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Upfront: Shock and awful
Behind PG&E's plan to unplug community choice once and for all

by Peter Seidman

When Marin Clean energy flipped the switch May 7 to send electricity flowing to the first community choice aggregation customers in the state, PG&E was ratcheting up its attack on local-power initiatives with a June 8 ballot measure that's a cynical dagger aimed at the heart of community choice.

PG&E is running wall-to-wall television ads in which an attractive, mild-looking woman looks earnestly into the camera and says The Taxpayers Right to Vote Act will protect California residents from dangerous politicians eager to usurp their democratic rights. A full-page newspaper advertisement touts "Protect Your Right to Vote! It's Your Money." The thrust is that Proposition 16 will keep avaricious politicians from sneaking taxpayer money into public-power coffers.

But the money behind public-power startups comes ratepayers, not taxpayers, say opponents. That's the same money ratepayers now shovel into PG&E coffers. The opponents favor a public-power paradigm in which agencies such as Marin Clean Energy (MCE) can keep ratepayer dollars local, where ratepayers and residents have much more control over their energy future than if they hitched their electricity wagon to the PG&E star.

A short history of Proposition 16 illustrates the reality behind PG&E's contention that the company has placed it on the ballot to protect taxpayers in the name of democracy and the "right to vote."

When PG&E first introduced the proposition, its title was "The Taxpayers Right to Vote Act." The title infuriated proponents of public-power plans. County Supervisor Charles McGlashan is chair of the Marin Energy Authority, the joint powers agency that gave birth to MCE. McGlashan and MCE filed a complaint with the state attorney general charging that PG&E was using deceptive practices in naming the proposition. The attorney general agreed and forced the utility to change the name to the New Two-Thirds Requirement for Local Public Electricity Providers; Initiative Constitutional Amendment.

The name change accurately reflected the intentions at the highest level of the PG&E administration.

"The word 'Orwell' keeps on coming up," says Paul Fenn. "This is a corporation playing an old approach to trick voters into seeing the government as an opponent and playing the game using freedom of speech as a tactic." Fenn is the founder and president of Local Power. The Marin resident wrote AB 117, the state legislation that allows municipalities to choose energy providers for their communities. The 2002 law paved the way for MCE, the first public-power plan to actually start supplying electricity to customers; other jurisdictions across the state are now looking to Marin as they contemplate their own energy future. That interest elicited a response from PG&E—Proposition 16.

The story line that PG&E is using in its advertising rests on the corporation's undying interest in protecting California voters and their right to stop government intrusion into their power stream. But no less a personage than Peter Darbee, PG&E's CEO, drove a wedge into his own company's thematic pursuit of Prop 16 when he addressed an investor conference March 1 in New York. This was about a month after the company announced it was amassing a $35 million war chest to push Prop. 16. It wasn't out of bounds for investors to wonder what they would be getting for their money.

Audio of the conference went up on the company's website for all to hear. Darbee said Prop. 16 came about when, a few years ago, elected officials in Woodland, Davis and West Sacramento supported a proposal from the Sacramento Municipal Utilities District to supply electricity at rates below PG&E's. Darbee told investors in March it cost his company between $10 million and $16 million to block ballot measures in Sacramento and Yolo counties that would have cleared the way for the SMUD expansion. The money worked. A measure that called for breaking away from PG&E failed by a substantial margin in Sacramento. In Yolo County, however, the proposal to join SMUD lost by less than 1 percent. PG&E also spent millions blocking a public-power plan in San Francisco, and more money opposing a plan in the Central Valley.

Darbee conferred with PG&E Vice President Nancy McFadden and Prop. 16 was born. The June election "seemed more favorable" than a November ballot, Darbee told investors. "As the time approached, it also occurred to us that people aren't very pleased with the job that government is doing these days in general, you know, across the board," an outlook PG&E capitalizes on repeatedly in television and print ads.

Darbee made some remarkable statements at the investors' conference: "And the idea was to diminish [individual public-power efforts], you know, rather than year after year different communities coming in as this or that and putting this up for vote and us having to spend millions and millions of shareholder dollars to defend it repeatedly, we thought that this was a way that we could sort of diminish that level unless there was a very strong, you know, mandate from voters that this was what they wanted to do."

Prop. 16, in other words, is a good investment for shareholders. "So this was really a decision about [whether we could] greatly diminish this kind of activity for all going forward rather than spending $10 million to $15 million a year of your money to invest in this." Darbee told investors Prop. 16 would create "some flap," but after the election, the company would "mend any broken fences."

Prop. 16 mandates a two-thirds vote of residents before a municipality can form a community choice aggregation energy agency such as MCE. It also makes it even harder for public-power agencies to grow and compete against utilities, including PG&E. If a public-power agency wants to expand its customer base, it first must receive approval from two-thirds of its current customers and also from two-thirds of residents in the proposed expansion area. Some Marin cities chose not to join MCE. City councilmembers said perhaps their cities would consider joining in the future. But if Novato, for example, wanted to join after Prop. 16 passed, MCE would have to garner that super-majority vote of current customers and of future customers in Novato. (Even Novato and other cities currently hesitant to joining public-power systems are opposing Prop. 16.)

PG&E representatives say the company only wants to ensure that residents can tap into the democratic process before their communities join a public-power system. But critics say the super-majority requirement belies that sentiment. Almost all political experts in California agree a two-thirds vote ensures that nothing ever happens, no matter what the issue. And when dealing with the details of power generation and transmission, that two-thirds requirement skews the democratic process to the side that can throw the most money at dumbed-down TV ads.

Fenn is blunt when he puts the PG&E push for Prop. 16 into a wide-frame context: "We just went through this huge crash in the legitimacy of corporatism in the United States on Wall Street [and in the oil market and the banking industry]. This is an event on that radarscope for the nation. This is an attack on government. It's disaster capitalism. It's shock doctrine. They are f--king with us. The action is monopolization. The historical context is deregulation."

Mindy Spatt, communications director at TURN, The Utility Reform Network, echoes Fenn's outrage. Her language is less salty but just as charged. She says it's absurd for PG&E to talk about protecting the democratic process for ratepayers and residents. "I am a PG&E customer. I got no chance to vote on Darbee's $10 million pay package. I didn't vote on their $9 billion bailout, and I don't vote on rate hikes. For PG&E to present itself as somehow being a bastion of democracy is absurd. Customers have far more input into public power than they do with PG&E."

After the Enron-era energy debacle and deregulation chaos, PG&E went bust and sought that $9 billion in public money. "For PG&E to keep talking about risks [of public-power plans] is absurd," says Spatt. "No public-power entity has received a dime in bailout money, yet PG&E received $9 billion."

Prop. 16 has the support of many chambers of commerce and the usual anti-tax contingent. In the Bay Area, Jim Wunderman, president and CEO of the Bay Area Council, is a key advocate. And the International Brotherhood of Electrical Workers (IBEW) Local 1245 also is on the list. Labor has pension money invested in PG&E, which may explain their support. Opponents count cities and towns up and down the state in their camp. Editorial boards of virtually every major newspaper in the state have come out against Prop. 16. Even some Republican groups have joined the opposition. One interesting note: the Southern California utility companies, which are sitting out the campaign.

Conservative political opponents and editorial boards at conservative papers oppose Prop. 16 because of the super-majority requirement, which they say is clearly undemocratic. The danger, they stress, is that the initiative process is dominated by money. In February, PG&E pledged to spend $35 million on its Prop. 16 effort. Spatt says opponents have a little less than $35,000 in their war chest.

Gov. Hiram Johnson created the initiative process about 100 years ago to give the little guy some clout in fights such as his battles against the Southern Pacific Railroad and Harry Chandler, the powerful and wealthy owner of the Los Angeles Times.

"The PG&E strategy is so hubristic," says Fenn, "that the blowback could be pretty broad. If they lose, they face having wasted not just the money on the campaign, but also the [millions] they have spent since 2002 on improving their image: all the billboards, all the buses, all the ads."

The push to promote public power in California, and PG&E's pushback in the form of Prop. 16, is a battle of great consequence and epic proportions, according to Fenn and other proponents of clean, renewable, local power plans. "PG&E is focused on leading the nuclear and gas solution, and on cap and trade to support that solution. This is probably the most important demand-side energy war in the world. Can the U.S. get the energy industry out of its ass?"

There may be at least one positive that comes out of the Prop. 16 debate, according to Fenn. For years, the vast majority of the state's residents knew little or nothing about community choice aggregation. "It was such an obscure policy. To have it go [primetime] is fun as hell."

The week MCE flipped the switch, inquiries already were coming in from Illinois and Denver about how the Marin experience could translate to other jurisdictions. "It shows that just by virtue of having tried this, we already have helped the market and have had an effect on policy across the United States," says McGlashan.

"A whole bunch of market actors are praying that Prop. 16 fails so that we can open the doors on a new paradigm of renewable energy in the state."

Contact the writer at peter@pseidman.com.

Posted by Dave Erickson, a resident of another community, on May 30, 2010 at 11:50 am

Corporations have used the initiative process before in CA to create market advantages for themselves. In 1956, a group of oil companies put a total of $5M into an initiative that would have modified oil and gas taxation rules to their advantage (it was rejected by the voters). More recently, we have "The Pickens Initiative" to create a whole new gas market in CA. However, the deceptive, confusing and manipulative campaign by PG&E certainly marks a watershed in the history of corporate abuse of the initiative process. $46M in ads that are, at core, based on out-and-out lies, puts the electoral system to the test. Is it possible to buy an election based on slick propaganda alone? If this initiative is passed, it signals a historic moment in our democratic experiment. Does the body politic in America have the ability to see through slick corporate PR disguising a cynical attempt to institutionalize a permanent monopoly? Or does a corporation have the ability to buy itself a constitutional amendment by exploiting ignorance and apathy?