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California Utility Bailout Could Prove Devastating to Environment, New Report Says

Sept. 10, 1998

California Utility Bailout Could Prove Devastating to Environment, New Report Says

A planned $28.5 billion bailout of California?s electric utility industry is not only unfair to consumers, it could prove a dramatic setback to environmental gains of the past several decades and have a far-reaching impact on the development of a sustainable, non-polluting energy future, according to a new report from Public Citizen?s Critical Mass Energy Project.

Voters have an opportunity on Nov. 3 to reverse the most unfair and potentially damaging aspect of the bailout, which is part of a utility deregulation bill passed by the California Legislature. Proposition 9 would eliminate an approximately $12 billion ratepayer bailout of investor-owned utilities for bad investments in unprofitable nuclear plants.

As the report, Proposition 9: A Greenlight for Sustainable Energy in California, points out, by forcing ratepayers to pay off the utility companies? most expensive mistakes, the bailout renders conservation efforts and renewable energy resources uncompetitive by providing “free capital” to utilities to increase their market share and stifle competition and innovation that could result in cleaner, cheaper energy over the long-term.

“Under the California ?deregulation? scheme, billions of dollars of ratepayer money has been committed not to a sustainable energy future but to the outright bailout of uneconomic nuclear and fossil-fuel plants owned by investors, plants that ratepayers have already paid billions of dollars to maintain,” said a joint statement by consumer advocate Ralph Nader and environmentalist David Brower.

For consumers, the bailout will likely translate into price-gouging, cost-shifting from large industrial power users to residential and small-business customers and red-lining of low-income communities, the report says. But the environmental impacts are no less threatening.

Bailouts will allow utilities to increase their market power by providing huge war chests of cash — money readily available to purchase competitors, buy dams and dirty coal plants, subsidize the operation of nuclear plants, build polluting power plants in developing countries and increase market domination generally.

“The nuclear utilities and their allies would like you to believe that Proposition 9 is not an environmental issue, but it is our assessment that providing the nuclear utilities with free capital — to use the words of one vice president at San Diego Gas & Electric — is bad for the environment,” said Wenonah Hauter, director of Public Citizen?s Critical Mass Energy Project.

“The bailout subsidizes existing nuclear plants and allows them to continue operating,” Hauter said. “And it provides the resources for the big three utilities to purchase dirty power plants in the United States and the developing world.”

As one of the first states to deregulate the utility industry, the outcome in California will go a long way toward shaping the debate in other states as the industry is restructured over the coming years. Legislators in other states will certainly consider a California voter backlash before granting similar bailouts.

“An infusion of cash from the bailout of utilities across the country will leave us with even bigger unaccountable, unregulated monopolies with the potential to wreak havoc on the environment,” Hauter said.

Environmentalists and consumers are gearing up to send a clear message to California lawmakers, policy-makers and the state?s utilities that the people demand a better and more creative vision for their energy future.

“Unless we recognize this threat and act to abate it, the values of environmental protection, soft energy in the form of renewable energy and conservation will soon be trammeled by a pseudo-market driven strategy that treats the planet as simply a collection of resources, the price of which is determined by the short term laws of supply and demand in a global market,” said Nader and Brower.