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Dec 14, 2000
CONTACT: Doug Heller - 310-392-0522 x309
Utilities Threaten Bankruptcy; Give Davis Cover for $10 Billion BailoutDespite substantial profit increases by the parent companies of California's investor-owned utilities, the companies are using the threat of bankruptcy within a few weeks or months to push Governor Davis to authorize a $10 billion ratepayer bailout, through the Public Utilities Commission. The companies contend that the high prices associated with the state's deregulated energy market have placed the utility subsidiaries of the corporations on the brink of financial insolvency.
According to consumer advocates with the Foundation for Taxpayer and Consumer Rights (FTCR), the utilities' recent losses pale in comparison to the gains the companies earned as a result of the so-called "competition transition charge" of the last two years. The same frozen rate that Edison and PG&E blame for their current financial woes brought in an extra $17.6 billion since 1998, according to a recent TURN report. The report notes that consumers paid PG&E more than $8.3 billion in "competition charges" and Edison collected over $9.3 billion in these charges.
FTCR also noted that the utilities have not acknowledged that approximately 65% to 75% of energy purchased by the utilities is produced by power plants that are still owned by the utilities. The companies' alleged shortfall, therefore, must be reduced by nearly three-fourths, to account for the profitability of their own power plants.
Additionally, the parent corporations of the utilities have seen profits rise in 2000:
If the utilities succeed, this would be the second ratepayer bailout of the electric industry. The utility companies, in drafting the deregulation law, froze rates at 50% above the national price in 1996. They hedged against the risks of deregulation with a $17 billion competition tax on consumers' bills. While the law does not allow any back-billing or other charges, regardless of any change in the market price for electricity, the utilities are now demanding a second multibillion dollar bailout in the wake of the recent spike in energy prices.
"The companies knew the risks associated with deregulation and they wrote the law to protect themselves. Now that their foolish scheme has backfired they want Governor Davis to give them another bailout," said Heller.
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