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California's New Robber Barons

By Senator Tom McClintock

10/11/2001

 

At the turn of the last century, railroad robber barons had wrapped their tentacles around California's government. Through rampant influence peddling they obtained monopoly control of all rail transportation in the state and wheedled millions of dollars of taxpayer subsidies.

Californians finally rebelled in 1910, undertaking a thorough political housecleaning with the election of Governor Hiram Johnson. One of the first reforms was a new California Railroad Commission to protect the public against price gouging by the railroad monopoly. The Railroad Commission quickly evolved into the California Public Utilities Commission and expanded its duties to protect consumers from similar tactics by electric utility monopolies.

A century later, the wheel has come full circle. This year, wholesale electricity prices have fallen 95 percent from their highs while consumers' electricity rates have skyrocketed 40 percent. Worse, consumers will now be locked into these outrageously high levels indefinitely. This ugly state of affairs is the direct result of actions taken by the California Public Utilities Commission - the one agency specifically designed to protect consumers - at the behest of California's new robber barons led by Southern California Edison.

Edison waged a yearlong crusade in the legislature to force consumers to pay for the company's losses in California's failed electricity market. Edison had largely designed that market, lobbied extensively for its adoption and made billions of dollars in additional profits until last year, when it began losing money.

Instead of streamlining its operations and reorganizing its finances in bankruptcy court, as Pacific Gas and Electric has done, Edison undertook a massive public relations campaign to convince legislators to stick ratepayers with a $3 billion tab. When the state Senate stopped its scheme in the last hour of this year's legislative session, Edison secretly approached the California Public Utilities Commission.  

On October 2nd, the Commission suddenly announced - without a breath of public comment or warning - that it was unilaterally approving the same bailout of Edison that the state Senate had refused.

The cost to families and small businesses is staggering. The average Edison customer will pay $750 more for electricity than necessary over the next several years, just to fill Edison's coffers. And this is only the tip of a mountain of premiums facing Californians.

Consumers are locked into paying twice the current market rate for electricity because of sweetheart contracts negotiated in secrecy by Gov. Davis earlier this year.

And it doesn't stop there. In order to cover the Governor's day-trading losses, a $12.5 billion bond is awaiting sale that - with interest - will also be heaped on those same families. 

Until this year, Edison's customers could simply say "adios" to California's new robber baron. Under California law, consumers had the right to shop around for more reasonably priced power directly from other generators. NewPower Company, for example, has been advertising in Texas newspapers recently, promising customers $672 in savings over two years if they'll switch their accounts from Reliant. 

But not in California. Several weeks ago, the right to shop around for cheaper power was taken away from consumers by the Public Utilities Commission. Because the consumers' watchdog has a new owner, Edison's customers have no choice but to buy at Edison's outrageous prices or hook up their homes to a bicycle generator. (And even then, they would be forced to pay Edison a "stand-by" charge.)

What has befallen consumers is the same sort of influence peddling and special interest domination of government that California suffered a century ago. The safety mechanisms that Hiram Johnson left behind have now themselves become corrupted, and a new age of government-enforced monopoly has dawned. 

And the sad result is this: many Californians will have no choice but to pay electricity bills many times higher than neighboring states for many years to come - with their only escape being to leave or to die. Or, perhaps, to stand and fight and take back their government as their great grandparents did.

Senator McClintock represents the 19th Senate district in the California Legislature. His website is www.senate.ca.gov/mcclintock.

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