Utilities, Others Fight Rate-Cutting Measure

When Robert Rubio needed $150 so his Rio Hondo Boys and Girls Club in Bell Gardens could have a game booth at a local carnival, he knew he could ask Southern California Edison. An executive with Edison is on the Rio Hondo board of directors, and the big utility had been a steady supporter over the years.

And when Shirley Melendez needed transportation for the homeless and low-income children helped by the Door of Hope Community Center in East Los Angeles, she asked Edison for one of its old vans. Melendez was overjoyed when the utility company came up with a plain-looking 10-year-old vehicle with 156,000 miles on it.

“We were lucky to get it,” Melendez said, still pleased two years later with the gift.

It is common for utilities and other major corporations to spread their wealth in support of the community, and to build goodwill along the way. But this year such donations--and other, more unusual payments--are raising eyebrows as the multimillion-dollar campaign over the ballot measure heads into its final weeks.

Proposition 9 calls for a 20% cut in electricity rates for private utility customers and an end to surcharges levied on ratepayers to pay for costly nuclear power plants.

Rubio and Melendez are among more than 75 opponents of Proposition 9 who have financial ties to the utilities fighting the initiative.

In addition to small grants to community groups, Edison has paid tens of thousands of dollars to environmental groups, a former state treasurer and a former consumer reporter--all of whom have taken strong public stands against Proposition 9.

The strategy causes particularly acute problems for sponsors of Proposition 9, who have little money to spread their message and must contend with California utilities’ deep pockets.

“Everybody owes Southern California Edison, and Edison is calling in all its chits,” said Harvey Rosenfield, a coauthor of Proposition 9, complaining about what he calls the “checkbook politics” of Edison and the other private California utilities.

Not so, say Melendez and Rubio, unlikely voices in the high-profile initiative campaign.

“I just went on what I felt was right,” declared Melendez, who said her support for the No on 9 Committee is her first active involvement in an initiative campaign. “I am a Christian. Nobody is buying me. No one is telling me what to say. I did some investigating and decided on my own to oppose Proposition 9.”

Rubio says his opposition sprang from presentations against Proposition 9 that he heard at local Rotary and Chamber of Commerce meetings.

Ex-State Treasurer Defends Commercial

Former state Treasurer Thomas Hayes taped a television ad for the No on 9 campaign after his Sacramento securities and consulting firm received $104,000 for a study of the proposition. Opponents questioned his objectivity.

“We got paid for the study. We don’t work for free,” said Hayes, who insisted that his reputation was too valuable to risk for one study. He said he made an independent decision to make the No on 9 commercial because “it’s a bad initiative.”

Much the same position was taken by David Horowitz, a former consumer reporter with KNBC and KCBS in Los Angeles, who signed the ballot argument against the measure and has been speaking out against it. Horowitz’s firm, Fight Back Inc., received $106,000 from the No on 9 campaign after he started working against the initiative.

“If I can support an issue I feel passionately about and get paid for it, all the better,” said Horowitz, who produced a half-hour infomercial for the anti-Proposition 9 campaign.

But paying outside experts or prominent third-party spokesmen is moving initiative campaigns in “a dangerous direction,” said Bruce Cain, associate director of the Institute of Government Studies at UC Berkeley.

The problem, he said, is that voters put a large amount of trust in such people, particularly when they are trying to sort through a complex issue like Proposition 9.

He cited the ad featuring former treasurer Hayes.

“It poses him as kind of a dispassionate former official giving his judgment about Proposition 9. The fact that he is getting paid has at least the appearance of compromising his integrity, if not the reality,” Cain said. “You begin to think: Is he saying this because he believes it or because he was paid for it?”

Allan Zaremberg, head of the No on 9 campaign and president of the California Chamber of Commerce, said Hayes and other members of his firm brought unrivaled expertise to the study. Contributing to the study were Russell Gould, former California finance director, and Steve Spears, former deputy state treasurer.

“We went out and hired Tom Hayes as someone who is a financial expert on this and then asked him to tell voters what he found. I don’t see a problem,” he said.

Of course, not everyone who opposes the measure has received money from the utilities or their campaign committee.

Businesses, cities, counties, school districts and others have joined the utilities in raising concerns that the passage of the measure will delay the phased-in deregulation of the utility industry already underway and cast a cloud over the way government finances capital expenditures.

So far, Edison, PG&E;, and Sempra Energy, the corporate parent of SDG&E;, have reported putting $29 million into the campaign to defeat Proposition 9.

That number, as hefty as it is, is less than half the more than $65 million the utilities spent last year in dues, donations and charitable contributions to thousands of California nonprofit organizations and community groups, according to records on file with the California Public Utilities Commission. Utility executives say they are spending a similar, or possibly slightly smaller, amount this year.

Questioning Utilities’ Financial Role

The figures do not include cash contributions to the campaigns of most of the members of the Legislature as well as some city officials, such as Long Beach Mayor Beverly O’Neill and Los Angeles County Supervisor Don Knabe.

Bob Stern, who helped write the state’s political reform law in 1974 and now works with a West Los Angeles think tank that studies the effect of money on politics, said he was troubled by the utilities’ massive contributions.

“They give to everyone who is an incumbent, as opposed to people they really like. They give to both Democrats and Republicans. How does that compute?” asked Stern. “The only way it computes is they are giving to influence governmental decisions. And they are quite effective.”

The net result, at least in the eyes of Proposition 9 sponsors, is a solid wall of opposition to their initiative from organizations, both large and small, that have received financial gifts or payments from the utilities.

The California Public Interest Research Group, a consumer advocacy group sharply critical of the utilities, analyzed 162 groups and organizations listed as endorsers of the No on 9 Committee and found that 77 had received money from Edison in 1997.

Heavy Spending Can Backfire

Rosenfield hopes that the hefty spending backfires on the utility companies the way massive spending did on automobile insurance companies 10 years ago in the fight over the insurance reform measure Proposition 103. Rosenfield led the fight for Proposition 103, which passed despite $63 million spent to defeat it by the insurance industry.

Still a record for proposition campaigns, spending on Proposition 103 is likely to be eclipsed by spending on Proposition 5, the gaming initiative, this year.

Between July and the end of September, Proposition 9 supporters were able to spend $129,000, compared with $22 million for the opponents. Among the No side’s expenditures were matching $500,000 contributions to California Republican and Democratic parties.

Opposition to Proposition 9 by three respected environmental organizations is part of what sponsors of the initiative see as an unholy alliance between utilities and nonprofit groups in the campaign.

Proposition 9 supporters thought they could marshal support from environmentalists because of long-standing opposition to subsidies for nuclear power plants. A provision of Proposition 9 would end such subsidies.

The Sierra Club, Friends of the Earth founder David Brower, and the Washington, D.C.-based organization Public Citizen, which said it fears that the nuclear bailout in California would help shape national debate on the issue, are among the measure’s most ardent supporters.

But three other key groups--the Planning and Conservation League, the Natural Resources Defense Council and the Environmental Defense Fund--are aggressively campaigning against Proposition 9.

The Yes side points to $70,000 given by the three utility companies to a campaign committee controlled by the Planning and Conservation League to promote Proposition 7, which will grant tax credits as a means of encouraging greater use of vehicles that emit less pollution.

Jerry Meral, executive director of the Planning and Conservation League, said utilities and other businesses helped write Proposition 7. “It offers a tax credit to those who voluntarily clean up the air. That’s good business,” said Meral, who sent a letter to environmentalists urging a “yes” vote on 7 and a “no” vote on 9.

Environmentalists Criticize Measure

Environmentalists also said they like the landmark utility industry deregulation law approved in 1996, which established subsidies for wind, solar and geothermal energy producers.

“We do not approve of operating subsidies of nuclear plants, but we don’t believe this initiative is the best way” to end them, said Ralph Cavanagh, of the Natural Resources Defense Council.

“In our view, this is a rare disagreement among friends. But we think the restructuring plan that exists now encompasses significant environmental safeguards that we would lose if the initiative passes.”