Energy "Reform": Timing is Everything

by RonK, Seattle

War fever and its head-scratching aftermath have created virtual blackout conditions for scores of second-tier issues. A Republican White House, Republican Congress, Republican agencies and Republican courts eagerly seize the opportunity ... chewing away at established pension rights, wage-hour standards, consumer regulations, environmental standards, civil service protections and many other common public interest provisions while almost nobody was watching.

On April 24, 2002, by a 58-39 vote, the Senate killed an amendment authored by Sen. Maria Cantwell (D-WA), preserving federal authority over utility holding companies and clarifying Federal Energy Regulatory Commission duties with respect to pricing in electric power markets.

At the time, origins of the "California Energy Crisis" remained debatable. Some of us detected patterns of market manipulation, others blamed a "perfect storm" of supply disruptions, and still others fingered defects in California's deregulatory scheme. A libertarian-tinged FERC laughed up its sleeve at allegations of market manipulation, but dutifully plodded through the formalities of an investigation.

May 7, 2002, a "smoking gun" memo exposed explicit trading schemes in which Enron created illusions of shortage, and extracted ransom for illusions of relief -- in some cases without moving any electrons at all.

Later still, evidentiary proceedings determined that energy price swings were artifacts of "thumb on the scales" manipulation, not "invisible hand" equilibrium.

Local utilities were left with massive debt incurred under "buying panic" market conditions, and abusive long term contracts signed under threat of unbounded future exposure. These debts and costs are ultimately passed through to utility customers.

Involuntary burden on Washington residents averages $1,000 per man, woman and child (several times that figure in certain utility districts). In some precincts, this invisible catastrophe zeroes out the net worth of a majority of households ... and the outlook for relief in the courts is dim.

Last year's Energy Bill died a quiet death at end of session, but it's back. The energy industry is enthusiastic. So is Wall Street, and why not? Dole out licenses to steal, and somebody's bound to turn a profit. Or float speculative non-utility business ventures, stick captive ratepayers with the downside risk, harvest the upside for shareholders ... it's almost heaven!

Had the Cantwell Amendment come to the floor two weeks later in the previous session, media attention and public outrage would have made it a prohibitive favorite (so to speak).

Today the Senate debates S.14, which would repeal the longstanding Public Utility Holding Company Act and gut most federal authority over "Death Star" and similar trading schemes. Google/News citations for "Cantwell" and "PUHCA" earlier this morning: zero. The Cantwell Amendment was introduced, and defeated 48-50.

Timing is everything.

Posted July 30, 2003 11:10 AM