I spent a few hours today reading California newspapers online, trying to bone up on the energy crisis. A lot of propaganda, most of it anti-business. Here's another. The writer doesn't seem to understand corporate law very well.
>>PG&E's propaganda war
Unmasking five big lies from the private utility's P.R.
campaign.
By Rachel Brahinsky
PACIFIC GAS AND Electric Company has its back against the
wall. The ratepayers are already angry, and next month, when
prices go up by as much as 26 percent, they're going to get even
angrier. If PG&E succeeds in lifting the state's cap on rates, the
prices could soar even higher: in San Diego, many people's bills
have tripled. Before the winter's out, some low-income customers
may well be forced to choose between electricity and food.
So the utility is cranking up its propaganda machine and scrambling
to put some positive spin on what almost everyone now agrees has
been a failed experiment in deregulation. The latest example is this
letter, which the company inserted into 4.6 million customers' bills
in December.
PG&E – which helped author the deregulation bill – says it is deep
in debt because it hasn't been allowed to pass on to customers the
high prices it has to pay for power. But there's something the utility
executives aren't telling you: PG&E's parent corporation (Pacific
Gas and Electric Corporation) is making big profits (in part by
exploiting those same high energy prices).
Corporate officials insist that PG&E Company and PG&E
Corporation are two very different entities – but that's wrong on its
face. PG&E Corp. CEO and president Robert Glynn, for example,
is also the chair of PG&E Co. And PG&E Corp. stockholders own
PG&E Co. In fact, according to company spokesperson Staci
Homrig, the stockholders paid for the letter below.
PG&E's interest in deluding the public about these connections is
clear. The company wants consumers to pay more for power – and
has to cry poverty to get away with the rate hike. But in the first
three quarters of this year, PG&E Corp. posted record profits of
$753 million, a 40 percent increase from the same period in 1999.
And, according to the Utility Reform Network (TURN), the
corporation's operating revenues for the third quarter were the
highest in company history. Cumulatively, PG&E Corp. took in
profits of $2.1 billion between 1997 and the third quarter of this year.
TURN reports that profits rewarded shareholders and financed new
investments in unregulated assets worldwide.
Here's how the lies stack up:
Lie no. 1: Power games (see "PG&E Co. no longer produces the
electricity we bring to your home. We don't make a nickel...")
PG&E wastes no time in making a statement that is patently false.
The letter states that the company doesn't "make a nickel" from
power generation, but as California Public Interest Research Group
energy associate Susannah Churchill told us, "If you're talking
about stranded cost recovery, the bailout money that they've gotten
from consumers [under deregulation], it's not a nickel, but $10
billion instead.... That was part of the legislation that they brokered."
Under deregulation, PG&E is supposed to sell off the majority of its
generation facilities – which includes 174 hydroelectric dams
spanning the state from north to south – by the end of the year.
Meanwhile, however, the company is still operating a lot of those
plants. According to TURN, PG&E earned net profits of $1.5 billion
from utility-owned generation between January 2000 and October
2000.
PG&E claims that it doesn't produce your energy because all of the
power the company produces is sold to the Power Exchange, the
central agency that controls the flow of electrons statewide. The
utility then buys back that power, plus a little more, to distribute to
its customers. So PG&E is selling you PG&E power.
Lie no. 2: The market myth (see "Factors like that lead to
shortages and shortages lead to higher bills")
The utilities are spinning this yarn as fast as the mainstream media
can pick it up. But customers in San Diego, who have already felt
the painful pinch of free-market electricity rates in California, have
another take on the story. In November the San Diego-based Utility
Consumers Action Network filed a class-action lawsuit against a
group of power generators. UCAN, which filed on behalf of the
nearly 10 million customers of the three big utilities (including
PG&E), contends that the generators have worked together as an
electricity cartel to control supplies and raise the cost of power.
Among the generators named in the suit: Pacific Gas and Electric
Energy Services Inc., another one of PG&E Corp.'s affiliates.
Lie no. 3: Who sets rates? (see "and increased electricity bills
could be right behind")
Reading this paragraph, you'd think that PG&E was simply
watching events unfold, that the utility had no influence in the
rate-making process. Again, this is patently untrue. Not only did
PG&E help write the deregulation law, but the company is
perpetually filing requests with the state to raise rates (and using its
powerful political lobbying operation to get those hikes through). In
the current request, PG&E is asking for a 26 percent increase in
rates immediately, and the company wants the rate cap lifted. After
that, PG&E is seeking reimbursement from customers for the high
cost of power this year. And the company is pushing aggressively
for more money: PG&E has tried to get state and federal courts to
overturn the California Public Utilities Commission's five prior
decisions denying exorbitant requests and is lobbying legislators to
push the rate hike through. After holding three days of hearings last
week, the CPUC is slated to announce the next step Jan. 4.
Lie no. 4: The illegal monopoly see: pacific gas and electric S.F.
address at the top of the letter.
PG&E would like you to think that you have no alternative but to buy
its power. The deregulation bill the company helped write made it
almost impossible for other private competitors to get a toehold in
the market. But the truth is, PG&E has no business selling power in
San Francisco anyway.
San Francisco is the only U.S. city mandated by federal law to run
a public power system. The 1913 Raker Act allowed the city to build
a dam in the Hetch Hetchy Valley of Yosemite National Park – as
long as the city used the dam to deliver cheap public power to
residents. But thanks to PG&E's political influence, that mandate
has been thwarted for 87 years, and PG&E has maintained an
illegal monopoly over the city's electric business.
Last summer the Coalition for Lower Utility Bills circulated a petition
to form a municipal utility district, a public agency that could help
the city live up to that mandate. The petition, submitted with 24,000
signatures to the city, is on hold until the Board of Supervisors calls
for an election on whether to form the district. Statewide, the energy
crisis has catapulted the idea of public power to center stage.
Consumer advocate Harvey Rosenfield has promised that if the
state won't protect consumers, he will spearhead an initiative
campaign that would create a statewide public power system to
keep rates low, like existing public agencies already do.
Lie no. 5: It's your fault (see the third graf where it says "offer
suggestions on how you can help manage your energy costs")
It's nice of PG&E to offer advice on how customers should manage
their money and control electricity costs, and indeed, conservation
is a cheap and effective way to reduce energy demand. But the
implication is that customers' bills are soaring because they're
using too much power. In fact, bills are soaring because PG&E is
making too much money – and paying its executives plenty.
According to the company's 1999 proxy statement, the company's
top brass are doing just fine with your money. PG&E Corp. CEO
Glynn, who also serves as chair of the board of PG&E Corp. and
chair of the board of PG&E Co., earned more than $2.05 million in
1999, including bonuses. That's a 63 percent increase from the
year before. Gordon R. Smith, senior vice president of PG&E Corp.
and CEO and president of PG&E Co., earned a total of $1.02
million, 60 percent more than in 1998.<<
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