“Every industry gets their own little program. There’s pork in there for everybody.”
— Myron Ebell of the Competitive Enterprise Institute, quoted in the July 29 Washington Post.
“It’s Christmas in August for big energy, and consumers get lumps of coal,” was how Anna Aurilio of environmental and consumer advocacy group US PIRG described the new Energy Policy Act of 2005, signed by President Bush on Aug. 8. And despite a few ornaments attached to the Christmas tree as sops to the environment, the big presents under the tree had the energy industry’s name on them.
Most media attention since the bill’s passage has focused on the $14.5 billion in tax breaks and billions more in corporate subsidies and loan guarantees, a cost that Sen. Russ Feingold (D-Wis.) described as “staggering.” But largely escaping scrutiny was the new law’s far-reaching Electricity Title, which repeals the New Deal-era Public Utilities Holding Company Act (PUHCA) and shifts much state jurisdiction over energy matters to the pro-industry Federal Energy Regulatory Commission (FERC).
Much of the tax breaks represent subsidies to promote domestic oil and natural gas drilling, despite the fact that North American reserves are in serious decline and hold no real promise of bringing down consumer prices or reducing dependence on imports in the long run. Other subsidies would enhance corporate profits on natural gas and electric transmission lines, encourage the construction of new nuclear power reactors and expand certain renewable energy sources such as wind turbines.
Although the bill was touted as a bipartisan compromise (besides solid Republican support, it received the votes of a majority of Senate Democrats), the only significant consumer “victories” were the elimination of a provision giving lawsuit immunity to manufacturers of gasoline additive MTBE, which has contaminated drinking water in many states, and postponing the fight over opening the Arctic National Wildlife Refuge to oil drilling. Republicans in the House have promised to bring that up again in a budget bill next month.
Less-publicized provisions of the bill accelerate depreciation on investment in power transmission (in simple terms, this boon to investors speeds up payback and reduces their risk) and give FERC the power to both authorize higher profits for transmission to utilities and require state regulatory commissions to pass the costs on to consumers. In the name of enhancing reliability and avoiding a repeat of the 2003 East Coast blackout, FERC is given additional tools to promote deregulation, despite the contention of unions and some engineers in the industry that deregulation was itself a major cause of the blackout.
The AFL-CIO had made preservation of PUHCA its main priority for the energy bill. The 1935 law, passed by Congress in the face of massive opposition by the electric utility industry, restricted utility holding companies and mergers. The law was passed after the collapse of the Insull Cartel, the Enron of its day, which left many local utilities in shambles and consumers and small investors holding the bag for billions of dollars.
A Federal Trade Commission report to Congress at the time described manipulative practices permitting maximum control of operating facilities with minimum investment; arbitrary or imaginative overstating of accounts to encourage the sale of value-inflated securities; creation of fictitious profits by means of phony inter-company transactions and other similar devices; use of deceptive methods of accounting; manipulation of security markets; and other abuses. Sound familiar?
The FTC report concluded that “fraud, deceit, misrepresentation, dishonesty, breach of trust, and oppression are the only suitable terms to apply … [to] many practices which have taken sums beyond calculation from the rate paying and investing public.” PUHCA addressed many of these issues, and had the law been vigorously enforced, the Enron scandal might have been averted.
But even though inadequately enforced for many years, PUHCA has nevertheless been a barrier to mergers that serve no other purpose than to inflate utility stock prices, reduce employment and degrade service, and evade effective state regulation over rates and service quality.
Its repeal has been a top goal of the utility corporations, and both consumer groups and financial analysts are predicting a wave of mergers and consolidation in the industry. Says attorney Lynn Hargis, former staffer for FERC and now a volunteer with the consumer group Public Citizen: “Once PUHCA is gone, there will be a white-hot fury of buying and selling utilities and utility assets — it will be a revival of the 1920s, when three huge companies owned half of all utilities.” (Quoted in Energy Bulletin, June 23, 2005.)
The Energy Policy Act embodies Bush’s production-oriented, corporate-friendly energy policy. Absolutely nothing in that policy addresses any real problems, unless you consider inadequate corporate profits or a clean environment to be problems!
In an upcoming article, I’ll try to outline the elements of a people’s energy program. Stay tuned.
Chuck Williams is a California trade unionist with long involvement in energy issues.