As people’s frustration rose during last week’s rolling blackouts, there was consumer activist Harvey Rosenfield on the airwaves, blaming a “greedy cartel” of electric utilities and power generators for the mess and warning that the utilities, Gov. Gray Davis and state legislators were preparing to stick ratepayers with the bill.
And as he stood in front of the cameras, brandishing papers he claimed showed how the “energy cartel” was ripping off consumers, there was nary a peep of response out of the accused utilities and power generators. Nor was there a direct response from state officials when he contradicted their assertions about power shortages by saying there actually is plenty of power to go around.
In short, Santa Monica-based Rosenfield and his consumer activist partner Doug Heller have been able to get their message out essentially unchallenged.
“Harvey is a master at getting the media’s attention, and he’s a good quote,” said Sherry Bebitch Jeffe, professor of political science at Claremont Graduate School.
So how has Rosenfield been allowed to get away with making such explosive charges at the top of the evening news broadcasts? And why have there been so few direct denials or rebuttals to the charges on the airwaves?
For starters, with each passing day, Rosenfield’s allegations are gaining credibility as investigations and studies on the issue of energy market manipulation come to light.
Earlier this month, the Federal Energy Regulatory Commission issued a finding that 13 power generating companies, including Charlotte, N.C.-based Duke Energy and Houston-based Reliant Energy overcharged California customers and should refund $69 million. FERC, which is still investigating the wholesale markets, cited a federal law saying that power wholesalers must charge “fair and reasonable prices.”
Then came last week’s revelation in a study issued by the California Independent System Operator that power generators overcharged customers in California a total of $5.5 billion over the last 10 months.
Other investigations
Several other investigations are in the works, including ones by state Attorney General Bill Lockyer, the Public Utilities Commission and the state Senate.
“Look, he’s been proven right on a number of things in this crisis,” said Evan Goldberg, chief of staff to state Sen. Debra Bowen, D-Redondo Beach, who chairs the Senate Energy and Utilities Committee. “That’s a big reason why no one is out there refuting him point-by-point.”
But there has been some criticism of Rosenfield’s allegations. Arthur O’Donnell, editor and associate publisher of the California Energy Markets newsletter, has taken issue with Rosenfield’s assertions that the investor-owned utilities and the independent power generators had been working together to manipulate the market to wrest higher payments from consumers.
“That’s just way out there,” O’Donnell said. “The investor-owned utilities and the independent power producers can’t even agree on the time of day, let alone trying to manipulate the market.”
But even before the investigations started coming out, few were willing to take on Rosenfield and Heller directly. The governor and many state legislators are fearful of an initiative that Rosenfield has threatened to put on the 2002 ballot. “There’s really no way to get out of this mess without some sort of rate increase and everyone knows it,” Jeffe said. “But if Davis comes out and admits this, then he really mobilizes Rosenfield and his initiative. That’s why he’s trying to dodge the bullet.”
The initiative, if it were formally launched, would appear on the same ballot as Gray Davis seeking re-election as governor.
“If that happens, people may very well vote against him and any other incumbents they see as responsible for getting them into this mess,” Jeffe said.
Rosenfield hasn’t spelled out the details of his initiative yet “that depends on how much of a bailout the utilities get,” he said. But just the threat of it has caused legislators to coin a new term: “Harvey-proofing,” making sure that whatever laws are passed to fix the energy crisis can withstand an initiative challenge.
The independent power generators, which don’t have to be as concerned about the political ramifications, have chosen to ignore Rosenfield’s allegations, instead focusing on responding directly to the government entities investigating their pricing practices.
For example, in press accounts last week, Reliant Energy President Joe Bob Perkins flatly denied charges that it had shut down some of its generating units in California to shrink the supply of electricity and drive up the price. While Rosenfield has made this charge, he has hardly been alone. Virtually everyone from Gov. Davis on down has said they suspect some of the plant closures were actually intended to drive up the price.
Reliant and the other energy companies could have responded earlier when Rosenfield and Heller initially made these charges back in December. But they instead chose to answer only official government findings.
“When FERC makes an allegation, they have to respond. When Gov. Davis makes an allegation, they have to respond,” O’Donnell said. “But when Harvey Rosenfield makes an allegation, the power generators don’t have to deal with him. It’s the politicians who have to deal with him.”
As for the state’s three investor-owned utilities Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison Rosenfield has repeatedly charged them with conspiring to force the Legislature to enact what he terms bailout provisions in the 1996 deregulation law. That law set a four-year floor price for rates that was supposed to be higher than the wholesale price to allow the utilities to wipe out nearly $28 billion in high-priced investments in alternative fuels. Of course, when the wholesale prices skyrocketed last spring, it wiped out that profit margin.
“They took this money for three years and lined their shareholders’ pockets,” Rosenfield has said repeatedly.
When asked, Edison officials have denied that any of this money was used in an inappropriate manner or that shareholders have made off like bandits. If anything, Edison shareholders have lost money as the once-high-flying stock price has been repeatedly buffeted the last several years, asserted Southern California Edison CEO Steve Frank in a recent interview.
Nonetheless, the state Public Utilities Commission last December hired auditors to look at the utilities’ books to see if ratepayer funds were indeed transferred to non-regulated portions of the utilities. The audits found that, in the case of Edison, the funds were transferred to the parent company, which then used them to buy back stock, make disbursements to shareholders and pay down debts.
