Kelpie Wilson | Exponential Enrons Ahead

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Kelpie Wilson | Exponential Enrons Ahead

Thu, 23 Jun 2005 13:58:37 -0700

 

 

http://www.truthout.org/docs_2005/062305A.shtml

 

Exponential Enrons Ahead

Kelpie Wilson

t r u t h o u t | Perspective

 

Thursday 23 June 2005

 

One of the least-discussed provisions in the Bush energy bill that

has passed the House and is now fast-tracked in the Senate is PUHCA

repeal. " Pooka repeal, " you say, " what's that? "

 

The Public Utilities Holding Company Act (PUHCA) is a cornerstone

New Deal financial reform signed into law in 1935. It was the biggest

battle in FDR's first term. Utilities had become cash cows for power

moguls who created complex holding company pyramids for milking

ultra-reliable ratepayer income to feed speculative investments. The

crash of 1929 knocked these structures flat and took down millions of

small investors who had been sold on the reliability of utilities as

an investment.

 

Does any of that sound familiar?

 

Both the House and Senate versions of the energy bill now contain

the PUHCA repeal provision. At the insistence of Democrats, the Senate

added in some extra oversight by FERC (Federal Energy Regulatory

Commission), but it is a thin reed compared to PUHCA.

 

Supporters of PUHCA point out that for 50 years, we have had

reliable, cheap electric power that has allowed strong economic

growth, and that no PUHCA-regulated energy holding company has ever

gone bankrupt. Furthermore, it was partial PUHCA repeals in the 1990s

that opened the door to Enron, Westar and other energy debacles. To

repeal PUHCA now is equivalent to blowing up the barn after the horses

have escaped, never mind shutting the barn door.

 

PUHCA subjects utility finances and operations to strict

regulation by the states and federal government. Most importantly, it

restricts ownership of utilities to public or private entities that

are in the business of producing power, and keeps speculators out.

Replacing this kind of control with mere oversight is a joke. It is

like trying to rebuild the barn with splinters.

 

Lynn Hargis is an attorney with a long professional career in

power generation, including ten years at FERC. For the past two years,

she has held a volunteer position at Public Citizen educating the

public about the perils of PUHCA repeal. She says that " it is clearly

impossible for a state (or even federal) utility commission, with its

limited staff, to review, much less understand and control, the books

and records of a huge conglomerate ... " Once PUHCA is gone, she

predicts, " there will be a white-hot fury of buying and selling

utilities and utility assets - it will be a revival of the 1920s, when

three huge companies owned half of all utilities. "

 

There has been a lot of media focus on the $18 billion in tax

incentives contained in the Senate energy bill, but almost nothing

about PUHCA repeal, even though the latter is by far the greatest

prize: according to Lynn Hargis the value of all regulated utilities

exceeds one trillion dollars.

 

Hargis says there will be so much money chasing these utilities

that even the venerable public-owned and municipal-owned utilities

(PUDs and MUDs) won't be able to hold out.

 

And get ready to start paying your power bill to Halliburton

because some of the companies best positioned to take advantage of

this deregulation are oil companies: " The top five oil companies now

control 50 percent of US oil production. If they also controlled

public utilities, they would be too powerful for any government to

regulate, " said Hargis.

 

Also, the impact on renewable energy could be devastating. " If GE

owns your utility, " Hargis told me, " nothing will be able to stop them

from shoving a nuclear plant down your throat. This will kill renewables. "

 

David Sokol is CEO of MidAmerican Energy Holdings Company, a

subsidiary of Warren Buffett's Berkshire Hathaway that is now in the

process of acquiring PacificCorp, a western utility based in Portland,

Oregon. In a 2002 issue of Electric Perspectives, an industry

newsletter, Sokol made the case for PUHCA repeal, calling it " the most

blatantly out-of-date energy law. " In fact, the law as it stands would

prevent him from acquiring PacificCorp.

 

Sokol claims that: " Consumers have saved tens of billion of

dollars since Congress began the process of opening wholesale

electricity markets to competition 10 years ago. " He also argues that

by restricting utility ownership, PUHCA is keeping new capital out of

the energy industry that is needed for upgrading the electric power

transmission grid.

 

I spoke with Jack Casazza, an electrical engineer who was a Senior

VP for an investor-owned utility and who now serves on a task force

investigating the power blackout of August 14, 2003. Casazza scoffs at

the idea that regulation is keeping needed grid upgrades from

happening. " Warren Buffett doesn't know what he's talking about, " he

said, " and he doesn't have very good technical people. Utilities today

have no problem investing in transmission facilities if they are

needed and provide economic returns. "

 

On the other hand, grid reliability is an issue of vital concern,

and labor is the key. Jim Spellane, communications director for the

International Brotherhood of Electrical Workers (IBEW), said that the

problem with grid reliability arose with deregulation in the 1990s.

" It squeezed things like maintenance and worker training. "

 

Casazza echoed that opinion and said that one significant cause of

the 2003 blackout was labor reductions. He wondered how Warren Buffett

" would get the 25 percent rates of return he is used to. He can't cut

labor, that's already been cut. "

 

The IBEW issued a statement on June 15 praising the Senate Energy

Committee for including the new FERC authority in the bill, while

recognizing that the greater regulatory powers of PUHCA were still

needed. The union had flatly opposed any PUHCA repeal in the past, but

Spellane said, " We could see this energy bill has legs. It is going to

pass and we want to make sure that the FERC oversight does not get

stripped out along the way. " House Republicans are against even that

minimum amount of consumer protection and Spellane said the IBEW will

oppose the final bill if it does not include it.

 

Senator Ron Wyden was the only member of the Energy Committee who

voted against sending the bill to the Senate floor. A top reason given

for his dissatisfaction was repeal: " The bill also repeals the Public

Utility Holding Company Act (PUHCA) without providing adequate

safeguards to prevent captive ratepayers from getting fleeced to

support unregulated businesses of utility parent companies. "

 

Jack Casazza is wistful for the utilities of the past. " I'm a

believer in capitalism, " he said, " and I believe in getting a

reasonable return on my investment. But the company I came up in

believed that you don't hurt the customer. I have grandchildren and I

want to see this country run so they benefit, not so Warren Buffett

can put money in his pocket. "

 

Lynn Hargis fears we are headed for another Great Depression. She

said, " Not only is it going to be horrible for the whole country, but

nobody is even talking about it. "

 

Kelpie Wilson is the t r u t h o u t environment editor. A veteran

forest protection activist and mechanical engineer, she writes from

her solar-powered cabin in the Siskiyou Mountains of southwest Oregon.

Her first novel, Primal Tears, is forthcoming from North Atlantic

Books in Fall 2005.

 

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