Power Play: The Biggest Game in Town

The little-noted push to deregulate utilities will drive up rates and jeopardize service--not to mention

Most formidable of all elements in the deregulation coalition is the Electricity Consumer's Resource Council, otherwise known as Elcon. No assemblage of humble citizens this, but a slice of the Fortune 500 in the form of the 30 top corporate energy consumers in the country, including General Motors, Ford, and DuPont. The electric utilities, battling to save their monopoly and protected profits, have assembled their own coalitions, including the brazenly named Alliance for Competitive Electricity and the Edison Electric Institute, which jointly plan to spend more than $5 million in lobbying expenses this year. Their cause is being advanced by former Minnesota Rep. Vin Weber, who has close ties to the Republican leadership of the House, and former Reagan press secretary Michael Deaver at Edelman Public Relations Worldwide.

Eugene Coyle, an economist who studies the utility industry, puts it this way: "What we are looking at is the shift from a situation where there are more than a thousand utilities nationwide, over which rate-payers have some control, to a future where there will be perhaps 10 big power companies operating free of regulation and acting like the oil cartels of old. The benefits of deregulation will go to the big industrial buyers, who will sign 10-year contracts with companies like Enron and pay perhaps three cents per kilowatt hour, while residential customers and small businesses end up paying eight to nine cents."

There are troubling environmental problems associated with the kind of utility deregulation advocated by the likes of Schaefer and D'Amato. In New England, for example, many environmentalists fear that a deregulated power market will entice big industrial consumers to purchase more power from the high-sulfur coal-powered plants in the Midwest, which the 1990 Clean Air Act exempted from new air pollution standards, thus yielding more urban smog and acid rain.

We now come to the topic of "stranded costs," described by John Bryson, CEO of Southern California Edison, as the "make-or-break issue." The word "stranded" here is used in the sense of "beached," as in a beached or stranded whale--the whale in this case being nuclear power plants. Utility men usually call them "stranded assets," a decorous way of invoking a mountain of debt and potential liability with a half-life of several million years. Indeed, the electric utilities would like nothing more than to rid themselves of their costly, aging, unsafe nuclear plants. Their dream is to unload the $500 billion in debts on these nuclear plants and other mature facilities onto rate-payers and taxpayers instead of their shareholders.

The utilities insist that if deregulation is to take place and they surrender their monopoly, the albatross of the nukes should be handed amid furtive rites to the taxpayer in a bailout bigger than the S&L scandal. Martha Hewitt at the Center for Energy and the Environment makes the salient point: "Allowing the utilities to recover stranded costs would give the greatest reward to those utilities that made the worst business decisions. What other industry can tap widows and orphans to undo $500 billion in past mistakes?"

But this scenario is exactly what happened in California in the fall of 1996. At the midnight hour on September 15, the state assembly unanimously passed a bill deregulating the state's utilities and soaking the rate-payers for $28 billion. The money covered the utilities' disastrous investments in the Diablo Canyon and San Onofre nuclear plants. The cost will be paid by a hidden tax on the utility bills of unsuspecting residential rate-payers. In addition, the utilities convinced the Legislature to underwrite another $5 billion in subsidies through taxpayer-financed bond issues.

Southern California Edison and Pacific Gas and Electric, the state's two largest utilities, doled out more than $3 million in 1996 alone in political contributions and lobbying expenses to ease the way for the bill, which was drafted by a Southern California Edison lobbyist who temporarily joined the staff of the state senator leading the deregulation effort. Wendy Wendlandt of Californians Against Political Corruption calls it "one of the greatest consumer robberies in California history."

The California approach has been lauded as a national model by a rather surprising organization: the Natural Resources Defense Council. NRDC's energy guru is Ralph Cavanagh, who recently received an eco-genius award of $250,000 from Teresa Heinz's environmental foundation for his work on utility issues. Since the early 1990s Cavanagh has been working in what he demurely terms a "collaborative process" with utility companies, though he noted accurately enough in an interview with In Context magazine that "the term collaboration still has overtones of Vichy, France." And so it should. Cavanagh has been negotiating with the two major utilities in California, PG&E and Southern California Edison, on what's known as demand-side management, meaning conservation strategies such as better insulation, planting of shade trees, efficient light bulbs and so forth.

No bad thing in and of itself, but as Daniel Berman, co-author of the excellent Who Owns the Sun?, says, "Cavanagh and NRDC refuse to confront the utilities over existing nuclear power plants and lack of investment in renewable energy resources, and they look the other way when the subsidiaries of the large utilities build fossil fuel plants elsewhere in the United States and overseas."

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