More Deregulation Follies

    Ha ha ha ha ha ha ha!  Oh, my goodness!  I can't stop laughing!  It's just too, too cool!  Ha ha ha ha ha ha!  Snort!  Cough!  Giggle!

    The Dec. 15th issue of the LA Times carried a three quarter page "Urgent Message" from Southern California Edison, SCE to the locals, to its customers pleading to change the terms of energy deregulation in California

    Now, remember, SCE was a driving force behind the idiocy of the deregulation of the utility industry.  They spun off their generating plants and sold them to the drooling minions from Corporate America and their lovers on Wall Street.  In short, they did everything that deregulation demanded in exchange for the future of obscene profits and control.

    Well, guess what, gentle readers?  SCE is suddenly crying and moaning that the big bad deregulation monster that they had helped create was "unexpectedly" cutting huge holes of debt in the pockets where the profits were supposed to have gone.  SCE, as well as just about all the other independent utilities in the state who simply swooned at the piles of cash just waiting to be unloosed from the consumer's pockets, are finding that it just ain't happening.

    Here's what is going down, folks.  The independent utilities thought that they would make some long term deals with their largest customers, deals that would offer such cheap energy that these customers wouldn't go looking elsewhere for a supplier for years to come.  This they did with, as a friend used to say, great rapidity.  These same customers also promised (crossed their hearts and hoped to die kind of promises) to reduce their energy consumption whenever the availability of energy into the system fell below a certain, predetermined percentage.

    Now, who do you think these utilities were counting on to make up the difference in revenue since most if not all of the contracts with the corporate buyers were either break even or loss leaders for the utilities?  Did they count on the elves from Santa's workshops coming down their corporate chimneys with buckets of cash? Nah!  Did they figure that their residential customers would send along a little something extra when paying their energy bills?  Well, maybe!  Some folks are really that dumb.

    What they thought they would get away with is buying energy from their spun off generating systems so cheaply that the profits would just roll right on in.  Apparently forgotten in this rush into energy stupidity was the wee fact that the generating companies were now, like the parent, just as greedy and self-centered and nasty as any other competitor.  These generating operations quickly learned two very valuable lessons.

    First, if you are the only source for a commodity that is such a basic part of our lives as electricity, then you will pretty much hold all of the cards when it's time to offer it for sale.  You can limit production, and they did, which creates a market in which lots and lots of dollars are chasing less and less available energy.  Thus, even though there may be a huge surplus of energy available to be produced, a shortage can easily be created through the simple act of not producing to capacity, a move which is actually far more profitable since each Megawatt now sells for far more than before and the actual generation of that power requires less wear on the equipment and on and on.

    Second, since the generating industry was now owned by Wall Street, how they treated the folks like SCE wasn't on anybody's moral radar.  As is always the case, if folks like SCE and PG&E and the like were forced to shut off the power to residential customers, then that is their problem to answer for.  The generating industry will just up the cost per Megawatt to make up the difference on utilities that can still afford the electrons.  As long as Wall Street is happy, who cares what a few millions human beings think?

    Oh, and those companies who promised to decrease their energy consumption during possible power shortages?  They just sort of giggled when they were called and asked exactly where in the contracts were any stipulations that created a punishment for them if they refused?  Well, kiddies, there were no such penalties and, obviously, these little spawn of Corporate America kept happily sucking in the juice while residential customers were put in jeopardy of rolling brown-outs or outright blackouts over large sections of the state.

    Now, folks like SCE, who no longer control the price of generation nor control its availability on a daily basis, are seeing the costs of that generation skyrocket day after day and their profits flitter away like gauze in a hurricane.  Other than San Diego Gas & Electric (SDG&E), who charged ahead into deregulation with little  thought but much greed (and the legal right to triple their customer's rates in just the span of a month or so), SCE and their brethren are now faced with a dirty little clause in the deregulation legislation.  They cannot raise their rates to the average consumer for three years.  Thus, while the costs of electricity shoot up, SCE's rates stay the same.  The result?  Well, mostly tens of billions of dollars of debt and the near refusal of out-of-state utilities to sell any power to California because they don't see how they will ever be paid for it by any of the in-state utilities who are quickly falling apart financially.

    So, if you would like to view a documents full of distractions and half truths which, you'll see, combine into little more than a whining and sorrow filled plea to help out the poor old industry, here is the link (along with commentary and thoughts on their issues).  Keep your hanky handy, readers.  It's a real tear jerker.

    Oh, remember what I said about SDG & E?  Did you hear about the state legislators telling the citizens of San Diego to only pay half of their bill and it would all be worked out later?  The later is coming and the "worked out" is going to be just another grand example of Corporate Welfare.  The legislature is planning to steal taxpayer's money from the state budget in order to repay SDG & E billions of dollars.  Let's let the single women and their children live in whatever hell they find themselves in but, Lordy!  Let's start pumping our tax revenues directly into the poorly managed pockets of another troll of a company and Corporate America.

    The only other relief that your representatives seem capable of noting is to allow the utilities to increase your rates.  This, of course, after promising not to raise rates for at least another two years.  So, instead of a taxpayer bailout of the utilities and their stock holders, they want a ratepayer bailout and a taxpayer bailout.  Oh, and how much do they want to raise your rates?  Just somewhere between 10% - 30%.

    Oh, and just an aside in all of this, Edison issued a dividend on its preferred stock on Dec. 14, began a multimillion dollar advertising campaign (to whine about the need for relief), gave its CEO a huge raise plus the company spent many more millions in the Legislature for campaign contributions and lobbying.

    PUC Commissioner Carl Wood exposed just how insane this nightmare of deregulation is when he went to Washington, D.C. to complain that the federal government hadn't enacted regulations to impose a price cap on the power wholesalers.  Think about that for just a moment, gentle readers.  This idiot wants the federal government to regulate one segment of the industry at the same time that the state's utilities have been deregulated.  In other words, he and his ilk want their butts saved through the simple expediency of creating federal laws that will hide the stupidity of the state's laws.  Jeez!!!!!

    Another side issue to all of this is that even the Northwest is feeling the crunch with local power providers selling to the highest bidders, raising the cost of local power while also creating artificial shortages.  As it's winter and California normally but not lately providing the Northwest with 10% to 20% of its power, the situation just gets worse for all concerned.

    Okay, where does all of this leave us, boys and girls?  It leaves us still facing the conundrum of the idiocy of deregulation being controlled by the idiots in Corporate America (I'd include the government but since your representatives are just subsidiaries of Corporate America it seemed redundant).  It means that, once again, just as when the telephone system was deregulated and the trucking industry and the Savings & Loans and the airlines and on and on, Corporate America sucks up huge profits and you and I make up the difference in either taxes or rates.  The only redeeming factor in this wee debacle is that one portion of Corporate America is joyfully gnawing at the bleaching bones of another arm of Corporate America.  If we could just get all of the suits in all of the corporate suites involved in this great form of corporate cannibalism, we'd have a better show than Dallas or Titans or any of those "the Rich are better than us" programs. ( 1 - 6 )

 

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Copyright 12/25/00