BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
Bailout Watch #68 – Aug 21, 2001
Back in the Sac. With three weeks left in this year’s legislative session, we’ve entered the period of maximum danger to the public of a bailout. This is the time when the rules are waived, midnight hearings are held and backroom deal-making occurs; special interest lobbyists are crawling out of the woodwork and even the press has difficulty tracking events. Gov. Davis and Assembly Speaker Bob Hertzberg have agreed to begin jawboning lawmakers to get the derailed Edison bailout back on track. Apparently, going home for a month had the unforseen result of putting lawmakers in touch with their constituents’ concerns and that doesn’t fit well with the Davis bailout plan. When they were at home during the summer recess, lawmakers realized that the consumers who get stuck with a bailout tax on their utility bills will remember that tax when they put on their voting shoes and walk in the next election.
The Coming Ballot War
Read Harvey Rosenfield’s commentary on FTCR’s preparations for a ballot measure to lower your electricity rates next year.
Memory Lane. Just about this time five years ago, the deregulation train-wreck-to-be left the station. It was an August (if not particularly august) conference committee from which a small group of legislators forwarded the utility industry cabal that has since held the state by its ankles to shake every last penny out of our pockets. Not a single member of the state Legislature voted against the deal. But then nobody was watching and nobody pressed the pols for explanations. This time the whole world is watching. One way to stop a repeat of August 1996 is for every Legislator to be tested by constituents with a simple question: Can you explain the Edison bailout plan? It’s time to start asking.
Bond Facts 101: more risk = bad, less risk = good. The largest bond issuance in the nation’s history is soon upon us. Its purpose is to replenish the State’s crippled General Fund. We know it will be repaid by ratepayers. One thing (of a few) that is uncertain is how much it will cost. The PUC’s proposed "Draft Rate Agreement" and it’s Legislative alternative SB 2X 18, sponsored by Senate President John Burton, both ensure the bond repayment, but under SB 2X 18 the cost to ratepayers will be less. In the eyes of Wall Street investors, a guarantee of repayment put into law is more secure than a guarantee issued through an agreement between two state agencies. The lower risk associated with the Legislative plan translates to a lower interest rate for the ratepayers who will be repaying bondholders for years to come.
Don’t forget the lawsuits. The other thing that kind of screws up the PUC "Rate Agreement," in addition to it being terrible public policy (see BW # 65), is the likelihood that it will be challenged in court. With consumer groups, business groups and even utilities lining up against the PUC plan, the bond sale may be jeopardized by lawsuits. PG&E has all but filed the legal papers and that probably doesn’t sit well with the Wall Street investors that may buy the bonds. It’s so rare that every one (except the Dep’t of Water Resources, the state agency that is the beneficiary of the PUC approach) is opposed to something that it probably should be an indication that there is something very wrong with this deal.
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441 Days Until November 5, 2002