Mike Florio, a lifelong consumer advocate turned California Public Utilities commissioner, hasn't often found himself aligned with the California Chamber of Commerce, the Howard Jarvis Taxpayers Association and major power companies.

But in a very public setting not long ago, he warned about the issue that has exercised business advocates: the bill that is coming due as the state goes about reducing greenhouse gases and combating climate change.

"If we do not contain costs for ratepayers, we risk a potential ratepayer backlash when the costs of these contracts finally come into rates in the middle of this decade. The rate impact bomb is lingering on the horizon, and we cannot allow that bomb to go off," Florio warned at a Public Utilities Commission hearing a month ago.

Until Gov. Jerry Brown appointed him to the PUC last year, Florio, a lawyer, ran The Utility Reform Network, the leading consumer group that fights to keep utility rates low.

Florio supports the governor's goal of getting a third of its energy or more from renewable sources. He's also convinced of the need for AB32, the landmark 2006 legislation aimed at cutting greenhouse gases. But a "rate impact bomb" wouldn't be pleasant.

"I've been trying to sound the alarm on this," Florio told me. "A lot of people are looking at California and hoping we fall flat on our face. I don't want that to happen."


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Florio's worries aren't much different from those expressed by the state's major utilities, including PG&E, and by a lobbying coalition calling itself Californians Against Higher Taxes, led by the California Chamber of Commerce, oil industry and various anti-tax groups.

In ads, emails and letters directed at legislators, Californians Against Higher Taxes warns about $6-a-gallon gasoline. It's part of a campaign to persuade the Legislature to block the California Air Resources Board's cap and trade "auction" in which polluters would buy and sell pollution credits, with the state taking its cut.

In the auction set for Nov. 14, polluters such as oil refinery owners or power plant operators would buy and sell pollution credits in a system that would confuse Rube Goldberg and give bank robber Willie Sutton a warm feeling.

Lawmakers and Brown have big plans for the auction proceeds, which could amount to $1 billion, maybe more. It's key to the math that makes this year's budget balance, at least in theory. But the money is hardly free. You and I will pay the bill.

"The purpose of AB32 wasn't to raise revenue," chamber President Allan Zaremberg said. "The purpose was to reduce greenhouse gas. You can do that without an auction."

Scott Macdonald, the PR guy for Californians Against Higher Taxes, wouldn't say what the coalition would do if the Legislature doesn't block the auction. But members of the campaign could sue to halt it.

A suit could delay implementation of AB32, if not unravel key parts of it, and that wouldn't be good. AB32 is among the most far-reaching and important measures the Legislature has approved in decades.

Smartly, Californians Against Higher Taxes doesn't oppose AB32. Californians showed their support for efforts to reduce greenhouse gas by overwhelmingly rejecting a 2010 initiative, the oil-industry backed Proposition 23, which would have all but repealed AB32.

However, the firm that has organized Californians Against Higher Taxes, the Burlingame-based Woodward & McDowell, was part of the consulting team that tried unsuccessfully to win voter approval of Proposition 23.

Although the coalition claims to support AB32, political animals are tough to herd. Jon Coupal, president of the Howard Jarvis Taxpayers Association, a coalition member, was one of the out-front backers of Proposition 23.

The Air Resources Board is not about to budge.

"We have not found any solid grounds for the numbers they're floating," ARB spokesman Dave Clegern said. "In light of that, we're proceeding apace."

Wherever there is a potential pot of money in Sacramento, lawmakers grab. The budget bill headed allows the state to skim 15 percent of money generated in the auction by utilities as they buy and sell pollution credits. Legislators have noble notions about how to spend that money, such as making schools more energy efficient.

PG&E and other utilities have another idea -- returning all the money to ratepayers. In this instance, they're right.

Ratepayers have paid billions over the years for alternative energy. The solar industry, fuel cells and all the rest wouldn't exist without ratepayers' money. If there has to be an auction, the proceeds should be returned to ratepayers. Call it an AB32 dividend. It would soften the impact of the coming rate bomb.

Dan Morain writes for the Sacramento Bee.