BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
Bailout Watch #41 – May 10, 2001
Look Ma, no blackouts. It’s uncanny! Every time the wholesale energy gougers are looking for money, the lights flicker. (See our chart in BW#23). And then they’re back on again, as soon as the spigot is opened. Yesterday, the state Senate approved the single largest municipal bond issuance in American history; the proceeds will pay for state purchases of electricity. Since the legislation contains no cal on the use of the taxpayers’ credit card through November 15, the generators were assured that for the next six months, Governor Davis would have access to a limitless supply of money with which to feed their piggy appetite for California dollars. Presto! No more blackouts! How much did it cost us this time to keep the lights on? $13.4 billion.
Read FTCR’s statement on the bond legislation.
Honey, I shrunk the budget. California’s economic outlook took another hit yesterday when the state’s chief analyst acknowledged that previous budgetary revenue projections were $3.4 billion too high. This serves to magnify the danger associated with any more state expenditures on high priced power. We literally cannot afford to be gouged any longer. The surplus is gone, budget revenues are lower than expected and consumers are already scheduled to be hit with as much as 60% rate increases. It’s not just about power blackouts anymore. It’s school blackouts, law enforcement blackouts, and road blackouts, too.
When will this crisis come to a head? So long as the Gov. has access to billions of dollars of taxpayer money (see bond issue, above) we will be stuck in a cycle in which the state a) borrows from the General Fund to buy electricity from private power companies; b) sells bonds to repay the fund; c) raises electricity rates to pay for the bonds. Naturally, endless availability of money encourages the energy cartel to raise prices. And then the cycle starts over again: borrow from the fund for the next spate of power purchases; sell bonds; raise rates… No one in Sacramento seems willing to stop this catastrophic chain reaction. Governor Davis’s hand must be forced. He must be told that there will be no more expenditures from the state General Fund. That’ll bring things to a head, because either he’ll have to raise rates by 100 –200%, or he will have to confront the profiteering generators with an ultimatum: sell us your power at reasonable prices or California will take over the plants and run them at cost. Faced with that decision, the Governor will have no real choice except to take on the power pirates.
This little piggy went to (the Cal. energy) market. Energy execs met with Governor Davis yesterday, spurring a group of outraged consumers to visit the Governor’s office with a live pig. Of course the generators, called "piggish, swine-like and abusive to California," were not deterred. According to the Contra Costa Times, a Reliant Energy exec said: "At this point, we feel like we played by the rules and didn’t do anything to warrant having to return any of the money, any of the revenue, that was paid to us this last year." Oink, oink.
Judgment Day
544 Days Until November 5, 2002
