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Reamin'
Deregulation
and the Power Pirates
by
Greg Palast
April
24, 2003
On
April 10, 1989, Jacob "Jake" Horton, senior vice president of
Southern Company's Gulf Power unit, boarded the company plane to confront his
board of directors over the company's accounting games and illegal payments to
local politicians. Minutes after takeoff, the plane exploded. Later that day,
police received an anonymous call: "You can stop investigating Gulf Power
now."
Fast-forward
to December 2000. The lights in San Francisco blinker out. Wholesale
electricity prices in California rise on some days by 7,000 percent, and San
Francisco's power company declares bankruptcy. Dick Cheney, just selected vice
president by the U.S. Supreme Court, begins a series of secret meetings with
power company executives. On their advice, within three days of Bush's
inaugural, his Energy Department wipes away regulations against price gouging
and profiteering ordered that December by outgoing President Clinton.
Out
of Cheney's off-the-record meetings came the energy plan released by the
president in May 2001. Billed as the response to the California electricity
crisis, the president told us the plan contained the magic potion to end the
power shortage. Then, after the horrors of September 11, 2001, the plan was
remarketed as a weapon against Middle East terrorists. Nasty-minded readers may
believe the Bush energy program, still rolling around Congress, is just some
pea-brained scheme to pay off the president's oil company buddies, fry the
planet and smother Mother Earth in coal ash, petroleum pollutants and nuclear
waste. In truth, it's more devious than that.
There
is a link running from Jake's exploding plane to blackouts on the Golden Gate
Bridge to the polluters' wet dream of an energy plan offered by Cheney and
Bush. They are connected through the mystical economics of electricity
deregulation. Beneath the murky surface of this odd backwater of market theory
is a multicontinental war over the ownership and control of $4 trillion in
public utility infrastructure-gas, water, telephone and electricity lines-a
story that began a decade earlier with Jake Horton and continued through a coup
d'état in Pakistan and the bankruptcy of a company called Enron. Andersen's Magic Show
In
1989, I was brought into an investigation of Horton's employer, Southern
Company of Atlanta, by Georgia civic groups suspicious that Southern had
overcharged its several million electricity customers in Georgia, Alabama,
Mississippi and Florida. I focused on transcripts of tape recordings made a
year earlier by accountant Gary Gilman. Wearing a hidden microphone, Gilman
recorded his fellow executives detailing the method by which Southern charged
customers $61 million for spare parts which, in fact, had not been used. Like
all good accountants, Southern's kept a careful record of the phantom parts in
electronic ledgers-found in the trunk of one executive's car. I obtained copies
of the documents, spending months decoding the accounts, gaining an insight
into what would, a decade later, lead to blackouts and bankruptcies from
California to Argentina.
Take a
look at a bit of what I saw (figure 3.1) [Editor’s
Note: Omitted from this article. See p119, 2003 paperback edition of Palast’s
book cited in his bio below]
There's
two sets of numbers-one for government and one for the boys at the top of the
company structure to keep track of reality. Here's where it turns a little
technical. The parts held in inventory should have been
"capitalized," that is, listed as an investment in "Account
154." In fact, they were "expensed"-to use the accounting
lingo-and charged as if they were used. The difference between capitalizing and
expensing is the difference between having your cake (investing) and eating it
(using it up).
Moving
numbers from one account to the other cheated the IRS and bill payers out of
millions.
Shortly
after Horton's death, a grand jury in Atlanta was prepared to indict Southern
Company's Georgia unit for the spare parts accounting manipulations. But,
invoking a rarely used procedure under the federal racketeering statute, Bush
Sr.'s Justice Department overruled local prosecutors to quash the request for
indictment. The reason? Keeping hidden accounts in secret files and booking
costs into the wrong accounts may be a bit unusual, and may have cost the
public a bundle, but it was approved at each step by that upstanding auditing
firm, Arthur Andersen.
Indeed
they had. I found one letter from Andersen coaching the power company
executives on how to wave a bookkeeping magic wand over the spare-parts records
to make the problem disappear. I suggested at the time, "Why not indict
Andersen?" and proposed a civil racketeering claim against the accounting
giant, naming them as Southern's coconspirator. My suggestion, not surprisingly,
was dismissed with a chuckle by lawyers who understood that politics trumps
law. The signal from the Bush administration was clear enough: Hire Andersen,
knead your account books like cookie dough, and get a "Get Out of Jail
Free" card.
What
about poor Jake? "Looks like he saw no other way out," says former
Southern chairman A. W. "Bill" Dahlberg of the airplane explosion. A
suicide? Jake's brother doubts it: He says Horton had planned to meet with the
U.S. attorney in Atlanta. Jake apparently had a lot to say about Southern's
charging consumers for loads of coal bought from an affiliated mining company.
At times the train cars were filled with rock instead of coal.
Jake's
death and the failure to indict Southern and Andersen in 1989 marked the
radical turning point, albeit unseen at the time, in the way corporate America
would do business-or, as it turned out, fail to do business.
This
new world business order would be lead by power, water, and natural gas
corporations and telecommunications (what we used to call phone companies).
Until the 1990s, U.S. state governments kept a tight lid on these monopolies'
profits. America's old regulatory system, based on public hearings and open
records, was uniquely democratic, found nowhere else in the world. This was a
legacy of the Populists, an armed and angry farmers' movement whose struggles
from 1900 through 1930 bequeathed to Ameri- cans just about the lowest priced,
most reliable electricity services in the world-which is, of course, anathema
to power company shareholders.
In
1933, President Franklin Roosevelt caged the man he believed to be the last of
the power pirates, Samuel Insull, a wheelerdealer whose electricity trust
companies were cesspools of rigged prices, cooked books, watered stock and
suffocating monopoly. Roosevelt hit Insull and his ilk with the Public Utility
Holding Company Act, the Federal Power Act and the Federal Communications Act
which, combined with state laws, told electricity, gas, telephone and water
companies when to sit, stand and salute. Prices and profits were capped; the
tiniest asset had to be accounted for; issuing stock and bonds required
government approval; sales between affiliated companies were controlled;
"offshore" and "off-books" subsidiaries were prohibited and
lights kept on by force of law: no blackout blackmail to hike prices.
Furthermore, FDR made political donations from these companies illegal-no soft
money, no hard money, no money period. Roosevelt's rules held for half a
century. And utilities hated it, for good reason. Southern Company was typical:
In the 1980s, it was an unremarkable regional electricity company dying the
death of a thousand financial cuts. Consumer groups used the old regulatory
hearings to force Southern to eat the company's dumb investments on overpriced
nuclear plants. As a result, Southern showed nothing but cash losses for years.
Then
CEO Dahlberg, who took over after Horton's death, conceived an unorthodox way
out for Southern from its regulatory and financial troubles. The company had
tried breaking the law without much to show for it (it pled guilty to political
donations, a felony crime, and suffered penalties, though not criminal charges,
for its accounting games). Now it would go straight, not by adhering to the law
but by changing the law to adhere to Dahlberg's plan. That plan was not small
stuff: The near-bankrupt local company would take over the entire planet's
electricity system and, at the same time, completely eliminate from the face of
the earth those pesky utility regulations that had crushed his company's
fortunes. California blackouts were just a hiccup on the road to the
astonishing success of this astonishing program. Today, in 2003, Southern is by
far the biggest power company in America (that is, since the collapse of
Enron).
In
early 2001, America's papers were filled with tales of the woes of the two
California electric companies bleeding from $12 billion in payments for
electricity supplies. Yet, at the time, virtually nothing was said of the
companies collecting their serum: Southern and a half dozen of its corporate
fellow travelers- Entergy International of Little Rock, Duke Power of North
Carolina, and Texas operators Reliant, TXU, Dynegy, El Paso Corp and Enron.
Until November 2001, when America discovered a hole in Houston where Enron used
to be, the U.S. press could not be bothered with the who, how and why of these
companies. True, there were some profiles of Enron's chairman, Ken Lay, but
these were drooling hagiographies portraying Enron's chairman as a cross
between Einstein and Elvis.
America's
media have finally taken note of the Harry Potter accounting methods of many
U.S. corporations. But I have yet to read the whole truth: that this
ledger-demain began with the senior Bush's crusade to eliminate Roosevelt's
pesky rules, and crucially, the utility accountants' rule book, the Uniform
System of Accounts. Electricity deregulation, voted into law in 1992, the last
big gimme for Bush donors before the elder Bush left the White House, tore the
heart out of FDR's Holding Company Act. At the same time, Bush's Federal
Communications Commission castrated its own oversight system.
As
a result, the Uniform System of Accounts became a museum curiosity. Without it,
power and telecommunications companies could outfit their balance sheets with
antigravity shoes. It is no accident that ten of the twenty mega-bankruptcies
of the last two years involved the utility industry. Two companies in
particular -WorldCom and Global Crossing-became virtuosi at the trick that got
Southern in trouble in the prederegulation days: switching capital and expense
items. When Global Crossing paid Bush that $13 million in stock for one chat in
1998, was it for his golden words or gratitude for his bulldozing the stop
signs and safety rails that once constrained Global Crossing's industry? What
was a crime in 1980, by 2000 became "entrepreneurship." These
so-called reforms didn't come cheap. The electric utility industry showered
pols with $18.9 million in the last presidential campaign spree, though for
every dollar Gore wheedled from the power players, Bush took seven.
But
the official records of donations don't tell half the story. GreenMountain.com
is one of the power-selling creatures created in Bush Sr.'s deregulation
laboratory, founded by Sam Wyly. The Wyly clan of Texas are billionaires listed
with the Federal Elections Commission as the eleventh largest contributor to
George W. Bush's campaigns, with donations totaling a quarter million dollars.
But that's just the tip of the cash-berg. The Wyly's laid out a crucial $2.5
million for Bush that you won't find on any campaign report. These millions
paid for venomous advertisements aired in March 2000 smearing Senator John
McCain who was, until then, wiping the electoral fioor with Bush Jr. in the
Republican primaries.
Bush
Sr.'s killing federal regulations in 1992 put Sam Wyly in the power biz. Still,
there were restrictions at the state level. Bush Jr.'s deregulation act, which
Wyly's company helped draft, gave Wyly the right to sell into that big Western
market. On the day George W. signed the Texas law, Sam Wyly said,
"Governor Bush's hard work and leadership have paid off." And, it
seems, in March 2000, the Wylys paid back.
The
cloudburst of cash for politicians was not limited to, nor really begun, in the
USA. The success of the plan by Southern, Enron and their Texas followers for
world power conquest (or, if you prefer, "vision for globalization of
energy supplies") hinged on Britain. As the economist J. M. Keynes said,
"The mad rantings of men in authority often have their origins in the
jottings of some forgotten professor of economics." The professor in question
here is Dr. Stephen Littlechild. In the 1970s, young Stephen, a Briton who
studied at the University of Texas, cooked up a scheme to replace British
government ownership of utilities with something almost every economist before
him said simply violated all accepted theorems and plain common sense: a free
market in electricity. The fact that a truly free market didn't exist and
cannot possibly work did not stop Britain's woman in authority, Prime Minister
Margaret Thatcher, from adopting it. It was more than free market theories that
convinced her. Whispering in her ear was one Lord Wakeham, then merely
"John" Wakeham, Thatcher's energy minister. Wakeham approved the
first "merchant" power station. It was owned by a company created
only in 1985-Enron. Lord Wakeham's decision meant that, for the first time in
any nation, an electricity plant owner, namely Enron, could charge whatever the
market could bear . . . or, more accurately, could not bear.
It
was this act in 1990 that launched Enron as the deregulated international power
trader. Shortly thereafter, Enron named Wakeham to its board of directors and
placed him on Enron's Audit and Compliance Committee, charged with keeping an
eye on the company's accounting methods. In addition to his board fee ($10,000
a month), the company paid him for consulting services. If that strikes you as
a conflict of interest, conflict is Wakeham's forte. His lordship took the
Enron posts while remaining a voting member of Parliament. In Britain, that's
quite legal.
Following
the Enron deal, Wakeham pushed the British government to sell off every power
plant in the nation along with all the wires from plant to home. Thatcher then
launched the England-Wales Power Pool, Professor Littlechild's dream: an
auction house for kilowatts that would set electricity prices for the nation
based on free market principles. On paper, the Power Pool was an academic
beauty to behold. The new, privately owned power plant owners would bid against
each other every day, ruthlessly undercutting each other's prices for the right
to sell to England's consumers, who would, as a result of this market
competition, benefit from lower bills.
That
was the theory. I can't say whether the market scheme failed in minutes or
days, but the Power Pool quickly became a playground for what the industry
called "gaming"-bid manipulation techniques that allowed the
deregulated companies to expertly vacuum the pockets of consumers. Electricity
prices jumped and the owners of the power plants saw their investments grow in
value by 300 percent and 400 percent virtually overnight.
Thatcher
put the nutty professor Littlechild in charge of regulating the power industry
mess. When his term ended in 1998, he left behind a "free market"
that worked like a fixed casino and stank of collusion. Littlechild then landed
on the board of one of Enron's strange little affiliate companies.
There
was no way that Southern was going to let Enron and the Brits have all the loot
to themselves. In 1995, the Atlanta company, besieged at home by consumers and
regulators, bought up England's South Western Electricity Board. In England,
Southern could charge double what they charged in Georgia and earn five times
the profit allowed by U.S. regulators. This was the first purchase ever by an
American power company outside the United States. The takeover was new,
bold-and illegal.
Or,
at least the law said so. Bush Sr. had mangled and beaten FDR's regulations,
but many still stood, including the prohibition, written in clear no-nonsense
language, that barred U.S. electric companies from gambling on foreign operations
(or even operating outside their home states). But as Enron showed, rules were
made to be broken-or "reformed." Despite a formal complaint by
elderly "New Deal" Democratic congressmen, the Securities and
Exchange Commission blessed the Southern Company purchase after the fact.
Getting the SEC to bend over wasn't easy, but then, Southern had political
insurance: Entergy International of Little Rock, Arkansas. Bill Clinton was
president, and Entergy, his wife's former client, also wanted a piece of the
English action.
Entergy,
the near-bankrupt owner of some badly built nuclear plants and lines running
across Louisiana and Arkansas, soon became the proud owner of giant London
Electricity. In just eighteen months, Entergy would "flip" London to
the French government for a gain of over $1 billion. The return on investment
was infinite; Entergy bought London without putting up one dime in equity cash.
Behind
Southern and Entergy came TXU of Dallas and other Americans, which within three
years owned 70 percent of the British power distribution market, no money down.
Southern nearly grabbed Britain's biggest power seller, but reports of Horton's
demise and unsavory stories of accounting trickery forced the Tory government,
then fighting a losing election battle, to ban the takeover.
The
new government of Tony Blair was outwardly hostile to the American colonizers.
But in 1998, while working undercover for the Observer newspaper, I secretly
recorded the details of a backroom deal between government ministers and a
power company executive to let Reliant of Houston take over the second largest
company in England. I also learned that Blair had personally overruled his
regulators to allow Enron and Entergy to build new deregulated power plants-the
special request of the Clinton White House.
By
1998, after boarding and capturing England, U.S. power buccaneers, led by
Southern, Enron, TXU, Reliant and Entergy had grabbed generating stations and
wires on every continent save Antarctica.
But
not in the United States, not at first. Americans believe in free enterprise,
but we prefer cheap electricity and nearly free water, the product of a
combination of our tight regulations and government ownership. Almost alone on
the planet, the USA stubbornly exempted itself from what the World Bank calls
"neoliberal reform"-and this rankled the new international players
who hungered to work the free market con in the USA. The industry lobbyists
landed on two beachheads, Texas and California, the only two states with
electric systems big enough, and governments Republican enough, to convert to
"free" markets.
California
was the first to fall over the electricity deregulation cliff, but Texas was
the first to leap-with a push from its young new governor, George W. Bush. With
Texas companies raking it in worldwide, it's not surprising that the rush to
deregulate started in the Lone Star State.
But
there was a technical problem that delayed the ripping down of regulation in
Texas. To understand why requires a little lesson in engineering. The power
stations of Texas produce three things: electricity, pollution and political
donations. And, as always, Texas is biggest in all three. Take, for example,
the giant power plant named, with admirable candor, Big Brown, owned by TXU.
When it comes to filth, Big Brown is champ. A strip mine near Waco stuffs Big
Brown's furnaces with lignite, a kind of fiammable dirt. TXU dumps 389,000 tons
of contaminants into the air each year, making it the number-one polluter in
the number-one polluting state in the USA.
Bush
made Dallas residents gasp (literally) when he signed a "grandfather"
statute exempting some TXU plants from laws requiring scrubbers for these
fossil-burning dinosaurs. The other beneficiary: polluter number two, Reliant.
TXU and Reliant popped over half a million dollars into Bush's second
gubernatorial race.
In
1995, the Clinton Justice Department opened an investigation into evidence of
conspiracy by TXU and Reliant to monopolize the Texas power lines. The promised
"competition" created by deregulation could placate the Feds and make
Enron's Ken Lay a very happy man at the same time. Problem was, TXU and Reliant
were stuck with Big Brown and plants so costly, inefficient, dangerous and
contaminated the companies would lose billions in a true competitive market.
Governor
Bush was always cautious to avoid confiicts of interest-in this case, the
confiict between the interests of his top donors, Enron, El Paso Corporation
and Dynegy (power traders) and TXU and Reliant (power producers). Former Enron
lobbyist Terry Thorn told me straight up this quandary for the governor kept
Texas deregulation stalled for two legislative sessions until Bush found a
third party to pick up the tab: Texas electricity customers. In 1999, the
governor, the power traders and power producers shook hands on a deal to add a
$9 billion "stranded cost" surcharge to Texans' electric bills.
Ken
Lay had another concern. Bush's stranded cost surcharge would let the games
begin, but if the deregulation house of cards ever folded, there would be hell
to pay because one set of rules remained: tort law, the unique right of
Americans to sue the bastards who rip us off. In 1994, the year Bush ran for
governor, Lay founded Texans for Lawsuit Reform. Lay doesn't fool around: TLR's
PAC pays out a million dollars a year to Lone Star politicians. In 1995, Bush's
first big move as governor was to call an emergency session of the legislature
to act on TLR's agenda. "Tort reform" in the hands of Bush and Lay
became tort deformed. The governor pushed through the legislature new
restrictions on the right of stockholders, workers and pensioners to sue rogue
executives.
It
looks like Ken Lay thought of everything.
While
Texas companies delayed deregulation to haggle over the spoils, their
lobbyists, and the industry's, bored ahead in California.
Lincoln
said you can't fool all the people all the time-but, then, you don't have to.
To turn a quick buck, a slick line of academic hoodoo and some well-aimed
campaign contributions will do the trick. Like Columbus bringing Indians back
to the Old World for display, the power industry lobbyists brought Margaret
Thatcher's professors and their wheezing free market contraptions to
California. In 1996, armed with the suspect calculations of well-compensated
academics and inebriated with long droughts of utility political donations, the
California legislature tossed out a regulatory system which, until then, had
provided reasonably cheap, clean, reliable energy to the state.
Despite
knowledge of the British disaster, the sun-addled legislators wrote into the
preamble of the enabling legislation the lobbyists' line that a deregulated
market would cut consumer prices by 20 percent.
In
1999, my parents sent me their bill from San Diego. Instead of the 20 percent
savings promised by the law, in the first year of full deregulation, their
energy charges rose 379 percent over the previous year. But before the big
bills hit San Diego, the new planetary power merchants, using a combination of
money, muscle and Americans' penchant to follow the Hula Hoop state, suckered
twenty-three other states into adopting deregulation laws.
Not
every economist was for sale. Dr. Eugene Coyle, an incorruptible expert,
calculated that his fellow Californians were in for a multibillion-dollar
fieecing. In 1998, in an extraordinary uprising of the lambs on the
slaughterhouse ramp, Dr. Coyle and a band of community activists were able to
get a referendum on the California ballot to overturn the legislature's
deregulation vote. The power merchants didn't have to wait for the ballots to
be counted to know the outcome: They had bought it. In what is unarguably the
highest price ever paid to buy an election, Southern California Edison, Pacific
Gas and Electric and their allies spent $53 million to defeat professor Coyle's
proposal to slow deregulation.
From
the get-go, California's new computer-controlled electricity auction system was
a mess. The fiow chart looked like a bowl of linguini thrown against the wall.
In confusion is profit, in complexity more profit. I smelled Texans.
Commissioner Carl Wood, appointed after the blackout disasters began, told me
that Enron had little to do with the initial lobbying for deregulation, but
much to do with writing these weird, knotted details.
In
2000, Beth Emory told me something quite astonishing.
Emory
had been vice president and general counsel to the agency that oversees
California's auction house for kilowatts. It struck me that if Coyle and I knew
the English-style system would lead to a price explosion and blackouts,
certainly the Republican utility commissioners blessing the system knew it too.
Politicians expressed po'-faced shock when in 2002 they discovered an Enron
memo that describes tricks used to manipulate the market-with filmic names like
Get Shorty, Death Star and Ricochet. Yet every one of these tricks the power
gang used on California had been well rehearsed in England. Even the players
were the same: Enron, TXU, Duke, Southern California Edison (which owns
England's dams) and Southern of Atlanta. Over there, market hucksters used
"stacking," "cramming," and "false scheduling,"
Get Shorty's crude progenitors.
So,
I asked Emory, did the state go ahead with their deregulation plan knowing it
would blow up? "Oh yes, we knew it," Emory told me in 2000. Now an
industry lawyer in Washington, she added, "What happened [the blackouts
and price explosion] was predictable. We knew last year we'd have serious problems."
There was, she said, discussion of stalling deregulation but the political push
was on, despite foreknowledge of disaster.
Insider
Emory says the state was not surprised that on the first hot summer day after
deregulation, when California needed every bit of juice it could find, the
small coterie of plant owners held California's power system hostage. They
could name their price for electricity and they did: $9,999 per unit of
power-30,000 percent above the old regulated price of about $30. Californians
were lucky, says Emory: The power pirates thought that the state's computer
could only accept four-digit bids in the automated auction.
In
fact, the computers would have accepted seven digits, bankrupting half the
families in Los Angeles in a day.
But
one man's disaster is another man's windfall. And if that other man is someone
like Ken Lay or Steve Letbetter of Reliant, one might expect some of the
windfall to end up in the Republican Party pokey. The Typhoid Mary of
deregulation was California Utility Commission chairman Daniel Fessler who,
after an industry-sponsored junket to England, carried back this economic virus
to California. Fessler didn't know a darn thing about electricity when Governor
Wilson put him in charge of the state's power agency, but as a Republican
functionary, he certainly knew how to get the party's bread buttered.
Markets
for electricity don't work and can't work. Electricity is not a bagel-that is,
unlike your morning muffin, you can't do without it when it gets too pricey.
Enron
knew that too. Shortly after the California market opened for business, for
example, an Enron trader sold the state about 5,000 megawatts of power to go
over a 15 megawatt line. That's like trying to pour a gallon of gasoline into a
thimble-it can't be done. This forced the system operator, the agency that
actually keeps our lights on, to make costly emergency purchases, blowing
market prices through the roof. Enron, knowing in advance of the panic it would
create, could earn a super-profit.
The
slightest shortage on a hot or cold day and-whammo!- the tight little wolfpack
of electricity sellers can extract a limitless ransom. When the weather would
not create a shortage, a monkey wrench could. Repairs were scheduled at peak
times. Reliant employees say the company was running plants at odd hours,
"ramping" them up and down, which whistleblowers at the company
considered deliberate sabotage. Duke Power of North Carolina was less subtle.
Its managers, say employees, simply threw away spare parts needed to keep the
plants running. And San Diego's power distribution company told me that Duke Power
of North Carolina ordered them to shut down a plant during a shortage period-an
order the California firm refused.
Merely
by holding back the power from a single generator, the power merchants could
make the electricity from their other plants worth more than gold. In a report
for California's purchasing agency, Dr. Anjali Sheffrin had evidence that
California power companies used "physical withholding" and
"economic withholding" to create false shortages in California 98
percent of the time between May and November 2000. Three giant companies (for
which I have, frustratingly, only code names A1, A4 and A5) didn't put in a
single honest bid in those months. Add in "false congestion,"
"false scheduling" and "megawatt laundering," and the
overcharges add up, conservatively, to $6.2 billion in a single year. In
addition to the $39 million they paid to defeat Dr. Coyle's antideregulation
referendum in 1998, the three big California power companies, PG&E, Edison
and Sempra, spent another $34.8 million that year on lobbying and campaign
contributions. It was a big payout, but the payback in billions proved again
that investing in politicians has a consistently higher rate of return than
investing in plants or products.
There
are glimmers of justice. Pacific Gas & Electric, the company that crushed
Dr. Coyle's referendum, wrote a price freeze into that deregulation law. The
sly codicil permitted the San Francisco outfit and its L.A. counterpart,
Edison, to stuff their pockets with a $20 billion windfall as oil prices fell.
They earned even more selling off their power plants to the out-of-state power
merchants-who then used all those English tricks to beat the two California
companies financially senseless. Their $20 billion windfall soon became a $12
billion loss-and PG&E declared bankruptcy at the end of 2000.
But
we didn't have long to enjoy PG&E's comeuppance. California's governor Gray
Davis moved to bail out the companies.
Davis
signed off on long-term contracts to buy electricity for PG&E and Edison,
some of it priced at $500 per megawatt hour, more than ten times the old
regulated tariff. The state is paying for these pricey contracts by issuing
several billion dollars in government bonds. As Sam Wyly said, the Bushes' hard
work has paid off-and now, California will pay back at the rate of $2 billion a
year for thirty years.
In
other words, California didn't run out of energy, it ran out of government.
Greg Palast has been hailed
by the Tribune Magazine as “the greatest investigative reporter of our time.”
He works for The Guardian Newspaper and the BBC in London. He is author of The
Best Democracy Money Can Buy (Plume Books, revised edition, 2003), from
which this article is excerpted from. Visit Greg Palast’s website: http://www.gregpalast.com. This article first
appeared in ZNET (www.zmag.org/weluser.htm).