Bankruptcy of California's biggest private utilities might be the best thing for the state's electricity consumers, a public interest group suggests. Southern California Edison and Pacific Gas & Electric, which have made billions in profits since deregulation in 1996, now are seeking to rewrite the rules by raising consumers' electric bills as much as 76% over the next two years, breaking a pledge to keep rates at 1996 levels.
"California consumers have been lied to," said Wenonah Hauter, director of Public Citizen's Critical Mass Energy & Environment Program (CMEEP) on Jan. 3. "They were told that their electric rates would go down and that utilities would assume the risks of a free marketplace. This bailout plan shows that the utilities believe in the 'free-market' only when they profit. It is now clear that deregulation is a failure and should be repealed."
While California residents face higher electric bills, Tyson Slocum, senior researcher at CMEEP, noted that Edison International (parent of Southern Cal Edison) and Pacific Gas & Electric enjoyed over $6 billion in combined after-tax profits since deregulation began.
If the utilities cannot find the credit they need after slashing costs at their parent companies and suspending the million-dollar bonuses lavished on their executives, Hauter said, the utilities should declare bankruptcy and the state should acquire their assets. "Instead of spending billions to line the pockets of CEOs and shareholders, Californians would be making an investment in controlling their own power, as in Los Angeles and 30 other communities."
California Gov. Gray Davis on Jan. 8 said utilities should not be allowed to go bankrupt, but he suggested the state might build its own generating plants to stabilize the price of electricity and end reliance on out-of-state suppliers.
Residents of Los Angeles, who have a city-owned Department of Water and Power, already pay 20-25% less than the private utilities charge. The LA utility had plenty of power over the holidays and sold excess power to the private utilities, the New York Times reported Dec. 22. Higher natural gas prices may sideline plans for a 5% cut in LA's rates next year, but the stability of city-owned utilities in LA and 30 other municipalities has regions served by cash-strapped private utilities, including San Francisco, Berkeley, San Diego and surrounding communities, examining the possibility of forming nonprofit municipal utilities. Stuart Wilson, assistant executive director of the California Municipal Utilities Association, said much of the increased interest occurred after rates tripled in San Diego this summer after deregulation.
If the rate freeze is repealed, Public Citizen notes that this wouldn't be the first time consumers have bailed out the utilities. Utilities were allowed to add a surcharge onto electric bills, charging consumers more than $18 billion, to cover debts for the utilities' past investments in nuclear power. "It's like deja vu all over again," Slocum said. "Any rate freeze repeal must be offset by the $17 billion consumers have already bailed out the utilities for their bad investments in the past."
The private utilities got the state's Public Utilities Commission to approve an emergency 10% rate increase in January and are seeking more increases to restore them to profitability.
Since deregulation, no new major power stations have been built despite the state's growing needs. The utilities -- Southern California Edison, Pacific Gas & Electric and San Diego Gas and Electric -- buy their power from public and private generators at prices that are up as much as 600%, the Washington Post reported. With the state on the verge of rolling blackouts, Energy Secretary Bill Richardson in December had to order out-of-state power producers to supply electricity to California to ease the crunch.
BUSINESSES CRITICIZE FAIR TRADE DEALS. A coalition of business lobbyists and their Republican allies are gearing up to fight trade deals the Clinton Administration is negotiating with Singapore and Chile -- because Clinton wants the two nations to agree not to weaken their labor laws or environmental standards to win new trade contracts, the Jan. 8 Business Week reported. Similar clauses are included in a trade deal with Jordan, soon to be sent to Congress. Business groups argue that labor and environmental standards antagonize other countries, but unions and environmental advocates say those clauses are needed to stop US companies from exploiting cheap labor or pushing to relax pollution controls in other countries. Even with the clauses, union and environmental leaders say the protections don't go far enough, since they only prevent trading partners from backsliding on existing labor and enviro safeguards. Sen. Max Baucus, D-Mont., ranking Democrat on the Senate Finance trade subcommittee, calls the business reaction "unhelpful" and said Republicans ''have to find a way to accommodate labor and environmental concerns in trade agreements.'' Otherwise, he warns, Bush's efforts to secure ''fast-track'' trade negotiating authority will founder, as did Clinton's.
LOW POWER RADIO SIDELINED. Allies of commercial broadcasters managed to insert a "rider" into an appropriations bill during the lame duck session in December to overrule a plan by outgoing Federal Communications Commission Chairman William Kennard to license low-power community FM stations. The National Association of Broadcasters and National Public Radio argued that the 10 to 100-watt community stations would "interfere" with the signal of the full-power commercial stations. The FCC's engineering tests showed that any interference was minimal at most, and 1,200 applications had been filed by nonprofit organizations in 20 states, but the rider, sponsored by outgoing Sen. Rod Grams, R-Minn., permits less than 100 low-power stations in the most rural and unpopulated parts of the country. Senate Commerce Committee Chairman John McCain, R-Ariz., said he will try to repeal the provision limiting low-power stations.
BUSINESSES SEE HIGHER HEALTH COSTS. Small businesses saw a 14% increase in health care costs last year, according to the Mercer/Foster Higgins National Survey of Employer-sponsored Health Plans, the largest and most comprehensive survey of its kind, as noted by the National Federation of Independent Businesses. Businesses with 10 to 49 employees experienced an increase in health care costs at more than three times the rate of general inflation, and 40% of employers reported that they will raise employee contribution levels in 2001 (twice as many as last year), while 17% will raise deductibles, co-payments and out-of-pocket premiums. NFIB members have listed the rising cost of health care as their top concern every year since 1986, and more than 60% of the 43 million Americans without health insurance live in households headed by individuals who either own or work for a small business. NFIB opposes efforts to require small businesses to provide health coverage.
HOUSING BILL LOCKS OUT PUBLIC WORKERS. When Congress passed its major housing bill for 2000, loaded with mortgage and financial assistance for select beneficiaries, from Native American and Native Hawaiian home buyers to the elderly and disabled, it excluded hundreds of thousands of teachers, firefighters, police officers and other local public workers who had been in line most of the year for a new, low-down-payment federal mortgage plan. Under the House version, large numbers of local public employees would have qualified for programs designed to help them buy homes and live in or near the communities that employ them. But when it got to the Senate, the Washington Post reported, Senate Banking Committee Chair Phil Gramm (R-Tex.) and Housing subcommittee chair Wayne Allard (R-Colo.) objected to any FHA mortgage breaks for public employees or school teachers. An angry House Republican told the Post Gramm and Allard opposed the plan because they didn't want to provide any special benefits to unionized public employees and teachers "who they know aren't going to vote Republican."
BIOFUELS HELP CLEAN AIR. Use of biomass fuels made from plants such as corn and soybeans, promoted in an executive order by President Clinton last year, would be put into law by a bill by Senate Democratic Leader Tom Daschle of South Dakota and Senate Agriculture Committee Chairman Richard Lugar, R-Ind.. About 3% of US energy comes from biofuels, including corn-based ethanol and biodiesel, a clean-burning, high-oxygen fuel that is made largely from soybeans, George Anthan reported in the Dec. 31 Des Moines Register. The National Farmers Union on Jan. 3 called for the EPA to reject a petition by California to waive the national clean-air requirement that mandates oxygenate additives, such as ethanol, to gasoline that make it burn cleaner. With the proposed elimination of the use of the oxygenate methyl tertiary butyl ether (MTBE), a known groundwater contaminant, the additional use of ethanol in California alone could increase the price of corn by 25 cents and double ethanol demand to 3 billion gallons, the NFU said.
Biodiesel, like some other renewable fuels, costs more than petroleum, especially when oil prices are low and commodity prices are relatively high, but studies indicate alternative fuels are closing the cost gap. Clean-burning biodiesel received a boost earlier this month when the EPA required diesel refiners to cut sulfur content by 97% and to reduce emissions of smog-producing pollutants and soot by 90% during the next 10 years.
Also, the USDA has announced a $300 million program to encourage output of renewable fuels, including ethanol and biodiesel, especially by farm coops and smaller facilities.
RECORD HUNGER IN BOOM TIMES. Food banks around the country are reporting record requests for assistance, with much of the demand for food coming from people with jobs, and most from families with children, the Los Angeles Times reported on Dec. 18.
In Los Angeles, requests for emergency food assistance increased 22% in the last year. "Our charities tell us it's mostly the increase in the working poor, people working two or three jobs and yet they still don't have enough to pay rent and food," said Daren Hoffman, spokesman at the Los Angeles Regional Food Bank. Amid the nation's unprecedented prosperity, an estimated 31 million Americans live in households that suffer from hunger. The US Conference of Mayors reports that most people seeking food assistance are employed. Research by J. Larry Brown, head of the Center on Hunger and Poverty at Brandeis University, indicates that from 1998 to 1999, requests for emergency food aid increased an average of 18% nationwide -- with nearly 60% coming from families with children.
Federal free breakfast programs reach only 41% of eligible low-income children, Brown said. Only 22% of eligible kids take part in the federal summer food program. Typically, said Brown, about 68% to 72% of eligible families receive food stamps. But with welfare reform changes, that figure has dropped to about 60%. The number of poor children whose families receive food stamps fell from 94% in 1994 to 75% in 1998, he said. In terms of elementary hunger economics, said Brown -- who recently assessed 50 current studies on hunger -- "the short version is that over the last decade, real wages for entry-level workers have fallen by almost 8% for men and around 6% for women." Changes in welfare policy also mean that fewer families than ever get food stamps, Brown and other experts said, noting that the hunger issue also is propelled by a minimum wage that since 1970 has not kept pace with inflation. These factors merge, Brown said, to produce "the strange situation where we have a strong economy, low unemployment and yet hunger is almost impervious." For more information see www.hungerfreeamerica.org.