Electricity Crisis Manufactured by Energy Firms, Consumer Group Says

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Deregulation Created Motive & Opportunity

Los Angeles–The state’s energy crisis has been manufactured for the financial gain of the utilities, energy companies and Wall Street firms, a citizen group said today.

In a lengthy report summarizing the energy situation published today in its Bailout Watch newsletter, the non-profit, non-partisan Foundation for Taxpayer and Consumer Rights (FTCR) concludes that the 1996 California law that deregulated electricity lifted controls over the energy industry and ignited a “greed-driven frenzy,” which has cost Californians tens of billions of dollars and may ultimately cost over $60 billion.

Read the full report .

The report compiles published data which contradict the oft-repeated argument that the skyrocketing price of electricity and rolling blackouts are caused by enormous increases in Californians’ use of electricity and the state’s failure to build enough power plants. The report concludes that:

  • Thanks to the 1996 deregulation law, energy generation in California is now controlled by a cartel of unregulated power companies that have financial incentives to withhold power from the energy market.
  • Artificially created shortages boosted wholesale electricity prices by as much as 3200%. The wholesale energy companies’ profits have soared as much as 600%.
  • Power companies have used the perception of supply shortages to gouge Californians even at times when demand was little more than half of the available supply.
  • The utility companies prospered enormously from the deregulation law, which they wrote, but now are demanding that their recent losses be paid for by ratepayers. The utilities’ creditors, including the wholesale energy suppliers, trading firms and Wall Street interests, want the utilities to be bailed out so that the utilities will pay them 100% of what they are owed.
  • January’s rolling blackouts were not justified by supply/demand issues and were intended to force state officials to use taxpayers’ money to buy electricity.
  • State projections confirm that there should be no shortages this summer, contrary to threats from the energy industry and their allies in Washington. But more price-gouging and “blackout blackmail” can be expected in the short term unless California officials take strong law enforcement and legislative action to protect California from the greed-driven conduct of the energy generators.
  • The Governor’s utility rescue plans are likely D.O.A. at the Legislature because of their massive cost to ratepayers.

“A comprehensive review of independent information shows that California’s ‘electricity crisis’ was manufactured by utility and energy firms for their own financial gain. The energy companies have used their cartel power under deregulation to soak the public, through artificial shortages and rolling blackouts. Unfortunately, state officials have so far capitulated to the energy industry by paying them tens of billions of taxpayer dollars. And they are demanding that ratepayers pay billions more to bail out the utilities. Unless the Governor and lawmakers stand up to the utilities, the energy companies and Wall Street, with tough action and the creation of a public power system, Californians will continue to be held hostage to ”

“Bailout Watch” is published by FTCR on a regular basis. Click here to view Issue #21 and previous issues.

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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