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NEWS RELEASE
Jan 03, 2001

Utility Bailout Begins

Governor Davis orders 9% rate increase: the first installment
Read FTCR's complete statement about the electricity rate hike.

Governor Gray Davis's PUC today ordered the first installment of a ratepayer bailout of California's three public utilities without even completing an audit of the utility companies' financial condition and without requiring the utilities to repay one penny of the ratepayers' forced investment in keeping the utilities afloat.

Consumer advocates who have fought deregulation -- and twelve years ago forced insurance companies to issue $1.2 billion in refunds and imposed stringent regulation -- decried the action and called today for a ratepayer revolt directed at the Legislature, which four years ago deregulated the utility industry.

"Today, the single greatest public policy mistake in California history -- the deregulation of electricity -- has become one of its greatest scandals," said Harvey Rosenfield, President of the Foundation for Taxpayer and Consumer Rights. "Governor Gray Davis has capitulated to the three utility companies and ordered a ratepayer bailout. And make no mistake about it: this is just the first installment. Nor should the public be fooled by the ostensibly "modest" size in which this multi-billion dollar bailout is cloaked -- 9%. Unless the Legislature intervenes to protect the public, the insatiable greed of the utilities, which refuse to take any responsibility for this debacle, means that we can look forward to such rate increases on a regular basis until they are satisfied."

Deregulation A Disaster

"The people of California never asked for deregulation, were never given a vote on it, and never got a penny of the promised savings from it. Instead, electricity deregulation will end up costing them at least $30 billion -- an average $950 for every person in California. The depth of the betrayal of the public in this fiasco is difficult to comprehend," said Doug Heller, FTCR advocate.

From the Legislature's unanimous approval of deregulation in 1996, through the Governor's action today, the state's utility and energy companies have succeeded in forcing California consumers to bear all the risks of deregulation, while they reaped all the rewards, according to FTCR.

Governor Davis

A number of methods to ensure the reliability and affordability of electricity have been proposed to Governor Davis. Advocates note that by taking bold action or even simply by threatening it he could have backed down the energy cartel and lanced the artificial price balloon they created, and he could have kept prices for the innocent victims of deregulation at very close to the present price. Instead, the Governor has ordered ratepayers to become involuntary investors in the utilities to keep them afloat, without even providing ratepayers with the right to repayment or stock ownership that investors normally receive.

"Governor Gray Davis gave it all away. By his action today, the Governor has informed the energy industry that they may continue to plunder the pocketbooks of the people of California, because he will make the people pick up the tab, whatever it is," said Heller.

Legislature can protect the public

"Now, only the Legislature can immediately protect the public against the bailout. We intend to do everything we can to urge the Legislature to protect ratepayers and adopt a comprehensive and practical plan to restore a reliable and affordable electricity system in California. It will only be as a last resort -- in the event that our elected officials fail us -- that we will seek to place the matter before the voters in 2002. That was the outcome in 1988, when the Legislature refused to defy the insurance lobby. The voters forced the insurance companies to issue $1.2 billion in refund checks and imposed massive regulation that has blocked over $14 billion in auto insurance rate increases. We ask all Californians to join us in this grassroots campaign -- the ratepayer revolt begins today," Heller concluded.

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