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State Pays $800,000,000 Ransom to Keep Lights On; Pro-Industry Legislators Block Plan to Protect Public

Rebuffing a proposal by FTCR to end the energy deregulation crisis, California lawmakers late last night by near-unanimous votes approved another $400,000,000 in cash payments to energy companies to buy electricity. The legislation, requested by Gov. Davis, will buy enough electricity, at today’s prices, to last but two weeks at the most. It brings the total spent in the last few days to $800 million.

FTCR advocates had urged lawmakers to impose conditions on the payments, such as a deadline of five days for the energy suppliers to negotiate fair long term power contracts or the state will seize the plants to protect the public health and safety, and the creation of a state public power agency. But pro-energy lawmakers blocked the protections. Senate President John Burton said such protections will be voted on in a separate bill next week, but other lawmakers are working on a long-term ratepayer bailout to keep the utilities afloat.

Consumer advocates said the rolling blackouts now underway were intended to force lawmakers into the bailout. “The energy and utility companies sponsored deregulation and have now used it to bring California to its knees. Paying the energy companies a ransom of $800 million in hard-earned taxpayer dollars to keep the lights on isn’t going to solve the problem. It’s just putting money in the hands of crooks. Once you start paying blackmail money, it’s never going to stop.”

“Blackout Blackmail” Pushes Lawmakers to Taxpayer Infusion

Data released yesterday show that energy power supply and demand in California was lower during four of the last six months then the same period last year, justifying suspicions by state and federal officials that the blackouts are intended to pressure state lawmakers to bail out the utility companies. The blackouts began one day after Edison stopped paying bills due for energy it had purchased.

FTCR noted that Edison and PG&E have roughly $1 billion in cash in the bank and over $9 billion worth of non-essential assets scattered throughout the globe. These were bought during the last three years as a result of the bonanza provided by the 1996 deregulation law, under which residential and small business electricity rates were frozen at extraordinarily high levels in order for the utilities to reap $20 billion in subsidies to pay off non-economic investments, principally in nuclear energy. FTCR has called upon the utilities to use these resources to keep themselves afloat.

“Instead of bailing themselves out, the utilities threatened bankruptcy to get the Legislature to order a ratepayer bailout of their deregulation mistakes. When that didn’t work, Edison chose on Tuesday not to pay the bills it owed the energy suppliers. The next day, the blackouts began. The blackouts are blackmail by the energy companies, who want the Legislature to bail out the utilities so the utilities can pay the energy companies. We are at the mercy of blackmailers, and the $800 million is just the first payment. Until our elected officials take bold, decisive action to stop this organized crime, it won’t stop.”

FTCR Plan to Protect Taxpayers and Ratepayers Runs Into Pro-Energy Politicians

Yesterday, FTCR presented a proposal to Assembly and Senate lawmakers which would keep the lights on and protect the public against higher rates. It called for:

o Utilities use cash on hand, or sell non-essential assets purchased with ratepayer money during preceding three years, to pay their bills to power suppliers.

o Utilities sell their in-house power — 60% of state’s total consumption — to residential and small business ratepayers at their cost, plus regulated profit (as they did before deregulation). Reduces by 75% need for state to buy power. Large energy users negotiate their own deals, or reimburse state for purchases.

o Power generators given five days to negotiate short-term power contracts, under a sealed bid process, and to negotiate reasonable schedule for payment by utilities of debts owed to generators. If generators do not comply within five days, state will seize assets of sufficient number of power generators with eminent domain to assure adequate supply of electricity — to protect public health and safety. The state could buy two power plants for the $800 million paid so far to energy companies.

o If taxpayer money is needed to keep lights on, i.e., utilities will not put up cash or sell assets, then state purchases enough power for five days until state seizes plants (as per #2 above).

o Immediate establishment of public power agency to effectuate this plan and move forward in future: seize assets/eminent domain; forecasting demand and supply; develop conservation plan; plan use of renewable technologies, retrofit existing plants or construction of new plants. Other relevant state agencies consolidated into power agency; DWR acts during transition.

o Creation of Consumer Utility Board watchdog to represent small ratepayers’ interest before PUC, FERC, courts, legislature.

o No bailout of utilities’ debts either by residential/small business ratepayers or taxpayers, either through lump sum payments or through “headroom” or other hidden charges placed in rates/long term contracts to be paid over many years.

But some lawmakers — Republicans and some “pro-business” Democrats — refused to accept the conditions, potentially killing the $400 million taxpayer appropriation, which, as an urgency measure, required a two-thirds vote of each house. However, Senate President Pro Tem John Burton stated publicly he had secured the Governor’s support for public power legislation to be heard next week.

Bush Needs to Ignore Energy Friends, Do His Homework

Consumer advocates also expressed dismay at news reports that President-elect Bush has dismissed requests that he take action, by ordering caps on federally-controlled wholesale energy prices. “President-elect Bush cannot afford to write-off California — it’s too important to the national economy and to him politically. Mr. Bush needs to ignore his friends and advisors who are in the energy business and do some homework on what is happening here. Blind reliance on the free-market ideologues got California into this mess. A federal policy of ‘California-be-damned’ will crush the California dream — and destroy the concept of deregulation forever.”


Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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