The depths of recession and its impact on California’s economy are driving both business and government to desperate measures in search of revenue. In this state of great dreams but unfunded aspirations we are seeing a growing pushback by voters and ratepayers over the costs of living into those aspirations.
Los Angeles Renewable Rate Increase Fallout
In Los Angeles, there is a tragic comedy, of sorts, playing out in the fight between the City of Los Angeles and LADWP, its independent electric utility. The City is in deep financial trouble. LA’s Mayor Antonio Villaraigosa is a former California Assembly Speaker who knows a few tricks about how to eek out revenue. But he apparently tried to play a fiscal shell game with utility rates betting that LA voters who support renewable energy policies would not object too much to a rate increase to pay more for renewable energy. The mayor proposed a 2.7 cents per kilowatt-hour power rate increase except his strategy, as it turned out, was to shift 2 cents of that increase to the City General Fund to reduce his budget deficit leaving LADWP with 0.7 cents to pay for the City’s ambitious renewable energy goals.
The Utility objected and the LA City Council rejected the proposed rate increase and postponed further consideration for three months. The Utility then told the City that without its rate increase it could not cover the cost of its mandated renewable energy policies and thus refused to transfer $73 million into the City treasury creating a cash flow crisis for the City. What a mess!
AB32 Repeal Ballot Initiative
Separately, in an act of rebellious direct democracy an initiative petition is being passed to get signatures to put on the ballot the repeal of AB32 the California Global Warming Solutions Act. Roughly half of the $ 1 million in campaign cash raised so far comes from the refineries and oil and gas lobby with Valero leading the charge. The bet is that the measure will get enough petition support to make it to the ballot later this year.
One of the provisions of AB32 is that the California Air Resources Board has the authority to set “fees” annually for permits required for emissions of greenhouse gases. These “fees” do not require approval of the Legislature–no politician wants his fingerprints on anything like a carbon tax even though that is precisely what this is. But it is also no coincidence that the potentially large revenues these fees can generate will find their way into the State General Fund. Does this sound familiar? This is exactly the same fiscal slight of hand that the Mayor of Los Angeles was just “busted” for trying. Sacramento is worried that the whole house of greenhouse gas revenue cards will fall leaving them to face the music of their unfunded aspirations and a giant sink hole in the treasury.
Only this time there is no ‘soak the rich’ option since the recession has drained their portfolios, put their stock options and home values underwater, leaving behind losses instead of the capital gains which fed Sacramento in the good years.
Does this mean Californians are turning against their environmental policies and beliefs? It is too soon to draw that conclusion. But we do know this. With an unemployment rate higher than 10% and no prospects for any near term relief, voters are surly.
PG&E Rate Design Wake-up Call
The recent outcry in Bakersfield over PG&Es rate increases was a wake-up call that frightened PG&E into proposing an entirely new rate design structure flattening its five progressive rate tiers into three flatter ones giving its ratepayers on the “warm side of the hills” in the Central Valley a break. This is a body blow to the environmental community that has campaigned ruthlessly for progressive rate structures in power and water from their cool, foggy San Francisco or Berkeley offices while sticking it to Fresno, Stockton and Bakersfield where both the political heat and temps are high. The conventional wisdom was that if you were dumb enough to live on the warm side of the hills then you deserved to pay more for wasting energy. But that was before smart meters were installed and rate cases kicked in combining to create a firestorm well before fire season over rate spikes. No one—not PG&E, not the CPUC, not the State of California wants to see smart grid, smart meter deployment or renewable energy discredited by ratepayer revolts caused by bill spikes. So now the PG&E plan is to raise customer charges applicable to everyone—even those in San Francisco so that variable usage rates can be combined into three tiers instead of the steeper five tiers.
So far California still seems to favor clean energy and strong environmental policies but they appear to strongly resent the gaming of those policies by politicians. All of this may be moot. Unless the California economy gets better soon these games will get worse and voters will get even more surly.
I sure would not want to be Senator Barbara Boxer this coming November!