This article is from Cal-Tax Digest, published
by the California Taxpayers' Association.
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Protecting Taxpayers in the Energy Crisis
By Larry McCarthy

Taxpayers are at risk for several billion dollars because the state has used public funds to underwrite the cost of electric energy for homes and businesses. Of enormous importance to taxpayers and the economy is a quick solution to the energy crisis that does not blur the distinction between taxes and electricity rates.

Substantial increases in electricity rates are inevitable as part of any comprehensive solution to assure reliable energy and to protect California's vibrant economy. Reliable energy is critical to this state's growing population and job-producing industry.

This conclusion has been reached by the California Alliance for Energy & Economic Stability, a coalition of leading business groups. The alliance - the California Chamber of Commerce, the California Business Roundtable, the California Large Energy Consumers Association, the California Manufacturers and Technology Association, the California Retailers Association and the California Taxpayers' Association (Cal-Tax) - cites three critical elements to a workable rate increase:

• Equitable distribution of rate increases while sheltering those in need;
• Promoting conservation to reduce outages;
• Implementing rate increases without causing soaring unemployment.

Attempting to insulate consumers from the realities of increased costs for energy consumption by shifting those costs from the rate structure to the tax structure discourages conservation and jeopardizes the fiscal health of the state. Consumers have some ability to respond to higher energy costs by managing utilization. Taxpayers have no control over their exposure to high energy costs financed through the tax structure.

California must also work now to increase the supply of electric energy for the future by doing whatever is necessary to expand generation capacity. Eliminating unnecessary bureaucratic impediments and providing tax incentives to encourage new generating capacity and self-generation may be methods of expediting financing and development of these energy facilities.

Cal-Tax also believes that the solvency of investor-owned utilities is critical to the delivery of reliable energy in California.

Reliable energy is critical to California's economic future. It is necessary to sustain the current workforce and attract additional investment. Failure to meet this state's electric energy needs as soon as possible will cost California jobs as businesses depending on reliable energy flee to other, more capable states.

Damage to the economy has already begun. California's credit rating was downgraded from AA to A-plus, one of the lowest state ratings in the nation. The April 24 action by Standard & Poor's Corp. increases the state's borrowing costs. Also, a study by the (San Francisco) Bay Area Economic Forum found that 34 days of rolling blackouts this summer would cost the state's economy $16 billion. That's far more than the economic impact of a 50 percent increase in commercial energy rates, the study found.

California must act now to stop the destabilizing effect this ongoing crisis is having on our economy.

Larry McCarthy 
is president of the California Taxpayers' Association (Cal-Tax).