Quick: What's a Competitive Transition Charge?
Here's another: What's a Trust Transfer Amount?
Don't know? I don't blame you.
But pretty soon you will know. This fall, if all goes as planned, those phrases will produce one of California's patented political upheavals. Billions of dollars will ride on the outcome. And across the land, the rest of the country will watch and wait.
The phrases arise from California's deregulation of its electric power industry, and you may have seen them on your bill. If so, did you pay attention? Of course not. You went brain dead instead.
So did everyone else, and that's the problem. The process of moving old dinosaurs like Southern California Edison, San Diego Gas & Electric and Pacific Gas & Electric into the free market proved so stupefyingly boring that everyone fell asleep at the wheel.
I mean, when the switch-over finally took place in March, the lights still came on, right? Your bill stayed roughly the same, right?
If fact, maybe a tad less. A new line on the bill said "Legislated 10% Rate Reduction." And, sure enough, the 10% got deducted from the bottom line.
So don't worry, be happy. Except that, at the bottom of the bill, there appeared those new phrases like Competitive Transition Charge. And Trust Transfer Amount. Let's call them CTC and TTA so we can sound like real bureaucrats.
Within those phrases lies the tale. The charges that accrue from them now amount to more than what you pay for the electricity itself.
Say you used 500 kilowatts of juice from Edison last month. The electricity cost $7.62. That's cheap, very cheap, and represents the great benefit of the new, free market.
Then you get to the CTC, which came to $11.56. And then the TTA at $8.43.
Why were you paying Edison more for these obscure charges than for the electricity you used? Because, friends, we truly went comatose when this deal went down. We looked the other way, bored out of our gourds, while a truly bizarre negotiation was conducted in Sacramento.
The deal, in essence, obligates us to pay for every bad investment made by PG&E, Edison and other utilities from time immemorial.
The bill for those bad investments comes to roughly $28 billion. That's right. Billion, not million. If you want to play with the figure, think of it as more money than Microsoft has earned in profits since it was created.
It includes, among other things, payoffs for every utility-operated nuclear power plant in the state. Just one of the nukes, PG&E's Diablo Canyon plant, will cost us $3.5 billion.
That's $3.5 billion in addition to the $3 billion we've already paid for Diablo. And it doesn't count the electricity. It's our obligation to pay off the remaining costs of a plant that, as of now, cannot produce energy at a free market rate.
Here's the interesting part. PG&E is a private corporation with shareholders. So is Southern California Edison. What is the obligation of the shareholders of PG&E and SCE to pay for these investments that have turned lamentably sour?
Zero. Under the deal, electricity customers pay all of it. When you see the CTC charge on your bill, that's your part of the bill for that particular month.
And thus the upheaval. "When this sinks in, people are going to be angry. We think they will be prepared to act," says Harvey Rosenfield, the activist who last brought us auto insurance reform via Proposition 103.
Rosenfield and a coalition of other reformists have gathered more than 700,000 signatures for a November initiative that would preserve the deregulation process but force the power companies to pay for the nukes. The signatures now sit in Sacramento awaiting certification.
"Under the [Public Utilities Commission], we've always had electricity that cost about 50% above the national average," says Rosenfield. "The whole deregulation scheme arose because big business was tired of paying those premiums. They went to Sacramento and said, 'What would it take to get the utilities out of their protected status?'
"This scheme was the answer. It's an outrage. No one can defend it."
Maybe. The utilities already have predicted chaos and bankruptcy if the initiative passes. The chaos is arguable, but the bankruptcy is probable. So severe is the threat that the utilities asked the courts to invalidate the initiative before it even qualified for the ballot. Thus far, no decision has been made.
"The initiative would kill deregulation and all the benefits it brings," says Alan Zaremberg of the California Chamber of Commerce. "Cheaper energy, in the long run, will outweigh any of the issues that the initiative seeks to address."
Incidentally, you may be wondering where L.A.'s Department of Water and Power falls into all this. The answer is that the DWP, as a municipally owned utility, is spared for now. Its time will come in 2002, when it must also join the fray.