Nader on CA power crisis, deregulation

Dayne Goodwin dayneg at SPAMaros.net
Thu Jan 18 17:59:50 MST 2001


> Deregulation disaster
> California consumers shouldn't bailout PG&E.
>
> By Ralph Nader
>
> Next time some major industry starts talking
> about the glories of deregulation, consumers
> should hold tightly to their billfolds.
>
> The rush to deregulate has intensified during
> the past 25 years as lobbyists for airlines,
> cable television, financial institutions, and
> telephone, natural gas, and electrical
> utilities have succeeded in convincing
> compliant local, state, and national
> legislative and regulatory bodies to let
> corporations escape consumer protections.
>
> These well-financed campaigns for deregulation
> invariably are centered around grandiose claims
> about "consumer benefits" of free-market
> competition. Against an onslaught of
> high-powered corporate lobbying, warnings and
> questions from citizens groups are either
> ignored or buried as afterthoughts in news
> stories and legislative hearings. All too often
> the rosy scenarios about consumer benefits have
> faded into horror stories of higher prices and
> poorer service - and taxpayer-financed
> corporate bailouts.
>
> California, the nation's most populous state,
> has become the poster child for electric
> utility deregulation gone bad. A 1996 state
> deregulation plan which was supposed to make
> electricity cheaper has resulted in vastly
> higher energy costs for consumers and
> businesses. California residents and businesses
> paid nearly 11 billion dollars more for
> electricity last summer than the previous year.
> The state now faces the possibility of power
> shortages manipulated for price maximization.
> This possible manipulation was pointed out by
> the California Public Utility Commission last
> summer.
>
> Even California's current Democratic governor,
> Gray Davis, who has tiptoed cautiously into the
> controversy, calls the state's deregulation "a
> colossal and dangerous failure." But, now the
> big question is how the mess is to be cleaned
> up and, more important, who pays: consumers or
> the big utilities which promoted the
> deregulation scheme in the mid 1990s?
>
> Two investor-owned utilities - Southern
> California Edison and Pacific Gas and Electric
> - have turned their public relations and
> lobbying teams loose around the state with sob
> stories about their financial plight.
>
> Lurking behind all the corporate hand-wringing
> is the hope that the politicians can be cajoled
> into providing a bailout financed by the
> taxpayers. High on the corporate wish list is
> authority for a bond issue to be financed by
> consumers through higher electric rates; a
> scheme that would burden electric ratepayers
> for years to come.
>
> Davis has called for the establishment of a
> California Power Authority and more state
> control over power generated in the state along
> with increased production and conservation
> measures. As yet, he has not endorsed the
> utilities' bond scheme, but the final chapter
> on the utility lobbying efforts will be written
> in a special session of the state legislature.
>
> What should make California consumers
> (taxpayers) nervous is Gov. Davis's inordinate
> concern about the possibility that the
> investor-owned utilities might be required to
> face up to their mistakes in a bankruptcy.
>
> "I reject the irresponsible notion that we can
> afford to allow our major utilities to go
> bankrupt," Davis told the legislature in his
> annual State of the State message. "Our fate is
> tied to their fate." That is the kind of
> dangerous philosophy that, too often, has
> fueled the costly idea in state and federal
> governments that the taxpayers are responsible
> for bailing out the mistakes of corporations.
> Contrary to the fears stoked by the utilities,
> the companies will not disappear in a
> bankruptcy. The corporate entities simply will
> be restructured with new management under
> supervision of a bankruptcy court. There may
> well be losses for the shareholders, but that
> risk is part of being an investor in our
> economic system.
>
> At least one California consumer organization,
> the Foundation for Taxpayer and Consumer
> Rights, has come up with data suggesting that
> the utilities have vast worldwide assets that
> could more than cushion their financial
> problems in California - without reaching into
> consumers' pockets for higher rates and a
> bailout.
>
> As Harvey Rosenfield, president of FTCR, said,
> "Edison can bail itself out."
>
> Figures compiled by Rosenfield show that Edison
> International's assets are valued at $37.9
> billion. Rosenfield said that some of these
> assets - like Edison's Massachusetts' trading
> affiliate ($45 million), the logo on the
> Anaheim [Calif.] Angels' baseball stadium ($25
> million), investments in Mission Windpower
> Italy, B.V. ($43 million), a 40 percent stake
> in Contact Energy, New Zealand ($676 million),
> and plants purchased from Commonwealth Edison
> of Illinois ($4.9 billion), among others -
> should be sold before the well-being of the
> company becomes the responsibility ("fate" in
> the words of Gov. Davis) of California
> taxpayers. The consumer advocate also urged the
> company to cut the bloated salaries of its top
> executives ($7.5 million) and $371 million of
> shareholder dividends as further buffers
> against bankruptcy.
>
> Consumers should not be coerced into a
> monstrous bailout as this electric drama
> unravels in California. It will be interesting
> to see who stands up for the consumers against
> the utilities in California. California has an
> opportunity to set an example for the nation:
> an example which establishes clearly that
> consumers should not be required to pay for
> failed deregulation schemes, corporate
> mistakes, and greed. Citizens in other areas of
> the nation should realize that their states are
> not immune from the type of deregulation
> disasters that have befallen California.
>






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