> Jordan Hayes wrote:
> >
> > > There wouldn't be a shortage of Electricity in California
> >
> > There's no shortage of electricity in California.
> >
> > There's a shortage of money.
>
> Why do you think there is a shortage of money, Jordan?
>
> RO
I think there may have been a major breakthrough into the official national media; the real shortage of money story just broke on AP.
john mage
February 8, 2001
Utility Money Shift Causes Outrage
By THE ASSOCIATED PRESS
Filed at 12:47 p.m. ET
SAN FRANCISCO (AP) -- It all sounds so sneaky to Californians
facing sharply higher energy bills, but diverting billions of dollars from
the state's two biggest utilities made perfect sense on Wall Street.
In the four years since California decided to deregulate its electricity
market, holding companies Edison International and PG&E Corp.
have milked cash from their now-impoverished utilities to enrich
investors and affiliated businesses that are prospering amid the current
chaos.
The financial juggling act, documented in state-ordered audits of the
utilities, has reinforced the perception that Southern California Edison
and Pacific Gas and Electric wouldn't be so destitute if they had
hoarded the cash that they accumulated between 1996 and 1999.
``It's quite clear that the parent companies vacuumed out the utilities
and siphoned out all the wealth so they could put it where they
thought it would be safe,'' said Nettie Hoge, who heads The Utility
Reform Network, a critic of the utilities.
The California Public Utilities Commission was expected to open an
investigation Thursday into how Edison and PG&E shifted assets
around. The PUC is examining whether the utilities intentionally
violated rules that allowed them to set up the holding companies only
if they didn't harm customers.
``It's easy to understand why everyone seems to get outraged and
wonders who was watching the store while all this went on,'' PUC
Commissioner Carl Wood said. ``But what people are forgetting is
that the store wasn't being watched by design.''
Neither Edison nor PG&E returned phone calls seeking comment
about the planned investigation. Both companies have insisted their
actions were legal, accepted business practices.
The utilities say they have suffered combined losses exceeding $12
billion since May. They've incurred the losses buying wholesale
electricity at high prices they can't recover from customers under the
state's deregulation law.
The PUC likely will focus on efforts by Edison and PG&E to insulate
their thriving unregulated businesses from the financial meltdown of
the utilities. The holding companies used a technique known as
``ringfencing,'' which makes it difficult for courts to seize the assets or
profits of a business to pay the bills of affiliated companies.
The holding companies have coddled these businesses -- Edison's
Mission Group and PG&E's National Energy Group -- because they
don't face the same regulations governing utilities.
Since 1996, Edison invested $2.5 billion in the Mission Group and
just $153 million in SoCal Edison, according to a state-ordered audit
by KPMG. During that period, the Mission Group returned $400
million in dividends to Edison International while SoCal Edison
turned over $4.7 billion.
From 1997 to 1999, PG&E invested $838 million in its unregulated
subsidiaries and provided nothing to its utility, according an audit by
the Barrington-Wellesley Group. During that same time, PG&E's
utility paid its holding company $4 billion.
Consumer activists believe the money shifted from the utilities to the
unregulated businesses should be factored into a proposed
ratepayer-backed bailout under consideration in the Legislature.
``Ratepayers should not be asked to dig into their pockets when the
companies aren't willing to dig into theirs,'' Hoge said.
But Wall Street is apparently convinced that lawmakers stand little
chance of piercing the ring. The state-ordered audits found no
evidence that ringfencing violated any rules.
Besides investing heavily in their unregulated businesses, both parent
companies dipped into the utilities' coffers to provide shareholders
with dividends and stock repurchases.
Edison International spent $4.6 billion on shareholder dividends and
stock buys from January 1996 through November 2000, according to
the audit. PG&E spent $4.8 billion from January 1997 through
September 2000.
The cash crunch at the utilities prompted their holding companies to
suspend their dividends this year, causing a double whammy for
shareholders, who've recently seen heavy losses.
Edison ended Wednesday at $13 a share on the New York Stock
Exchange, falling more than 50 percent from its 52-week high. PG&E
finished regular trading at $12.90 a share, roughly a 60 percent
decline from its high of $31.75 in September.
The utilities have come under fire for not hoarding more money, but
analysts say Wall Street wouldn't have tolerated billions of dollars
sitting in money-market accounts.
``That's an invitation for someone else to take over the company,''
said Standard & Poor's analyst Peter Rigby. ``That's just dumb
business.''