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The Whistleblower

The Whistleblower #27 - May 24, 2002

Geoff Brown is a Joke. PUC Commissioner Geoff Brown apparently has no respect for his office, for its mandate to protect consumers, or for the public itself, based on comments he made at a recent energy conference. "Ratesetting by government rather than market forces is a joke," Brown said, as reported by Dow Jones Newswires. Market forces -- think Enron, Dynegy -- forced Californians to hand over billions of dollars in windfall profits to a cartel of energy companies, but Commissioner Brown thinks that regulating the market to protect consumers is a humorous proposition. Brown also does not see any problem with allowing big businesses to escape the state's overpriced long-term contracts while everyone else's rates go up. It seems Brown just doesn't get it--and he admitted as much at the conference, saying that he has to struggle to comprehend complex issues and that he had difficulty understanding recently released internal Enron memos detailing market abuse strategies. Brown also heaped praise on the chief executives of PG&E and Edison, who, after siphoning ratepayer money from their utilities to their shielded holding companies, expect their customers to fork over billions to bail the companies out of debt. While all this may be quite a laugh for Brown, those deregulated electricity rates are no joke. With such contempt for his own regulatory authority, Brown should step down from his job as a regulator.

In Pennsylvania, deregulation's poster child drops dead. To counter the obvious signs that deregulation allowed companies to manipulate the California market --e.g. rolling blackouts during periods of low demand, 3000% price spikes-- the energy industry and anti-regulation ideologues have consistently pointed to Pennsylvania's system as a free market utopia, where loosened controls over energy providers magically leads to low prices for consumers. But the Philadelphia Inquirer reported Sunday that competition has not lowered prices in Pennsylvania, and that high prices are causing consumers to desert the alternative suppliers in droves to return to the regulated utilities. Because the promised cost savings have not materialized, nearly half of the customers of Pennsylvania's private power suppliers have left the market to return to their old-fashioned "provider of last resort." Meanwhile, in neighboring New Jersey, which is part of the same electricity market, high prices have led almost all of these customers --93% -- to retreat to the old utility. In so far as the much-vaunted customer savings has materialized at all, fully three-fourths of Penn. customers' savings have been due to state-imposed rate caps, not deregulation. All of New Jersey customers' savings have been the result of a regulatory mandate, not the free market. Of course, it wouldn't be deregulation without market manipulation. Sure enough, one of Pennsylvania's utilities, PPL Corp., is under investigation by the Penn. PUC for jacking up rates.

A California Senate Committee Passed an Enron reform bill to punish silence in the suites. SB 1452 (Escutia), passed by the Senate Public Safety Committee yesterday, would impose hefty fines on executives who cover up financial fraud within their corporation and would add new protections for employee whistleblowers who expose wrongdoing in the workplace. In the wake of Enron's precipitous collapse, this proposal will make it costly for execs to sit idly by while some in the corporation perpetrate financial frauds on pensioners, employees and investors. The bill imposes up to $100,000 fines on executives, directors and high-ranking managers who cover up accounting fraud, and up to a $1 million fine on corporations that withhold information about financial fraud. It also provides new protections to employee whistleblowers and subjects businesses to increased penalties for retaliating against employees who report, or who refuse to participate in, illegal activity. It also establishes a Whistleblower Hotline to provide employees with confidential access to law enforcement authorities. Cal. readers should contact their State Senator and urge them to protect the public from the next Enron by supporting SB 1452.

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