People Power vs. Power Companies

Article excerpt

The search for good news from the election leads to Oregon. Voters in that state approved the nation's fourth Citizen Utility Board (CUB), which may represent the most promising movement in utility reform this side of public ownership.

In most places, individuals hand over more money to utilities than they do taxes to the state's treasury. Gas companies underestimate demand and have to buy excess fuel at inflated prices. Electric companies pour capital into nuclear power plants and then abandon the projects, charging customers for their mistakes. More routinely, a utility company asks its state regulator for a rate hike several times greater than what it expects to get; the Public Service Commission trims the request a bit, and both sides go home happy, leaving the ratepayer to pick up the tab. Adding insult to injury, customers are usually forced to pay "rate case expenses," the amount spent by the utility to argue for the increase.

Despite those indignities, efforts to change the system have lacked energy and consistent direction. Citizen groups occasionally field their own intervenors in a case, lobby for legislation or propose that regulators be elected rather than appointed. But there has been little in the way of reform of the process by which utilities set their rates.

Until CUBs came along, that is. Inspired by Ralph Nader and his acolytes in the mid-1970s, the boards hire experts to represent residential ratepayers in various ways, lobbying and advocating their case at rate hearings, for example. Funded and controlled by those who belong to it, a CUB receives no government assistance--only the right to piggy-back its membership solicitations on utility bill mailings.

On Election Day, 53 percent of Oregon's voters approved the establishment of a CUB in their state. The Oregon State Public Interest Research Group (OSPIRG) spent about $40,000 in behalf of the initiative, while utilities poured more than $1 million into a slick radio, TV and direct-mail campaign to portray it as a "boondoggle." The latter's effort, which began in September and in which the utilities attempted to conceal their role behind a front organization, backfired. "Their ad campaign succeeded in creating visibility for us," Eric Stachon of OSPIRG said recently.

Oregon is the first state to pass a CUB initiative by referendum. State Legislatures set up CUBs in Wisconsin and Illinois in 1979 and 1983, respectively, and California's Public Utility Commission formed a local version in San Diego in 1983. CUB legislation was introduced in ten states this year, and the prospects for passage seem particularly good in Massachusetts.

Rising electricity and gas rates aren't the only reasons the CUB idea is finding favor across the country. As the Center for the Study of Responsive Law and other public interest groups promoting CUBs point out, utilities get the rate hikes they seek because Public Service Commissions usually hear only one side of the story. A commission sees itself as a quasi-judicial body, arbitrating between competing claims. A utility can afford to spend hundreds of thousands of dollars on economists, engineers and other experts to present its case. It will spare no expense on those hearings because so much is riding on them and because its costs are ultimately borne by ratepayers. Across the hearing room from this three-piece-suited battalion is, depending on the state and the importance of the issue, an assistant attorney general, an appointed government intervenor, a lawyer for a local public interest group or, as in Oregon, no one at all. Thus if rate hikes are approved routinely, it may be because regulators never hear a good argument for rejecting them.

The spoils claimed by the utilities don't end with higher rates. The vast majority of states have enacted automatic fuel adjustment clauses that permit surcharges to be levied on customers before a hearing is held, or with no hearing at all. …