Voters Defeat Controversial Proposition 16 in California

Published June 9, 2010

A ballot measure championed by the United States' largest electric company that would have made it more difficult for competitors to sell electricity in its territory was rejected Tuesday by California voters.

With 100 percent of the votes counted, semi-official results showed Proposition 16 lost with with 52.5 percent opposed and 47.5 percent in favor.

The vote tally, from the office of the Secretary of State, was 2,015,297 opposed and 1,830,278 in favor.

PG&E Corp., the parent of Pacific Gas & Electric Co., spent more than $46 million promoting the statewide passage of Proposition 16. The measure trailed by wide margins in the large population centers in PG&E's  service area, which covers much of Northern and Central California. It also was defeated in Los Angeles, the state's largest city, which receives electricity service from a municipal utility.

The proposition won approval from voters in much of the rest of Southern California, which is not within PG&E's territory. The two large private utilities in that region – Southern California Edison Co. and San Diego Gas & Electric Co. – took no official position on the initiative, but campaigners funded almost entirely by PG&E Corp. blanketed the region's voting population with campaign literature and commercials urging a yes vote.

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Proposition 16 won handily in Southern California's Orange County, where one of the few state newspapers supporting the initiative published editorials and opinion articles in favor of passage. It lost by a wide margin in San Francisco, where PG&E has its headquarters.

Proposition 16 would have amended the California constitution to require two-thirds voter approval before a public utility could provide service to new customers or territories, or before a local government could set up a community choice aggregator, or CCA, an energy-supply approach in which municipalities group together to purchase electricity wholesale.

Two community-choice aggregation programs have recently become established to provide electricity to customers in the San Francisco Bay Area, the heart of PG&E's service area. One, in Marin County north of San Francisco, is called the Marin Energy Authority. The newest one, in San Francisco, is called CleanPowerSF.

The two-thirds "super majority" requirement would have made it more difficult for additional CCAs to form. It also would have been harder for municipal utilities, such as the Sacramento Municipal Utility District or the Los Angeles Department of Water and Power, to expand their service areas. The state has nearly 50 public utilities.

In 2006, three Northern California cities and Yolo County sought to leave PG&E's electric service jurisdiction and join the Sacramento Municipal Utility District, but lost the vote after PG&E spent heavily on an opposition campaign.

The utility company provided almost all of the funding for the campaign to pass Proposition 16, which was supported by business groups such as the California Chamber of Commerce and other chambers, taxpayer groups, and some conservative and anti-government organizations, along with a number of African-American, Asian and Hispanic business groups. Some proponents were concerned that community choice aggregators are not subject to regulation by the California Public Utilities Commission, and that low-income ratepayers might not receive equivalent protections with community choice programs.

Opposing the measure were many local and regional elected officials. Almost all of the state's major newspapers published editorials in opposition. Among the prominent opponents was Michael R. Peevey, president of the California Public Utilities Commission, which regulates PG&E and the state's other two large private utility companies. The three private utilities together provide electricity to more than three-fourths of state residents.

Most representatives of the solar industry in California, the leading solar state, did not take a public position on the ballot measure. Pacific Gas & Electric Co. has recently contracted to buy large amounts of solar electricity to be generated by proposed solar power plants in the deserts of Southern California and Arizona. The utility is already the national leader in solar-electric generating capacity.

Peter Darbee, the utility company's chief executive, who was sharply criticized by Proposition 16 opponents during the campaign, has been an outspoken supporter of establishing a price on carbon emissions to help counter the effects of climate change caused by greenhouse gases.  Mr. Darbee also has been a supporter of plug-in vehicles and is a member of the Electrification Coalition, a leading policy advisory group on electric vehicles.

Managers of the state's two new community choice aggregators have expressed a resolve to provide a greater percentage of their electricity mix from renewable resources than PG&E has, although they have said solar will play a small part initially. For more information, please see our earlier story.

Pacific Gas & Electric Co. is the nation's largest electric company as measured by its number of electricity customers, with about 5.2 million, according to the U.S. Energy Information Administration. American Electric Power, which is based in Columbus, Ohio, and operates in 11 states, also has about 5.2 million customers, but they are served by a number of individual companies.  Southern California Edison Co. is the second-largest single utility company, according to the EIA, with about 4.8 million customers.

The bitterly fought campaign focused broad public attention on the topic of electricity and the generation of renewable energy. Opponents of Proposition 16 had no central organization and were outspent by more than $500 to $1.

The Marin CCA, called Marin Clean Energy, has now been in operation for about a month. It serves only about 6,800 customers. The other CCA, CleanPowerSF, has not yet begun providing electricity.

Whether the defeat of Proposition 16 will result in additional efforts to establish community choice aggregations or to expand the reach of public utilities, as some PG&E executives and investors feared, is not yet known.