California:
The electricity ripoff continues

Nov 25, 2002

Two days after the election, which put California's Gray Davis back in office, the California Public Utilities Commission revealed it had cut a deal with Southern California Edison, the state's second largest utility company. The deal, reached behind closed doors in October before the election, allows Edison to keep electricity prices at their current high levels until the company pays off the billions of dollars of debt it got into during California's "energy crisis" two years ago.

Election or no election, the ripoff of California consumers by the energy companies continues.

In 2000, companies in the energy industry had created artificial power shortages in California. Wholesale prices rose to as much as $3000 per megawatt hour, that is, a hundred times higher than before. The utilities, prevented by a rate freeze from raising the prices they charged consumers, began to plead poverty. Two of them, Pacific Gas and Electric (PG&E) and San Diego Gas and Electric (SDG&E), declared bankruptcy.

During the election, Davis said that "out-of-state" traders took advantage of California. He also said the power suppliers which overcharged California consumers owe the state a refund of nine billion dollars. But that's only a fraction of the overcharges. A consumer advocacy group, the Foundation for Taxpayer and Consumer Rights, estimates that consumers were overcharged a total of 70 billion dollars.

But it's not just the traders and producers. The utilities themselves made enormous profits. During the first two years of deregulation, the utilities announced 20 billion dollars in profits and who knows how much they had really made, since they were busy shifting assets around between various companies, including their countrywide parent companies, which were making huge profits in the wholesale trade. Then when wholesale prices skyrocketed, the utilities started to pretend they were going broke and got the state of California to pay for the energy they distributed.

All of this is a matter of record. Federal and state officials have tons of evidence that power producers, traders, distributors and the utilities all resorted to legal loopholes, tricks and outright illegal practices to artificially limit production and jack up prices. Why is it then that these companies are not prosecuted? Why are only a few lower officials hauled into courts? Most important, why are these contracts not voided?

It's obvious. The regulators, both California's Public Utility Commission and the Federal Energy Regulatory Commission, are made of former officials of some of these same companies, appointed by politicians who, in turn, owe their careers to the support of big corporations.

This is the way capitalism works. Those who plan and carry out plunder won't end it.