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NEWS RELEASE
Jan 09, 2001

Consumer Groups United on Plan To Protect Consumers and Fix Energy Crisis

Sacramento -- Three major consumer advocacy groups announced they would urge legislators to support the proposal they have developed to protect utility consumers in the short run and fix California's electricity market for the long term. The three groups, The Utility Reform Network (TURN), The Foundation for Taxpayer and Consumer Rights (FTCR) and Consumers Union, in 1997, started the efforts to correct California's disastrous scheme to de-regulate the electricity market.

The current electricity market crisis has two separate but related parts.

The first aspect of the crisis is the design of our electricity system. To date we have provided the nation with an example of what not to do. We must do better this time. In the wake of the failure of the deregulation experiment, California must develop a system that ensures a reliable and reasonably priced supply of energy. We have set out the following two-part plan:
  1. Require PG&E and Edison to sell the power they generate to their core customers, homeowners, renters, and small businesses, on a cost plus reasonable rate of return basis subject to rate making by the P.U.C. This will stabilize prices for California ratepayers at lower prices than they now face and protect consumers from price gouging by out-of-state suppliers. The state should also provide Californians who are on fixed incomes, retirees and low-income consumers with additional financial assistance to help with increased electric/utility bills

  2. Create a public power authority that will:
  • Be authorized to purchase the electricity transmission system;
  • Build, to own and operate, power plants on a cost of service basis;
  • Institute "Integrated Resource Planning" to project demand and identify the appropriate actions needed to meet that demand. Resource planning includes conservation efforts, energy efficiency programs for residential and commercial consumers and the building of new plants that utilize renewable resources;
  • Contract with companies operating existing plants for reasonable electricity rates or, if the companies refuse, condemn the plants and generate power from these facilities on a cost of service basis.
The second aspect of the crisis is a financial problem, created by the utility companies' creative accounting, mismanagement and wrong headed design of a de-regulated market, which has led Edison and PG&E to claim billions of dollars of losses. Even assuming one can arrive at an accurate accounting for out of pocket loss, if any, bailing out and subsidizing the companies is unwarranted. A rate hike sends the message to generators that they can continue to exploit the wholesale market, and it signals capitulation to paying for problems private companies create in the future. California can't afford to continue resuscitating failing enterprises. Losses, if any, should be borne by those who stand to profit: shareholders and creditors, not customers. $20 billion in excess charges is enough.

The Legislature must protect consumers from rate hikes or any form of a bailout of the utilities that created this deregulation disaster. There must be no "securitization plan" in which bonds are sold to provide the utilities with an infusion of cash and the ratepayers or taxpayers are forced to repay the bonds over a period years.

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