Edison bills in Ventura likely to have 1% surcharge for city

Oct 16, 2009 (Ventura County Star - McClatchy-Tribune Information Services via COMTEX) -- SCE.Q | Quote | Chart | News | PowerRating -- A surcharge on all electricity bills in Ventura -- proposed in the city's new franchise agreement with Southern California Edison -- could jolt residents and businesses for an additional $845,000 a year.

The 1 percent surcharge -- the first of its kind among Edison customers in Ventura County -- stems from the city's latest effort to generate new revenues after making $11 million in budget cuts this year. Previous efforts to charge Ventura residents for 911 emergency service sparked much controversy, and the fee eventually was dropped.

The latest proposal comes as Ventura officials are trying to persuade voters to support a half-cent sales tax increase on the Nov. 3 ballot. But unlike the tax measure, voters have no say on the electricity surcharge -- leaving taxpayer advocates wondering if it violates the state law requiring voter approval for new taxes.

Ventura officials and other city attorneys say it's perfectly legal and in line with a growing number of communities getting utility companies to pay for impacts on city property. The revenues, they say, would go to preserve services like street paving and public safety.

The customer surcharge was the result of two years of tough negotiations between Edison and the city over a new 25-year franchise agreement, Public Works Director Ron Calkins said.

Under the deal, adopted by the City Council in July without any citizen opposition, Edison agreed to a city demand to pay 2 percent of gross electricity sales in Ventura -- estimated at $1.6 million per year -- to the city. The city in turn agreed to not oppose Edison's idea to place a surcharge on local ratepayers to cover the increased expense, Calkins said.

Edison currently pays 1 percent to the city, but the cost is factored in with its utility rates. The new surcharge would appear separately on residents' bills, with Edison directly forwarding all the proceeds to the city.

The surcharge is mentioned on the eighth page of the 19-page city franchise document and came to light when a citizen recently e-mailed The Star about Edison's proposal before the California Public Utilities Commission.

The proposal is pending before the PUC and could be approved by the spring. The commission in 2005 adopted a similar surcharge in Santa Barbara. The cities of Long Beach and Anaheim, among others, also have increased franchise charges.

Ventura negotiated the same type of surcharge when it updated its franchise agreement with Southern California Gas in 2007. As with the current proposal, that surcharge apparently was never publicized.

"This is the best package we could get," Calkins said of the Edison deal. "We wanted them to do this without going after Ventura ratepayers. But after two years of intense negotiations, it was Edison's decision to go after a rate surcharge on their Ventura customers, not us."

Councilman Neal Andrews also defended the agreement, saying Edison should pay its fair share to do business in the city. He praised city negotiators for doing a "marvelous job" getting the energy giant to pay the 2 percent, despite the fact that Edison was clear it would do it on the backs of residents.

"The city is not adding the charge," Andrews said. "It's Edison asking for it. We're not going to Sacramento to ask for it."

But in its application to the PUC, Edison says, "The City Council authorized its staff to request that SCE (Edison) initiate a 1.0% franchise fee surcharge request with the commission." And the franchise agreement specifically says the surcharge would be on "ratepayers within the limits of the city."

In addition to the city's 1 percent, Edison would add 0.134 percent for two years to recoup its costs in collecting the surcharge in Ventura, according to its PUC filing.

According to Edison, a typical electric bill would increase by 72 cents a month for a residential customer, $1.69 a month for a small business, $21.62 for a large commercial business and $21.14 for an agricultural customer.

Edison Region Manager Nancy Williams described the surcharge as "perfectly legal" but rare because the vast majority of cities Edison serves have "indeterminate" contracts that never expire and therefore never come up for renegotiation.

Ventura is the only city in Ventura County with a fixed-term agreement, she said. Franchise fees in other Ventura County cities, many dating back decades, range from 0.5 to 1 percent of gross sales, she said.

"Out of the roughly 400 cities that Southern California Edison serves, probably less than 30 have the opportunity to renegotiate," she said.

"This is not precedent setting," she said of Ventura's surcharge. "This is a legitimate opportunity for cities to raise needed funds."

Half of the estimated $845,000 a year would go for moving power lines underground and for growing streetlight costs, Calkins said, with the rest to be used at the City Council's discretion.

Some taxpayer advocates, however, see the surcharge as a tax in disguise that should require voter approval. They also say the fee is poorly timed as families grapple with the recession.

"Calling it a fee or a charge or a surcharge is just playing with semantics," said Paul Heidenreich of Manhattan Beach-based law firm Huskinson, Brown, Heidenreich & Carlin, which threatened to sue Ventura over its short-lived 911 fee.

"My gut reaction is that it violates Proposition 218," he said, referring to the 1996 initiative requiring a two-thirds voter approval for all local taxes but not user fees that pay for a specific service.

Santa Barbara City Attorney Steve Wiley disagreed. He said Proposition 218 exempts franchise agreements. Santa Barbara's franchise agreement has not been challenged, nor has any other to his knowledge, he said.

"These utility companies have an obligation to reimburse cities for cutting into our streets and using city property," he said. "We are not forcing them to pass on the cost."

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