Bailout Watch #43 – May 18, 2001

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

Bailout Watch #43 – May 18, 2001

Bush will blink: The Bush-Cheney plan means higher taxes, higher energy prices, more boondoggles for us to pay off, and no help for California. (Read our comments on the plan at But White House inaction pushes California closer to a calamitous confrontation between the energy generators and the state. By mid-summer at the latest, we’ll be out of state money, the bond proceeds will already be spent on power, further rate increases will be out of the question, and there’ll be only one option left for the state: seizure of the power plants and electricity contracts. Even Gov. Davis is now using the "S" word. We’re betting Bush-Cheney, FERC and the generators will blink before the largest state in the nation takes that unprecedented step.

They Said That? Bush-Cheney support seizure, use of eminent domain! The White House energy task force will propose legislation allowing the seizure of private property. No, the Presidential Partnership isn’t cracking down on its buddies in the energy industry. They want to be able to seize private land so the private generators can build more power plants.

PG&E afraid of powerful consumer advocates. Urging the federal bankruptcy judge to prohibit consumer groups from representing ratepayers’ interests in the bankruptcy case, PG&E called Consumers Union (the publisher of Consumer Reports) and TURN "special interest" groups with a "history of aggressive lobbying and litigation."

"It’s not my fault." The recently-leaked April 2001, secret memo from cartel member Duke Energy to Gov. Davis permitted the Gov. to continue to blame Pete Wilson for the debacle so long as Davis will support deregulation: According to the memo "Governor will continue to indicate that the California crisis is an aberration due to flawed legislation of Governor Wilson, not a necessary consequence of deregulation, and will not advocate scrapping deregulation in wholesale power markets."

The energy industry propaganda machine on Defcon 5. Yep, looks like they killed the goose that laid the golden egg: deregulation. But that’s not to say the armies of corporate-financed scholars and think tanks aren’t going to give up without a fight. At a 3/1/01 symposium on deregulation sponsored by the American Enterprise Institute and Brookings, two DC–based corporate think tanks, participants spent the whole day insisting that "deregulation is not a dirty word." According to a report on the symposium, an Edison rep said Democracy, not deregulation, is responsible for the California debacle: "John R. Fielder of Southern California Edison placed the majority of blame on the fact that ‘politics has overtaken market forces.’ As long as elected officials make regulatory decisions, they will act in the best interests of those who elected them. " Sounds right to us.

We love working with you. Last month, Texas-based Dynegy, one of the wholesale energy companies, refused to sell electricity to the state of California until the state agreed to pay in cash. Since the loss of the electricity would have precipitated blackouts, the Davis administration capitulated to the demand. Dynegy’s CEO was pleased: "This is exactly how the system is intended to work when business partners come together in a collaborative spirit."

We won’t work with you. According to the SF Chronicle, three power companies under investigation by Cal. Attorney General Bill Lockyer, have refused to turn over documents that the AG subpoenaed in February. The docs include information that may indicate that the power companies manipulated electricity supply to increase power prices in the unregulated market. Of course, Chuck Griffin with cartel member Mirant Energy, notes that "We have never said we didn’t want to cooperate with the attorney general." That’s it: we’re not saying we don’t want to cooperate with California, we’re just saying that we won’t.

Mrs. Landingham is dead. As California faces the summer, state lawmakers remain bizarrely preoccupied with resuscitating Edison, which, even if we wanted to, we simply cannot afford. (The Gov.’s $5 billion price would mean another rate increase spread out over fifteen years, like a mortgage). State Sen. Richard Polanco is carrying the Gov.’s Edison bailout plan. The Assembly leadership is offering "Ratepayer Bailout Light" — an estimated $3.5 billion bailout. Several Senators are trying to concoct something. It’s almost as if the lawmakers, so used to the nurturing presence of Edison and PG&E, cannot accept the fact that the utilities are dead… and so the politicians see their friendly ghosts haunting the hallways of the Capitol, like West Wing President Jed Bartlet’s encounter with his deceased secretary, Mrs. Landingham. (PS. Last week, the California Assembly adjourned early in honor of the death of that TV character).

Crisis history repeats itself. How many times must we repeat the same lesson: when legislators act in a hurry to protect the utilities, it’s a disaster. First, there was the 1996 dereg law, AB 1890, a bill virtually no lawmakers understood rushed through with little public scrutiny. We thought the lawmakers would have learned that lesson, but they made the same mistake again last January when they rushed through a $500 million appropriation to buy power in order to avert blackouts. "No one should believe that there is any appetite in the Assembly for coming in here every day and opening up the checkbook of the state and acting like that’s problem solving because it isn’t," said Assembly Member Fred Keeley, five months and $7.2 billion ago. Now we have another rush to rescue Edison, when it is clear that bankruptcy is the forum for disposing of its prior debts. Why should the public pay billions to keep it out of bankruptcy?

Judgment Day
536 Days Until November 5, 2002

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