BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
The whole world is watching
Last time, no one was watching. This time, the whole world is watching. Last time, state legislators bought the ideology that a free market in electricity would lower rates. (Or maybe, the ideologues simply bought the lawmakers). This time, the politicians are looking for a way out of the ideological box. Last time, to get deregulation, ratepayers had to pay off the bad debts of the utilities. This time, to rescue the utilities from deregulation, we have to pay off the bad debts of the utilities. Two weeks ago, Gov. Davis got authority to spend $800 million of taxpayer' money to keep the lights on -- now it's nearly gone. Last week, the taxpayers got into the business of buying electricity for the private utility companies. This week, legislation to pay off billions of dollars of the utilities' inflated losses will be pushed by the utilities and Wall Street. A rip off this big deserves its own newsletter.
Audits: utilities don't deserve bailout. The PUC audits of Edison and PG&E confirm our claim that the utility companies exacerbated their present financial woes by siphoning off billions from ratepayers, then paying dividends and going on an international spending spree. When the market turned, the utilities mismanaged their power purchases and failed to cut their expenses -- and are now inflating their recent losses by over 45%. A good summary by TURN of the audits can be found on our website. A plan under which Edison can sell its non-essential assets to bail itself out is also available.
Gas companies plot price-fixing. Deregulation of electricity is shaping up to be a more expensive disaster than deregulation of savings and loans, another brilliant idea pioneered by the California Legislature in the early 1980s. It ultimately cost taxpayers $300 billion. But yesterday's Los Angeles Times reveals how deregulation of natural gas by the federal government under Bush and Clinton has empowered the energy companies to manipulate gas prices by controlling the movement of gas through interstate pipelines and dramatically increase the price of gas when it crosses the Arizona-California border.
A "voter proof" bailout? Guess what: the utility companies want to prevent California voters from reversing a legislative bailout at the ballot box. Even though the California Constitution reserves for the People the right of initiative and referendum, lawmakers are planning to insert language into the bailout legislation which will preclude voters from challenging such laws through direct democracy. FTCR will seek to invalidate any such legislation in the courts.