SMUD-slinging

That’s precisely the kind of drastic transformation that could emerge from California’s current deregulation-induced electricity rate crisis, the state’s top consumer advocates predicted in a conference call to reporters last week.

“There will be a ratepayer revolt in this state,” said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights, who spoke to reporters together with Nettie Hoge of The Utility Reform Network and Harry Snyder of the Consumers’ Union.

That conference call came a day after Gov. Gray Davis expressed support for letting utility companies Pacific Gas & Electric and Southern California Edison pass skyrocketing wholesale power costs on to consumers.

The utilities have claimed to be on the brink of bankruptcy from having to absorb nearly $10 billion in excessive wholesale energy costs, a situation triggered by dysfunctions in an energy market that California lawmakers—with encouragement from the utilities—deregulated in 1996.

Davis expressed support for letting utilities pass on roughly half of those costs to ratepayers, which could increase the bills of PG&E customers by more than 10 percent. But consumer advocates object to the ratepayer bailout, saying they would rather see Davis call the utilities’ bankruptcy bluff.

Hoge says the utilities have essentially dummied their numbers to disguise the record revenues they’ve been accumulating in recent years, while Rosenfield criticized the “threat of bankruptcy as a form of extortion and economic blackmail to force legislators into a bailout.”

They would rather see Davis hold the utilities to their previous pledges to accept the risks of deregulation. And if the companies do go under, then the public might essentially be able to seize control of those companies, eliminate the waste and profit-motive that drives up rates, and operate them in the public interest.

“If the utilities have to go into a receivership, that might not be that bad,” Hoge said, referring to what would happen under a Chapter 11 bankruptcy filing.

Davis spokesman Steve Maviglio said that scenario is fraught with peril: “When it goes to a bankruptcy court, a judge sets the rules and can do what he wants to salvage the company and protect stockholders, even ordering double-digit rate increases.”

Yet with Davis facing potentially the biggest political crisis of his career, Maviglio said his boss is still open to the idea of legislation that would place operation of the state’s power grid under a nonprofit entity accountable to the public, much like SMUD.

“That’s on the table,” Maviglio said. “It’s something the governor has not ruled out.”