Power crisis sheds light on lobbying process

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Utilities’ donations raise questions of intent

Ventura County Star

As California’s energy crisis approached, the owners of electricity-generating plants and their affiliated organizations began seeking political power in the Golden State and in Washington, D.C., pumping millions of dollars into the coffers of elected officials and into the accounts of lobbyists.

The independent power providers say they were just participating in the political process, but, in doing so, they have raised new questions about the need for campaign-finance reform, especially from organizations that charge politicians are influenced by large donations.

The trend is clear.

A review of contributions at the state and national level confirms there is an upward trend in giving and the biggest players in the California electricity market are among those writing the checks.

The Center for Responsive Politics, a nonpartisan, nonprofit research group based in Washington, D.C., reports that in the general election of 1996, electric utilities donated $ 3.6 million in unregulated soft money. In the 2000 general election, the center said, utilities had more than doubled their soft-money contributions to about $8 million.

Before talk of deregulation, in 1992, utilities donated less than $600,000 a campaign season.

“I think all Californians should be worried about whether energy policy is being driven by campaign contributions and I think that’s something that’s going to play out over the next year,”said California Common Cause Executive Director Jim Knox. “There are more players now vying to gain political influence, and in California you do that through political contributions.”

Common Cause is in the process of analyzing the financial involvement of power companies in California’s recent elections. It plans to release a report in three to four weeks.

If the national pattern is any indication, California politicians received millions this past year.

Reliant Energy, a Texas-based company that owns five electricity-generating plants in California, including two in Ventura County, increased its giving nationally by 99 percent in the past two years, according to records on file with the Federal Election Commission. Duke Energy North America, a company founded by the same family that founded Duke University and which owns four plants in California, including Morro Bay, increased its giving by 63 percent.

Both Reliant and Duke only recently began donating in state elections in California, a circumstance that they attribute to the fact that neither owned power plants in the state until after deregulation was approved in 1996 and implemented in the years that followed.

“It was just the first time we gave,” said Richard Wheatley, a spokesman for Reliant, who addressed the issue during a telephone interview from his Texas office.

“What we’re doing is essentially supporting candidates with positions very similar to ours,” he said. “We donate to campaigns to have a say in how legislation is advanced. E If you don’t have a say in the political process through legal and ethical means, then you don’t have a say in the process. It’s very simple.”

Tom Williams, a spokesman for Duke Energy based in Morro Bay, also defended his company’s involvement.

“I don’t think the level of contribution shows any attempt at all for undue influence,” Williams said. “It shows we’re getting more involved as our interests expand.”

Duke Energy invested $611 million in its four power plants in California.It’s rebuilding one and planning to rebuild another.

“We’re not only a player, we’re a huge player,” Williams said.

“When we finish our modernization in Monterey County we will be the largest taxpayer in the county by two times. We’ll be paying two times more in tax fees than Pebble Beach Co. E so we’ve gotten involved in Sacramento. It’s certainly not unusual for us when we get into communities.”

But Douglas Heller, a consumer advocate with the Foundation for Taxpayer and Consumer Rights in Santa Monica, said such answers are just “spin.”

And Ventura County Supervisor Steve Bennett, the loudest local voice for campaign finance reform, said it’s “just typical of the influence-buying that is dominating politics.”

Steven Weiss, a spokesman for the Center for Responsive Politics in Washington, D.C., said the donations are viewed as investments by companies.

“A large contribution certainly can get you the ear of the candidate after the election is over,” Weiss said. “Certainly, large contributions are given with that in mind.

“It would be very difficult for George W. Bush to turn away a call from the executive at a big energy generator that has poured millions of dollars into his campaign for president and for governor. The politicians know who they can turn to for much-needed campaign contributions and they’re certainly going to pay attention to those people and companies when the phone rings.”

Campaign finance reports on file with the California Secretary of State’s office indicate that Duke Energy gave almost $43,000 in the 2000 general election, $10,000 of which went to Gov. Gray Davis‘ campaign committee.

Reliant is reported to have given $37,000 to candidates and committees in the same election cycle.

The biggest beneficiaries of Reliant‘s California giving were Assembly Speaker Robert M. Hertzberg, a Van Nuys Democrat, who received $11,000, and Senate President John Burton, a San Rafael Democrat, who received $9,000.

Hertzberg and Burton, who can expedite or kill proposed legislation as they route it through the legislative committee system, also received sizable donations from other power companies. Hertzberg received $6,500 from Dynegy Inc., which co-owns eight power plants in the state, and $19,500 from Calpine Corp., which owns 16 plants in the state. Burton received $11,000 from Dynegy and $16,000 from Calpine.

Several of the companies were not involved in prior election cycles in California because they didn’t own plants in the state prior to 1998.

In national campaigns, the dollar amounts are much larger.

Like most all of California’s big energy providers, Reliant Energy’s political action committee, HIPAC, has increased its giving steadily during the past decade. For example, it gave $391,000 to candidates and committees in the 1998 election cycle, including $143,000 in soft money. But those donations increased significantly in 2000 to donations totalling $ 780,000, including $477,000 in soft money — $403,000 of which went to Republican organizations, according to Federal Election Commission data.

Reliant also reported spending $1 million in lobbying at the end of 1999.

Duke Energy’s political action committee “Dukepac” made similar increases. During the 1998 election cycle it contributed $173,000 to campaigns and committees, $110,000 of it in soft money. It increased that to $282,375 in the 2000 cycle, $61,500 of which was soft money.

Heller said in a telephone interview while in Sacramento this week that the donations represent sinister intent.

“These companies have become the economic bad guys in California, which means that in politics they have to become the institutional funders,” Heller said. “When they took on the role of wrecking our economy and turning the lights out in the state they brought lobbyists and campaign cash with them to protect them politically.”

Some of those dollars have been coming from California’s electricity market.

It all started with the passage in 1996 of the legislation that created deregulation, upon which many blame the state’s current electrical woes. Deregulation forced investor-owned utilities such as Southern California Edison to sell off their power plants to companies such as Reliant, Southern Company and others, who then began to generate the electricity and sell it back to Edison, which sold it to its consumers.

The whole system was supposed to create competition and lower power prices, but it didn’t. Suddenly Edison began being faced with higher prices. Shortages of power caused by a lack of rain at hydroelectric facilities, breakdowns and maintenance at the independent plants pushed demand and prices up. The cost of a megawatt hour — enough energy to power 1,000 homes for one hour — went from a 1999 average of $31 to more than $1,400 for the same amount of energy at certain times.

As a result, Edison, which delivers power to Ventura County residents, is deep in debt. Tax dollars have been put forward in the hundreds of millions to help out. Rolling, one-hour blackouts are still a threat and officials warn that the summer air-conditioner use in Southern California will make the situation even worse.

Some officials have suggested that the independent power producers are intentionally keeping part of their power-making capacity off line to drive up demand, but no proof of that accusation has been found despite investigations by the California Public Utilities Commission.

In the meantime, profits of the companies that generate electricity have skyrocketed.

Reliant reported last month that its wholesale energy businesses and electric operations pushed its earnings up 65 percent for the past year. It reported operating income of $482 million in 2000 from its wholesale energy group, a remarkable increase when compared to the $27 million it reported making in 1999 in the same category.

But company spokesman Wheatley said during a telephone interview last month that operating revenue cannot be viewed as though it were profit because it doesn’t include deductions for maintenance and upkeep. The company chooses not to break out what it made in the wholesale market in California.

Consumer Watchdog
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