California Proposition 16, Supermajority Vote Required to Create a Community Choice Aggregator (June 2010)
If Proposition 16 had been approved by voters, it would have henceforward taken a two-thirds vote of the electorate before a public agency could enter the retail power business. This would have made it more difficult than it is currently for local entities to form either municipal utilities, or community wide clean electricity districts called Community Choice Aggregators (CCAs). Forming a local municipal utility or a CCA, if Proposition 16 had been approved, would have required the approval, through election, of 2/3rds of the voters who live in the area of the would-be local municipal utility or CCA.
Pacific Gas & Electric was the primary financial sponsor of the initiative, having contributed $46.1 million. That made PG&E the Goliath in a David-v-Goliath battle, since Prop 16's opponents had access to less than $100,000.,
The proposed constitutional amendment would have required a two-thirds majority vote of local voters before a local government could:
- Establish a Community Choice Aggregation (CCA) program.
- Use public funding to implement a plan to become a CCA provider
- Expand electric service to new territory or new customers.
The CCA program, established in 2002, allows local governments to purchase blocks of power to sell to residents, and to construct municipal electricity generation facilities, which means that cities and counties can become competitors to private utilities.
These final election results are from the California Secretary of State June 8, 2010 results page.
Ballot label details
Ballot title: Imposes new two-thirds voter approval requirement for local public electricity providers. Initiative Constitutional Amendment.
Official summary: Requires two-thirds voter approval before local governments provide electricity service to new customers or establish a community choice electricity program using public funds or bonds.
Estimated fiscal impact: Unknown net impact on state and local government costs and revenues—unlikely to be significant in the short run—due to the measure’s uncertain effects on public electricity providers and on electricity rates.
The name of the campaign committee sponsoring the measure is "Californians to Protect Our Right to Vote."
The official proponent of the initiative is Robert Lee Pence, who was listed as an opponent of California Proposition 80 (2005). Pence's firm has been paid $62,500 for its work promoting the measure.
Endorsers of Proposition 16 include:
- California Taxpayers Association
- California Chamber of Commerce
- The Oakland Jobs and Housing Coalition
- Willie Brown, former San Francisco Mayor.
Arguments in favor
- The Yes on Proposition 16 website is http://TaxpayersRightToVote.com
- Greg Larsen of Larsen Cazanis, a Sacramento public relations firm, is the paid spokesperson for the measure. He says, "Why shouldn't the people who are going to pay the bill have the right to vote on that?"
- Former Sacramento County Sheriff, Lou Blanas says "As local governments struggle to fund the most essential and basic services, local leaders in several communities are working to spend millions of public dollars or debt to get into the retail electricity business. And they do not want the people to vote on it. In tough times like these, voters deserve a voice in this decision... California voters have consistently supported sound proposals brought before them. In fact, between 2002-2008, 286 local special tax and bond measures that required a two-thirds vote were approved."
- President and CEO of the California Chamber of Commerce, Allan Zaremberg says "Requiring a vote will ensure that the complicated and risky choice to create a government-run electricity business gets the public discussion it deserves. These are long-term deals that can commit generations to hundreds of millions of dollars of debt. And to pay for them, more cuts in local programs might be required or, perhaps, even new taxes or fees. The voters need to be allowed to weigh the promises of benefits versus the real risks and costs of failure."
- Jim Wunderman, president and CEO of the Bay Area Council, says, "Regardless of how you feel about public power, ask yourself: Should the public have the right to vote before elected officials spend our money entering the electric power business?"
One campaign committee (named "Yes on 16/Californians to Protect Our Right to Vote Major Funding from Pacific Gas & ELectric Company and Ca Business PAC, sponsored by California Chamber of Commerce, a Coalition of Taxpayers and Business") was formed to advocate for a "yes" vote on Proposition 16. This group ended up raising $46.5 million, the great majority of which came from Pacific Gas & Electric.
PG&E, which reported a $1.22 billion profit in 2009, notified its shareholders during the campaign that the cost of contributions to the "Yes on 16" campaign would amount to about 6-9 cents per share of the stock. Company executives told shareholders they believed this was a good use of PG&E funds because if Proposition 16 lost (as it in fact did) the company would have to spend "millions and millions of shareholder dollars to defend it repeatedly" every time a municipality is thinking about going the CCA route. PG&E fights against municipalities forming CCAs because when local government agencies form their own local utility districts, PG&E loses customers, thus cutting into the corporation's long-term profitability.
- Bedrock Strategies: $80,000
- California Voter Guide, a slate mailer: $200,000.
- David Binder Research: $45,300
- Direct Voices, a subsidiary of Arno Political Consultants, was paid $2,199,794 for collecting signatures to qualify Proposition 16 for the ballot.
- Discovery Data: $111,000
- Forward Observer: $240,000
- Larsen Cazanis: $325,000
- Mercury Public Affairs: $138,000
- Moore Methods: $423,250
- Nielsen, Merksamer, Parrinello, Mueller & Naylor: $1,326,627.,
- Robert Pence: $122,500
- Sipple Strategic: $100,000
- SK Impact: $30,000
- Swanson Communications: $95,000
- Townsend, Raimundo, Besler & Usher: $940,638.
Campaign tactics and PUC
On May 3, regulators at California's Public Utilities Commission told Pacific Gas & Electric Co. that some of its telephone and direct-mail campaign tactics violate state law, and ordered them to stop.
Specifically, PUC Executive Director Paul Clanon wrote:
- PG&E is not allowed to use its own phone banks to call customers in Marin County and then transfer them to customer service after discouraging them from doing business with Marin Clean Energy, a PG&E competitor.
- PG&E's mailers to customers were "misleading" and the utility "must refrain from sending any mailers of this nature in the future."
- Certain practices, involving calling customers, taking out newspaper ads and sending mailings inviting customers to opt-out of Marin Clean Energy are "in violation of your tariffs and must cease."
PG&E, in response to the warning, said, "The C.P.U.C has already affirmed our ability to communicate with our customers who are included in the Marin Energy Authority’s Phase 1. We will continue to work with the C.P.U.C to address the concerns raised in its letter."
- Local Power Inc., which created Community Choice Aggregation and formed the official No on Prop 16 campaign joined by TURN, city governments and many others. Paul Fenn of the company says, "PG&E still thinks it can play energy cowboy and and bully everyone into doing what they want. But communities have figured out that they can buy twice the amount of green power for the same price." 
- The Utility Reform Network. Mindy Spratt of the group says, "This is the worst kind of special interest ballot proposition. Something that would basically benefit one corporation at the expense of everybody else."
- Nine California state senators sent a letter to PG&E President Peter Darbee in which they said that they believe Proposition 16 is "misguided as a matter of public policy." The letter was signed by senators Darrell Steinberg, Mark Leno, Jenny Oropeza, Lois Wolk, Christine Kehoe, Alan Lowenthal, Gilbert Cedillo and Dean Florez.,
- The Palo Alto City Council voted by 9-0 in early February to pass a resolution against Proposition 16. The city is worried that if Proposition 16 passes, it might make it harder for the city to buy new non-renewable production or transmission facilities outside its borders.
- The Modesto Irrigation District voted 5-0 to oppose Proposition 16.
- Former California Energy Commissioner John Geesman.
- AARP, the Sierra Club, and the Consumer Federation of California oppose Proposition 16, and signed the official voter guide arguments against it.
Opponents of Proposition 16, according to Mercury News, have had to be creative in their campaign tactics because they have very little money with which to wage a campaign:
- "Outspent and outgunned, several California residents are taking matters into their own hands. With homemade fliers, song parodies and 30-second videos, they are mounting small but determined efforts to fight back against Proposition 16."
- With a $30 budget, Ben Zolno has made several short videos with filmmaker Jacob Kornbluth, CCA author Paul Fenn, intern Charles Schultz and friend Ben Goldstone, posting them on YouTube and on a "No on Prop 16" blog. Zolno says, "I could take the approach of trying to raise money so I can fight a flame thrower with a candle...But I think it's better to just try to get a few thousand people exposed to this, and then it becomes common knowledge that this proposition is a piece of garbage." Fenn produced a video depicting a giant octopus attacking San Francisco, and Schultz also produced several farcical videos in a comic approach to the question centered around the symbol of the octopus. 
- Retired social worker Liz Keogh spent $500 getting 1,200 color flyers printed at a local copy shop which she then handed out in her neighborhood.
- Megan Matson of Bolinas re-wrote the lyrics to the coal-mining ballad "Sixteen Tons" to reflect aspects of the Proposition 16 fight, got some friends to perform it, and posted the results on YouTube.
- The initiative reduces the ability of people to choose between private and public utility companies. "It really goes to the heart of the right of people to have choices, that’s the intent of this measure. It’s horrendous", according to Elisabeth Brinton, director of communications for the Sacramento Municipal Utility District, a public utility.
- Holding local elections where people vote on whether to have a private or public utility company would be expensive.
- This measure proves that California's initiative process has become "a plaything of powerful interests using deception and misdirection to line their pockets", according to Michael Hiltzik, a Los Angeles Times columnist.
- "The Taxpayers Right to Vote Act is a dagger aimed directly at a movement to enable municipalities to offer renewable green power to their residents in competition with private utilities."
- Proposition 16 is poorly drafted, according to Tim O'Laughlin, general counsel for the Modesto Irrigation District.
- Requires two-thirds vote to provide electricity service through a community choice program (CCP) using public funds or bonds. Without CCP at PG&E's service area, the residents buy the electricity along with transmission and distribution (T&R) service from PG&E. The power is generated or purchased by PG&E to be sold to residents. Under CCP, the residents buy the PG&E's T&R service, but electricity through the municipal organization. The municipal organization buys the electricity from another source, at a direct negotiated price. In california, many large organizations, such as LAUSD and LA community college district, buy electricity directly from another source, similar to CCP program, and save significant electricity cost, because IOUs (investor owned utilities) can no longer attached its profit margin to electricity purchase. LIkewise, residents will likely to pay less for electricity under CCP, and this initiative will allow IOUs such as PG&E to easily block CCP, by making it costly to implement CCP, and/or by getting the opportunity to campaign against it through election.
Three campaign committees filed on behalf of a "no" vote on Proposition 16. Cumulatively, the three committees raised about $130,000.
Political consultants who provided paid services to the "No on 16" campaign included:
- Goodwin Simon: $27,700
| I • II • III • IV • V • VI|
VII • VIII • IX • X • XA
XB • XI • XII • XIII • XIII A
XIII B • XIII C • XIII D • XIV • XV • XVI • XVIII • XIX • XIX A • XIX B • XIX C
XX • XXI • XXII
XXXIV • XXXV
- See also: Complete text of Proposition 16
The new section 9.5 will say:
(a) Except as provided in subdivision (h), no local government shall, at any time, incur any bonded or other indebtedness or liability in any manner or use any public funds for the construction or acquisition of facilities, works, goods, commodities, products or services to establish or expand electric delivery service, or to implement a plan to become an aggregate electricity provider, without the assent of two-thirds of the voters within the jurisdiction of the local government and two-thirds of the voters within the territory to be served, if any, voting at an election to be held for the purpose of approving the use of any public funds, or incurring any liability, or incurring any bonded or other borrowing or indebtedness.
(b) “Local government” means a municipality or municipal corporation, a municipal utility district, a public utility district, an irrigation district, a city, including a charter city, a county, a city and county, a district, a special district, an agency, or a joint powers authority that includes one or more of these entities.
(c) “Electric delivery service” means (1) transmission of electric power directly to retail end-use customers, (2) distribution of electric power to customers for resale or directly to retail end-use customers, or (3) sale of electric power to retail end-use customers.
(d) “Expand electric delivery service” does not include (1) electric delivery service within the existing jurisdictional boundaries of a local government that is the sole electric delivery service provider within those boundaries, or (2) continuing to provide electric delivery service to customers already receiving electric delivery service from the local government prior to the enactment of this section.
(e) “A plan to become an aggregate electricity provider” means a plan by a local government to provide community choice aggregation services or to replace the authorized local public utility in whole or in part for electric delivery service to any retail electricity customers within its jurisdiction.
(f) “Public funds” means, without limitation, any taxes, funds, cash, income, equity, assets, proceeds of bonds or other financing or borrowing, or rates paid by ratepayers. “Public funds” do not include federal funds.
(g) “Bonded or other indebtedness or liability” means, without limitation, any borrowing, bond, note, guarantee or other indebtedness, liability or obligation, direct or indirect, of any kind, contingent or otherwise, or use of any indebtedness, liability or obligation for reimbursement of any moneys expended from taxes, cash, income, equity, assets, contributions by ratepayers, the treasury of the local government, or other sources.
(h) This section shall not apply to any bonded or other indebtedness or liability or use of public funds that (1) has been approved by the voters within the jurisdiction of the local government and within the territory to be served, if any, prior to the enactment of this section; or (2) is solely for the purpose of purchasing, providing or supplying renewable electricity from biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric generation of 30 megawatts or less, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current, or providing electric delivery service for the local government’s own end use and not for electric delivery service to others.
The Orange County Register endorses a "yes" vote, saying, "Municipal utilities may have a better track record in service and rates, but there's no guarantee that difference will continue. There is, however, a distinct threat that financially strapped elected officials could use electricity rate increases to backfill government budgets. Increasing electricity rates is easier than raising new taxes, which generally require two-thirds vote of the people. So, too, should the government's entry into the lucrative electricity business. Weighing the benefits for ratepayers against taxpayers' exposure, we choose to urge a "yes" vote for Proposition 16, to restrain government."
- The editorial board of the San Francisco Guardian said on September 22, 2009 that "this is a profoundly important issue, and every elected official, city council, board of supervisors, and utility agency in the Bay Area needs to immediately come out in opposition and start organizing to defeat it."
- The Oakland Tribune editorialized for a "no" vote, saying, "Voters should not be fooled into thinking Proposition 16 is anything about improving the democratic process. It is entirely about PG&E's financial interests and would do considerable harm to local governments' ability to create and expand publicly owned utilities for the benefit of electricity customers. We urge voters to soundly reject Proposition 16 to protect their own pocketbooks and local choices about electricity service, and to send a message to PG&E and other special interests that the voters cannot be bought."
- The Fresno Bee's editorial board urges a "no" vote, saying, "Proposition 16 is the clearest illustration yet of how special interests have corrupted California's initiative system."
- The Petaluma Press Democrat urges a "no" vote, saying, "The long slow descent of California’s initiative process has reached a new trough with Proposition 16 on the June 8 ballot...To make matters worse, this corporate handout is being billed as a taxpayer protection measure. Don’t be fooled."
- The Sacramento Bee: "Voters should not be fooled by this attempt at winning a guaranteed monopoly for one firm."
- The Marin Independent-Journal: "Proposition 16 is a corporate power play disguised as election reform."
- The Lompoc Record: "The measure is being bankrolled by PG&E, whose chairman told stockholders at a recent meeting that the purpose of the ballot measure was to freeze out the competition. We oppose Proposition 16 on that basis alone."
Path to the ballot
- See also: California signature requirements
The Office of the California Secretary of State announced on January 12, 2010 that Proposition 16 had qualified for the June 8, 2010 ballot. As an initiated constitutional amendment, the supporters of Proposition 16 needed to submit 694,354 valid signatures to qualify the measure for the ballot.
The petition drive management company "Direct Voice" was hired to collect signatures to qualify the proposition for the ballot. Direct Voices is a subsidiary of Arno Political Consultants. They were paid $2,199,794 to collect signatures to qualify the measure for the ballot.
Lawsuit to remove from ballot
A consortium of public utilities filed a lawsuit on March 18 to remove Proposition 16 from the ballot.
On May 5, Sacramento Superior Court Judge Allen Sumner rejected the lawsuit, allowing Proposition 16 to stay on the ballot. He said that the plaintiffs had waited to long to file the lawsuit and on the issue of the merits, that, "The question is whether the title and summary of Proposition 16 adequately disclose its purpose - not the motivation of its sponsors."
The legal grounds asserted in the lawsuit to remove Proposition 16 from the ballot was the claim that Proposition 16's language is so misleading that removing it from the ballot is the only just outcome. Court-ordered removal of a ballot measure because of misleading language is rare but not unprecedented.
Plaintiffs in the lawsuit included the Merced Irrigation District, Modesto Irrigation District, Sacramento Municipal Utility District, and the San Joaquin Valley Power Authority. The City and County of San Francisco is also a plaintiff in the lawsuit.
April 28 filings
On April 28, additional papers were filed in Sacramento Superior Court by the lawsuit's plaintiffs saying that comments made by PG&E chairman Peter A. Darbee at an investor conference on March 1, 2010 tend to establish their overall claim, which is that Proposition 16 is not about the "Taxpayer's Right to Vote" but is instead about PG&E wanting to "choke off competition".
Specifically, plaintiffs said in their additional filing, it is inconsistent for Darbee to tell his shareholders that the point of Proposition 16 is to avoid PG&E having to entangle itself in expensive local elections about public utilities and then to have the Proposition 16 state in its advertising for Proposition 16 that Proposition 16 increases one's right to vote.
What Darbee said at the March 1 investor conference that plaintiffs took particular exception to is:
- "You know, rather than year after year different communities coming in, this or that, and putting this up for vote and us having to spend millions and millions of shareholder dollars to defend it repeatedly, we felt that this was a way that we could sort of diminish that level."
The California Supreme Court removed initiatives from the ballot in 1934 and 1936 on the grounds that their ballot titles did not mention that they would raise taxes, and in 1999, a California state appellate court removed a local ballot measure from the San Francisco ballot that would have prevented building a 49ers stadium at Candlestick Point on the grounds that the initiative itself contained numerous false statements to the point that the ballot language itself would have prevented voters from being able to assess the merits of the measure. However, in general, it is rare for a California court to remove a proposition from the ballot.
- Official Voter Guide to Proposition 16
- Proposition 16 ballot title, summary, and analysis in California's official voter guide
- Proposition 16 arguments and rebuttals in California's official voter guide
- Ballot labels for the June 8, 2010 California propositions
- Letter requesting a ballot title for 09-0015
- Website of the Sacramento Municipal Utility District (SMUD), an example of a public utility
- Guide to Proposition 16 from the California Voter Foundation
- Guide to Proposition 16 from the League of Women Voters
- Easy Voter Guide to Proposition 16
- Guide to Proposition 16 from the Institute of Governmental Studies
- Who endorses/opposes Proposition 16? from the Institute of Governmental Studies
- Taxpayer's Right to Vote, official website advocating in favor of Proposition 16
- Yes on Prop 16 on Facebook
- Campaign finance reports of "Yes on 16/Californians to Protect Our Right to Vote Major Funding from Pacific Gas & ELectric Company and Ca Business PAC, sponsored by California Chamber of Commerce, a Coalition of Taxpayers and Business"
- PG&E Ballot Initiative Factsheet, a blog that chronicles opposition to Proposition 16
- No on Prop 16 blogspot blog
- Taxpayers to Stop the PG&E Power Grab PAC site
- Local Clean Energy Alliance's Power Grab site
- Campaign finance reports of "No on Prop 16, Taxpayers against the PG&E PowerGrab, Sponsored by Local Power, Inc., & The Utility Reform Network"
- Campaign finance reports of "Ratepayers, Businesses and Governments Oppose Prop 16-Stop the Power Grab"
- Campaign finance reports of "Sierra Club SF Bay Chapter Issues"
- ↑ San Francisco Chronicle, "PG&E initiative on power suppliers on ballot", January 14, 2010
- ↑ Capitol Weekly, "Initiative backers submit paperwork promising a busy 2010 cycle", October 22, 2009
- ↑ Santa Cruz Sentinel, "Prop 16 is June's priciest ballot initiative, with PG&E coughing up big money", March 25, 2010
- ↑ Text of Taxpayer's Right to Vote Act
- ↑ 5.0 5.1 Fox and Hounds Daily, "Money Flows for PG&E Power Initiative", November 9, 2009
- ↑ 6.0 6.1 6.2 6.3 San Francisco Bay Guardian, "PG&E attacks consumer choice", June 17, 2009
- ↑ 7.0 7.1 7.2 7.3 7.4 7.5 7.6 Cal-Access, List of "Yes on Proposition 16" expenditures
- ↑ Mercury News, "Opinion: Two-thirds vote should be needed to let government start a utility", March 28, 2010
- ↑ San Francisco Bay Guardian, "Willie Brown to speak in favor of Prop 16 tomorrow", March 16, 2010
- ↑ 11.0 11.1 11.2 Los Angeles Times, "PG&E ballot measure is a stealthy power play", December 28, 2009
- ↑ Modesto Bee, "Bee editorial wrong on Proposition 16", February 9, 2010
- ↑ Bakersfield Californian, "Proposition 16 would force cities to think", March 5, 2010
- ↑ San Francisco Chronicle, "Yes on 16, be heard on utilities issues", April 18, 2010
- ↑ Election Track, "Contributions to Californians To Protect Our Right To Vote Major Funding From Pacific Gas & Electric Company A Coalition Of Taxpayers, Environmentalists, Renewable Energy, Business And Labor"
- ↑ Mercury News, "Old bureaucrats never die", January 24, 2010
- ↑ Sacramento Bee, "PG&E flips the switch", April 22, 2010
- ↑ Los Angeles Times, "Pacific Gas & Electric's campaign tactics are illegal, California regulators warn", May 4, 2010
- ↑ 19.0 19.1 New York Times, "P.G.&E. in Hot Water With Public Utilities Commission", May 4, 2010
- ↑ "PG&E Spending Millions to Block Local Utilities", January 31, 2010
- ↑ KCBS, "PG&E Spending Millions on Ballot Initiative", February 21, 2010
- ↑ Letter from Steinberg, et al, to Peter Darbee
- ↑ Los Angeles Times, "PG&E amps up bid for power", February 10, 2010
- ↑ Mercury News, "Palo Alto votes to oppose PG&E-backed ballot measure", February 3, 2010
- ↑ 25.0 25.1 Modesto Bee, "MID opposes measure requiring vote before utility could expand", February 24, 2010
- ↑ News Review, "PG&E boss: Prop 16 all about the shareholders", March 15, 2010
- ↑ Los Angeles Times, "California Democratic Party convention wrap-up", April 19, 2010
- ↑ San Francisco Chronicle, "Opponents to PG&E ballot measure demand ads pulled from airwaves", March 24, 2010
- ↑ 29.0 29.1 29.2 29.3 Mercury News, "Fight over Prop 16 a David vs. Goliath battle", May 28, 2010
- ↑ 30.0 30.1 News Review, "PG&E’s power trip"
- ↑ Orange County Register, "Proposition 16 not perfect, but good", April 27, 2010
- ↑ San Francisco Bay Guardian, "Stopping PG&E's fraudulent initiative", September 22, 2009
- ↑ Inside Bay Area, "Editorial: California voters should reject Proposition 16", March 12, 2010
- ↑ Fresno Bee, "EDITORIAL: Vote 'no' on Proposition 16", April 22, 2010
- ↑ Petaluma Press Democrat, "No on Proposition 16", April 18, 2010
- ↑ Sacramento Bee, "Corporate-sponsored measures: No on Props. 16 and 17", April 25, 2010
- ↑ Marin Independent-Journal, "IJ's choices for state propositions", May 10, 2010
- ↑ Lompoc Record, "Initiatives, confusion in primary", May 14, 2010
- ↑ List of qualified statewide ballot measures
- ↑ San Francisco Chronicle, "Judge rejects bid to omit Proposition 16 from ballot", May 6, 2010
- ↑ Renew Grid Magazine, "Public Utilities File Suit To Rip Proposition 16 Off California Ballot", March 19, 2010
- ↑ 42.0 42.1 Fresno Bee, "Lawsuit alleges PG&E boss admits Proposition 16 is meant to thwart competition", April 29, 2010
- ↑ Sacramento Bee, "Utilities sue to remove Proposition 16 from California ballot", April 30, 2010
- ↑ San Francisco Chronicle, "S.F. sues over PG&E-backed ballot measure", March 19, 2010
- Public power fights back
- SSJID ponders opposing PG&E ballot measure
- Senate Pro Tem Darrell Steinberg's Letter to PG&E CEO Peter Darbee
- PG&E's Proposition 16 Ad Spending Riles Some
- Plugging in a monopoly
- Disingenuous PG&E cares more about its monopoly than taxpayers
- Utilities do battle on California ballot
- Money talks loudly in California elections
- Prop 16 could turn the light out on California energy market
- Candidate stumped by Proposition 16
- Proposition 16 changes rules on public power
- Prop 16: Ugly use, but not abuse, of initiative process, say experts