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LWV CA Ed Fund LEAGUE OF WOMEN VOTERS OF CALIFORNIA EDUCATION FUND
Nonpartisan Pros & Cons of

Proposition 9

ELECTRIC UTILITIES. ASSESSMENTS. BONDS.

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Initiative Statute

THE QUESTION

Should private electric utility companies be prohibited from using tax, bond and surcharge assessments to pay for the cost of nuclear power plants and also be limited in how they recover costs for non-nuclear power plants? Should they be prohibited from issuing rate reduction bonds and assessing customers for payment of bond costs? Should a 20 percent rate reduction be required in residential and business customers' rates?

THE SITUATION

In 1996 California legislators restructured the laws governing the electricity industry to deregulate the production of electricity but not its transmission or distribution. Competition will determine the prices consumers pay for electricity.

THE PROPOSAL

Proposition 9 would prohibit electric companies from:

  • recovering the costs of nuclear power plants through the use of utility taxes, bond payments or surcharges.
  • charging customers for the costs of non-nuclear power plants, except when adequately justified through public hearings with the Public Utilities Commission {PUC)
  • assessing customers for payments of bond principal, interest or related costs.
Proposition 9 would allow actions of the PUC to be subject to a review by the court of appeals and require a 20 percent rate reduction for residential and small commercial customers. The measure would also prohibit electric companies from providing information about residential or small commercial customers to any third party without the "express written consent of the customer".

FISCAL EFFECT

The Legislative Analyst estimates that Proposition 9 will result in net losses to state and local governments in the tens of millions because of:

loss in tax revenue should electric companies be unable to collect about $10 billion in outstanding debts

  • reduction in rates and fees paid by residential customers and small businesses resulting in increased sales and income taxes paid to government; and
  • spending on schools would be reduced proportionally as the state budget is reduced.

The state, however, would have to offset any losses sustained by local school districts if fewer property taxes are collected.

SUPPORTERS SAY

  • Consumers should not have to pay the debts utility companies incurred through poor investments in nuclear plants.
  • State law already prohibits taxpayer liability for the utilities $6 billion bond debt.

OPPONENTS SAY

  • Proposition 9 will jeopardize electric rates and reliability and ultimately force higher electric rates.
  • Taxpayers will be liable for $6 billion in previously sold bonds.

(Analysis prepared by the League of Women Voters of California Education Fund.)


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Last updated: August 30, 1998
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