BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
Bailout Watch #88 – Feb 04, 2002
No Money Down Until November 5, 2002. Last Thursday, the California PUC took the first step toward handing control over electricity prices to California Governor Davis, which has become crucial to his re-election strategy. As a result of the PUC’s action, the Governor has been given a $13.4 billion credit line with which he plans to provide consumers sudden rate reductions in August. But read the fine print: these rate reductions are a lot like paying bills with a credit card, and they will have to be repaid with hefty interest charges coming due after Davis begins his final term as Governor. Rather than the PUC handing off rate regulation to Governor Davis and allowing him to buy re-election on a credit card, the $10 billion in ratepayer money that has been set aside to bail out Edison and PG&E should be used to cover electricity costs, interest free.
Hertzberg to Edison: Your Wish is My Command. In the waning days of Bob Hertzberg’s reign as Assembly Speaker, Hertzberg’s House sent a letter to the 9th Circuit Court of Appeals supporting the Edison bailout deal signed by the PUC. The Assembly’s amicus curae brief, dated January 11, 2002, is one of many of efforts led by Hertzberg to fulfill Edison’s bailout demand. In fact, the first bailout proposal of the energy crisis last year came from then-Speaker Hertzberg in the form of AB 18x. After the Legislature failed to pass his bailout legislation and he was unable to get the full Legislature to pass the Assembly’s final bailout proposal, the Hertzberg genie showed that he could satisfy, at long last, his master’s wish.
Ken Lays an egg. Enron’s former CEO and deregulation’s most enthusiastic corporate proponent suddenly pulled out of a Senate hearing Monday, because, apparently, the Senators sounded too aggressive on the Sunday morning talk shows. The Senate committee, which, in part, was looking into the impact of Enron and its deregulation scheme in the California energy debacle, may subpoena Ken Lay in coming days.
Bush administration still towing the Enron line. A recent report from the Bush- (or was it Enron) appointed Federal Energy Regulatory Commission (FERC) claims the price cap that regulators imposed last June was not, in fact, the reason that market prices dropped substantially during the summer of 2001. This bizarre denial has the regulators — who put the caps into effect with the express goal of "restraining prices" — arguing that their actions were irrelevant, despite the fact that the regulatory measures taken by the FERC in June had the desired effect of lowering wholesale electricity prices. Instead, the Bush administration continues to spout the failed market rhetoric of energy guru-cum-con man Ken Lay, claiming that after a year of unprecedented high prices and no regulatory actions, the vaunted forces of the free market just happened to kick in after the regulators required lower prices… pure coincidence.
More "coincidence." According to the congressional testimony of energy consultant Robert McCullough: "On December 3rd, Enron went into Chapter 11. At the same time, forward markets on the West Coast fell by 30%. No other changes in operations, hydroelectric supply, or fossil fuel prices took place at that time." In other words, this company and its unregulated electricity operations were not bringing efficiency to the electricity markets; it was manipulating the system to tack on extra costs to consumers. The full testimony of Mr. McCullough is available at http://consumerwatchdog.org/utilities/pr/pr002219.php3 .