Zoltan
I e-mailed the Cato article to a local talk show guy(MRKABC, same channel as Larry Elder) that has been commenting heavily on the energy crisis. His comment was that he'd read it, it was old and not very accurate. I went to his comments and found this.
The "Power Crisis"
Copy, paste and eMail the following information to anyone you think is interested in
the "Power Crisis." Please Credit "Mr. KABC" on TalkRadio 790 KABC in Los
Angeles.
CLAIM: SCE was forced into deregulation.
FACT: George Dunn, Governor Pete Wilson's Deputy Chief of Staff (now a lobbyist)
brokered the deregulation agreement, largely behind closed doors, with Southern
California Edison, its biggest industrial customers and an association of independent
power producers. All parties pledged to support legislation that would create an
independent power market. 3
"Utilities played a major role when the Legislature drafted and approved the
restructuring that has turned sour. They received, at the time, an entitlement to
compensation for anticipated losses (apart from any rise in the price of electricity) that
was generous." 5
CLAIM: SCE was forced to sell all their power generating facilities by deregulation.
FACT: The San Onofre Nuclear Generating Station (SONGS) is a 75% owned by SCE.
Today, SONGS provides nearly 20 percent of the power to more than 15 million
people in Southern California -- enough power to serve 2.75 million households. SCE´s
Big Creek hydroelectric system which comprises approximately 90% of SCE´s
Hydroelectric generation capacity. Big Creek Hydroelectric System has grown into an
integrated hydroelectric project consisting of 23 generating units in nine powerhouses.
1
CLAIM: Edison has not profited by deregulation.
FACT: Edison has overstated its electricity-buying debts by failing to subtract the
amount of money it paid for power from its own power plants. That amount is at least
$1.5 billion, it said. Edison has acknowledged that the debt figure it publicizes most
widely, $4.5 billion through Dec. 31, does include payments to itself, but it has not
specified an amount. Some speculation has placed the figure at more than $2 billion.
PG&E has said its $6.6 billion in electricity buying debt includes about $3.3 billion for
power from its own plants. 10
In the last 5 years, SCE had generated net income of $2.7 billion and a positive cash
flow from operations of $7 billion. 2
CLAIM: No new power plans have been built in CA because of environmentalist
opposition.
FACT: Some of the power generators complaining loudest about California's
environmental obstacle course have used the system to hold up the licensing of a
competitor. According to Energy Commission documents, 22 energy companies have
intervened in 12 proposals by competitors. Some become formal "interveners" simply
to glean information. But others aggressively use their status to hire lawyers, file
objections and cross-examine competitors in evidentiary hearings. Of the 21 power
plants proposed for licensing since 1997, competing companies have intervened in 12
proposals, slowing the process in at least four situations. Six years ago, the Public
Utilities Commission ordered the state's investor-owned utilities to contract with private
companies that were planning to build 1,400 megawatts of new plants. Southern
California Edison objected, and appealed the order to the Federal Energy Regulatory
Commission, arguing it would "not need this power until 2005." FERC sided with
Edison, and the proposed plants never were built. The following year, the state passed
its deregulation legislation, and that slowed plant construction even more, said John
Tiner, a professor emeritus of electrical engineering at Johns Hopkins University. "Once
deregulation became a factor, the power utilities stopped building plants, with good
reason. They knew they would have to divest," he said. Since 1996, the California
Energy Commission has tried to speed up new generation with its "one-stop-shop" for
plant permits. The result: The commission has licensed nine big power plants, totaling
6,278 megawatts, said Claudia Chandler, an assistant director of the commission. Six
of those plants are under construction. Firms are formally seeking licenses for 12 others,
she said. When their interests are threatened, energy companies also throw their
muscle around. 12
"Assertions that environmental regulations were holding back power production were
'absolutely false.'" - spokesman for Houston- based Reliant Energy, which operates four
Southern California plants. Nor, apparently, did environmental regulations play much
of a role in California's failure to build new plants in the years since deregulation. In
fact, environmentalists generally favored deregulation, because they thought it would
lead to the construction of new plants, which would be gas-fired and hence cleaner
than the coal-fired plants that still supply much of the state's power. 8
CLAIM: SCE is nearly bankrupt because of deregulation.
FACT: A formal audit of SCE's books released by the California Public Utilities
Commission Monday 1/29/01 confirmed that between January 1996 and November of
2000, they transferred about $4.8 billion of net income to Edison International, their
parent company.4
An independent audit of PG&E on 1/30/01 accused the investor owned utility of not
heeding months of warnings and for not moving quickly to save money when things
turned bad. PG&E Corp. (the parent company of PG&E) spend $800 million of the
money it collected from PG&E to support other subsidiaries, auditors said, while
providing no cash, credit or other financial assistance to its struggling California utility.
7
CLAIM: California utility executives are just trying to keep the lights on.
FACT: Two senior PG&E executives pocketed more than $118,000 by cashing in stock
options last August, just weeks before the company's shares tanked on news that the
utility was racking up billions of dollars in debt. The stock profits are the first suggestion
that PG&E officials may have benefited from their inside knowledge of the company's
precarious financial condition before the full scope of the crisis was made public. It is
also significant -- and potentially illegal -- that senior PG&E executives were enriching
themselves the same month that the utility's parent company, PG&E Corp., retained
outside bankruptcy attorneys to advise on the possibility of financial ruin. 11
CLAIM: California rate payers got a 10% rate rebate when the deregulation bill passed.
FACT: The utilities were allowed to float $7 billion in bonds to pay for the 10% rate
rollback. Because customers are paying off those bonds today, over 10 years, the
promised 10% cut amounts to more like 3%. 3
CLAIM: The crisis was caused by a sudden increase in demand.
FACT: The utilities took an unusually large amount of capacity off-line for what it
described as ``routine maintenance.'' At the same time, members of the
power-generator cartel also began to systematically withhold power. Ostensibly, this
was done because the cartel feared that any power sold to the near-bankrupt utilities
on credit would be money lost. The practical effect, however, was to drive wholesale
electricity rates through the roof at the same time that the now-artificial electricity
shortages triggered rolling blackouts throughout the state. 9
CLAIM: Prices are high because of the free wholesale market of electricity.
FACT: Six investigations by state and federal agencies are underway, seeking evidence
of collusion or other illegal behavior. Multimillion-dollar lobbying efforts in
Sacramento are intensifying. 3
Sources:
1 www.sce.com
2, 4 cpuc.ca.gov
3 Nancy Vogel, LA Times 12/9/00 "How State's Consumers Lost With Electricity
Deregulation."
5 Editorial, Wednesday, Jan. 31, 2001, in the San Jose Mercury News
7 Bian Melley, Associated Press 1/31/01 "Audio Confirms PG&E near broke."
8 Paul Krugman, New York Times January 31, 2001 "Smog and Mirrors"
9 Peter Navarro, Pioneer Press 1/30/ 01 Navarro is an associate professor of economics
and public policy at the University of California, Irvine. Distributed by the Los Angeles
Times-Washington Post News Service.
10 By Dale Kasler, Carrie Peyton and Dan Smith Sacramento Bee 1/30/01 "Audit finds
Edison overstated debt: Utility still near end of its cash; PG&E report expected soon."
11 David Lazarus, SF Chronicle, 2/1/01 "PG&E Execs Cashed In Before Crisis Pair
made $118,000 selling stock options."
12 Stuart Leavenworth and Chris Bowman, Sacramento Bee 1/8/01 "All kinds have
foiled new plants"
All the articles were dated after the Cato one you linked and show a definite liberal bias. Not a very strong rebuttal and until I see someone go to jail for the alleged "evils" mentioned above, I'm not inclined to believe this hype. Typical "greedy" smears. |
