Do you really care if the Southern California Edison Company ends up being owned by the Paducah Electric and Storm Door Company? I suspect the answer for most of you is, not really, unless, of course, you happen to be a creditor of SCE, or an employee of the company or its banker. For the rest of us, all we want is that our supply of electricity be there when we need it, and that it is available to us at a reasonable price.
The mantra that’s being put forward by politicians, principally the governor and legislative leaders, the utilities and numerous others, is that the availability of power at a reasonable price is dependent on the survival of the large utility companies. Therefore, we ought to be willing to raise rates and, in effect, have ratepayers bail the companies out because it’s in our own interest to do so. The utilities say our survival is dependent on their survival. I must admit, I’m more than a bit skeptical.
My question to this mantra is, who says that’s the only way? Lots of large companies have gone into a Chapter 11 bankruptcy and ultimately worked their way out from under their debt, and got back on their feet. If they don’t, someone else, like Paducah Electric and Storm Door Company, comes along, buys them out of bankruptcy and continues to operate the company.
Bankruptcy doesn’t mean a company stops operating, or that it cuts down wires and tears down poles. What Chapter 11 means is, the bankrupt company continues to operate under the supervision and protection of the bankruptcy court, or, more likely, a committee of experienced power company executives appointed by the court. It buys the company time, gives them credit, and most times, allows it to pay off its debts at less then 100 cents on the dollar. The alternative to bankruptcy is that we pay higher electric rates, which is going to happen anyway because electricity costs are going higher in today’s market. We would also pay off the utilities’ debts at 100 cents on the dollar, which doesn’t sound like a hell of a bargain to me.
I didn’t get the utilities into this expensive deregulation plan and I see no reason why my checkbook, along with all of your checkbooks, should be responsible for getting them out of it. If they make me an interesting offer, I’m willing to listen. But, so far, all they’ve offered is, “We stay and you pay more,” which doesn’t sound like such a hot deal to me.
I can hear their screams already: “We didn’t want this deregulation. We were forced into it by a bunch of pushy politicians”–to which I say, “Baloney.”
When deregulation finally passed in 1995, it was almost unanimous. Everybody got on board for a variety of different reasons. It was a Republican governor and the Public Utilities Commission (PUC) that pushed it. And it was a bunch of Democratic legislators who practically, unanimously voted for it. Environmentalists liked it because it meant no more power plants in California. Free enterprisers liked it because the free market was better and it got rid of large, cumbersome utilities and their regulators. They expected, that, with competition, supply would increase and prices would come down. The utilities loved it because they got a gigantic pot of money and got to sell off their old plants, which they were itching to do.
It turned out that everybody was wrong except for a few, very smart out-of-state energy companies, that did their own arithmetic and saw opportunity. They saw that demand was increasing and no new plants were being built. The other western states were growing and booming and they were going to be using more power. California, as usual, was living in la la land and these big, bad out-of-state energy guys figured all they had to do was wait and help it along a little. In time, shortages would come and prices would explode. It turned out they were right and all the smart guys in California were wrong. No one, left, right or center, had anticipated this happening.
So now, the question is, what do we do? Do we go back to the same cast of characters, who got us into this situation, to get us out of it, or do we start looking at alternatives, like perhaps letting the utility companies involved go bankrupt?
I’m not saying bankruptcy is necessarily the answer. However, I certainly am not prepared just to dismiss it off-hand, because the people who might get hurt by bankruptcy are running a gigantic spin campaign to convince us it has to be avoided at all costs.
If somebody has to lose in this thing, why should it be us? Of everyone involved, we, the ratepayers, had the least to do with getting us into this situation.
I must admit, like many of you, I’m totally out of my league on this issue. I would appreciate some feedback, particularly from financial types who deal in this kind of thing. So, I invite you to write.