.How Energy Companies Are ‘Robbing the ‘Hood’

Low-income residents in Oakland and throughout the state likely will face higher energy bills in the years to come, while wealthy residents will see rate cuts.

The Kardashian family’s spotlight consumes real power. For five seasons, the gated-community of Hidden Hills, Calif., served as the backdrop for the TV show “Keeping Up with the Kardashians.” During that time, Hidden Hills consistently topped the list of what Forbes magazine has called the state’s “most egregious energy hogs.”

In September 2012, every home in Hidden Hills consumed an average of nearly four-and a-half megawatt hours of electricity, according to energy consumption data from the California Public Utilities Commission. That’s 4.3 million watts used to fuel each of the star-powered homes owned by Drake, Britney Spears, the Osbournes, Jessica Simpson, and Sean Penn. For just a single month. You would have to leave a standard light bulb on for more than eight years to match that level of energy use.

About 370 miles north, the average household in Oakland used less energy than that during all of 2012. But Oakland and Hidden Hills aren’t anomalies. There’s a strong correlation between energy use and wealth.

Browse the country’s most expensive zip codes, and you’ll find a list of the state’s biggest energy consumers. Atherton, Hillsborough, Los Altos Hills, Rolling Hills, and Woodside, are all among the state’s biggest energy hogs, while communities like Oakland and Southeast Los Angeles consume the least energy.

Yet, in the coming years, energy bills likely will be going down in Hidden Hills and up in Oakland, thanks to a controversial energy rate restructuring plan that was passed by the legislature and signed by Governor Jerry Brown last year.

This is the story of how that bill passed, why a notorious special-interest junket to Maui is partially to blame, and how the state Senate’s only convicted felon tried to stop his colleagues from “robbing the ‘hood.”

Not every kilowatt of electricity sold in California costs the same. The CPUC categorizes rates in five different price tiers, based on energy consumption. Some consumers, as a result, pay as much as 233 percent more than others. Pacific Gas & Electric Company customers in Tier 1 pay as little as 12 cents per kilowatt, whereas Tier 4 customers, who use more than 200 percent of the baseline energy consumption, pay 40 cents for the same quantity of electricity.

As heavily regulated and complicated as it may be, energy policy in California traditionally could be reduced to one simple philosophy: The more energy you use, the more you pay.

Is this tiered-pricing fair? Well, that depends on your perspective. For low-income families, it means a relatively fixed price as long as they stay within the energy baseline. The rate structure also encourages energy conservation and provides an incentive to make energy-savings improvements to older, energy-inefficient homes. However, in hot-weather areas of the state, such as the Central Valley, rich and poor alike spend big bucks to run the AC during the middle of summer.

Fair or not, the policy means higher energy bills for hot-weather regions of the state and large commercial users that consume substantial amounts of energy. It also means lower bills for consumers who invest in renewable energy systems that take their homes off the grid.

But that all may come to an end with Assembly Bill 327, which took effect on January 1. Authored by Assemblyman Henry Perea, D-Fresno, the bill promises to produce the biggest change to California’s energy laws since deregulation. The bill grants the California Public Utilities Commission substantial power to rewrite California’s energy policy.

Perea contends that the state’s energy policy needed to be updated for the 21st century. “AB 327 is a balanced approach to modernizing California’s outdated rate structure to protect all Californians from soaring energy bills and addressing the state’s renewable energy goals,” he said in a statement.

AB 327 authorizes the CPUC to reduce the number of rate tiers and significantly lower energy rates for the state’s biggest energy users. It also will allow utilities to charge customers who install rooftop solar panels and send energy back to the grid. And it allows the CPUC to add a surcharge of up to $10 on all energy bills — regardless of how much energy people consume. All of these changes likely will mean higher bills for people who conserve and for poor and middle-class families in the state’s lowest tiers, including low-income electric and gas customers in the California Alternate Rates for Energy (CARE) program.

State Senator Jim Beall, D-San Jose, who was one of one of only a handful of state legislators to oppose the energy rate-restructuring bill, believes it is unfair to raise rates and add a $10 monthly surcharge on people who are conserving energy. “You could use no electricity — you could put back into the system — and you’d still be charged,” said Beall. “I kind of thought of it as a tax increase, where you tax people that conserve.”

Oakland residents could be among the hardest hit by AB 327. In 2012, the average monthly bill for each of PG&E’s 161,288 customers in the city was $55. That means the potential $10 monthly surcharge would represent an 18 percent increase in energy costs for the average Oakland household. And that price hike does not include further tiered-rate increases made possible by the new law.

PG&E officials contend that the law is necessary to bring equity to the state’s energy rate structure, because the utility argues that the biggest energy users have been paying more than their fair share. “By making it possible to bring high rates back into line with costs, the law will help make California’s system of electric rates fairer, simpler, and more equitable,” PG&E President Chris Johns told Currents, the company’s in-house publication.

But opponents of the bill, which included the Sierra Club, dismiss Perea’s rhetoric that the bill “protects all Californians.”

“AB 327 is a powerful reminder of the extent to which utilities influence public policy to the benefit of their shareholders and the detriment of working families,” said Sierra Club California Director Kathryn Phillips. “It’s disappointing that so many legislators walked away from their constituents’ interest.

“They’ve now saddled Californians with up to $120 a year in new charges on their electricity bills,” she added.

So how could an energy bill that benefited the state’s energy giants by “saddling” low-income Californians with higher electricity bills get through a Democratic supermajority in both houses of the state legislature, especially at a time when income inequality is one of the hottest topics in American politics?

“All the big utilities got their lobbyists tap dancing on the steps of the Capitol,” explained Senator Beall, who has spent his time in Sacramento giving a voice to underrepresented communities — children in foster care, low-income families, and people with disabilities.

Since 2011, the state’s three biggest utility companies — PG&E, Sempra Energy, and Southern California Edison — have spent a combined $14 million in lobbying politicians. Edison has led the pack with $4.8 million in checks to lobbyists, according to state disclosure records. Sempra and PG&E aren’t far behind with $4.7 million and $4.4 million, respectively.

Think of these numbers as a combined figure. Unlike other industries, utility companies aren’t competitors. They each enjoy monopolies over their respective areas and largely share the same interests in swaying energy policy. And in the last few years, all three big utility companies made energy rate restructuring their top legislative priority.

The $14 million in lobbying also doesn’t include the millions of dollars energy companies spent in campaign contributions. In the last two years, energy utilities donated a combined $8.64 million to political candidates and campaigns. PG&E’s campaign spending dwarfed the others. From 2012-13, Sempra spent $1.98 million, with Edison donating $1.3 million.

“Sometimes, corporations have the ability to turn off beliefs on both sides,” Beall said. “There are some legislators that are conservatives — until it comes to dealing with corporations. There are some legislators that are liberals — until it comes to dealing with corporations.”

If there’s a single word associated with California’s energy policy, it’s deregulation. In 1996, California passed Assembly Bill 1890, a major restructuring of energy policy that led to the 2000-01 energy crisis. The man who was widely regarded to be the legislative architect of energy deregulation was the bill’s principal co-author, Steve Peace. A rebel Democrat, the San Diego Assemblyman was a member of the “Gang of Five” that tried to unseat powerful Assembly Speaker Willie Brown. He was also the chairman of the State Senate Committee on Energy in the mid-Nineties, when the legislature approved deregulation.

Although the legislature passed AB 1890 unanimously, Peace earned the lion’s share of the public blame. He now says that he opposed deregulation and tried to stop it. But that’s not how history recorded it. In a 2000 report on what led to the state’s energy crisis, the San Francisco Chronicle described how AB 1890 became law four years earlier: “During a hurried two-week conference in August — dubbed the ‘Steve Peace death march’ for his propensity to keep negotiators at the table late into the night — the fine points of the energy law were hashed out.” 

By 2006, Peace and Dan Howle, his former chief of staff, had founded the Independent Voter Project, describing it on the organization’s website as a way to “again become active participants” in the public decision-making process.

“When you’re a candidate, the scary thing is these independent guys,” Peace explained in 2012 at a campaign finance reform symposium, co-hosted by the California Fair Political Practices Commission and USC’s Price School of Public Policy. Peace was referring to independent expenditure committees — political groups that can raise and spend unlimited amounts of money for or against a candidate. But Peace could have been talking about the “independent guys” like him at the Independent Voter Project.

The Independent Voter Project is best known for hosting an annual bash in Maui that brings lobbyists and legislators together to talk policy away from the public and press. The group, which claims it is “sincerely independent, transparent, and inclusive,” won’t reveal the names of the legislators that participate in its junket or all of its donors. By law, it isn’t required to make such disclosures.

“Our major contributors include diverse corporate entities such as Eli Lilly, Pacific Gas and Electric, the correctional officers labor union CCPOA, and high-wealth individuals, such as Charles Munger Jr., John Moores, and Board Member Steve Peace,” explained Jeff Marston, the co-chair of the Independent Voter Project.

But Marston’s list is by no means comprehensive. The public has few methods of verifying the interest groups behind the Independent Voter Project. However, some checks occasionally show up on campaign finance reports. For example, Occidental Petroleum Corporation, a California-based oil and gas exploration and production company, donated $7,000 to the Independent Voter Project on September 4, 2013 to underwrite the November 2013 IVP Conference.

Understandably, this arrangement — special interests footing the bill for legislators to secretly relax with lobbyists at a five-star resort — doesn’t sit well with good government groups. “If there are legislative discussions or the agenda of leadership that is shaped by this secret conclave in Maui,” said Kathay Feng, executive director of California Common Cause, “people should know the identities of the legislators who attend and the names of the corporations and unions who are paying for this exclusive audience.”

At the Independent Voter Project’s November 2013 conference, the exclusive audience discussed AB 327. “With the recent passage of AB 327, which reformed the rate structure for energy consumers in California, along with the current public debate on the feasibility of fracking in the state, California lawmakers and energy representatives had much to discuss in the Independent Voter Project panel discussion on Energy at last week’s conference,” wrote Jane Susskind, the community manager at the IVN Network, which is a product of the Independent Voter Project.

A year prior, energy rate restructuring was also a hot topic at the Independent Voter Project’s Maui bash. At the time, in mid-November 2012, some California Republicans were concerned that late absentee and provisional ballots might tip the scales in favor of Democrat Steve Fox in the 36th Assembly district. But if Assembly Republican leader Connie Conway was worried, she didn’t show it. Instead of participating in a ballot-monitoring program for her candidate, Ron Smith, Conway was relaxing in Maui, a guest of the Independent Voter Project.

Wined and dined to the tune of $2,514, Conway was one of a dozen legislators courted that year at the Fairmont Hotel Kea Lani resort, which is described on its website as “Hawaii’s only all-suite and villa luxury oceanfront resort” and a “luxurious haven in one of the most scenic places on Earth.” The Independent Voter Project provided each legislator with up to $2,800 to attend the event.

“The track record of this conference is for special interests to have an exclusive audience,” said Feng of Common Cause. “This is lobbyists buying exclusive and private access with legislators.”

In November 2012, that exclusive audience was talking about energy rate restructuring. “There wasn’t a bill yet,” a source familiar with the annual Maui conference told me. “But the concept of energy rate restructuring was discussed in Maui that year.”

State lobbying disclosure reports on file with Secretary of State’s Office independently confirm that energy rate restructuring was discussed in Maui during the 2012 conference.

On November 12 of that year, Assemblyman Bill Berryhill was monitoring the ballot counting in his unsuccessful state Senate race. But his brother, State Senator Tom Berryhill, was drinking with lobbyists for PG&E at the Kea Lani. According to PG&E’s lobbying reports, the conversation focused on “energy efficiency and rate reform,” “net energy metering,” and “residential rate restructuring,” among other topics. Two days later, as Bill Berryhill lost ground in his state Senate race, PG&E’s lobbyists gained ground with Tom, sharing more drinks and a $139.44 bill at the Kea Lani.

A week later, the same PG&E lobbyists went from Maui to Fresno — yes, Fresno — where they dined at George’s Shish Kebab with Erica Cabrera, the district director for Assemblyman Perea, the author of AB 327. Two weeks after that, PG&E’s lobbyists were throwing back drinks at the Sacramento Hyatt’s Dawson’s Restaurant with Conway and Assemblyman Frank Bigelow, R-O’Neals. Neither Conway nor Bigelow reported those beverages on their annual disclosure reports — a potential violation of state ethics laws. According to records, they discussed “residential rate restructuring.”

According to state disclosure reports reviewed by the Sacramento Bee, a dozen state legislators received money from the Independent Voter Project to attend the 2012 Maui conference. Eleven of the twelve politicians who jetted to Maui voted for AB 327:

State Senator Bill Berryhill, R-Twain Harte: $2,860;

Assemblyman Isadore Hall, D-Compton: $2,653;

Assemblyman Reggie Jones-Sawyer, D-Los Angeles: $2,602;

Assembly GOP leader Connie Conway of Tulare: $2,513;

Assemblyman Paul Fong, D-Cupertino: $2,491;

Assemblyman Jeff Gorell, R-Camarillo: $2,383;

Senator Steve Knight, R-Palmdale: $2,343;

Assemblywoman Bonnie Lowenthal, D-Long Beach: $2,298;

Assemblyman Manny Perez, D-Coachella: $2,298;

Assemblyman Donald Wagner, R-Irvine: $2,179;

Senator Ron Calderon, D-Montebello, $985.

Legendary state Assembly speaker Jesse Unruh used to say of being a legislator dealing with lobbyists and big donors in Sacramento: “If you can’t eat their food, drink their booze, screw their women, and then vote against them, you have no business being up here.” Ironically, the 12th Maui guest, the only one to apply Unruh’s ethic to energy rate restructuring, could soon be driven out of Sacramento.

It’s called robbing the hood,” state Senator Rod Wright, D-Inglewood, said of AB 327 when it reached the Senate floor on September 9, 2013. “This is a bad bill. You’re going to raise people’s rates.”

AB 327 started out as a measure to smooth out rates for residents of the Central Valley. But the final bill, which was never heard by the energy policy committee, included a number of amendments that will hurt the people the bill was originally supposed to help. “For people who thought, ‘Wow, I’m going to help the Central Valley people because I got rid of tier structuring,’ guess what — you didn’t. It’s still there,” Wright said. “You have the potential to raise rates somewhere in the excess of 50 percent.”

Wright’s objections to AB 327 focused on three areas: net-energy metering, renewable energy standards, and the potential $120 annual energy surcharge. Since he’s considered to be the legislature’s foremost expert on energy policy, Wright was able to inspire four of his Senate colleagues to vote against the bill.

“Members, my colleague from Los Angeles said this bill is robbing the ‘hood,” said state Senator Lois Wolk, D-Davis, one of the Senate’s no votes on AB 327. “And in my ‘hood, he’s absolutely correct. In my ‘hood, the farmers, the schools, the wineries, and others have made financial investments in renewable energy systems based on the current program. And 327 could significantly undermine those investments and their willingness to invest in renewable energy technologies in the future.”

Designed as an incentive to install renewable energy systems, such as solar panels, net-energy metering allows customers to sell energy they don’t use back to the grid. But it’s not as simple as letting every customer run the meter backwards.

Energy utilities persuaded the state to adopt a 5 percent cap on net metering. And some of their concerns are understandable. First, utility companies must pay to maintain transmission lines. “If you think about it, if everyone was on net metering, who would be paying for the grid that we all need to have?” argued PUC Commissioner Mike Florio at a recent hearing.

Second, there is a fluctuating need for power. Energy produced from solar panels may come when it’s not needed on the grid.

But instead of addressing these issues, or taking more time to figure out a compromise on net metering, the legislature chose to codify the CPUC’s net-metering policies, which Wright contends had been illegally adopted by the agency. It also relinquished future decision-making power to the un-elected CPUC board.

“A Faustian bargain was made, and in that bargain, one of the things that we did is we codified an illegal act by the PUC,” Wright said. “When you’re voting for this bill, you should understand that the PUC illegally increased NEM, the net-energy metering bill. They did that illegally. They know that it was illegal. They know that they should be sued. So what they did is, they slipped it in this bill so that you will codify the illegal activity that they engaged in. You should say to them absolutely not.”

There’s a cruel irony to Wright’s opposition to AB 327 for its “illegality.” The irony: In late January, Wright was convicted of eight felonies for lying about where he lived. The cruelty: Wright’s lies sent him to Sacramento where he fought on behalf of ratepayers against illegal rate hikes.

In the end, just five state Senators voted against AB 327: Beall, Wright, Wolk, Ted Lieu (D-Torrance), and Marty Block (D-San Diego). In the State Assembly, only Assemblyman Das Williams (D-Santa Barbara) voted against the bill. The policy objections raised by Wright were no match for the political power of energy companies.

In 2012, the Independent Voter PAC spent $187,450.83 to defeat Marty Block’s campaign for the state Senate. So why would “independent voters” be so opposed to Block? Perhaps it’s because they’re being paid by energy companies.

Last year, the Independent Voter PAC received $110,000 from utilities — $80,000 from Sempra Energy and $30,000 from PG&E, according to state campaign finance reports. It was a small but important part of the millions of dollars energy utilities have spent in recent years. That spending also helped finance a slick marketing campaign that portrays itself as a news outlet.

A portion of Sempra’s funding was earmarked, according to the news site UT San Diego, for “paid consultant IVC Media to develop the website and social media campaign” for AB 327.

IVC Media, LLC fulfilled its obligations to the energy companies with the website FixMyEnergyBill.com. IVC Media employees also posted articles on the Independent Voter Network’s “news” website IVN.us.

“IVC Media was hired on a contract completely unrelated to IVP or IVN.us,” Chad Peace, president of IVC Media, wrote in an email to me. “As you also know, IVN.us is an open platform. I went back and looked to see if there were articles concerning AB327 on IVN. There was 1.”

But there wasn’t just one article; there were four, all but one of which plugged the “Fix My Energy Bill” website.

“This bill comes at a time when small business, families, and seniors are worried about a potential big spike in their energy bill,” wrote Michael Higham, a member of the IVC Media, LLC Team, in a July 2013 post on the Independent Voter Network. “The idea is to make rates fairer by making energy rates more equitable, but political consequences may get in the way of practical policy.”

In May 2013, Higham wrote a similar piece that praised the Perea bill as a measure “introduced to address the inequity between rate tiers.” Another piece by Lucas Eaves included an info-graphic that promised “AB 327 would not change the rates, it would just give the CPUC the authority to MAKE RATES FAIR.”

It’s not uncommon these days for consulting firms to publish favorable content in support of a bill. But this media spin was different because of the people behind IVC Media. “None other than Chad Peace, son of Steve, the politically peripatetic former legislator who has been busy been taking apart California’s political party system, among other endeavors,” explained San Diego Reader‘s Matt Potter in an August 2013 blogpost. “And Steve runs the non-profit Independent Voter Project, which throws an annual fall bash for lobbyists and California legislators on the island of Maui that has drawn national media scrutiny for its practice of mixing fun and alleged influence peddling far from prying public eyes.”

Steve Peace told the San Diego Reader that the Independent Voter PAC is separate from the Independent Voter Project and IVC Media. It’s true that the entities are different, but the people behind the organizations share a network of overlapping families and connections.

Chad Peace is the director of operations for IVC Media, LLC, which received the $65,000 to “design internet communications regarding AB 327.” Last year, the Independent Voter PAC paid Chad’s IVC Media another $77,500. Another connection: The Independent Voter PAC reimbursed Dan Howle, a board member for the Independent Voter Project, for a post office box rental, according to state campaign finance reports.

Plus, there are connections to Steve Peace’s glory days drafting energy policy in the legislature. In 2013, Independent Voter PAC paid $12,500 to an Arizona company, Centerline Consulting, LLC. According to business filings obtained from the Arizona Corporation Commission, the two individuals on record for the company are Gary Adrian Condit and Chad Mathew Condit. Those names should be familiar. Gary Condit, the former Central Valley Congressman brought down by the Chandra Levy case, served with Steve Peace in the state Assembly. He was a renegade Democrat, just like Peace, one of the “Gang of Five.” In 2012, Condit’s son, Chad, ran as an independent candidate for Congress with the backing of the Independent Voter PAC.

Add one more Condit into the mix, Gary’s daughter, Cadee. She’s listed on IVC Media’s website as Cadee Condit Gray, a member of the team in charge of government affairs. She’s also the wife of Assemblyman Adam Gray, a Central Valley Democrat. Assemblyman Gray not only voted for AB 327, the energy rate restructuring bill, but was among the exclusive group of state legislators who attended the November 2013 Maui conference, hosted by none other than the Independent Voter Project.

Same “independent” voters. Same last names. Same sweeping changes to energy policy.

A lot of folks are wondering ‘What does this mean for my bill?'” Stephanie Chen, energy policy director for the Greenlining Institute, told the San Jose Mercury News. “The truth is that we don’t know yet.”

But the mystery may be by design. AB 327 didn’t raise rates, its supporters say. It just kicked the final decision over to the California Public Utilities Commission, which is chaired by Michael Peevey. And who really knows what the former President of Edison International and Southern California Edison Company will do?


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