Consumers Seek to Block Energy Measure

A highly technical and arcane piece of legislation moving its way through the state Capitol has become an unlikely rallying point for consumer groups trying to mount a late-inning challenge to California’s electricity deregulation, set to take effect Jan. 1.

The bill, SB 477, would implement the sale of up to $10 billion in rate reduction bonds, with proceeds going to utilities to help them cut rates by 10%, and make an early payoff on billions of dollars of debt associated with money-losing investments in nuclear and alternative energy.

Consumer critics--all but silent last September when the California utility deregulation bill, including a bond provision, was signed into law by Gov. Pete Wilson--now say the bond issue would put too much onus on consumers and not enough on utility investors to pay off liabilities associated with uneconomical energy investments totaling more than $22 billion.

Their strategy, announced at a San Diego press conference Tuesday, is to block passage of SB 477 and thereby force the Legislature to “restructure the restructuring” of California’s power industry. An Assembly vote on SB 477 could come as early as today, with a Senate vote to follow.

The opponents stand only a slight chance, given the unanimous passage of deregulation by both the Senate and Assembly last year.

The size and other details of the bond issue are yet to be drawn, and will not be finalized until after Aug. 4, when the state Public Utilities Commission issues an order specifying the amount of money to be raised.

But the bond money raised would go directly to the three investor-owned utilities--Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric--to finance a four-year, 10% consumer rate cut and freeze starting Jan. 1, as mandated by the deregulation law.

If the bonds are sold, consumers would see a portion of their bills after Jan. 1 dedicated to paying the bond principal and interest, and another part to a “competitive transition charge,” which is earmarked to pay off the $22-billion-plus liabilities.

After 2002, consumers would start seeing just the bond payments on their bills, since the transition charge would have been paid off. At that point, rates should fall steeply. Meanwhile, consumers themselves would, over time, be paying back nine percentage points of the 10% rate cut mandated for January 1998.

Proponents describe SB 477 as nothing more than a “technical clean-up bill” designed to give the bonds the highest possible rating. The bonds would be backed, or secured, by ratepayers’ monthly electricity payments.

But critics note that the bonds would, in effect, make consumers pay for the utilities “stranded” or uneconomical assets. And they maintain that the law stipulates that consumers have a 10% rate cut coming to them, whether or not the bonds are floated.

The utilities and bill sponsors counter that consumers are already on the hook to pay off those bad assets, and that the bonds would only accelerate and lower the cost of the payments.