PG&E price tag for Prop. 16 could reach $35 million

Fueled entirely by $15.5 million of its own money, and with another $10 million to $20 million on tap, Pacific Gas and Electric Corp.’s effort to limit the creation of local electricity districts without the approval of two-thirds of local voters is picking up steam – including a $9 million check in one day.

In terms of the financial divide, the proposal, Proposition 16, is the most lopsided measure on the June ballot.

All of the money thus far in its support has come from PG&E itself. In a statement to shareholders, the company noted that the per-share cost could be 6 cents to 9 cents to finance the campaign, which translates into a total campaign price tag of $25 million to $35 million. The corporation had $1.22 billion in profits during 2009.

“This one-time item reflects activities outside of PG&E’s regular utility operations and is expected to impact total GAAP earnings between $0.06 and $0.09 per share for the year,” the company’s corporate arm said in a detailed Feb. 19 statement on its Web site.

The company believes it was strategically better to try to resolve the issue in a single ballot measure, rather than fight the same battle over and over again each time a local municipality seeks to create a new public-power authority.

In a March 1 conference with shareholders, PG&E’s CEO Peter Darbee and President Chris Johns discussed the issue, according to a transcript.

“The idea was to diminish (it), rather than year after year different communities coming in and putting this up for vote and us having to spend millions and millions of shareholder dollars to defend it repeatedly,” the company said. “We thought this was a way we could diminish that level unless there was a very strong mandate from voters that this is what they wanted to do.”

The campaign’s spending thus far includes about $3.48 million, including $2.2 million for signature gathering, some $437,000 to the firm of Sacramento-based political consultant David Townsend, with the rest spread among a variety of consultants or providers of legal services. It’s donations – a total of six, all from PG&E – includes a payment of $3 million, one of $1.5 million and a Feb. 12 payment of $9 million.

Seven Senate Democrats, including Senate Leader Darrell Steinberg, D-Sacramento, complained about the initiative directly to Darbee, calling the proposal “misguided as a matter of public policy,” because it hamstrings the ability of locals to choose how they want to obtain their power supplies.

“It is unacceptable for a company that is falling behind in meeting state-adopted for clean energy to impede the efforts of others who would attain those goals through innovative means,” they said in a Dec. 22 letter.

The main opponent of Proposition 16, The Utility Reform Network, ended 2009 with about $98.17 in the bank, and so far this year has raised about $26,000.

PG&E and its allies believe that the high-dollar issues involved in creating a electrical utility or what are known as “community choice aggregation” districts – such as was set up in Marin County — should receive voters’ careful scrutiny before encumbering local governments with long-term debt.

“It’s pretty straight forward and gives the taxpayers a right to vote on projects that use quite a bit of their tax dollars. And we think that’s a good idea,” said David Kline of the California Taxpayers Association. “It empowers taxpayers to decide whether they want to go forward.”

But critics contend that Proposition 16 would cripple the ability of local governments to create publicly owned and operated utilities throughout the state because the two-thirds-vote threshold traditionally has been difficult to surpass. They cite the political battle four years ago when cities in Yolo County tried to join the Sacramento Municipal Utilities District. The move was rejected, in part because of an $11 million campaign mounted by PG&E.

And they complain that the public face of the pro-Proposition 16 campaign, the “Taxpayers Right to Vote,” is a misleading. “It’s clearly disingenuous for PG&E to all of a sudden be the champion of Democracy,” said TURN’s Mark Toney.

The creation of local utility districts draws ratepayers from PG&E’s base, thus cutting into the utility’s revenue over time.

PG&E says strong local voter support should be necessary in cases where locals are being asked to invest hundreds of millions, even billions, of dollars of public money, and notes that between June 2002 and November 2008, nearly half – 286 — of the 600 local tax and bond measures were approved.

“That’s where this is coming from,” said Proposition 16 campaign spokesman Greg Larsen. “It says that if you’re going to do it, go ahead and do it, but know that it is a big financial commitment and that people should have the opportunity to weigh the promises of what it could do and the risks of what will happen if it fails,” Larsen said. “When voters are presented with the right idea at the right time, they will approve it. The will approve a good idea – if it makes sense and it is well presented.”

The coalition backing Proposition 16 includes the California Taxpayers Association, the California Chamber of Commerce, an array of local chambers and the Oakland Jobs and Housing Coalition.

There are scores of public utilities in California – the California Municipal Utilities Association represents about 70 of them – that are owned and operated by local governments. Often, they confronted opposition from the major utilities when they were created.

“There are really two models on customer retention,” said Toney. “For any company, the first model is that you maintain customers by offering them the best service with the lowest prices and good customer care. That’s the preferred method. The other method is customer retention through captivity by locking in higher rates and buying a constitutional amendment. That’s PG&E’s method.”

But PG&E said its plan is intended to ensure a rigorous, systematic look at the creation of municipal utilities, rather than what it says is the current haphazard approach.
“It forces a public discussion of the issue. It’s a statewide issue, and it lays out a basic way that it can be done consistently,” Larsen said.

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