Initiative Attempts to Thwart Utility Reform, Lawmaker Says

A key legislator grilled backers of Proposition 9 at a special hearing Monday, accusing proponents of the complex ballot measure of an ill-informed and misguided attempt to thwart landmark legislation that deregulated the electric utility industry.

State Sen. Steve Peace (D-El Cajon), the co-author of the 1996 agreement between the Legislature and the utility industry that is the target of the initiative, told one backer that “your understanding of this is so poor . . . that you should go out, sit down, find out what the law is . . . and then you’d have something useful to say. As it is, you’re wasting our time.”

The hearing, held jointly by Senate and Assembly utility committees, was required by state law. But pro-Proposition 9 lawyer Michael Peter Florio called the session “completely one-sided” and another supporter of the measure, Consumers Union lobbyist Harry Snyder, left when Peace refused to allow him to use charts during his testimony.

“Steve Peace wanted to tell me how I should testify,” Snyder said later. “I wasn’t going to participate in a kangaroo court.”

Proposition 9, on the Nov. 3 ballot, promises a 20% rate cut to residential and small commercial customers served by the state’s big private utilities. A 10% rate cut is now required by state law.

Utilities would be barred from passing on to customers the costs of repaying about $6 billion in bonds that were issued to finance the 10% rate cut. And the proposition would eliminate surcharges on consumer bills that the utilities charge to operate state nuclear power plants.

Much of the debate at Monday’s session focused on who would be responsible for paying off the $6 billion in bonds if utilities could no longer pass the cost on to the 75% of state electrical consumers they serve.

Assemblyman Rod Wright (D-Los Angeles) said that if ratepayers are absolved of repaying the utilities’ $6 billion in bond debt, “my concern is . . . the bondholders will come after taxpayers” to retrieve their investment. That would be unfair to Los Angeles citizens, Wright said, because they are served by the Department of Water and Power, a public utility that is not a party to Proposition 9 provisions.

Opponents of the measure agreed.

“We believe Proposition 9 is unconstitutional and that the state is on the hook” to pay the debt, said Allan Zaremberg, the president of the California Chamber of Commerce.

But Nettie Hoge, the executive director of The Utility Reform Network, or TURN, said the state could not be held liable for the bond debt under the terms of the 1996 law that authorized utility deregulation.

Peace accused the measure’s proponents of knowingly creating a measure that would be overturned in the courts, with the intent of discouraging bond dealers from doing business with California utilities.

“It was a cynical attempt, at its birth, to influence a financial transaction, and not an attempt to put an initiative measure before the people” in the hope of winning its passage, Peace said.

Florio acknowledged that part of the philosophy behind the initiative was to “hopefully deter” bond houses from allowing utilities to assume bonded indebtedness to pay for a rate reduction.