BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
Bailout Watch #6 - Feb 12, 2001
Fooling voters by hiding the bailout.
Politicians who want to bail out the utilities think they can get away with it by stretching out the number of payments the ratepayers have to make. Their plan is to force ratepayers to pay off utility-floated bailout bonds in installments so small that utility bills will increase by just a few percent per month. We don't think that'll work. Last week's passage of AB1X contemplates long term contracts and bonds that could be difficult to keep within the existing rate structure. Add a multi-billion dollar bailout of the utilities and the price is going to have to go up -- unless the repayment period stretches into decades. "The amortization of the debt would have to last for a good long period of time if it was to be done within existing rates," a Wall Street expert told the Wall Street Journal. In other words, the bailout charge will be a legacy of debt handed down from generation to generation. We are certain that the voters are not so easily duped.
Plan to deny voters right to reverse bailout through ballot measure.
As utilities, energy companies and Wall Street increase the pressure for a bailout, Gov. Davis is reportedly looking for a way to prevent California voters from reversing a bailout at the ballot box. According to a report in the San Jose Mercury News, one scheme would be to negotiate a bailout in the context of a settlement of the federal lawsuits brought by Edison and PG&E against the state; the utilities believe a federal court settlement order cannot likely be overturned by legislation. However, consumer groups will challenge such a settlement in court and appeal it. Moreover, any such settlement including a bailout would require legislative action. Such action could be challenged in court by consumer groups. One thing is certain: California voters consider the right to propose initiatives one of their most sacred democratic rights. Public officials who try to deprive voters of that right by doing an end run around the Constitution will be held strictly accountable for their actions.
Davis: Does he or doesn't he?
The utilities loved it -- until last June, at least. Wall Street loves it. So do the energy companies, the corporate-sponsored academics and ideologues. We're talking about deregulation. But what is Governor Davis's position? It seems to change from day to day. In his state of the state speech, he said: "California's deregulation scheme is a colossal and dangerous failure. It has not lowered consumer prices. And it has not increased supply. In fact, it has resulted in skyrocketing prices, price-gouging and an unreliable supply of electricity. In short, an energy nightmare." But then a few weeks later, the Sacramento Bee quoted him as saying he had still not "given up" on deregulation. He said: "I'm deferring judgment about whether deregulation will work in the long term." "Deferring judgment," after writing a $450 million check on the state treasury to buy electricity for the utility companies? How can we expect a coherent energy policy if the Governor can't make up his mind on two different energy paths? This is one issue we can't afford to let him have both ways.