“Electricity deregulation is a matter of religious faith” says No on 7’s chief economist

I noticed that the No on Prop 7 website has what appear to be several white papers on the economic impacts if Prop 7 passes. These white papers are all predicated with the phrase “economists predict…”

Not surprisingly, these 'white papers' forecast nothing short of a financial apocalypse if Proposition 7 passes. All the doom-and-gloom predictions made me curious about who these ‘economists’ doing all this ‘predicting’ were.

Oops…Looks like what the utility-funded No on 7 campaign meant to say was: The Sacramento-based political consulting firm that has been paid over $100,000 by PG&E, Sempra, and Southern Cal Edison to defeat Proposition 7 predicts…”

True story. The ‘economists’ that the Big Utilities are trying to scare people with is actually a Republican political consulting firm called The Forward Observer that is staffed by Gov. Pete Wilson and Arnold Schwarzenegger advisors. Incidentally, this is not the first measure the Forward Observer was hired by big industry money to defeat –

“Californians for Affordable Prescriptions retained Forward Observer to assist in a campaign to support Proposition 78 and oppose Proposition 79 on the November 2005 California statewide ballot. The initiatives were competing measures addressing the cost of prescription drugs in California. The campaign committee sought out Forward Observer to assist in advancing substantive arguments and responding to the opposition.”

Proposition 78 was the measure sponsored by the pharmaceutical industry, which was in a tizzy over Proposition 79’s promise to lower prices on prescription drugs for poor people and seniors.

But more interesting than the Forward Observer’s past campaigns may be the Forward Observer’s ‘economists’ themselves.

I’ve mentioned it before, but the remarkable thing to me about looking into who opposes Prop. 7 is the emerging roles that all of these parties played in getting deregulation passed for the Big Utilities. Turns out, the Forward Observer’s economist was right there with PG&E, SDG&E, Ralph Cavanagh of the NRDC, the Democratic and Republican parties, all working together to help Enron and the Big Utilities get deregulation passed in the Legislature.

From a February, 2001 New York Times article:

“…since deregulation began in earnest, this dogma (that market competition makes electricity cheaper) faces a serious real-world failure.

Despite this, many economists still think that electricity deregulation will work. A product is a product, they say, and competition always works better than state control.

"I believe that premise as a matter of religious faith," said Philip J. Romero, dean of the business school at the University of Oregon and one of the architects of California's deregulation plan. Optimists like Romero say the current period is merely an ugly transition, not yet even true deregulation."

Interestingly, S. David Freeman is also quoted in the above article, pointing out something of the obvious to us now:

Deregulation promised much, but at least in California, it hasn't yet delivered, and people lose patience very quickly when the lights go out. As S. David Freeman, general manager of the Los Angeles Department of Water and Power, said, "What is the purpose that's being served by going to a system of higher prices, other than satisfying people who believe that the marketplace is better?"

Like all of the No on 7 campaign’s ‘experts’, the Forward Observer’s ‘economists’ were assisting in deregulating California’s electricity market and defending the move even after the lights had gone dark on Californians. And then, as now, S. David Freeman was fighting against the Big Utilities’ lie campaign.

I posed the question in the headline of my blog – What’s with all the inexplicable opposition to Proposition 7, the Solar and Clean Energy Act of 2008?” It would seem to me that the Big Utilities are terrified of Proposition 7 because it removes all the loopholes in current law, so that they cannot avoid the mandate to get off dirty fossil fuels and coal, which is cheaper and more lucrative for them. And indeed, every layer of this onion that I unpeel reveals another connection to the Big Utilities.