman, vice president of the manufacturers group.

But Hoge labeled them “nuclear mistake bonds” and said the new legislation would ensure that investors who buy the so-called rate-reduction bonds would have first claim to revenue from the electric bills paid by the utilities’ customers.

Utilities contend they need to sell the bonds to finance a 10% reduction in rates for residential customers of Southern California Edison, San Diego Gas & Electric and Pacific Gas & Electric. The rate reduction, mandated by the original deregulation bill, is due to go into effect in January.