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Robert Sterling
Editor, The Konformist
http://www.konformist.com
http://www.konformist.com/botm/volume04/botm0301.htm
Beast of the Month - March 2001
Kenneth Lay, Enron Corporation Chairman
"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"
Not since the Savings & Loan scandal under Reagan-Bush has such a
huge financial scandal hit the United States. Just as the S&L crisis
was caused by a government policy that seemed to beg thievery, so has
the California electricity swindle, both of which were sold to the
public as "deregulation". And just as the senior Bush's fingerprints
were everywhere surrounding the S&L looting, cronies of "president"
Shrub are the main culprits behind the latest fiasco. The crisis is
no minor thing: though it is currently merely a state-wide problem
(albeit the largest state, one that controls a sixth of the US
economy), it will either turn into an early warning for other states
not to follow or a shape of things to come. Roughly half the United
States has deregulated their electricity market, or is in the process
of doing so. So far it has nearly bankrupt the state's three largest
utility companies (Southern California-Edison, Pacific Gas & Electric
and San Diego Gas and Electric) and led to widespread blackouts -
something normally associated with a Third World Nation, not a
leading edge economy.
How did this all happen? News reports often try to chalk it up to a
variety of reasons, but it really is due to only one: state
deregulation of the electricity market. The proof is in the
differences in the state between the deregulated areas and the
control sample. For example, the city of Los Angeles is hardly known
for being stern power conservationist, and yet residents are
unaffected by the scandal. The reason: Los Angeles has a municipal-
owned utility system, and thus was not part of the scheme. The L.A.
utility has even profited off the mess itself, by selling surplus
electricity to the rest of the state at a profit (though at a
merciful lower price than other energy producers have gouged.) If
that isn't enough evidence of a scandal, a study by Public Citizen
concluded that peak power demand has been lower in four of the last
six months, which proves the claim by power producers that increased
consumer demand is the culprit to be bogus.
California Assembly Bill 1890 was presented to the public as a
remarkable restructuring of the electricity market for their
benefit. It changed the electricity marketplace radically: it split
the electricity business into one group of companies to generate
power, and another to buy and deliver it. Utility companies were to
sell off their power plants, a move they lobbied for since the high
costs of building and maintaining unprofitable plants - most notably
inefficient nuclear power plants, which didn't lived up to the
promises of their proponents - had eaten away profits. Price caps on
electricity providers (a turn-of-the-century Progressive era reform
to prevent market manipulations and gouging) were eliminated, with
caps on utility bills to follow when companies recouped expenses from
failed plants. The theory behind the deregulation plan was that with
multiple sellers and distributors of electricity, a competitive
marketplace would develop. It hasn't quite turned out that way: the
large capital required to enter the electricity market leads to an
oligopoly. If oligopolies secretly (and illegally) agree to limit
supply of an inelastic good such as electricity, they can reap
windfall profits when prices remain unrestricted. That is precisely
what has happened. While utilities were paying $35 per megawatt hour
last year for electricity, the price recently has reached up to
$1,400.
A.B. 1890 was passed in both houses of the state legislature by a
unanimous vote. This was despite protests from consumer groups, who
objected to the subsidy of failed power plants and warned of the
potential fiasco that has since erupted. The objections were ignored
by both sides of the aisle in a rush to serve the interests of big
business. The main proponent of the measure was Republican Governor
Pete Wilson: now, with Democrat Gray Davis in the governor's seat,
the rush continues. After he promised no blackouts, public bailouts,
or rate increases, he has since predictably caved in and all three
are ready to follow. He now appears to be on his way to signing up
long-term contracts with electricity providers at rates nearly double
previous years to stop even more rampant theft. While his actions
are praised by mainstream media as supposed "crisis management", more
cynical observers note that he could've used the state of emergency
and seized electricity plants in California: even with ample
compensation of plant owners for this maneuver, it would be cheaper
than the strategy Davis has used instead. This would still be a
benevolent strategy: considering secret agreements to fix prices are
against the law (the legal definition, incidentally, of a
conspiracy), prosecution of corporate criminals and the confiscation
of their plants would be a modest proposal. Instead of doing this,
Governor Davis has decided to negotiate with an industry which,
coincidentally, has given his campaign $239,000 over the last three
years.
Meanwhile, George W., the self-proclaimed healer, has dismissed the
crisis - in a state he soundly lost during the 2000 campaign and
likely will lose again in four years - as a state problem, not a
federal one. Though a reinstitution of an electricity rates cap
could end the crisis in a second, he has refused to do so. (For the
record, Slick Willie refused to take this step as well.)
Nevertheless, he has offered to charitably ease air pollution
regulations on the state's power plants. Other right-wing business
interests are using the power threat to push for easing up on zero-
emission car requirements and nuclear power plants. As Arnold would
put it, "Heal on this."
The Bush connection to the fiasco runs even deeper. The biggest
beneficiaries of the California energy mess come from the Lone Star
state. Seven energy companies listed in a lawsuit over the scandal
have Houston headquarters. Most notable is the Enron Corporation,
which has been a major backer of Dubya. Enron has given $820,000 in
soft money to the GOP and recently "donated" $100,000 toward the Bush
inaugural. Its two top executives, Chairman Kenneth Lay (The
Konformist Beast of the Month) and Jeffrey Skilling, apiece also gave
another $100,000. Lay himself has donated more than $350,000
directly to Bush campaigns since 1997, and was one of several
Bush 'pioneers' who helped raise more than a $100,000 dollars for his
2000 campaign. The contributions appear to have paid off already:
fourth-quarter revenues for Enron have risen 271% from a year earlier
to $40.8 billion, and earnings from wholesale energy business nearly
tripled to $777 million as well.
Not that the state's private utilities, the supposed "victims" of
market thievery, aren't a beneficiary from the mess themselves.
While Pacific Gas and Electricity is billions in debt, it's parent
company, PG&E Corp., is raking in dough, as it owns 30 power plants
in 10 states. All told, PG&E Corp. (the villains in Erin Brockovich)
has revenues of at least $21 billion and total assets of nearly $34
billion. California-Edison is a similar shell corporation for Edison
International. Therefore, much of the immense "losses" these two
companies face go directly to themselves in another pocket.
Still, the real villain here (besides the sinister swindler-in-thief
posing as president) is Enron, the top sugar daddy for Shrub and his
frightening political career. While GOP hacks feign outrage at Bill
Klinton's sleazy pardon of financier Marc Rich, their silence over
the slimy trail of dollars from Lay and Enron to Bush speaks
volumes. The activities of Enron and its executives in this fiasco
appear to be criminal, but what are the odds that Bush or supposed
good Christian John Ashcroft will investigate? As thanks for all his
campaign dollars, Kenneth Lay was reputed to be on Bush's short list
for energy secretary, which would've been a curious conflict of
interest had it moved forward. As it turns, such a move would've
been a step down for Lay. Right now, he seems to be personally
running energy policy quite fine.
In any case, we salute Kenneth Lay as Beast of the Month.
Congratulations, and keep up the great work, Ken!!!
Much of this article was adapted from:
The California Electricity Swindle
Robert Sterling ([EMAIL PROTECTED])
Disinformation ( http://www.disinfo.com )
February 01, 2001
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