BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
Bailout Watch #42 – May 15, 2001
Bankrupt Leadership Edition
While the energy cartel threatens the state with financial ruin, the Gov. and some Democratic lawmakers are wasting precious time trying to figure out how to rescue Edison from the folly of its deregulation law. The Gov’s "MOU" is dead, of course, but the politicians are looking for "Plan B": a way to order ratepayers to pay billions to bail out Edison that looks like a "compromise." As for the quaint notion that ratepayers should get utility property in exchange for a bailout, consider the thought-process of Assembly Member Joe Nation (D-Rafael), who is authoring one of the "Plan Bs." He reasoned that that would be communism: "This idea that we step in and purchase the entire utility is an East German model." Gee, we always thought that government running roughshod over its citizens was the hallmark of those authoritarian countries. The fact is, that kind of empty rhetoric by the politicians in 1996 is what got us into this mess in the first place. These elected officials just don’t get it: the utilities gambled, won at first, then lost. Game over. We’ve got to worry about the generators turning California into Calcutta this summer. We don’t have the time — nor the money — to spend on Edison. One thing for sure: no one’s going to be able to bail out the politicians who vote for such legislation.
$6.7 billion budget burn-through since January, 2001. That’s the latest crime statistic on deregulation, the crime of the century; meanwhile, the state of California paid $1900/ mWh last Wednesday to avert blackouts. That is ten times the Gov.’s projection for average summer wholesale prices. At this price, the average residential utility bill in California would be: $950/month.
The LA Times, Treasurer Angelides call for plant seizures. The reality of our situation is slowly making its way through the multitudinous layers of California’s political and business establishment: we cannot buy or pay our way out of this deregulation disaster. If the generators won’t refund overcharges and lower prices to fair profit levels, the state will go broke, the lights will go out and Governor Davis will have no choice but to commandeer the plants and operate them at cost, at which point prices will plummet. Treasurer Angelides made the same point on Friday. Free market extremists brought us this debacle, and tough measures are the only response. "Governor, Take Command!" the Times wrote.
Looking for business leadership. What’s more important: ideological purity, or staying in business? That’s the decision our business leaders are going to have to make. Support a return to regulation and public power, or let the state be crushed in the name of "deregulation." The PUC’s rate hike — a majority of which may land on the big business users who backed deregulation in the first place — may serve to involuntarily deploy these folks as lobbyists for cost-based, regulated wholesale prices.
Experience Money Can Buy. Gov. Davis is said to be lobbying the PUC to put more of the burden of the rate increase on residential ratepayers rather than on big businesses. Get that resume ready, Gray!
Judgment Day
539 Days Until November 5, 2002
