Utilities Do Battle on California Ballot

May 3, 2010


Big investor-owned utility PG&E Corp. has stirred a hornet's nest by sponsoring and funding a measure on California's June 8 ballot that could impede the growth of municipal utilities.

The measure, Proposition 16, would amend the state constitution to require the state's 47 city-owned utilities and a new kind of supplier called a "community choice aggregator" to hold public elections to add new customers. Two-thirds of voters would have to approve a utility's expansion plan for it to proceed.

Currently, many city-owned or municipal utilities can gain new customers or expand their service territories with the approval of local elected officials.

"Prop. 16 is a way to stop competition," said David Modisette, executive director of the California Municipal Utilities Association in Sacramento, a trade group. He said a supermajority requirement allowed a minority of voters to stop municipal utilities from winning over customers from investor-owned utilities like PG&E or, by one interpretation, even adding customers in their existing territories.

Critics of the measure say the courts would need to interpret its language, which they say is ambiguous.

The Yes on Proposition 16 campaign says that wasn't the intention, and that voters need more say-so in tough economic times. "Our opponents like to frame this as PG&E trying to stifle competition," said Robin Swanson, campaign spokeswoman in Sacramento. "We think people should be allowed to vote. A two-thirds vote is not a high bar."

With California's primary election still a month off, PG&E is outspending opponents by nearly 400 to 1, according to numbers gathered from the two campaigns and California's secretary of state. PG&E is bankrolling the campaign with a $34.5 million donation, so far. The proposition is endorsed by the California Chamber of Commerce.

Municipal utilities, which have the most to lose, are prohibited from donating money to ballot measures. Opponents of Prop. 16 raised $82,000 as of April 23, mostly with small individual donations, and the opposition campaign has been endorsed by editorial boards of all of the state's major newspapers and many environmental organizations, cities, and labor organizations.

Last week, the California Association of Realtors donated $25,000 to the "No on Prop. 16" campaign, fearing that passage would make it difficult for new housing developments to receive service from municipal utilities, even when their rates are lower than PG&E's or that of other investor-owned utilities.

Many public officials also have come out against Prop. 16, including Michael Peevey, president of the California Public Utilities Commission, which regulates investor-owned utilities including PG&E. Mr. Peevey, a former president of Southern California Edison, another of the state's big investor-owned utilities, said Prop. 16 embodied a "blatant misuse" of the election process. "Imagine a single company trying to seek protection for its monopoly status in a state constitution," he said. "It's offensive."

In 2006, PG&E defeated a campaign in Yolo County to switch residents from PG&E service to Sacramento Municipal Utility District, after pouring $11.3 million into the opposition campaign. PG&E spent $10.8 million to defeat a similar effort in San Francisco in 2008.

Prop 16 opponents say efforts by municipality-owned utilities to win new customers already are subject to votes of elected officials.

The proposition also applies to a new kind of supplier known as "community-choice aggregators."

Under a 2002 state law, aggregators can buy bulk power, and utilities must deliver it over their power lines. Unlike municipal utilities, aggregators don't own power lines or substations. Utilities collect their regular fees for delivering energy. Aggregators garner customers when elected officials decide to have their jurisdictions join. Customers in these jurisdictions who don't want to join can "opt out" and stick with their old utility.

PG&E faces the prospect of losing customers in Marin County, across the Golden Gate Bridge from San Francisco, due to a new aggregator, the Marin Energy Authority. Seven cities and Marin County have voted to get power from MEA beginning in May. Its electricity costs the same as PG&E's but contains a higher proportion of renewable energy.

Shawn Marshall, a city council member from Mill Valley, Calif., which has voted to get power from the Marin Energy Authority, said PG&E was using "scare tactics" to get people to opt out. She said it was ironic because PG&E supported the 2002 aggregation law.

Paul Fenn, president of Local Power Inc., a consultant who helps supporters of community choice aggregation, said passage of Prop. 16 would effectively kill the movement. "It would stop at Marin," he said, adding that the two-thirds requirement would discourage citizens from even attempting to form buying groups. He said efforts under way in Sonoma County, San Francisco and San Luis Obispo would be hurt.

PG&E spokesman Andrew Souvall said the utility "supported giving its customers more control over how public funds are spent," and added the utility business "is very complex and there are a lot of risks in being a provider."

Write to Rebecca Smith at