Bailout Watch #44 – May 22, 2001

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

Bailout Watch #44 – May 22, 2001

Hey, Gray, Don’t Give the Grid Away. While the Gov. rails against the Bush-Cheney administration, it is rumored that he may give in to the Feds and hand over California’s treasured transmission system. The FERC demanded such a handoff as the price California would have to pay to get FERC to impose phony price-caps. (read our news release on this potential disaster). Why would Davis let his Independent System Operator and the utilities that he’s negotiating with submit a plan to form a private transmission grid company that would be solely controlled by DC bureaucrats? We have no idea. This "Regional Transmission Organization" (RTO) is a "Roll Them Over" plan for the wholesale energy companies. It will force California to give away the rest of its sovereignty under deregulation to the thieves and their allies in DC. "Giveaway Gray" will take on a whole new meaning if the Governor accedes to the Bush-Cheney push for what amounts to the deregulation of electricity transmission.

Bonds R Us. In case the fact California authorized the largest municipal bond issuance in American history a few weeks ago, didn’t shake you just a little, see if this quakes you up: It’s not enough. According to State Controller Kathleen Connell, who signs the state’s checks (including the power purchase checks), the $13.4 billion bond issue won’t be enough to keep the state coffers in the black and the state’s power system out of the black (so to speak). Yesterday she warned that another $3-5 billion in "revenue anticipation notes" will be needed for cash flow to get us through the year. Of course, at some point Wall Street is going to ask us to pay up, and guess who the state will send the bill to? Yep, YOU. Of course the politicians who got us in the mess will be retired, while we’re still paying their bills.

"Gravy Days." That’s what the energy industry calls California Governor Gray Davis, according to a fascinating column by Mark Golden of Dow Jones. He notes that the price of contracts for future delivery of electricity has dropped by 15% — in other words, the state is stuck with deals that will cost it an extra $6.5 billion, the equivalent of the damage done to the General Fund so far. No one is sure what the contracts say, but we’re told that many have terms that allow the generators to void them out for various reasons — if the bonds are not floated by July 1, for example. But, as Golden points out, no generator is going to void one of these sweetheart deals now. Read the Dow Jones Column.

Taxation without Representation. Are we wrong, or is this whole thing beginning to feel like what started the American Revolution? Last Friday, the federal judge presiding over the PG&E bankruptcy trial ruled against allowing ratepayers to be represented in the case. PG&E and its creditors — mostly the large wholesale power generators — want the judge to order ratepayers to pay off billions of dollars of debts the utility incurred as a result of its support for deregulation. Under the 1996 deregulation law, ratepayers were already required to pay an estimated $10 billion of PG&Es debts from the 1970s and 1980s. Taxpayers and consumers will be asked to pay higher utility rates every month without having the right to be represented in court.

Judgment Day
532 Days Until November 5, 2002

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