Private enterprise isn't always the best solution

Ever since the the Berlin Wall came down in 1989 the political discourse in the United States has been skewed by a presumption private enterprise does everything better than government. History says otherwise of course, but history has been ignored in favor of ideology that people thought would help them become rich and powerful.

The lessons of history have had some revenge over the intervening 20 years. Think Enron, AIG or Bernie Madoff. On a lesser scale think of dealing with your cable or phone company, getting bumped off your flight, or having it cancelled, or paying for taking luggage on a trip with you - all the joys of deregulation.

Now the ability of the ideologues to convince people over the last 20 years that private business is always better than government has reached its logical conclusion. Business is trying to prevent Government from doing something even in the face of irrefutable evidence Government is clearly doing a better job at than business.

In California Proposition 16 is sponsored by private energy companies to protect the monopoly position they have enjoyed in many areas California for decades. Most areas of California get their gas and electricity from one of three big energy Corporations. Pacific Gas and Electric (PG&E) in Northern and Central California, Southern California Edison (SCE) in the Los Angeles area and San Diego Gas and Electric (SDG&E) in San Diego. But some local governments have formed their own entities for providing electricity and power through local public agencies. The Los Angeles Water and Power Agency has been in existence over 100 years. The Sacramento Municipal Utility District (SMUD) was formed in 1923.

When it comes to cost and reliability the public entities kick the private businesses collective butts. As of March 1, 2010 a comparison of three publc power companies, SMUD, Roseville Electric and LA Department of Water and Power found the average per month residential rate was about $94 per customer ($88 for SMUD, $95.58 for Roseville, $96.18 for LA). The private for profit corporations, PG&E, SDG&E and SCE average monthly residential rate was about $125 per customer (PG&E $119.97, SDG&E $128.43 and SCE $128.85).

Other local governments are noting the difference, particularly in Northern California. PG&E has been losing battles to stop local governments from forming power agencies to better serve their local populations, so they are now seeking to use the California's (infamous) initiative process to insert a provision in the California Constitution that would require a 2/3 vote for a local government to join or form a public power company. They evidently believe they can use ideology and misleading advertising to get enough votes from voters who are not paying attention to their own energy bills to pass the proposition.

You question that they are relying on misleading advertising? One of the primary sponsors of Prop 16 is the "Common Sense Coalition" which is simply a lobbying effort funded entirely by PG&E. The title of Prop 16 is "The Taxpayers Right to Vote Act" - this for a proposition whose goal is to limit the ability of local voters to create local power companies.

You would think that the voters in California would be smart enough to not strengthen the monopoly of the people who they buy power from. But the battle plan is diabolically clever. PG&E only serves northern and central California. 2/3 of the voters in the State live in Southern California, which is served by San Diego Gas and Electric (SDG&E) and Southern California Edison (SCE). SDG&E and SCE will also be in a stronger monopolistic position from this proposition, but they are keeping a low profile. PG&E may lose in Northern California where people know them. But by being the front man while SDG&E and SCE keep a low profile PG&E can use their misleading feel good ads to garner votes from voters in Southern California (where more voters live) who are not paying attention because PG&E means nothing to them.

Prop 16 could easily pass.

In 2006 Yolo County, a small county just west of Sacramento County, put a measure on the ballot to try to become part of SMUD. Voters of Sacramento also had to approve the merger. PG&E spent $12,600,000 on misleading ads and convinced the voters of Sacramento County adding Yolo County to their system would raise their rates, thereby scuttling the merger. The combined population of Sacramento and Yolo County is about 1,500,000, so assuming about 1/4 of those are voters PG&E spent about $30 per voter to win that battle.

PG&E has reportedly budgeted about $35,000,000 to promote Proposition 16. They are going to be relying on subtle references to the notion that Government is inherently corrupt and incompetent and business is inherently honest and competent. They are going to be throwing around lots of allegations and inuendo's about incompetent bureaucrats and terrible budget consequences. This from a company that was in bankruptcy in 2002 because of bad decisions in the energy market. PG&E was a big supporter of the 1997 derugulation of utilities in California - you could almost see the dollar signs blinding their vision. In the resulting chaos in the deregulated market PG&E got hammered and ended up getting bailed out by to the tune of an $8 billion dollar surcharge on the rates we Northern Californians pay for power.

Oh, and by the way, that $35,000,000 they are willing to spend to try to solidify their local monopolies is just a few million more than what the CEO of PG&E has taken home over the last 5 years or so. That might explain part of the reason why the public agencies have lower rates. Do you think?