Plan DOA in Legislature
Desperate to redeem his credibility on Wall Street in the aftermath of PG&E‘s bankruptcy, California Governor Gray Davis has announced a deal with Edison. Under the known terms of the deal — the Governor refused to make the details available — ratepayers will be required to pay more than 100% of Edison‘s actual deregulation losses — possibly up to $10 billion. Sources have said that the deal will also require that PUC rules will be altered to free Edison of future regulatory scrutiny and halt the PUC‘s investigation of Edison‘s parent company.
Citizen advocates with the Foundation for Taxpayer and Consumer Rights (FTCR), a California advocacy group, immediately denounced the proposal and said they would fight it in Sacramento, in the courts and, if need be, at the ballot box next year. FTCR believes that the plan will be rejected by state lawmakers.
“No doubt they’re popping the champagne corks down at Edison,” said consumer advocates with FTCR. “But this panic-driven deal by a Governor desperate to appease Edison, Wall Street and the energy industry is Dead On Arrival. We cannot conceive of lawmakers willing to force their constituents to pay billions of dollars for Edison‘s mistakes. Edison backed deregulation, pocketed billions of dollars of ratepayer money and now that deregulation has collapsed, Edison and its shareholders should be forced to suffer the consequences.”
“The People of California can no longer afford Governor Davis’s capitulation to the utility and energy cartel. We need a plan to protect us against the energy and utility companies that have used deregulation to steal our hard-earned money, not a surrender of our wallets and state regulatory protections.”
Massive New Increases
FTCR offered the following critique of the terms of the deal described by Davis:
Price to Consumers — While Gov. Davis claimed he could not estimate the price of the bailout, Edison has pegged its losses at nearly $10 billion, which does not include its income from the sale of electricity it generates. Since the recent PUC increase of 40% will cover only $5 billion of power purchases, the bailout proposed by the Governor could add another 100% to that figure.
Overpayment for Transmission Lines — The Governor is offering far more than the book value for the transmission grid; moreover, PG&E‘s transmission system is subject to the bankruptcy court. Owning two of the three transmission systems is of very limited value.
Parent Company Gets Off — Edison siphoned more than $4 billion from its utility subsidiary during deregulation, which it used to reward investors, its executives and purchase power plants throughout the world. Yet the Gov. is requiring Edison to return only $400 million.
“Low Cost” Power Contracts — Edison is already required to sell its power at a low, regulated cost. There was never any possibility that Edison would be allowed to raise its rates as the failed deregulation law once provided. This is no concession from Edison.