The Whistleblower #15
Foundation for Taxpayer & Consumer Rights Corporateering
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The Whistleblower

The Whistleblower #15 - Apr 02, 2002

The power crisis around the corner. Last summer, power companies -- fearful of some California leaders' threats to take power plants by eminent domain -- assured the state that the free market (that is, the huge profits being earned by generators) would spur an increase in plant building and the state needs to ride out this bump on the road to deregulation. So much for those assurances. Concerns are surfacing that California may face a shortage of electricity that could lead to another energy crisis in a few years. The California Energy Commission predicts that peak demand may rise significantly by 2004, while the needed power plants may not come on-line by then. According to the Sacramento Bee, 15,000 megawatts, or 47% of new generation anticipated by 2006 has been stalled or cancelled outright. The failure of the private market to protect energy consumers is the reason power has historically been a "public utility." Last year FTCR predicted that many of the promised plants would never be built because the appearance of a shortage makes it easier for power companies to gouge, as happened in 2000 and 2001. These companies aren't going to build plants as a favor to California, or any other state; so long as deregulation hands these decisions to the power industry, the power companies will keep supplies low.

Power traders are licensed to kill. Apparently, it takes a special kind of person to work in energy trading operations such as those that manipulated California's electricity market during the power crisis. A recent Los Angeles Times article detailing how Williams Cos. gamed the energy market quotes the head of the company's trading division: "A competitive nature is a given for a trader. That's why you see a lot of ex-athletes, Delta Force people, Navy SEALs and snipers littered throughout the industry." Save for the ex-athletes (or maybe not), these folks to whom deregulation entrusts the nation's energy system aren't competitors, they're trained killers. Just look at the California economy.

It's the Pitts: SEC Chief wants accounting firms to self-reform. In light of the revelations brought about by the Enron-Andersen scandal, basic reforms of corporate bookkeeping are needed, including increased public oversight of auditing firms and a ban on conflict-ridden consulting deals. But Securities and Exchange Commission chairman Harvey Pitt, whom Business Week called "The Reluctant Reformer," is headed in a different direction. Pitt proposes a misnamed "Public Accountability Board": a private-sector agency that would be charged with imposing discipline for breaches of ethical standards, rather than a new law enshrining public oversight of accountants. And while the Andersen debacle shows that auditors are likely to turn a blind eye to fraudulent bookkeeping if they take in extra cash from lucrative consulting deals with their clients, Harvey-The-Reluctant doesn't want Congress interfering with that business either. In testimony before the Senate Banking Committee last month, Pitt recommended that Congress "decline to adopt legislation that forecloses [the SEC's] flexibility" to ban or not to ban auditor consulting deals. Notwithstanding Pitt's faith in the Big Five accounting firms, lawmakers must rewrite the rules to protect shareholders, pensioners and consumers.

irony (i r -ne) n. Incongruity between what might be expected and what actually occurs. Example: It was recently reported that the Bush administration used funds earmarked for renewables and energy conservation to print the National Energy Report, which has been used to undermine the expansion of renewables and conservation in favor of development of oil, gas, and nuclear resources.


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The Foundation for Taxpayer and Consumer Rights (FTCR) is a non-profit, non-partisan advocacy organization. For over a decade FTCR and its advocates have exposed and challenged injustices that betray the public trust. The Whistleblower newsletter addresses core issues of the corporate and governmental crises of today and blows the whistle on the brewing fiascos of tomorrow. FTCR does not take a position on candidates for any elected office.

For more information about FTCR's work, to DONATE, to join the fight, or to comment, visit our web site at www.consumerwatchdog.org. 310-392-0522 xt.309. 2002 FTCR



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