Energy Co’s Use Ballot Initiatives, Other Tools to Fight for Continued Market Dominance

Earlier this month, California voters rebuffed a power-grab by Pacific Gas & Electric (PG&E), defeating a ballot initiative that would have helped the utility maintain its monopoly on electrical power in northern California.

California’s Prop 16 would have required local governments to gain the support of two-thirds of voters before purchasing local power. The state’s voters rejected the measure. It would have made it extraordinarily difficult for local governments to create or expand their own municipal utilities and compete with PG&E.

PG&E is not the only utility company using legislation, ballot propositions and lots of cash, to try to hold onto its monopoly or control the future of power supply in the vicinity of its operations.

In May, an attempt by New Hampshire utility PSNH to spend most of the state’s renewable energy project funds was rejected by the state legislature.

In Kansas, Sunflower Electric Corp has been waging an ongoing battle to build new coal-burning power plants that would export most its power to out-of-state customers.

And in Colorado, the state’s Renewable Energy Standard (RES), passed by a large majority of voters, is facing attack in the legislature.

But in these fights, political influence and a deep war chest does not necessarily translate into victory for the utilities. PG&E spent $46.1 million on the failed ballot initiative in California. Opponents say they stopped the utility with a campaign that cost less than $100,000. 

"What this clarifies is that PG&E has the wrong approach, certainly to customer retention," says Mindy Spatt of The Utility Reform Network (TURN), an organization that worked to defeat the ballot measure, Prop 16. "Rather than offer lower rates, reliable meters and good customer service, they thought ‘why don’t we just lock the customers up in a constitutional jail so they can’t leave us no matter what we do."

Spatt calculates that PG&E shareholders lost about 12 cents-a-share from the $46.1 spent by the utility on the failed proposition, not to mention the loss incurred by the fall in PG&E’s stock price following the vote. 

“If I were a PG&E shareholder, I would be demanding the resignation of the CEO," said Rick Jacobs, Founder of the Courage Campaign, another grassroots organization that also worked to defeat Prop 16.

The embarassing defeat in California is not stopping a similar kind of effort in Colorado, where a fight has been brewing over Proposition 37. It’s the measure that brought the state a renewable energy standard (RES) in 2004 when it was passed by a healthy majority of voters.

But a group called the Western Tradition Partnership recently floated a proposition that would allow Colorado residents to opt-out of the RES and undermine it. The group, headed by two Montana Republicans–former U.S. representative Ron Marlenee and state representative John Sinrud– has since shelved what they call a costly ballot initiative and has vowed to pursue its goals in next session’s state legislature. Opponents believe there’s oil and gas money behind the effort, whcih has not disclosed the sources of its financing.

More Action to Come in California

In California, Prop 16 is only the beginning of the energy battles in the state this year. The biggest fight is yet to come in November, over AB 32, California’s greenhouse gas reduction law.

Oil companies Tesoro, Valero and Occidental Petroleum have already put over $2 million into a ballot initiative that would suspend AB 32 until the state’s unemployment reaches 5.5% for 4 consecutive quarters. That’s only happened twice in the last 20 years, so if the measure passes, it would effectively suspend AB 32. In the end the voters will have the final say, but another recent dispute shows how formidable oil interests can be.

The city of Richmond sponsored a ballot measure that would slapped Chevron’s local refinery with a 10% utility user tax, similar to what city residents pay. In response, Chevron put together its own ballot initiative that put the city on the defensive. Chevron’s measure would cap the refinery’s utility user taxes at $20 million a year, but here’s the kicker: It would also allow all Richmond residents and businesses to apply for rebates of half of their utility user taxes, and exempt low income residents and seniors from paying the utility taxes altogether.

The city was sure it would lose big in the warring ballot initiatives and lose substantial tax revenue, so it chose to settle with Chevron in May. It agreed to pull its ballot measure if Chevron would agree to pay $20 million in taxes a year, with an additional $114 million spread out over the next 15 years. The city also agreed to back off on trying to slap a manufacturer’s tax on the refinery.

In response, Chevron pulled its ballot measure, having secured what it wanted.