Good Intentions, Bad Law

Proposition 9 aims at rolling back parts of California’s landmark 1996 legislation that changed the way that electric utilities are regulated and do business. The initiative far oversimplifies an extraordinarily complex issue by baiting voters with the populist appeal of a 20% electric rate cut. In short, it’s governance by initiative at its worst.

Proposition 9 grew out the frustrations of a small group of consumer advocates who claimed that Sacramento was turning a deaf ear to their legitimate concerns when parts of the 1996 legislation were enacted. Having given up on the Legislature, champions of Proposition 9 have turned to the ballot box. But good intentions do not translate into good law.

Utilities are in a four-year transition, being weaned from their monopoly protections and positioned to compete in a free market. Since the state changed how utilities must do business, it was deemed fair to allow investor-owned utilities such as Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric to recoup--from customers--the costs of past investments in nuclear plants and contracts for certain alternative and renewable power.

In exchange, these utilities agreed to freeze rates and then cut them 10%, beginning last Jan. 1 for residential and small commercial customers. (Customers of the municipally owned Department of Water and Power were not affected.) To help finance the cut, Sacramento created a new private entity to sell $6 billion of rate-reduction bonds, with ratepayers to repay them over time.

Proposition 9 would block charges aimed at recouping the costs of nuclear power plants and ban the issuance of rate reduction bonds. It calls for a rate cut of up to 20% by next Jan. 1.

But Proposition 9 doesn’t guarantee a rate cut. If approved, it would unleash uncertainties that could prove costly to state and local governments, says the state legislative analyst’s office.

This initiative is not the vehicle to modify the 1996 legislation. That should be done in the Legislature. Vote no on Proposition 9.