The Whistleblower #23
Foundation for Taxpayer & Consumer Rights Corporateering
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The Whistleblower

The Whistleblower #23 - May 06, 2002

Corporate Accountability, Euro-style. US lawmakers might turn to the European Union for a lesson on how to go after corporate renegades such as the energy cartels that manipulated the California energy markets and the national gasoline markets. Fearing that corporate wrongdoers will shred evidence in advance of an inquiry (gee, would they really do that?), European Union anti-trust investigators have taken to "dawn raids," surprise investigations to catch corporate criminals red-handed, as the Wall Street Journal recently reported. With reports of shady corporate behavior piling up (K-Mart, KPMG--and that's just the K's), maybe U.S. investigators should be similarly aggressive and muster up a Special Forces team of their own.

The California Power Authority exists for a reason. Last year, private energy companies assured California politicians that the private market would finance new power plant development in the state -- one of the purported benefits of deregulation. Chalk up another failure for deregulation. As the Sacramento Bee and others have recently reported, numerous power generators are canceling plans to build in California as promised. State officials should waste no more time on the misplaced hope that the unregulated marketplace will do any better with California's long-term energy needs than it did with the state's miserable foray into deregulation. The obvious solution to the private companies' failure -- or refusal--to build plants is for the Power Authority to step in and take over. The agency certainly has the ability to compensate for the market's disappointments. Moreover, the Authority also has a mandate to protect California from the future ravages of the energy markets. In many cases, the taxpayers have already funded feasibility studies for some of the plants. The time for head-scratching is over, and the time has come to take the reins and steer California away from another crisis.

Pac Bell's fingers will do the walking--straight to your wallet. A California bill of, for and by a couple of California's telephone giants, passed a second Assembly committee last week and is now headed for the Assembly floor. AB 2958, authored by Assembly Member Rod Wright on behalf of Verizon and Pacific Bell, will tie regulators' hands and will have consumers handing over excess profits to the phone companies until 2007 (see WB #21). Not surprisingly, consumer groups and the state's Office of Ratepayer Advocates (ORA) oppose this outright giveaway. Less expected was Assemblyman Wright's next move: apparently furious that the agency dared to question his corporate welfare proposal, the vengeful legislator proposed to cut the ORA's funding.

PG&E made $631 million last quarter, but still demands public assistance. When the California Public Utilities Commission announced its bailout plan for PG&E a few weeks ago, representatives of the PUC acknowledged that the situation was "unusual" because it involved a "solvent debtor." This is unusual, indeed. Not only is PG&E -- the utility -- solvent, the parent company -- PG&E Corp. -- is raking in the bucks. According to its most recent quarterly report, the company's profits reached $631 million in the first three months of 2002. Despite the fact that it is making plenty of dough, PG&E dresses its utility subsidiary in a barrel in hopes of qualifying for more public assistance -- either a license to gouge consumers (PG&E's proposed bankruptcy reorganization plan) or a straight bailout of its deregulation disaster (PUC's proposal). PG&E looks like a classic welfare cheat.

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