BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
Bailout Watch #8 - Feb 14, 2001
$2 billion in ransom payments.
FTCR warned that opening the state's treasury to the energy profiteers would only inspire the blackmailers to demand more money. (And resist as long as possible long-term contracts). The state has already spent over $1.5 billion of public money to buy electricity at the extortionary price. This is a moral outrage that cannot be permitted to continue. But the one individual who has the authority to stop it -- by seizing the powerplants involved -- has become the Invisible Man. The Governor threatened to seize plants in his state-of-the-state address. Since then? Nothing. There is no plan in Sacramento that will stop the bleeding. Rescuing the utilities won't do a damn thing to address the present cost of electricity.
How to turn $10 billion into $17.5 billion.
Well, just add interest. The actual cost to ratepayers of AB1X -- the bill authorizing the state to procure electricity to give to the utilities -- is estimated at $17.52 billion (in 2001 dollars) when you add the interest ratepayers will have to pay on the bonds, assuming that they are taxable. Another way to view this: for $17.5B, the state could use its eminent domain authority to seize four of the major power plants which are now charging prices thousands of times above their costs -- and getting away with it, thanks to deregulation.
A favorite example of what's wrong with government is the DMV -- California's Department of Motor Vehicles. These days, opponents of a state public power agency use the DMV to argue that the state shouldn't get into the power business. The better example is DWP -- LA's Department of Water and Power. This publicly-owned utility offers its customers lower rates and no threat of blackouts.
We Have Met the Enemy and He Is Us.
The energy industry's search for a scapegoat in the deregulation debacle has targeted California consumers, who, they say, are just greedily sucking up all the power. If ratepayers had to pay even higher prices, their theory goes, we wouldn't use so much and -- PRESTO! -- there'd be no crisis. Now we're being told we'll have to ration energy as if we were at war. A spokesman for Duke Energy, a North Carolina-based company that has been selling electricity at windfall prices in California, told the Bakersfield Californian that "over the short term, people will need to conserve like a World War II level." Duke's profits were up 45% from January through September 2000.
In a letter sent to state legislators yesterday, FTCR warned of political repercussions if lawmakers attempted to preclude voters from overturning any bailout at the ballot box next year. The letter is on our website.