People power vs. power companies.
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. Most states allow electric utilities to charge their customers for construction work in progress, which amounts to paying for power they will theoretically receive in the future. Finally, utilities are universally permitted to collect money for "phantom taxes" (taxes they overestimate and ultimately don't have to pay), which cost electric utility customers almost $5.1 billion in 1982, according to a study conducted by the Environmental Action Foundation. Arguably, such practices flourish because citizens lack adequate representation in the hearing rooms where they are approved.
Many states have government-appointed consumer counsels, but they are to the utilities' representatives as public defenders are to the ritzy corporate lawyers. Also, they are vulnerable to political pressure. Brian Lederer, an aggressive public advocate in Washington, D.C., was ousted in 1983 by Mayor Marion Barry Jr., apparently for his effectiveness at challenging the utilities. According to Mark Green and Michael Waldman, writing in The Village Voice, when New York's Consumer Protection Board began organizing consumers in opposition to a rate hike request by the Niagra Mohawk Power Company, the State Senate lopped $50,000 from the board's computer budget. Unlike government intervenors, "a Citizen Utility Board isn't in jeopardy when it starts making waves," says Tom Tobin, who is coordinating CUB campaigns around the country. "What's more, a CUB is directly accountable to consumers; it's got the resources to do a crack job on a number of cases, and it can do public education and lobbying. All of this make sit more powerful than any public agency or board."
One naturally looks to Wisconsin for information on how well the boards wokr, since it was the first state to have one. Attracted by eye-catching CUB leaflets ("ARE YOU MAD AS *!% ABOUT HIGH UTILITY BILLS?") accompanying their utility bills, 27,000 people joined during the first year of operation, and membership has more than quadrupled since then.
The annual budget of $719,000 has been put to work in a way that has won plaudits even from skeptics. The board's claim to have saved ratepayers about $100 for every dollar contributedf proves to be more than puffery, and utility officials grudgingly concede its effectiveness. Consider:
* CUB-sponsored testimony played a decisive role in defeating both automatic fuel adjustment charges and Wisconsin Telephone's request for local measured service.
* The CUB persuaded the Public Service Commission to assess consumers' ability to pay higher utility rates and then take that into account for all future rate increases--a ground-breaking policy.
* Clever cross-examination of Wisconsin Telephone officials proved that the financial indexes used by the company to win a previous increase in its rates had since improved. As a direct result of this strategy the commission, which had seemed sympathetic to another increase, denied the request.
Despite the success in Wisconsin, or perhaps because of it, getting the necessary legislation in other states has not been easy. In Illinois the legislators acted on a CUB initiative only after 111 cities and towns had approved it by a margin of at least two to one. Oregon's referendum effort was mounted because the legislature had killed a CUB bill. A few powerful state senators in New York have refused to allow pertinent legislation out of committee, so proponents are applying to the Public Service Commission instead. The commission has already endorsed the idea of establishing a board in New York, but utilities are suing to block implementation.
Progress is being made, however. Each year, CUB bills are introduced in more states and get a little further in those states where they are already before the legislature. In Massachusetts, for example, the Public Interest Research Group has signed on 105 legislative co-sponsors, and the bill could come to a vote before long. A CUB for Pacific Gas & Electric's customers in California may be established soon, and Montana's Public Service Commission is seriously considering a CUB proposal as well.
Besides their significance in utility reform, according to Tobin and his colleagues, Citizen Utility Boards signal a consumer revolution, a decisive step toward the empowerment of citizens. If corporate interests are developing a nervous twitch as they watch the growing popularity of CUBs, it is understandable: the architects are happily sketching plans for organizations that would guarantee consumer representation on insurance and banking issues, using a similar procedure for funding.
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|Date:||Dec 29, 1984|
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