BAILOUT WATCH: Keeping an eye on the energy industry and the politicians

The sleeping giant is awakened. Until yesterday, the great population center known to its residents as the Southland knew of the electricity "crisis" only as an abstraction, and even then they were angry. Not since World War II had there been rolling blackouts in the region. Yesterday, the lives of 1.8 million Californians were interrupted, with no warning, by the blackouts. The truth is, the energy industry has declared war on California. Yesterday’s surprise attack was the Pearl Harbor.

Blackout Blackmail, Round II. FTCR yesterday published a lengthy analysis of supply, demand and other data concerning the state’s so-called "energy crisis." Our conclusion: The energy crisis (and its concomitant "supply shortages") has been manufactured by the energy industry to secure massive profits in our deregulated market. In the report, we noted that in a Dow Jones story last Friday, an anonymous Edison executive rued the loss of the "sense of urgency" surrounding the utilities’ allegedly "bankrupt" financial condition — the utilities have cried wolf too many times. We warned of another round of blackouts when the utilities’ creditors realized that prospects for a utility bailout were now greatly diminished. We didn’t, however, expect to be upstaged by the blackouts. Read the Special Report.

And sure enough, as last January, the energy companies’ blackouts got public officials’ attention: the PUC is expected to order Edison to join PG&E in making partial payments to the "QFs," which the companies should have been doing without the pressure of the state. These qualifying facilities (QFs) are small, natural gas fueled plants and renewable energy suppliers that, unlike the biggest generators, haven’t been paid by Edison at all since November and only partially by PG&E. We’re sympathetic to their plight, but completely unsympathetic to using the electric switch as a means of forcing attention to their plight.

The little guys alone cannot take 1/3 of the power off-line. The big out-of-state generators got off scot-free yesterday, with all attention on the small QFs who took power off-line for "financial concerns," as the Cal-ISO euphemistically put it. At least 12,000 mW were off line; only 3,000 of those were from the QFs. The big guys have a hand in these on-going blackouts and will continue to use rolling blackmail until the state gives in to their demands. Creditors who need to get paid can pursue bankruptcy if public officials refuse their entreaties for a bailout. But shutting off the lights is going to kill people.

Utility rescue plan still DOA? We think so. There is simply too much evidence, from too many credible sources, of market manipulation for lawmakers to justify a forced bailout by ratepayers. True, as we noted yesterday, rolling blackouts worked in January to blow open the state treasury. But paying blackmail demands never solves the problem. And continuing blackouts are going to raise public ire to a fever pitch. We don’t think ratepayers will find it acceptable to avert blackouts by forcing them to pay off the blackmailers for the next ten or fifteen years.

Tomorrow: Governor Davis is working with energy generators and lawmakers to strip the PUC of authority to investigate plant "outages."

Also: the academics who frequently appear on the oped pages and television to provide "impartial analysis" are often funded by the energy industry.