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NEWS RELEASE
Jun 19, 2001


CONTACT: Doug Heller - 310-392-0522 x309

Consumer Leaders Voice Opposition to Davis Bailout Plan

Utility Bailout Will Cost Consumers Billions, Does Nothing for Energy Crisis
Sacramento-- Consumer advocates with the state's leading ratepayer advocacy organizations called on California lawmakers to reject the Governor's proposed Memorandum of Understanding (MOU) with Edison -- contained in SB X2 78 (Polanco) -- at a news conference in Sacramento today. Later in the day, the advocates will testify before the Senate Energy Committee during the first official hearing on the MOU. The deal proposed by Edison and Governor Davis, the consumer groups contend, is a ratepayer-funded bailout of the Southern California utility that will cost each ratepayer nearly $2,000, in addition to the recent rate hikes.

"Five years ago lawmakers and the utilities foolishly foisted this deregulation scheme onto California consumers, and now the Governor and Edison expect the ratepayers to pay billions more to save the utilities from their own mismanagement and bad policy decisions," said Harvey Rosenfield, consumer advocate with the Foundation for Taxpayer and Consumer Rights. "There is no public money left to bail out Edison, and if legislators dedicate any portion of consumer rates to such a bailout, there will certainly be a ratepayer revolt at the ballot box in 2002."

According to the groups, the MOU contains more than a dozen anti-consumer provisions including:
  • A "Dedicated Rate Component," the chief mechanism by which Governor would bailout Edison. With interest it will amount to approximately $5-7 billion dollars for Edison customers;
  • Protections for Edison's parent corporation, removing their responsibility for this crisis and future utility problems;
  • The stripping of important PUC regulatory authority;
  • Extreme overpayment for the purchase of the utility's transmission lines.
"This deal does nothing to address the basic energy crisis caused by the out-of-state profiteers," said Harry Snyder, senior advocate for Consumers Union, the non-profit publisher of Consumer Reports Magazine, "The plan is a waste of taxpayer and ratepayer money. The only beneficiaries of the Governor's deal are the utilities and the energy companies that have abused the California market for the last twelve months."

In November, FTCR urged lawmakers and Governor Davis to firmly oppose a utility bailout, pointing out that, as a result of the 1996 deregulation, consumers had already paid $20 billion to Edison and Pacific Gas & Electric above their electricity charges. The MOU would force consumers to now pay the utilities to protect the very market they created with the 1996 law.

Rather than bailing out the utilities, consumer groups argue that the state should aggressively target the energy generators, traders and marketers who have used the deregulation scheme to lay waste to the California economy. It is not the utilities financial woes but the profiteering by the generators that has led to the largest rate increases in California history. Whether or not the utilities are solvent has no impact on the electric bills consumers now face, according to advocates.

"PG&E chose to put itself into bankruptcy, because the company refused to take responsibility for their problems. Edison could choose to bail itself out or choose the PG&E route, but that burden must not be placed onto the ratepayers," said Rosenfield.
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