California was gouged -- to the tune of $35 billion

Back in simpler times, VP Cheney was in charge of formulating an energy policy that would, theoretically, prepare the nation for its energy needs into the future.

At the time, California was experiencing a rash of brownouts -- an energy crisis that forced the state to bail out PG&E and Edison and enter into expensive long-term contracts with energy producers. The total bill? About $45 billion.

Cheney's answer at the time? Those damned environmentalists are blocking the construction of more power plants.

California has got the best record in conservation in the country in terms of the amount of energy that they use per on a per capita basis, but they've got the most serious electricity problem in the country with rolling brown-outs because of a fouled-up regulatory scheme, because they didn't build any new power plants for ten years.

California Democrats and its congressional delegation cried "foul", and political pressure was brought to bear on the GOP-dominated and industry-friendly Federal Energy Regulatory Commission to investigate allegations of price gouging.

The evidence was so blatant, that even the FERC had to concede the obvious truth -- energy companies including Enron used market manipulation to manufacture a fake energy crisis.

At the height of the power crisis, energy traders bragged of charging double the going rate, slowing down power plants and one urged colleagues to "stick-it to 'em" when selling to California, memos released by federal regulators showed.

The memos were part of the evidence California officials used to make their case for $9 billion in refunds at the Federal Energy Regulatory Commission.

[...]

The FERC singled out seven subsidiaries of bankrupt Enron Corp. and five other companies for taking advantage of a dysfunctional market and reaping millions of dollars in unjust profits.

"The price gouging abounded," Commissioner William Massey said, adding that he regretted FERC did not intervene earlier to police the newly deregulated power market in California.

$1.8 billion is woefully small punishment for tactics that cost the state $45 billion over the past two years (California must cover a budget shortfall of about $30 billion this year).

But it's a surprising and vindicating start.

Posted April 01, 2003 08:49 AM | Comments (76)