Public Process Replaces Backroom Dealmaking:Consumer Group Says Audits of Edison International, PG&E Corp. Must Be Independent
San Francisco — As Wall Street firms and California utilities joined to pressure California into a ratepayer bailout, the process for solving the state’s energy crisis has moved into the public forum of the California Public Utilities Commission (PUC) and the Legislature. According to today’s ruling, the PUC will inspect the financial books of Edison and PG&E to determine the veracity of claims that the companies are on the verge of bankruptcy.
Today’s CPUC order delays the possibility of rate hikes until its January 4th meeting. FTCR, which has criticized the Governor for negotiating a bailout of the utilities in private meetings in recent days, contends that there is no justification for any electricity rate increase. FTCR strongly disagrees with the PUC finding that retail rates must rise.
“The utility companies and their Wall Street allies are playing chicken with our economy and the reliability of our electricity system. We cannot be held hostage by their demand for a ratepayer bailout,” said Doug Heller, consumer advocate with the Foundation for Taxpayer and Consumer Rights (FTCR). “The movement toward a public process is an encouraging sign, but Governor Davis must be firm and hold the energy industry responsible for the deregulation fiasco rather than the ratepayers.”
Audits Must Be Independent; Ratepayer Representatives Must Be Allowed to Participate
Consumer advocates warned that, while a true financial assessment of the companies is essential, there is concern about the independence of any of the auditors that will likely be hired by the Governor. Edison International and PG&E have combined assets approximately $71 billion, which means that they are major clients of virtually all of the Big Five auditors. Consumer groups will seek to monitor the audits.
“We are skeptical of the independence and integrity of these audits, especially given the time constraints. The danger is that the audits become a whitewash of the utilities’ cooked books. We will participate to ensure that the audits accurately portray the financial status of these corporations,” said Heller.
Parent Companies in Strong Financial Condition
FTCR said that it was encouraged by reports that the audits would include the parent companies of the utilities. According to the most recent 10-Q filings with the Securities and Exchange Commission:
- Edison International reported total assets of $37.9 Billion;
- Edison International reported $1.076 Billion cash on hand;
- PG&E Corporation reported total assets of $33.8 Billion;
- PG&E Corporation reported $304 Million cash on hand;
According to a review of SEC filings, Edison International’s 3rd quarter, was the most profitable in the company’s history. On Thursday, December 14, 2000 The Board of Directors of Southern California Edison Company declared a quarterly dividend of $1.8075 per share on certain preferred stock.
Data analyzed by TURN, as well as analyses of corporate filings with the Securities and Exchange Commission, show that Edison International and PG&E Corp. have the resources to protect their utility subsidiaries.
“The parent companies have benefited from the deregulation of the subsidiaries; they should be providing the utilities with financial support, rather than asking ratepayers to pick up the tab. No matter what the companies’ financial condition, the ratepayers should not be held responsible to bail them out. A bailout sends the worst possible message to the energy industry: charge whatever you want for energy, the ratepayers will always pay.
“The utilities sponsored deregulation in 1996 and knew the risks associated with the law they wrote. If they cannot survive in a marketplace of their own making, consumers should not be forced to bail them out. Investors reaped the rewards of deregulation; they should pay for its failure. Our elected officials must not be stampeded into a bailout by outrageous and irresponsible threats by the utilities’ executives that they will shut the lights off,” concluded Heller.