Bailout Watch #35 – May 01, 2001

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

Bailout Watch #35 – May 01, 2001

We’ve been saying for several months that President Bush will have to step in to the California energy debacle, in order to save the goose that laid the golden egg: deregulation. With one utility bankrupt, the other soon to follow, and the prospect of a western-states meltdown this summer, we figured even the ideological nuts and Bush’s buddies in the energy industry would realize they have to back off. At least temporarily. It seems we were wrong to expect such lucid, albeit cynical, thinking. Instead, the Herbert Hoover-like administration of George Bush is promoting a host of anti-California measures that grant the energy companies an official license to steal from the taxpayers and ratepayers of California:

Bush Proposes Utility Bailout Surcharge. Now that California lawmakers have wisely refused to order ratepayers to bail out the state’s utilities from the losses they have incurred under their deregulation law, the pro-deregulation bureaucrats at the Federal Energy Regulatory Commission (FERC) have decided to come to the utilities’ — and their creditors, the energy companies’ — rescue. FERC has tentatively ordered that the Dept. of Water Resources — the state agency which is buying electricity because the utilities won’t — add a surcharge to consumers’ bills to cover past debts. This Backdoor Bush Bailout exposes the Bush administration’s allegiance to the energy industry and utter disregard for the taxpayers and ratepayers of California. The Order’s request for comment on this hair-brained scheme to usurp state power and go around both Legislative resistance to a bailout and a possible initiative should anger just about anybody not employed by the energy cartel. According to the Wall St. Journal, one FERC staffer called it unprecedented, a Harvard prof. called it surreal, and Governor Davis says he will object.

Cheney: Nuke ‘Em. The Bush Administration’s handling of the energy crisis is cartoonish in its overt and unabashed fealty to the energy industry. Yesterday, Associate President Dick Cheney unveiled the Administration’s plan to solve the spreading crisis caused by the greed of the energy companies: allow the energy companies to build more plants, including nuclear reactors. (Follow the money: nuclear manufacturer General Electric’s credit arm provided PG&E Corp. some of the $1 billion capital infusion in March intended to protect the parent company from creditors seeking its assets under bankruptcy. So GE is another winner in the deregulation debacle). A generation of Americans missed the nuclear power debate: nukes are the most expensive way to boil water ever devised. They pose a severe public health and safety threat that is measured in eons.

Bush Caps Phony. Governor Davis was among the first to publicly recognize that the Bush Administration’s summer "relief" plan was full of loopholes and unacceptable conditions — including surrender of state control over the grid. California should call the Bush Administration’s bluff by rejecting this contemptuous plan. No doubt that is the meaning of comments emanating from within the Davis Administration that it might be better to have the lights go off than to knuckle under to the demands of the wholesale energy cartel, a.k.a The Texas OPEC.

Symbol More Important Than Substance. FERC and Williams, a major energy trading firm, have agreed to settle a federal proceeding in which the FERC accused Williams of keeping a plant off-line in California to increase its profits. Of course, the $8 million settlement (with no penalty) is another sweetheart deal between the Bush Administration and the industry — the amount doesn’t even match the $10.85 million FERC found in overcharges in this one instance. (And it is a pittance compared to the $6.3 billion in industry-wide overcharges found by Cal. Investigators.) It’s like catching a bank-robber and making him return only 75% of what he stole. Apparently that’s Bush-style "law enforcement." But today, we’re looking at the glass half-full: even the pro-industry Bush Administration admits that a wholesale energy company manipulated supplies!

Bush-Cheney, Inc.: Perhaps you’ve noticed that the geniuses at the White House have made it possible to move the onus for the California debacle from state officials to George Bush. We still believe the buck stops with the Gov. and state lawmakers — and that their only option now is to seize the power plants before the state is bankrupted. But instead of stepping in to protect California, the corporate administration of George Bush and Dick Cheney has lurched in to protect the energy industry.

PG&E: Perverse Greed & Extortion. Although Pacific Gas & Electric filed for bankruptcy last month, principally to push Governor Davis and the Legislature to agree to a massive public bailout, its not-at-all-insolvent parent corporation has been raking in massive profits throughout the country, including in the Californian energy market. The New York Times reports that PG&E is like many of the new energy pirates whose unregulated power generation and trading subsidiaries have become more valuable than the old-line utility in this energy market free-for-all. While the utilities are either stable or falling apart (as in PG&E’s case), the unregulated parts of the companies are making bundles of cash, by gouging each others’ local utilities and customers. At about the same time that PG&E declared the bankruptcy of its utility, it announced the phenomenal success of the rest of the corporation. Despite being bankrupt, PG&E has become the nation’s third largest energy trader and the owner of 30 power plants in 10 states, according to the Times, with nearly 20,000 more megawatts of power currently under construction or in development, according to recent SEC filings. That’s why they call it bankruptcy protection. By the way, PG&E’s unregulated arm is currently the target of a Justice Dept. investigation for engaging in the same sort of market manipulation on the East Coast that caused Pacific Gas & Electric’s problems in the first place.

Is the Chamber of Commerce failing California businesses? People who work in the state Capitol (as a politician, staff-person, lobbyist or reporter) know that the California Chamber of Commerce doesn’t represent business interests in the state, it represents Big Business interests, even at the expense of small and medium size enterprises in California. Over the last few months the Chamber has consistently sided with its utility corporation members (Edison, PG&E and SDG&E execs sit on the Chamber’s Board) and pressed for electricity rate increases. For most dues-paying business members this comes as a nasty surprise: Businesses are consumers of electricity and will be hit very hard by the unjustified rate increases. A few memos from Chamber president Allan Zaremberg to members of the Chamber indicate that his constituents feel betrayed. For that reason, FTCR is working with Joel Marks, founder of the American Small Business Alliance to provide small businesses with an alternative to the utility-centered Cal Chamber, one that will fight for small business ratepayers who, like residential ratepayers, are slated to get the short end of the energy-crisis stick. Read the Chamber memos and FTCR’s letter to Zaremberg and cohort William Hauck, whose Business Roundtable has joined with the Chamber and energy companies to stick it to businesses.

Judgment Day
553 Days Until November 5, 2002

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