Assembly Poised to Vote on Edison Bailout Legislation No One Has Seen

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Lawmakers “Walk the Plank” for Edison, Big Business

In a repeat of the legislative circus that brought California deregulation in 1996, state Assembly Members are poised to vote — on the eve of the Labor Day holiday weekend — on a $4.1 billion Edison bailout package, backed by utilities, energy companies and big business. The bill has not been printed and very few lawmakers will have read it prior to the vote.

SB 78xx, as amended after an industry lobbying onslaught in committee, not only requires a $4.1 billion bailout of Edison — including interest — (as presently drafted, to be paid for by most businesses in California). It also would leave residential and small business ratepayers to pay the bulk of the $100 billion+ worth of long-term energy contracts negotiated by the Davis Administration, and would allow Edison more than one billion dollars in excess profits.

Consumer advocates expressed disgust at the legislature’s capitulation, warning that industry and big business lobbyists would place the bailout on residential ratepayers in a conference committee.

“It seems clear that the politicians are so beholden to the utility companies that they don’t care what the legislation does or how many billions it will cost ratepayers. They’re going to pass it without even reading it and then hope their dirty deed gets lost in the holiday shuffle,” said Harvey Rosenfield, citizen advocate. “They’re wrong. This vote will be remembered.”

Since the onset of the California energy crisis, consumer advocates have pointed to the 1996 deregulation law, largely written by Southern California Edison and PG&E, as the cause of Edison‘s financial trouble. Under that law, AB 1890, Edison garnered approximately $10 billion in so-called “stranded cost” collection, by overcharging ratepayers and selling off power plants. Much of that money was siphoned off by the utility’s holding company, Edison International, which embarked on an international spending spree in the wake of the deregulation law.

After the utilities profited from the deregulation scheme, the private power generators began, last summer, to price gouge and achieved unprecedented earnings. Throughout the deregulation debacle, however, consumers have received no benefits, despite the statutory promise of a 20% rate reduction in the 1996 legislation. Indeed, as a result of deregulation consumers have suffered through the state’s first rolling blackouts since World War II and the largest rate increases in California history.

“Consumers are the innocent victims of deregulation, yet this law would hold ratepayers responsible for the entire fiasco,” said Douglas Heller, consumer advocate with FTCR. “Deregulation was not the fault of current Assembly Members. An Edison bankruptcy would not be their fault. But lawmakers who vote for an Edison bailout will be held accountable.”

In addition to the unacceptable bailout contained in SB 78xx, FTCR points to a series of amendments taken by the Assembly Energy Committee that are stridently anti-consumer. The bill, as amended:

  • Forces virtually all businesses, including small businesses & family farms (approximately 180,000 Southern California businesses), to pay the $4.1 billion bailout tax ($2.9 billion for bailout, $1.2 billion in bond interest). These costs will be passed on to consumers. Many businesses have already added “energy surcharges.”
  • Gives ratepayers nothing in exchange for bailout (In Sen. Pres. John Burton’s terminology, we give $ but get no “Hot Dog.”) The bailout bill removes the exchange of transmission lines from Edison for bailout money. Instead, ratepayers get an “option to buy” the lines at $2.4 billion (twice the book value), which can only be exercised by a future vote of the legislature. (In effect, submitting the issue to Edison‘s lobbyists at a future date). In the unlikely event that such a purchase happens, Edison‘s profit from the sale would not be used to reduce debt or repay the ratepayers.
  • Allows big businesses to escape the long-term DWR contracts through a Direct Access program that would leave residential and small business consumers with the burden of the long and vastly over-priced DWR contracts negotiated by the Governor.
  • Locks the state of California into a high-priced 10-year contract for electricity with an Edison subsidiary (the Sunrise plant).
  • Allows Southern California Edison to reap extra benefits worth more than $1 billion:

1. Guarantees Edison a higher-than-appropriate rate of return (11.6% profit) that cannot be lowered by the PUC for 5 years. The Office of Ratepayer Advocates (ORA) conservatively estimates this will provide at least $300 million in excess profits to SoCal Edison.

2. Says that if FERC orders refunds, Edison receives up to $500 million that should be designated to ratepayers. (ORA estimates $225 million will go to Edison as a result of limited FERC refunds.) In effect, if such refunds are made, Edison will come out of the bailout with extra profits beyond the payback of its stated debts.

3. Returns $425 million in tax overpayments to the utility without reducing the bailout paid by ratepayers.

“Lawmakers who read this bill should find it very difficult to support this straight bailout. Like the original deregulation law, SB 78xx was written by Edison executives and big business lobbyists and writes off the public,” said Heller.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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