PG&E’s Muscle Not Enough to Lift Prop 16 in the Face of Anti-Smart-Grid Consumer Sentiment

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By Matthew Feinstein

California voters rejected Proposition 16, which would have strengthened the position of utility giant Pacific Gas & Electric (PG&E), by a five-point margin despite a $46.1 million support effort from the utility. The measure would have instituted a rule requiring that each public agency looking to enter the power retail business gain approval from two-thirds of the electorate in a new referendum. As a result, passage would have hindered the formation of municipal utilities and Community Choice Aggregators (CCAs), which are community-wide clean energy districts. Both municipal utilities and CCAs allow local cities and governments to acquire and sell power to residents, as well as construct government-funded electricity-generation facilities, as competition to private utilities such as PG&E. 

Despite the utility's backing of the bill, counties in which PG&E provides power largely rejected it. Customers are widely dissatisfied with higher bills resulting from PG&E’s new smart meter technology, which provides more accurate measurement of energy usage than traditional meters, and was developed with government funding from the 2009 economic Recovery Act. In rejecting the measure, voters showed that even in a state as environmentally conscious as California, consumer dissatisfaction with high costs wins out over the desire for subsidized Smart Grid technology.

Although smart meters are not popular enough with the end user to want to subsidize the technology, utilities will continue to push other Smart Grid technologies that reduce the frequency of costly blackouts and expensive maintenance programs. Companies that provide these services, including both giant conglomerates like ABB and Siemens as well as startups like Current Group, will continue to see success. On the other hand, smart metering companies like Itronand Landis+Gyrhave to continue to rely on government largesse, as the benefits to the U.S. public are perceived to be too small to make up for higher electricity rates.

Matthew Feinstein is a research associate for Lux Research, which provides strategic advice and on-going intelligence for emerging technologies. Leaders in business, finance and government rely on Lux Research to help them make informed strategic decisions. Through their unique research approach focused on primary research and their extensive global network, they deliver insight, connections and competitive advantage to their clients. For more information, visit the Lux Research site or contact Carole Jacques to become a Lux Research client.

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