Consumer Federation of California

SAN FRANCISCO’Californians will vote on two ballot initiatives this fall that at first glance would seem shoo-ins for approval in a state long associated with environmental activism.

The first would require utilities to generate half their electricity from renewable sources such as wind and solar. The second would provide rebates of up to $50,000 for the purchase of alternative-fuel vehicles through a $5 billion bond.

Supporters say the measures on the Nov. 4 ballot would help combat global warming and make California a leader in the alternative energy industry. Like most initiatives that wind up on the state’s ballot, however, they’re more complicated and contentious than advertised.

Opponents say they actually would undermine state efforts to promote alternative energy, add to California’s already bloated budget deficit, saddle taxpayers with billions in debt and potentially benefit a handful of companies, including one linked to Texas oilman T. Boone Pickens.

Propositions 7 and 10 are two of the most heavily contested of the 12 statewide initiatives on California’s ballot, as measured by campaign contributions.

Experts on California’s initiative process say the propositions are the latest examples of special interest groups seeking to pass laws or authorize state bonds through the ballot. Anyone can place questions before voters if they collect enough valid signatures.

"What is clear is that increasingly complicated, expensive
and important measures are being put directly to the vote of the people instead of going to the Legislature," said Tracy Westen, chief executive of the Center for Governmental Studies in Los Angeles. "You have a very potent instrument for those who can afford to pay for it, without many checks and balances."

Voters in at least one other state will decide a similar issue.

An initiative on the Missouri ballot would require utilities to use renewable energy sources such as solar, wind, biomass and hydropower for at least 2 percent of the electricity they sell by 2011. That mandate would increases to 15 percent a decade later.

The alternative energy initiatives capitalize on the nation’s topic du jour, tapping into popular sentiment over the need for cleaner fuels and weaning the country off its reliance on foreign oil.

Proposition 7 would give California the nation’s most aggressive renewable energy mandate, requiring utilities to generate half their electricity from windmills, solar panels, geothermal plants and other renewable sources by 2025.

The measure was placed on the ballot by Arizona billionaire Peter Sperling, vice chairman of Apollo Group, which operates the University of Phoenix. He has given $3 million to promote the initiative in his former home state.

Supporters say California must curb its greenhouse gas emissions and encourage other states to do the same.

"The time has come where we have to think big and fast," said Donald Aitken, former chairman of San Jose State University’s Department of Environmental Studies who now runs his own consulting firm. "By setting those targets and achieving them, it will be terribly important in pulling other policies internationally."

Critics say the measure is well-intentioned but flawed.

The measure is opposed by leading environmental groups, taxpayer advocates and much of the renewable-energy industry who say it would shut out small green-energy projects, drive up electricity prices and set back California’s already aggressive alternative energy mandates.

The state’s largest utilities have raised nearly $24 million to defeat Proposition 7, with most of that coming from Pacific Gas & Electric Co. Southern California Edison Co. calls the initiative "misguided," saying it would disrupt existing renewable energy development and lead to higher utility bills.

Some renewable-energy firms say it could force them out of business because the mandate would exclude small-scale projects such as rooftop solar-electric systems.

The state’s utilities already are having trouble meeting California’s current mandate to generate 20 percent of its electricity from renewables by 2010. A recent report by the state Public Utilities Commission projects California will miss the target by at least three years.

Experts say a higher target for renewable energy is laudable, but some say California must first overcome the barriers keeping utilities from meeting the current mandate, such as a shortage of transmission lines connecting remote energy projects to urban areas.

"We think it would obstruct and delay renewable energy development in California," said Ralph Cavanagh, a senior attorney at the Natural Resources Defense Council. "The people who brought this initiative forward were not knowledgeable about renewable energy. They hired people who didn’t know what they were doing."

Proposition 10 would authorize a $5 billion bond that would have to be repaid from California’s general fund.

It would provide $2.5 billion in rebates for buyers of alternative-fuel vehicles and another $340 million in rebates for highly fuel-efficient vehicles such as the Toyota Prius. The rest of the money would be used to fund research and development of alternative energy technologies, as well as grants for training and education.

Backers say the money will jump-start the market for cars and trucks that run on hydrogen, natural gas, methane, electricity and propane and help cut greenhouse gas emissions to 1990 levels by 2020.

Opponents say California, which faces a $15.2 billion deficit and remains without a budget for the current fiscal year, can’t afford the bond. Proposition 10, if approved by voters, would cost the state $9.8 billion, or about $325 million annually, over 30 years.

They also say the measure was designed to benefit its chief sponsor, Clean Energy Fuels Corp., a Seal Beach, Calif.-based company founded by Pickens, the billionaire oilman. The company, which owns natural gas fueling stations across North America, has donated more than $3 million to the campaign.

Others that could stand to gain if the initiative passes also have chipped in. Aubrey McClendon, chief executive of Chesapeake Energy Corp., an Oklahoma City-based provider of natural gas, donated $500,000 to the campaign. Another $250,000 came from Westport Fuel Systems Inc., a Long Beach, Calif., company that makes natural gas engines for heavy-duty trucks.

The bond measure fits the so-called "Pickens Plan" to reduce the country’s dependence on foreign oil by building more wind farms to replace electricity produced from natural gas. That would leave more natural gas to fuel vehicles that now run on gasoline and diesel.

Critics say owners of cars and trucks powered by natural gas would get most of the $2.5 billion in rebate money because there are few other vehicles available that would qualify. Increased sales of natural gas vehicles could provide a big boost to the fueling business of Clean Energy Fuels Corp.

"It’s a classic case of a wealthy special interest using the California ballot initiative system to enrich itself," said Richard Holober, who heads the Consumer Federation of California. "California is literally going broke and cannot afford another major cost that will result in reduced public education, public health and public safety."

Todd Campbell, Clean Energy’s public policy director, said Proposition 10 is designed to "create a market for low-carbon fuel vehicles" and that there is no guarantee the company would benefit.

"I don’t think it’s a given that Clean Energy is going to cash in," Campbell said. "I wish it were that simple."