Bailout Watch #20 – Mar 12, 2001

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BAILOUT WATCH: Keeping an eye on the energy industry and the politicians

Bailout Watch #20 – Mar 12, 2001

Busting the supply shortage myth. The facts simply do not support the virtually universal conclusion that massive demand increases and the resultant supply shortages are at the heart of California’s deregulation debacle, according to data analyses performed by the SF Chronicle ("Soaring Electric Use More Fiction Than Fact," 3/11/01). The report finds that:

*California’s highest peak demand in 2000 was lower than the absolute peaks of 1999 and 1998.

*December 2000, when the state experienced its first Stage 3 emergency, was a month in which the state actually saw a reduction in electricity use from December 1999.

*During the rolling blackouts of January, more electricity was available and more plants were on-line than on days when the lights stayed on.

Supply shortage has become a cheap and easy apology for the failures of the unregulated marketplace. Apology not accepted.

Good News, Bad News from FERC. Last Friday, even the ideologically intransigent Federal Energy Regulatory Commission (FERC) acknowledged that deregulation led to market abuse, and that the private generators have been robbing California blind. They may require refunds from the energy companies. That’s the good news. The bad news is that the suggested refunds fall billions of dollars short of the appropriate amount, indicating that this is more politics (as if to say "the Bush administration is looking out for California") than proper enforcement (which would force the generators to repay billions in overcharges).

Thanks, but no thanks, Congress. The US Senate may be considering a very dangerous amendment to the bankruptcy reform bill (S. 420) scheduled for floor debate on Tuesday, March 13. The amendment, to be offered by Senator Ron Wyden (D-OR), would declare that any debts incurred by an electric utility for electricity sales that occurred under an order issued by the US Secretary of Energy are not dischargeable in bankruptcy. This change would reduce the incentive of private generators to negotiate fair terms for power contracts and practically obliterate their willingness to accept less-than-full payment for past debts. It will strengthen the resolve of the generators to accept nothing less than 100% of what they claim to be owed by the utilities.

Conflicts in the cabinet? One of Governor Davis’s recently hired energy negotiation "co-leaders," Vikram Budhraja, is a paid consultant to Edison, reported the San Diego Union Tribune. That brings the number of Davis’s formal advisors with Edison ties to three — Mike Peevey, a former Edison President, Larry Hamlin, Davis’s energy construction czar who is on a leave of absence from Edison, and Budhraja. You might think they’d hire a screener, but instead they brush off the obvious conflicts of interest. "What Budhraja did had nothing to do with Edison," said the governor’s spokesman. Everything everybody does in the governor’s office has plenty to do with Edison, so when the state is paying an Edison consultant to advise the governor, it crosses the line. It goes way past the line.

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