Last December, Southern California Edison allowed state officials a rare look at the company's books. The move was supposed to persuade pissed-off ratepayers to fund a multibillion-dollar bailout of a giant utility company nearing bankruptcy—a financial meltdown that might otherwise take the economies of California and the nation with it.
The 162-page audit, released Jan. 29, was quickly hailed by power executives. "It does validate what we've been saying all along about our condition," said Steve Conroy, Edison spokesman. The press agreed. The next day, the San Jose Mercury News reported that the audit reinforces the utility's "contention that it is running out of cash and should be allowed to bill customers for its multibillion-dollar debt." A New York Times headline erroneously reported that the "Loss at California Utility is Placed at $4.5 Billion." Not surprisingly, The Orange County Register ridiculously claimed that the audit revealed "nothing unusual." Two days after the audit was released, Governor Gray Davis used it to push through the state Legislature a $10 billion bailout of the state's three big utilities.
In fact, the audit established beyond a reasonable doubt how lucrative life is in the world of utility monopolies.
Consider, for example, John Bryson's December campaign, in which the Edison International chairman purchased prime-time TV space to predict a California apocalypse if taxpayers didn't bail out his company. He wanted the public to believe that the crisis was real, that his company was doing everything imaginable to pinch pennies. But the audit demonstrates that Bryson—who took home more than $2.7 million last year—did not exactly break a sweat when cutting costs. Instead, he put a freeze on remodeling the company's swank offices, vaguely suspended all "nonessential" travel and ordered Edison's top executives to take Christmas week off without pay. (Buried in the audit's fine print was this tidbit: instead of forgoing pay during the holiday, the executives could merely use it as a paid vacation. Net savings: $0.)
But that much is spare change. The most breathtaking revelations show that the utility monopoly is a well-oiled, moneymaking machine. Since 1996, the year the deregulation bill was signed into law by Republican then-Governor Pete Wilson, the supposedly cash-strapped Southern California Edison has seen more than $14 billion flow through its coffers. During that time, the state-granted monopoly has transferred $4.8 billion in profits to its non-Public Utilities Commission-regulated parent company, Edison International. For the third quarter of 2000 alone, Edison gave its shareholders $91.2 million—at the same moment it was insisting it was near bankruptcy. (San Francisco-based PG&E made the same claims —and then paid $108 million in dividends in the third quarter.)
Few in the press noted that Edison overstated its debt—by a whopping $1.5 billion—and refused to include all profits on its ledgers. State officials and company executives also agreed to exclude from consideration $9.5 billion in real-estate assets and billions of dollars Edison has invested in numerous foreign countries. Without cracking a smile, an Edison official said such accounting sleight-of-hand is "normal business."
Medea Benjamin, a Green Party nominee for the U.S. Senate in 2000, said what no one in the governor's office or Legislature would: "These are multibillion-dollar companies that have the ability to bail themselves out without our help."
Utility-company executives—whose lobbyists designed California's now thoroughly discredited deregulation statute—should be elated. They nabbed a massive, early January rate hike and a multibillion-dollar government bailout; maintained outrageous giveaways contained in the 1996 deregulation law (including a $30 billion ratepayer-funded subsidy to utility stockholders); blocked out-of-state competition; and managed a textbook PR coup by successfully blaming consumers, consumer rights groups and environmentalists for the mess. Writing in the Register, one gullible, nationally syndicated, conservative columnist, Thomas Sowell, blamed not the greedy utilities but California's residents, whom he depicted as pot-smoking, tree-hugging, homosexual leftists undeserving of sympathy or protective legislation.
And the utilities have captured the legislature. State Republicans say the solution is to give Edison more freedom to build power plants. And Davis, a Democrat, has refused every chance to defend rate-raped consumers for the long haul by ending the power companies' outrageously profitable shell games. Last year, Edison and PG&E gave the governor's campaign committee more than $63,500. After his bailout plan won approval, Davis insisted he is going "to continue to work together" with the utilities until the crisis is over.
You can count on it.
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