Consumer Federation of California

Pacific Gas and Electric Company’s Proposition 16, an attempt to require the approval of two-thirds of local voters to create new, publicly owned electricity districts, was defeated Tuesday night. The giant utility had raised and spent some $46 million to win passage ‘ more than 575 times the amount raised by opponents.

 ‘When you’re being outspent $46 million to $80,000, the fact that it’s this close, I think people smelled a rat. I think they overspent until people got suspicious,’ said Richard Holober of the Consumer Federation of California, opponents of the initiative.

The initiative, Proposition 16, which had led narrowly, fell behind by 47.5 percent to 52.5 percent, with 99 percent of 23,000 precincts reporting. The gap had widened through the night and into the early morning as returns came in from heavily Democratic counties, including Los Angeles, San Francisco, Santa Clara  and Alameda.

The measure was spawned by PG&E’s opposition over the years to the formation of locally owned public electricity districts. In one campaign several years ago, the utility spent some $11 million fending off an attempt in Yolo County ‘ now in PG&E’s service area ‘ to join the Sacramento Municipal Utility District.

PG&E strategists hoped that the two-thirds-vote requirement of Proposition 16 would limit future efforts to form local districts. The utility characterized the plan as a taxpayer-protection measure that would curb risky investments by local governments.

Opponents, led by The Utility Reform Network, a San Francisco-based, ratepayers’ advocacy group, said Proposition 16 simply allowed PG&E to block locals’ attempts to own and operate their own utilities.

Nearly all of the money to finance the campaign came from PG&E itself, except for a $91,258 contribution from the state Chamber of Commerce. Of the 15 donations, the largest single contribution was $13 million on Feb. 26. Opponents raised about $80,000.

Statewide public polling data prior to the primary election was not readily available, although a SurveyUSA telephone poll released on June 7 said the race was too close to call.

In a statement to shareholders, the company noted earlier that the per-share cost could be 6 cents to 9 cents to finance the campaign, which translates into a total campaign price tag of $25 million to $35 million – $11 million shy of what ultimately turned out to the final price tag. The corporation had $1.22 billion in profits during 2009.

PG&E and its allies believed that the high-dollar issues involved in creating an electrical utility or what are known as ‘community choice aggregation’ districts – such as was set up in Marin County – should receive voters’ careful scrutiny before encumbering local governments with long-term debt. The high threshold of a two-thirds vote, they argued, is justified when large amounts of public money are at risk.

But critics contended that Proposition 16 would cripple the ability of local governments to create publicly owned and operated utilities throughout the state because the two-thirds-vote threshold traditionally has been difficult to surpass.