Senate to Vote on Most Important Short-Term Solution to Energy Crisis

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Windfall Profits Tax – SB 1X – on Senate Floor

The Foundation for Taxpayer and Consumer Rights (FTCR), a non-profit, non-partisan organization, strongly supports the “Windfall Profits Tax” legislation, SB 1X. Considering the severity of the crisis and the failure of the FERC and the Bush Administration to protect Californians, this legislation represents the most important bid to effectively resolve the deregulation disaster and protect consumers in the short term, according to FTCR.

As the energy crisis approaches its one year anniversary, virtually all sectors of the state’s economy have been hurt or jeopardized severely. One industry, however, has consistently benefited from California’s deregulation fiasco: the energy industry. Most of these out-of-state companies have seen their profits skyrocket, with earnings reaching unprecedented levels for generators and traders. They have achieved these profits by abusing their market power and escalating prices in a manner entirely unrelated to the cost of production of electricity. Prices have, at times, been 3900% higher than at corresponding times of the year in previous years. Their profiteering is at the heart of our crisis, and with Vice President Cheney’s recent comments that he does not support wholesale price caps, it is essential that California takes this matter into our own hands.

SB 1X would impose a tax on the energy corporations that have gouged California ratepayers, taxpayers and utilities and claw back billions of dollars that these companies have overcharged us. Their profits have soared in recent quarters, as a variety of federal, state and private agencies have assessed the generators overcharges conservatively at $6.3 billion and growing. If we are to rein in these companies, it will take the consumer protection of a windfall profits tax to establish our unwillingness to be gouged any longer.

On March 19, 2001 FTCR published a report titled “The Manufactured Energy Crisis,” in which we demonstrate a variety of ways that the energy companies have used our deregulated electricity market to game the system at a devastating cost to taxpayers and consumers. Chief among the conclusions of our study is that:

“Officials should implement a windfall profits tax to reimburse consumers (and the utilities) for profiteering to the extent that FERC refuses to uphold its regulatory duty to subject unjust and unreasonable wholesale prices to refunds and fines.”

California consumers and taxpayers desperately need this protection, for, short of seizing power plants by eminent domain, there is nothing else that will hold the energy industry accountable for their abusive and avaricious behavior in the California energy market.


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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