November 8, 2005 Ballot Prop. 80

Introduction

This initiative repeals key provisions of the 1996 electricity deregulation and restores authority to regulate rates to the California Public Utilities Commission (PUC). In addition it requires that 20 percent of electricity be from renewable sources by 2010

Proposition 80

Californians receive electricity service from three kinds of providers: investor owned utilities (IOUs), municipal utilities, and electric service providers (ESPs). Historically, three IOUs have dominated about three-quarters of the market - Southern California Edison, San Diego Gas & Electric, and Pacific Gas & Electric. The rates and services of the IOUs are regulated by the California Public Utilites Commission (PUC).

Efforts by the federal government to open up energy markets to more independent power producers have been underway since the energy crises of the 1970s. In the 1990s the CPUC joined this trend to liberalize regulatory policy. As electricity prices rose, the PUC worked with the legislature to craft the 1996 Assemby Bill 1890 energy-deregulation measure.

AB 1890 sought to break up the IOUs and increase competitive markets in both the generation and retail marketing of electricity. It allowed consumers direct acccess to the provider of their choice, giving IOU customers access to ESPs. It provided incentives that led the IOUs to sell many of their energy generation facilities to power companies that compete in the open wholesale power market. The Power Exchange (PX) was created to auction competitively generated power. IOUs also divested their control of transmission grids, handing over that responsibility to the non-profit Independent System Operator (ISO). New independent unregulated ESPs were allowed to sign up new customers and provide them with power purchased on the open market.

Along with restructuring the market, AB 1890 scaled back the regulatory authority of the CPUC, giving responsibility for oversight of the PX and the ISO to the Federal Energy Regulatory Commission (FERC). The PUC's ability to regulate both the wholesale cost of power and retail rates were greatly diminished.

In the wake of the 2000-01 energy crisis, the state stopped the flight of IOU customers to ESPs. Discussion has continued on the extent to which AB 1890 deregulation contributed to the energy crisis. In 2004 the legislature passed AB 2006, which would have significantly enhanced the PUC's regulatory authority. The bill was vetoed by Gov. Schwarzenegger. The initiative currently on the special election ballot is based upon AB 2006.

The Initiative

This initiative repeals key provisions of AB 1980. In particular it:

• Extends some PUC regulation to ESPs.
• Bars cutomers currently receiving electricity from an IOU from switching to an ESP.
• Codifies in law the long-term procurement process that the PUC has adopted for IOUs, and extends it to ESPs. This includes a requirement that all providers achieve "the best value" for ratepayers.
• Requires both IOUs and ESPs to maintain adequate reserves to ensure system reliability.
• Accelerates to December 31, 2010, the timeline for meeting the state's 20% renewable energy requirement.

Arguments For and Against

Proponents of the initiative say that AB 1980 was a failed experiment in deregulation that led directly to the electricity crisis of 2001. They claim that the initiative will prevent another energy crisis and secure the state's energy future so that consumers and businesses can depend upon reliable electric service at reasonable rates.

Defenders of deregulation generally claim that a competitive free market produces the lowest rates for consumers. They contend that Proposition 80 would give utilities an unfair advantage over independent power generators.

Legal Challenges

Proposition 80 was removed from the ballot on July 22, 2005 by the Court of Appeals in Sacramento in its ruling on a lawsuit by the energy industry. The court agreed with industry arguments that the state constitution only allows the legislature to increase the authority of the PUC. Therefore a constitutional amendment, requiring additional qualifying signatures, would be necessary rather than the initiative statute that was circulated. Proponents of the proposition immediately appealed the ruling.

On July 27, 2005, the California Supreme Court restored the energy initiative to the ballot, saying the public should be able to vote on the measure before the energy industry's legal challenge is heard. The court said that it was not clear whether or not the ballot measure and the constitutional provision were in conflict. They declared that delaying the initiative now would disrupt the electoral process and the right of the people to decide the matter.

Official Voter Information

Official Voter Information Guide

Campaign Finance: 
Individual Campaign Committees
Total Contributions and Expenditures (select "Nov. 2005 election" and "Prop. 80" in dropdown boxes)

Key Websites

League of Women Voters
Prop. 80 site.

Public Opinion

Schwarzenegger Propositions Still Trailing: Three of four ballot initiatives backed by Governor are behind
and Proposition 75 is now in a dead heat. Support for both prescription drug initiatives falls. Polimetrix poll, Nov. 6, 2005.

"NO side leads YES side on all four of the propositions backed by Governor Schwarzenegger," Field Poll, Release 2174, Nov. 1, 2005.

"Prop. 75 continues to lead by big margin: strong tide running against prop. 76: Yes vote dropping on Prop. 74: narrow sentiment against prop. 77: divided vote on Prop. 80," Field Poll, Release 2168, Sept. 5, 2005.

Baldassare, Mark. 
PPIC Statewide Survey: Special survey on growth. San Francisco: Public Policy Institute of California, May, 2001. 
See section on California's electrical problems.

Reports and Studies

After the storm: interviews with prominent economists and policy leaders on the future of the California energy market. Sacramento, CA: Energy Foundation, 2002.

California State Auditor.
Energy deregulation: the benefits of competition were undermined by structural flaws in the market, unsuccessful oversight, and uncontrollable competitive forces. Sacramento, CA: Bureau of State Audits, 2001.

Kiesling, Lynne.
Getting electricity deregulation right: how other states and nations have avoided California's mistakes. Los Angeles, CA: Reason Foundation, 2001.

Weare, Christopher.
The California electricity crisis: causes and policy options San Francisco, CA: Public Policy Institute of California, 2003.