BAILOUT WATCH: Keeping an eye on the energy industry and the politicians
Bailout Watch #59 – Jul 18, 2001
Get Your Buckets Ready; It’s Bailout Time! Lawmakers in Sacramento are falling over themselves trying to scrape together some way to bail out Edison. There’s the Speaker’s bill, which, according to a senior Edison official, speaking at an investor conference call on Friday, uses the MOU as a "platform." There’s the Senate version, which requires as much as a $2.5 billion tax on businesses for the deregulation disaster (see below), and then there’s Assemblyman Wright’s bill, which he acknowledges to be a straight bailout. Ironically, the company’s balance sheet is stable, as Edison noted in the conference call, and investors can look forward to tens of millions of dollars to be paid out this week.
You’re Not Going Anywhere Until You Implement My "Vision." Since March, the Governor’s pet project has been the Edison bailout, known as the Memorandum of Understanding (MOU). But with some legislators suggesting that an bankruptcy is no worse than a bailout, Gov. Davis is threatening to use his emergency powers to force lawmakers to work through their summer vacation until they bail out Edison. A few years ago, Davis told the San Francisco Chronicle that the legislature exists solely to implement his vision. Never mind the legislators’ own positions on the merits of the bailout. Never mind the letters and phone calls from constituents — of which we are aware of tens of thousands. Never mind the opinion polls that show that the public opposes the bailout. Davis has a vision (second term in 2002, White House in 2004, brought to you by Edison International) and nothing better get in his way.
A trickle down bailout. According to the Assembly’s 28,000 word, 79-page bailout plan issued at 2:00 am on Friday and scheduled for a vote as soon as Tuesday, residential ratepayers and larger consumers will pay a bailout tax for Edison for 2 years and then businesses and large gov’t agencies and non-profits such as hospitals will pay for approximately ten years after that. Putting aside that ratepayers shouldn’t pay for the utilities’ deregulation fiasco, there is some basic economics to consider here. Although there is a superficial sense of poetic justice that some of the large energy consumers that demanded deregulation in the first place would be responsible for a larger amount of its failure, the bailout costs would inevitably be passed onto consumers in the form of higher retail costs of products and services and increased taxpayer costs associated with job losses directly associated with higher manufacturing costs. When a supermarket and dairy farmer both are forced to pay a ten year bailout tax, the consumer pays more for milk.
Don’t try to buy off environmentalists by sticking a renewable energy bill in the midst of the bailout bill. Environmental groups and consumer groups have been working on legislation to create a "Renewable Portfolio Standard" (RPS) to lessen the state’s reliance on natural gas and other non-renewable energy sources. That legislation already exists in SB 531 (Sher) and need not be tethered to this bailout behemoth. In 1996, groups from a range of interests were seduced by the inclusion of one of their ideas in the otherwise horrendous deregulation bill and accepted the whole plan just to get a piece of the pie. Well, it wasn’t and is still not worth it. The five to ten bills contained in this omnibus bailout bill should be de-linked and addressed independently on their own merits.
Read my lips: "No New Rate Hikes." The Gov.’s people held a news conference Sunday to tell reporters that his administration has done such a fantastic job taming the energy market that no new rate hikes are necessary. Sure, after being handed the largest rate hike in state history, Governor White Knight (or at least his henchman) rides in to tell us that we’ve been saved from rate hikes (new ones, anyway). That’s like taking a "no new taxes" pledge the day after raising taxes. Wish you took that pledge yesterday. Also, the no rate hikes does not account for the utility bailout plan proposed by the governor. Why count that $6-7 billion (plus another $12 billion if PG&E gets the same deal) — it just makes everything so messy?
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Judgment Day
475 Days Until November 5, 2002
