ON TUESDAY, NOVEMBER 3, THREE WEEKS AFTER I wrote this column, California voters narrowly defeated Proposition 9. In case you missed it, that was the ballot initiative that would have cut off funding for nuclear power in California through securitization or any other fancy financing for stranded costs. A "yes" vote would have told utilities, in effect, to "take these bonds and shove it."

But the voters said "no," however, and I'll tell you why - even before the first ballot was cast.

In the end, Prop 9 failed for the same reason that George McGovern lost to Richard Nixon in 1972. The moment had come and gone. As McGovern discovered, the anti-war passions of 1968 could not be rekindled four years later to spark a crusade and a run for President. The war, in fact, was already over. We just didn't know it yet. Today, as then, crusades have fallen out of fashion. Are utilities getting a free ride? Maybe, but who believes that's more important than risking chaos in bond markets?

ON OCT. 13 I INTERVIEWED HARRY SNYDER, of Consumers Union, the nonprofit publisher of Consumer Reports magazine and a prime mover behind Proposition 9. Snyder, the senior advocate for the West Coast office of Consumers Union, sounded a bit like I imagine I did back in 1972. As we talked, it occurred to me that he might be living in the past. He hasn't yet figured out that the anti-nuclear and anti-business fervor of the late 70's and early 80's has faded too far too fast for voters to risk putting state or local governments into default, just because they might feel miffed at not being consulted when California legislators bowed to industry pressure and allowed recovery of stranded costs in Assembly Bill 1890, the state's primary electric restructuring statute.

I asked Snyder to name any other group besides Consumers Union that was supporting Proposition 9.

"How about the League of Women Voters?" he asked. "How about the Sierra Club? All the groups that cannot be bought with utility money are supporting Prop 9. It's a wonderful volunteer effort that's going on, door-to-door. This is an assault on democracy."

Snyder was waxing sarcastic about the "democratic" process that saw the utilities and big industrial customers get what they wanted from the state legislature through AB 1890. Snyder emphasizes also that while the 10-percent rate cut that state legislators guaranteed for California Consumers will last only four years, until the market opens for real (without subsidies) in 2002, but that the payments to the trust for securitization - the so-called "Trust Transfer Amount" - will continue for 10 years. That's why Consumers Union says that AB 1890 is a bad deal for utility customers.

Nevertheless, I wanted to learn more about the fate of the bonds. I asked Snyder about the study by MetWest, otherwise known as Metropolitan West Financial and Strategic Services. Cited widely by Prop 9 opponents, such as the AB 1890 Coalition, and CARES (Californians for Affordable and Reliable Electric Service), the MetWest study quantifies the real-life implications of invalidating the revenue reduction bonds issued by the California Infrastructure and Economic Development Bank to securitize stranded costs and fund the state's guaranteed 10-percent rate cut. As I understand it, the MetWest study predicts that if Prop 9 should pass, the state government would be forced to back the bonds anyway, and to do so would have to hike the personal income tax rate by 38 percent (or the sales tax rate by 3.25 cents on the dollar) to raise the funds needed to cover the bonds. The San Francisco Chronicle says in its Oct. 6 editorial that state schools could lose $65 million in taxes.

Snyder disagrees. He claims the debt will lie with the utilities.

"That's a phony argument. There is no tax liability for cities and towns. The utilities are trying to fool you. They report on their form 8K's that they have a liability to pay the bonds."

NOT EVERYBODY BELIEVES THAT PROP 9 WOULD LEAVE utilities liable on the rate reduction bonds. In an editorial against Prop 9, published on Oct. 7, the San Diego Union Tribune wrote: "The bonds won't just vanish. The state entered into a contract on the bonds, and there are constitutional mandates against reneging on contracts. Bondholders would sue the state and win. State taxpayers would wind up repaying the bonds."

In a May 22 letter, the California Department of Finance said that Prop 9 could lead to state liability for repaying the bonds that "could directly affect every program in the state budget."

"Never before has an initiative forced default on already sold bonds," adds Allan Zaremberg, president of the California Chamber of Commerce and chairman of the "No on 9" Coalition, which commissioned the MetWest study.

"If Proposition 9 passes on Nov. 3, we'll be in court on Nov. 4," said Deann 'DeDe' Hapner, vice president for regulatory relations at Pacific Gas & Electric Co., speaking at a utility conference in Pittsburgh on Oct. 5. Hapner stressed that in her opinion, PG&E would win the suit: "The proponents were in a hearing in the state legislature last week," she said. "They admitted that parts of Proposition 9 were unconstitutional."

How did Snyder see his chances?

"Different polls come out with very different results," he explained. "They're all over the lot. Some show us prevailing, some show us losing. But one thing is clear. The advertising that the No on 9 Coalition is doing doesn't seem to have much of an impact."

Snyder's assessment jived with what I was hearing from other sources. The consensus seemed to be that the most recent polling data was running slightly against Prop 9.

"The reason," said Tom Smith, Texas Director of Public Citizen, the Ralph Nader group, "is that money wins. It's not just the utilities lobbying against the measure. It's all the cities and towns and local governments saying that their tax positions will disintegrate. That's the message that seems to be having an effect of voters. Not the utility advertising."

Snyder was ready to put a good face on a losing proposition.

"We have won in 49 other states," he said. "Because no other state is going to do as bad a job as in California. The regulators will know from now on that they can't let the

utilities put their hands in the consumers' pockets."

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