Was Prop 16 Defeat a Referendum on Smart Meters?

PG&E spent more than $46 million to put Proposition 16 on the June California primary ballot and blitz the state with endless advertising to support it.  But voters statewide said no, defeating the measure 47.5% yes to 52.5% no.

Maybe the defeat is a simple reflection of voter anger over the economy and other factors since they turned down every ballot measure except Prop 13 prohibiting property tax reappraisals after seismic retrofits and Prop 14 on the open primary making it easier to throw the bums out.

Proposition 17 sponsored by Mercury Insurance lost by similar margins so perhaps the voters are telling corporate big wigs that they are not going to fall for the bait and switch that went on in pitching these ballot measures as “the taxpayers right to vote” act in the case of Prop 16 when the REAL agenda was to stifle competition from cities seeking to create their own public power or community aggregation programs.

Then again, PG&E has been a frequent target for voter backlash so it could be a hangover from past battles or too many bored voters watching reruns of Erin Brockovich on TV.  Once voters realized that Prop 16 was sponsored almost solely by PG&E they smelled something fishy.

Then in this morning’s San Jose Mercury News was a story analyzing the more detailed results for Prop 16.[1] Several interesting facts influence the analysis of what message the voters were sending by defeating Prop 16:

  1. PG&E customers rejected Prop 16 by a larger margin than voters statewide—42.1% yes vs 57.9% no.  This is not a good news public relations outcome for PG&E that its customers mistrust it.  Customers as voters are saying they want more choices and they favor competition as a better way to keep PG&E honest.
  2. Fresno County voters (Bakersfield) voted 61.1% to reject Prop 16 demonstrating clearly that PG&E has some work to do in the hot bed of anti-smart meter agitation.
  3. Santa Cruz County rejected Prop 16 by 70.2%. These are people who never met a renewable energy project they didn’t like—unless it was going in next to them.  They favor energy efficiency and reduced greenhouse gas emissions by wide margins.  Maybe their rejection is just saying no to anything that government or big utilities want since the county is arguably even more liberal leaning than San Francisco. But these are the true believers and they said NO!

Meanwhile, opponents of Prop 16 raised a meager $90,000 in their successful effort to defeat the $46 million PG&E initiative.  Pete Darbee, CEO of PG&E,  must feel a little like Barack Obama ready to “kick some ass” for this defeat.  But if the marketing geniuses at PG&E are smart they will use the results of this election to better understand customers and thus voter sentiment.

Pete Darbee has a tough job ahead.  He must realign the PG&E strategy with his customers and then read the changing tea leaves in Sacramento about where state policy may be going after November.  This is no small challenge, but it is an essential one.  The problem for Pete Darbee and other utility CEOs is they are running out of time.

Smart Grid Revolution is Backfiring

This nightmare scenario must keep Pete up at night—Prop 16 rejection by super majorities in Fresno County and Santa Cruz County is another clear message that the smart meter revolution is backfiring big time.  But PG&E is pushing forward with “Peak Day Pricing” [2]and the essential rate changes necessary to expose customers to more price volatility in order to get them to change their energy behaviors and reduce demand.  Doing so is ‘betting the PG&E farm’ on an uncertain outcome, in a very volatile political and economic climate, in the face of surly voter/ratepayers.

More worrisome is the rejection in Santa Cruz County which says it favors all these clean energy policies but it clearly does not believe the message or messenger.  And customers despite their green policy views and liberal leanings are still off put by price volatility.

This is not a criticism of living into a cleaner and greener energy economy.  Voters still favor those policies and aspirations, but they are telling PG&E and the state’s politicians that the transition is going to take longer because jamming this transition down the throats of ratepayers is not “change they believe in.”

If the Bakersfield customer revolt was like Paul Revere’s Ride protesting the looming fight, then defeat of Prop 16 is like the Boston Tea Party making it clear to the king that his policies and tactics are rejected.

Utility Business Model is at Risk

The truth is the real threat from the Prop 16 defeat is the pressure it adds to re-think the traditional utility business model.  PG&E and other utilities have it within their power to change the dynamics of the entire conversation and transform their approach and the entire industry practice around smart grid and living into the clean and green energy economy.  BUT utilities must realize the true goals they seek must involve customers, align corporate strategy and interests with customers and be their Jedi Knight not Darth Vader.

But utilities fear change as much as customers in this transition.  They cling to a central station generation business model in an emerging era of distributed generation.  They cling to command and control in support of reliability when a strategy of customer driven demand response offers equal or better benefits for both utilities and customers alike.

Smart meters are being rejected by customers because they are seen as a tool of the utility to intrude into customer privacy, control the way customers live their lives, and jerk them around with price volatility.  Utilities see smart meters as the first step to the smart grid future.  Customers see that smart grid promise as too vague and too far off to put up with the volatility of the smart meter present in order to have a chance at winning lotto in the smart grid-enabled future.

The good news is PG&E is one of the best positioned utilities in the country to make this utility business model transition to the future.  That it is stumbling and clumsy in living into its smart grid potential is worrisome because it signals that neither the market, nor customers, nor utility management is ready to make the changes needed to realize the promise of smart grid.  But that is not stopping the Federal Government from over-stimulating smart meter deployment, nor impeding the California Public Utility Commission or the feckless State Legislature from pushing faster than the public is willing to accept the policy and rate changes needed to accomplish it.

Volatile and rapidly rising utility rates can kill the smart grid before it gets a chance to deliver its promised benefits. The defeat of Proposition 16 is a warning shot that should not be ignored, but it also is a second opportunity for PG&E to redeem itself, realign its strategy, partner with its customers, and win the smart grid marathon.

Don’t Screw Up!

[1] http://www.mercurynews.com/san-jose-neighborhoods/ci_15266026?nclick_check=1

[2] http://www.pge.com/mybusiness/energysavingsrebates/demandresponse/