Poor Edison

Now broke, the power company uses taxpayer cash to fund a global business empire

On April 3, the California Public Utilities Commission (PUC) tried to quiet increasing calls for "public power" by ordering yet another audit of the state's three power companies. According to the PUC, the probe will settle a critical question: Did the utilities conceal valuable assets in parent companies while demanding rate hikes and billions of dollars in public assistance?

"We should be assured no assets were transferred imprudently to the parent companies," a stern-sounding PUC Commissioner Geoffrey Brown told reporters.

Of course, Brown and the three other commission members already know the answer. Since the first days of the state's energy-deregulation law in 1997, the utilities have funneled an estimated $15 billion in profits to their unregulated parent companies. That fact was established two months ago by the regulatory agency's auditors.

Miraculously, even the truth-challenged utilities peg the audit correctly. Pacific Gas & Electric spokesman Greg Pruett said, "The commission . . . is wasting its time reviewing old ground. It's a smoke screen."

So why the ruse? According to Brown, "the audit is absolutely necessary to establish the credibility for any rate hike." But someone forgot to tell Brown that the PUC has no credibility. For example, the audit used to justify the Jan. 3 commission-approved rate hike of 9 percent was not completed until Jan. 29.

The latest audit will be just as meaningless. Commission regulations mandate that parent companies must give "first priority" to the capital needs of their utility subsidiaries—the state-regulated entities now claiming poverty. Executives at Edison International, the parent company of Southern California Edison (SCE), have had no intention of following that rule. In January, they said it would be "unfair" to force Edison International—which was created by SCE to channel profits outside of regulatory view—to return funds to its utility subsidiary. According to their peculiar version of capitalism, it is consumers and not corporate shareholders who "are and must be responsible" for guaranteeing the financial stability of SCE.

Though contrary to the regulation, Edison's view will win. Members of the PUC—historically beholden to utility companies and their armies of lobbyists—are clearly reluctant to enforce their own rule. At the height of the energy crisis, they waited 75 days to order a probe into the $15 billion transfers to the parent companies. Meanwhile, Governor Gray Davis and utility executives have been secretly negotiating a taxpayer bailout of the privately owned monopolies. It is probable that the sure-to-be interesting details of the audit won't be made public until after that bailout is finalized.

Reports filed with the Securities and Exchange Commission (SEC) show in graphic detail how utility profits have been raided by the parent companies. Edison International has bought hundreds of diverse companies around the world. They now have new businesses in Turkey, New Zealand, Puerto Rico, Thailand, Australia, Italy, Spain, the United Kingdom and Indonesia as well as California, Florida, Illinois, Nevada, New Jersey, New York, Pennsylvania, Puerto Rico, Virginia, Washington and West Virginia.

Perhaps SCE executives can't afford to buy wholesale power for California because, for example, they spent:

•$635 million for 40 percent ownership in a hydroelectric and natural-gas-fired generating plant in New Zealand.

•$1 billion for a hydroelectric plant in North Wales.

•$500 million for an Italian electricity plant.

•$180 million on a power business in Istanbul.

•$243 million on a gas plant in Puerto Rico.

•$282 million for domestic housing complexes.

•$20 million for stock in a Mexican cable station.

•$1.8 billion on a New York power-generating plant.

•$50 million for the right to put its corporate name on a baseball field in Anaheim.

I could go on, but you get the picture. If the SEC filings are accurate, SCE's corporate spin-offs are loaded. Edison Mission Energy alone had assets of more than $15 billion in 2000. At the same time, Edison Capital reported assets of $2.7 billion, and Mission Land Company had assets of $112 million. There are numerous other affiliates with similar assets.

But those facts haven't deterred Edison from claiming poverty and seeking public handouts. "Our shareholders have literally been pummeled," the utility insisted in a recent press release. "Edison shareholders are sharing the pain."

Back in reality: since deregulation, California consumers and shareholders have been forced to give utility shareholders more than $45 billion in loans and subsidies.

Don't look at the massive subsidies as a bail-out, Edison insists. Instead, look at it as "contributing constructively to resolving the crisis."

 
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