Proposition 16

California’s proposition 16, which will be voted on next Tuesday, is an interesting use of California’s bizarre ballot initiative process. The proposition says that if a local government wants to start a municipal electrical utility, it must get a 2/3 majority of votes. The proposition was initiated and almost entirely funded by PG&E, a California electric company, which has reportedly spent over $35 million on advertising in support of the proposition. I rarely watch television, but I’ve received quite a few flyers in the mail about it. Some even list a long set of candidates and positions to endorse, along with proposition 16. However, since these flyers are required to list the groups which explicitly endorsed the flyer, it’s easy to see that the flyers are being put out for proposition 16, and they are trying to slide in support for it along with other candidates I might be inclined to vote for anyhow.

PG&E is the only company from which I can buy my electricity. Electricity distribution is a classic natural monopoly; why would two different companies put up wires to everybody’s house? Since modern life requires electricity, and since I can only get it from PG&E, I am a PG&E customer. Proposition 16 appears to be designed solely to preserve PG&E’s monopoly position, by making it much harder for communities to create their own municipal power companies. It would be hard enough to get a majority vote in favor of government run power; I think we can assume that a 2/3 majority would be effectively impossible. It’s pretty darn annoying that PG&E is spending $35 million, including money they collect from me, on this. Is that a good use of my money?

Municipal power is not impossible. For example, Palo Alto, California, uses a municipal power utility. It was notable during the rolling blackouts that affected most of California in the early 2000s that Palo Alto was immune. So it’s not as though PG&E deserves to be protected because they are doing a particularly good job. When a real crunch time came, they did a very poor job indeed.

It’s difficult for me to imagine why anybody would vote in favor of such a blatant power grab by a private company. But then, of course, there’s the $35 million. The opponents of proposition 16 have reportedly raised less than $100,000. I assume that if PG&E succeeds we will see more and more cases where private companies spend lots of money on ballot initiatives in their favor. I hope that it fails, and if I have any readers in California I encourage you to vote against proposition 16 this Tuesday.


  1. nigelm said,

    June 5, 2010 @ 12:57 pm

    Distribution is a natural monopoly but generation is not necessarily so and the two do not need to be owned by the same organisation.

    The UK model – which is not necessarily ideal – is that the generation and distribution are split. The distribution is a monopoly – previously government owned, now slightly more complex. I buy my electricity from a supply company – a choice of quite a number.

    Of course it really splits into 3 parts – distribution, generation and sales – companies that sell the stuff buying in the other 2 components as needed.

    Gas is done the same way. Water is still basically a monopoly setup.

  2. ppluzhnikov said,

    June 5, 2010 @ 3:12 pm

    Alternative analysis/conclusion:

  3. Ian Lance Taylor said,

    June 5, 2010 @ 10:26 pm

    nigelm: Yes, PG&E is in charge of electricity distribution for parts of California but electricity generation is handled in a much more complex manner. PG&E handles all the billing. California partially deregulated the electrical utilities, forcing PG&E to sell off its generation facilities, but they didn’t do it very well. This allowed Enron and others to artificially restrict supply, push spot prices very high, and led to the rolling blackouts 8 to 10 years ago.

    ppluzhnikov: Thanks for the link but I don’t buy it. If somebody wants to make a principled argument for why we should require a 2/3 majority before we do anything, I’m willing to listen. Until then, it should be majority voting for most things. Setting up a government utility for a natural monopoly is not special enough to require a 2/3 majority when most decisions require an ordinary majority.

RSS feed for comments on this post · TrackBack URI

You must be logged in to post a comment.