California power ripoff
PG&E uses bankruptcy to hide loot
By Tahnee
Stair
San Francisco
On April 6, Pacific Gas & Electric, one of the two
largest power utilities in California, filed for bankruptcy.
PG&E's latest maneuver is an attempt by the utility
monopoly to send already skyrocketing electric rates even
higher.
California Gov. Gray Davis had been in negotiations with
PG&E and the other major California utility, Southern
California Edison, for state bailouts of the companies. The
bailout of PG&E would have involved the state purchasing
the power grid and transmission lines from PG&E, reducing
payments PG&E would make to power producers they owe, in
exchange for PG&E agreeing to provide power to California
at "a reasonable cost" for 10 years.
On April 10 Davis reached an agreement for a similar
bailout plan with Southern California Edison. The state paid
$2.8 billion for Edison's transmission lines--more than their
value.
Since the energy market deregulation in 1996, people have
overpaid PG&E $20 billion through surcharges and rate
hikes. On March 26, the Public Utilities Commission, whose
members are appointed by the governor, gave PG&E and
Southern Cal Edison a whopping 46 percent consumer rate
increase that followed an earlier 22 percent rate hike. On
April 4 Gray Davis delivered a live television address in
which he backed the power rate hikes.
It was not enough for PG&E.
$50 million to managers and execs
The utility filed for Chapter 11 bankruptcy protection in
Federal Court--but not before awarding $50 million in bonuses
and raises to 6,000 management employees, plus additional
"cost of living" pay raises to executives.
The utility said its $9 billion debt was caused by the
state's 1996 power deregulation plan, which did not allow it
to pass on astronomical costs it paid the power wholesalers
to its customers. The truth is, deregulation legislation was
pushed through the state legislature by utilities like
PG&E, who lied to consumers and told them they could
expect to save 20 percent as a result.
The utilities knew full well that putting power on the
"free market" would pave the way for monopoly price
manipulation and super profits. That is exactly what
happened.
PG&E is known to have funneled $4.6 billion to its
parent company since 1996, and until a year ago 85 percent of
the parent company's profits came from PG&E. The money
was spent on out-of-state ventures.
The energy crisis is a result of capitalist monopoly price
fixing. Natural gas producers withheld their product to
create greater demand and raise prices. They also favored
their own affiliate companies' bids to transport power to
California, even if the cost was far greater than other
offers.
According to California's Independent Systems Operator,
over the last 10 months in which the state bought natural gas
for the utilities, wholesalers charged the state $6.2 billion
above standard market value. Even the Federal Energy
Regulatory Commission, whose five members were appointed by
George W. Bush, has been forced to ask wholesalers to explain
their outlandish prices. FERC has said it is investigating
thousands of power transactions involving overcharges to the
state.
No effective action is expected from FERC, a commission
whose purpose is to encourage greater "competition" in the
power industry while regulating it. One business writer
termed the FERC "more of a lapdog than a watchdog."
Due to PG&E's bankruptcy, the power to reorganize the
company, decide which of its debts will be paid off first,
and raise rates belongs to federal bankruptcy judge Dennis
Montali.
In any case, the money will come directly from the pockets
of those workers who can afford to pay utility bills. It is
very likely that a new bailout plan for PG&E could be
negotiated in federal bankruptcy court. The state only owns
half the power grid now and wants to get the rest from
PG&E.
People get no help
from bankruptcy court
On April 8 PG&E and the state's Public Utility
Commission lawyers appeared in a San Francisco federal
bankruptcy court. PG&E requested a temporary restraining
order to fend off creditors and the state. The one community
member allowed to address the court requested that someone
break down the confusing proceedings into layperson's terms.
Judge Montali replied arrogantly, "Hire a bankruptcy
lawyer."
It's obvious the federal courts will not serve the
people's interests. The state set the stage for the crisis in
the first place. Profits of 300 percent are normal for the
large private generators that caused this crisis. They were
given the green light to manipulate the market when the
deregulation laws were passed by the state legislature in
1996. These private generators provide almost half of
California's power. Generators stopped selling to PG&E
because it became more and more obvious that the utility
would not be able to keep up with the prices the generators
were charging. The stability of a state bailout, though
always part of the utility companies' plan, became
questionable due to California's worsening economy.
Though capitalist economists expect a severe economic
slowdown or stagnancy throughout the state, the San Francisco
Bay Area, including Silicon Valley, is expected to experience
a recession. It has been the hardest hit in the state with
layoffs and dot-com failures in the Internet and high tech
sector.
The effects of the "free market" the U.S. pushes all over
the world are hitting home. Since January, the state has
spent more than $4 billion of tax money to buy energy. It
could burn through more than $2 billion a month this summer.
It is expected by the end of the summer that the state's
surplus will be drained.
If all the governor's requests to purchase power go
through as anticipated, the state will be in debt. This money
is needed to fund schools, health care, and rent and food
subsidies. Instead the governor is turning it over to power
companies that have already stolen so much.
Rainfall has been less than normal in the state and
hydroelectric plants are not expected to generate normal
amounts of power this summer. The Independent Systems
Operator has already announced there will be at least 30 days
of rolling outages throughout the season. The state says it
is building new power plants, but they will not be completed
until the fall. As the hot weather approaches and power
demands soar causing outages, many people will face dangerous
temperatures without air conditioning. Hospitals, schools and
public transportation are all at risk.
With big layoffs happening, thousands losing welfare
entitlements as a result of Clinton's 1996 welfare
destruction bill, rising energy costs, and the highest cost
of living in the United States, many people in California
cannot afford to pay their utility bills. The federal court,
the capitalist state and the utility corporations all put
corporate profits ahead of ensuring people's right to
electricity, heat and light.
The People's Energy Committee of the International Action
Center has begun a campaign to demand a rollback of gas
prices, no electricity rate hikes and no shutoffs. To get
involved in upcoming actions in the Bay Area, contact the IAC
in San Francisco at (415) 821-6545.
This article is copyright under a Creative
Commons License.
Workers World, 55 W. 17 St., NY, NY 10011
Email: ww@workers.org
Subscribe wwnews-subscribe@workersworld.net
Support independent news http://www.workers.org/orders/donate.php)
HOME
:: U.S. NEWS ::
WORLD NEWS ::
EDITORIALS
:: SUBSCRIBE ::
DONATE
Email
this article
Printable
page