Tag: California election

Xavier Becerra wants to be California’s next governor. His big affordability promise? Declare a state of emergency and freeze utility rates and home insurance premiums. Sounds decisive. Here’s the problem.

California’s electricity rates aren’t high because utilities are greedy. They’re high because of wildfire liability baked into balance sheets, mandatory grid-hardening programs, the shift to renewable energy, and transmission costs across a massive state. Those are real costs. Freezing rates doesn’t make them disappear. It just forces utilities to absorb them, defer them, or shift them to other customers.

We already ran this experiment with home insurance. California effectively froze insurance rate increases for years under Proposition 103. The result? State Farm stopped writing new policies. Allstate stopped. Farmers pulled back. When you force a product to be sold below cost, the seller leaves the market. Becerra watched this happen. Now he wants to do it again with utilities.

His second promise is enforcing housing laws against cities that aren’t building. That has more merit. Some California cities are openly ignoring their state-mandated housing requirements. Fining them is reasonable.

But here’s the contradiction. Becerra is a labor ally who insists all housing be built with union labor under prevailing wage standards. That mandate adds fifteen to twenty percent to construction costs. You cannot promise lower housing costs while simultaneously requiring the most expensive labor structure in the country. Those two things cannot coexist in the same budget.

Enforce housing laws plus prevailing wage equals more units at the same unaffordable price. That is not an affordability solution. That is a permitting solution with a press release attached.

Becerra is a skilled coalition builder. His platform is designed for voters who want action and aren’t checking the math. Rate freezes feel powerful. They produce market exits. Enforcement without cost reform produces supply without savings.

The Hedge rating: Polished. Inadequate. Read the full analysis at The Hedge.

Carl DeMaio is a California Assemblyman running a ballot initiative campaign under the banner of his Contract to Reform California. His flagship bill is AB 23, the Cost of Living Reduction Act. The mechanism: whenever California prices exceed the national average by more than ten percent, state agencies are automatically required to cut taxes, fees, and mandates until prices come down.

He’s also promising twenty-five hundred dollars per year in cost-of-living rebates to every middle-class family in California, funded out of the Greenhouse Gas Reduction Fund.

DeMaio is the loudest, most specific, and most relentless critic of Sacramento’s cost failures in this entire election cycle. His indictment of the political class is largely accurate and difficult to rebut. The benchmarking concept in AB 23 is genuinely interesting — automatic accountability not dependent on any individual politician’s will.

His examples are real numbers. Average ER visit in California: thirty-two hundred dollars. In Maryland: six hundred eighty-two dollars. Average ambulance ride in California: twenty-four hundred dollars. In North Carolina: six hundred sixty-two dollars. That differential is primarily regulatory. He’s right about the problem.

Now open the spreadsheet. California has approximately thirteen million households. Twenty-five hundred dollars per household is thirty-two and a half billion dollars per year. The Greenhouse Gas Reduction Fund — the account DeMaio proposes to use — disburses three to five billion dollars annually. That is the entire fund. Emptying it gets you to roughly ten cents on the dollar of his promise.

DeMaio has not addressed this gap in any public forum. The twenty-five hundred dollar figure exists on petition sheets and in press releases. It does not exist in any fundable budget.

When a politician promises thirty-two billion dollars out of a four billion dollar fund, that is not a rounding error. That is the whole ballgame.

The Hedge rating: Best critique of the status quo in the race. The math is theater. Full analysis at The Hedge.

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Xavier Becerra wants to be your governor. His campaign is built around two core affordability moves: declare a state of emergency to freeze utility rates and home insurance premiums, and enforce existing housing laws against cities that aren’t building. He’s the frontrunner in Democratic polling heading into the June 2 primary.

The Problem with Rate Freezes

California’s electricity costs are high because of wildfire liability exposure baked into utility balance sheets, mandatory grid-hardening programs, the transition to renewable generation, and transmission costs across a geographically massive state. Those are real costs. Freezing rates doesn’t make them disappear — it makes the utility absorb them, defer them, or restructure them onto other ratepayer classes.

We already ran this experiment with home insurance. Proposition 103 effectively froze insurance rate increases for years. The market’s response: State Farm stopped writing new homeowner policies. Allstate stopped. Farmers pulled back. The lesson is simple: you cannot administratively price a product below its cost without the seller exiting the market. Becerra watched this happen during his time in California government. He’s proposing to do it again, with utilities, and calling it relief.

The Problem with “Enforce Existing Laws”

He is a staunch labor ally who insists California housing be built by union labor under prevailing wage standards — a commitment that adds 15–20% to the cost of every publicly subsidized unit. You cannot simultaneously promise to lower housing costs and mandate the most expensive labor regime in the developed world. If you enforce housing laws but require every project to use union prevailing wage, you get somewhat more housing at the same price it’s always been. That’s not an affordability solution. That’s a building permit solution.

The Bottom Line

Rate freezes feel decisive and produce market distortions. Enforcement without cost reform produces more supply at unaffordable prices. Neither gets you where you need to go.

Rating: Polished. Inadequate.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com