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NEWS RELEASE
Apr 02, 2001


CONTACT: Doug Heller - 310-392-0522 x309

Private Memo Shows Davis Is Ready to Impose Massive Rate Hikes After He Is Re-Elected

Reputed Agreement Would Have Ratepayers Bail Out Edison
The Davis Administration has allegedly been working with Edison to reach an agreement in which California ratepayers would be forced to pay a special surcharge to bail out Edison. This bailout tax would be in addition to the 46% increase recently authorized by the CPUC. In a draft agreement, reported by The Los Angeles Times, Governor Davis would not have the bailout charge appear on consumers' bills for two years, presumably to avoid the consumer and voter anger that will ensue in the wake of the rate hikes.

"This memo demonstrates the worst side of politics," said Doug Heller, consumer advocate with the Foundation for Taxpayer and Consumer Rights (FTCR). "Governor Davis will betray the consumers of California with a massive bailout tax on utility bills, but he will withhold the charges until after the next election."

Governor Davis should end private negotiations with the utilities and initiate a public process for addressing the state's energy crisis, according to consumer advocates.

"It seems that Governor Davis hopes to strike a deal with the utilities and energy companies and then ask the Legislature to take it or leave it, probably with the warning that if they do not go along with the plan, the lights may go out," said Heller. "Despite his public statements to the contrary, Governor Davis is clearly working behind the scenes to force a consumer bail out of the utilities through unjustified rate increases. The Governor must open up the process to the public, rather than negotiate away our economy in private."

Consumer advocates say the March 27 memo, which was called "ancient history" by the Governor's spokesman, reads like a utility wish list. The memorandum reportedly says that consumers would pay a twelve-year "dedicated rate component" (a special bailout surcharge) to the utilities to pay off their alleged deregulation-related debts. While the amount of this surcharge is not disclosed in the memo, it would likely reflect the $5.5 billion that Edison claims to be its utility debt. The memo also reiterates a previously announced agreement to purchase Edison's portion of the transmission grid for $2.7 billion, a price that is far too high according to FTCR. The agreement also would make it more difficult for the California Public Utilities Commission to reduce Edison's 11.6% rate of return that the utility earns as a regulated company.

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