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Fight for power: Battleground California (page 2)

Has this government cap hurt the power industry? Of course it has prevented profits from running through the roof. However, evidence indicates that the power companies are not struggling economically to stay afloat. Reports conclude that between 12 and 20 billion dollars have been siphoned off by the national parent companies of these California subsidiaries. Considering they are claiming a 5 billion dollar debt, this would indicate about a 7-12 billion dollar profit for those companies. The question becomes why would they siphon off that money from their subsidiaries when they need that money to run their companies?

Could it be that the parent companies want their California subsidiaries to look weak financially for a purpose? The parent companies have been in a process of insulating themselves from the subsidiaries for a while. Why would a parent company create a wall of financial separation from their subsidiary after siphoning off 12-20 billion dollars causing it to be 5 billion dollars in debt? What would be the purpose? Afterall, aren't the companies in business to make money? Could there be a reason that a perception of bankruptcy would be good?

Some have asked why the power companies have not built any power plants in California. They claim that the environmental lobby has prevented the building of new power plants. However, republican control of California government until 1998 would not be consistent with that theory. Why would power companies wait until democrats are in office to start proposing power plants? Since when has the environmental lobby gained support in their causes from republicans? Why would republicans let environmentalists prevent power plants from being built? Historically, the environmental lobby has supported and been supported by democrats and opposed by republicans. If one were to buy into this theory, one would have to throw away a long-standing political reality.

Could it be that it is important for power companies to create an image of not being able to keep up with the power needs of California? Could it be that those same power companies have to create an image of not having enough money to keep up with those power needs? And if so, why? With the claim of deregulation in 1996 came a bailout that cost the taxpayers billions of dollars. So the question becomes, how do they go broke if they have a captive consumer, they get billions of dollars in bailout money, and they get to purchase power at a competitively lower rate?

Just after "deregulation" in 1996, power plant proposals began to show up. Currently, there are approximately 22 power plants between the permit stages and completion stages in California. This is necessary to give the illusion that the money made and given to the power companies has gone to work for Californians. With population almost doubling in California in the last 15 years, no power plants built in that time, it sends a signal that there is a power shortage coming. So the power companies begin to propose to build those power plants, knowing they will be up and running by 2005 to solve the perceived problem. Billions then get siphoned off to the parent companies, who then create paper walls of separation from their subsidiaries. Then, amazingly, 30% more power plants than ever, go offline for "maintenance" creating an artificial power shortage of power. With so much power offline, California is forced to buy more power than ever from other states and countries. This puts a strain on the entire market in America and raises the price of power that is purchased on the open market for all states. Then when the state of California steps in to look at the prices of power in the market, they find the prices artificially higher than they would otherwise be and allow for higher rates to be charged.

One of the goals is to raise money for the parent electrical company. The parent electrical company is the one selling this same power to California at the higher rates, so they make out on both ends. They make the money at the market for producing the electricity elsewhere. They also make money on a potential bailout of the utility by the state, which the state has done before, so it is reasonable to think they would do it again. They also get a rate increase because the state has seen how expensive power is to purchase on the open market, even though it is set at an artificially higher rate than "normal." Even if the state does not do these things, they file for bankruptcy. They still have all the supporting evidence of costs and losing money, the parent company is insulated, so they focus on the subsidiary alone in court. Because the state needs electricity, a judge would most likely simply order reorganization and probably raise the rate cap to consumers, giving the power company a raise. Either way, they win.

With the power market being stressed across the nation, power companies in other states can also raise their rates. That means Edison's subsidiaries can charge more in any state they are in and blame California. Since California is in democrat control, this creates a political backlash against not only the state, but the democrat party for not being able to take care of these issues. This is largely the focus of blaming the democrats and environmental lobby for this problem.

Additional benefits to these groups include economic benefits for these groups. Companies need power to operate. The more expensive the power, the higher the costs. Companies are notorious for moving to save money and have a reliable place to operate. It has taken about a month for other states to begin to actively recruit companies to move to their states.

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