BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
Bailout Watch #4 - Feb 08, 2001
Parent corporations must protect the utilities. That is what the California Public Utilities Commission (PUC) required when it allowed Edison and PG&E to form holding corporations in 1988 and 1996, respectively. According to PUC decisions that were released Wednesday as part of the Assembly Energy Oversight hearings, it is and has been the responsibility of Edison International and PG&E Corp. to ensure that the utility companies can fulfill their duty to provide electricity to consumers. "The capital requirements of the utility, as determined to be necessary to meet its obligation to serve, shall be given first priority by the Board of Directors of Edison's parent holding company and Edison" (PUC Order#88-01-063, condition 12). The same rule applies to PG&E. This means that the parent companies cannot "cash out," go on a worldwide spending spree and then pressure the state to bail the utilities out. Edison and PG&E must bail themselves out.
Don't blame the failure of deregulation on public health standards. Governor Davis is expected to announce new rules for permitting power plants in an effort to increase the state's supply of electricity. As part of the effort to misdirect the public from the real problem -- that the unregulated electricity market creates an incentive to tighten energy supplies -- the Republicans and some Democrats are leading a charge to undo environmental protections that ensure the construction of safe power plants. Even if the state removed all public health and safety protections in plant siting, this would do nothing for the state's current energy problems. Furthermore, there are currently 14 fully approved major power plant projects throughout the state and another 9 in the permitting process. The projects were approved under current regulations. These plants will be up and running long before any unsafe plants could be sited and built no matter how lax the standards.
CEO says Edison doesn't need a bailout; CEO lobbies for bailout anyway. Edison International CEO, John Bryson told the news media that Edison does not need a bailout, because the company expects to win a federal lawsuit. He was reported to add, however, that the company would sell its part of the state's power grid for quick cash if the offering price is right. After his media briefing Tuesday morning, CEO Bryson was being led around the State Capitol by an Edison lobbyist. FTCR noted that if Edison is really so confident about its lawsuit, it would not send the CEO of the company to walk around the legislative offices in Sacramento.
Bryson's comments mark more posturing by the utilities in their quest for a massive ratepayer bailout. First the companies threatened bankruptcy and secured a 10% rate increase from Governor Davis. Then they threatened rolling blackouts and the energy companies pulled the plug on California. The Legislature and Governor submitted, opened up the treasury to the energy industry and bailed the utilities out of their obligation to serve customers. Now the utilities suggest that the only way they will drop their lawsuit is if the state gives the companies a major bailout, possibly by overpaying for the state's electricity transmission grid. FTCR believes that if the utilities want cash from the public, they ought to offer up their transmission lines at a cut-rate price and then officials can determine if it is a worthwhile purchase.
Edison's parade. The allegedly "bankrupt" company spent $250,000 on its float for the Rose Parade. Worried that such an extravagance might undermine its push for a bailout, Edison gave the float to the Wetlands Recovery Project to use in the parade.