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The Whistleblower #29 - Jun 07, 2002
Piecemeal regulation -- one loophole at a time. Deregulation crushed California, perturbed Pennsylvania, and jacked New Jersey (see WB#27). Electricity deregulation just doesn't work. In Texas, deregulation has exposed Enron's home state to the company's --and others'--market abuse strategies, and regulators there have decided to take a finger-in-the-dike approach to protecting consumers form more such abuse. The Houston Chronicle reports that the Texas Public Utility Commission proposed fining the bankrupt Enron Corp $7.1 million dollars for manipulating the state's wholesale electricity market last summer. Enron did to the Texas market what it did California, overscheduling power deliveries, then getting paid not to use the transmission lines. The Texas PUC, after it learned that Reliant Energy Services, TXU Electric, American Electric Power Service, Mirant Americas Energy Marketing and Constellation Power Source also had their way with consumers, introduced regulations to remove the incentive for overscheduling. This approach -- re-regulating problem by problem while leaving the overarching deregulation scheme in place -- means regulators will forever play catch-up with the power companies as they find new ways to steal.
Business on the rocks? Try a public bailout! California utilities got one in 1996. The airlines got one last year. Now the insurance industry wants a bailout, too. In a crass attempt to exploit last year's tragedy in New York, an alliance of insurers, banks, real estate companies, and other big businesses took out full-page ads in the Washington Post and in National Journal's Congress Daily Wednesday calling for the Senate to pass legislation guaranteeing that taxpayers will bail out the insurance companies in the event of terrorist attacks. The coalition has already greased the wheels at the capitol; according to the Center for Public Integrity, the coalition and its members have contributed at least $3.8 million to political campaigns. Needless to say, the industry is not offering to share any of its profits in return for public subsidies for insurance companies.
More CEO resignations. In issue #26, we began to chronicle the post-Enron firings--er, resignations--of executives who steered their companies straight into scandal. While it may be premature, we've decided it's a safe bet to add a soon-to-be-resigned executive to the list:
Barely hanging on: Steve Letbetter, Chairman and CEO of Reliant Energy Inc. It's only a matter of time before Letbetter gets the boot, judging by his reception at Reliant's annual meeting on Wednesday. According to Energy Info Source, shareholders are incensed at Letbetter for having presided over Reliant's sham trading activities and are demanding Letbetter's resignation; one investor called the company a "baby Enron." Another shareholder's criticism of Letbetter certainly applies to the energy industry generally: "I suggest you all take an ethics course. You've lost credibility. You've lost integrity. The market has no confidence in you anymore."
Notes from "Never Never Land." That's where the energy industry finds itself these days, according to the CEO of Allegheny Power, quoted in Dow Jones Newswires. Actually, the industry conference he was speaking at may have taken place in a fantasy tale, judging by some of the other participants' comments. This from the President and CEO of power company Mirant: "We all have the right to expect ethical behavior from all participants... Ethical behavior is the key to long-term success for any company in this industry."
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