BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
Bailout Watch #9 – Feb 15, 2001
D-Day for Gray
Friday is Decision Day for Governor Gray Davis. He is scheduled to announce his long-awaited plan to solve the deregulation disaster. Will his plan protect ratepayers and taxpayers and restore a reliable and affordable electricity system using clean technologies? Or will it be a financial bailout of the utilities, their banks, their vendors and their Wall Street investment firms?
Deregulation Price Tag: $40 billion.
Here’s a partial, estimated itemization of what this colossal mistake has cost ratepayers so far:
Cost of creation of ISO: $100 million
Ratepayer-funded ad campaign supporting AB1890: $100 million
Bailout of utilities’ "stranded costs" under AB1890: $20 billion
AB1X State procurement of electricity, with interest: $17.5 billion
Emergency Purchases of Electricity from "market": $2 billion
Total: $39.7 Billion
Where did it all go?
Did any of this massive transfer of wealth from ratepayers actually benefit California in any way? No. The utilities used their $20 billion on an international spending spree, buying plants in other states, buying back stock, paying dividends and increasing executive pay. Unless you count the increased purchasing power of their CEOs, not much of this money trickled back to California. The rest is going into the pockets of energy generation companies based in other states. And note that the above amount does not include the $12 billion the utilities are demanding in the form of a bailout of their losses between May 2000 and January 2001. We could have bought all the plants: For the $2 billion of taxpayer (eventually to be ratepayer) money spent since mid-January to buy electricity, detailed by the San Jose Mercury yesterday, California ratepayers could have purchased all of the in-state plants that the utilities sold to private companies that are now gouging us. California’s three private utility companies sold off power plants valued at $1.7B which produce approximately 20,000 megawatts of electricity (more than a third of the state’s total generation). $1.7B is slightly less than the $2B of taxpayer money that has been authorized for procurement of electricity since mid-January, when utilities stopped paying their power bills and independent energy companies instigated rolling blackouts. The blackouts ended two days later, after the Governor began buying power directly from the energy generators. The utilities ultimately sold the plants to nine buyers for $3.1 billion, well above their book value — but still less than two months’ worth of state expenditures at current rates. As FTCR noted last month, opening the state’s treasury to the energy profiteers will only inspire the blackout blackmailers to demand more money, and to resist as long as possible negotiating a fair price for long-term contracts. We cannot permit the energy cartel to steal the state’s surplus. Solution: a windfall profits tax, eminent domain… and some strong leadership. For our press release on this, visit our web site.