...Storm Warning: Merger madness in utilities
(From Page 8)
shown no stomach for interfering with
holding companies that want to use their
utility subsidiaries as cash cows: “FERC
has, under its deregulation experiment,
uniformly granted blanket approvals un-
der the Federal Power Act for all stock
issuances and loan guarantees based on
utility assets for all electricity sellers that
sell at market-based rates.”
Residents of California remember
how reluctant FERC was to intervene in
the energy crisis of 2000-2001. “Cali-
fornia trusted that the Federal Energy
Regulatory Commission would step in
and regulate if necessary, which was a
huge mistake — the FERC has never
shown any ability to regulate on a state-
by-state basis, much less the political
will to do so,” former California Public
Utilities Commission (CPUC) President
Loretta Lynch said in an interview last
year with UC Berkeley News.
The state hemorrhaged $40-70 bil-
lion before FERC finally stepped in and
imposed price caps on wholesale power.
Even if FERC had the will and re-
sources to act as enforcer, mandatory re-
liability standards may not be a powerful
enough tool to get the job done. FERC
could levy fines on individual utilities
for having too many outages, but will
the prospect of such fines be enough to
persuade utilities to make the invest-
ments needed to keep the system reli-
able?
Schneider, the former EPRI director,
is skeptical. What’s left out of the relia-
bility standard, he says, is the long-term
adequacy of the workforce.
“Having a commitment that five or
10 years from now your staffing is going
to be well-trained and of sufficient size
is not included” in any standard, he says.
Last Line of Defense
State regulatory commissions may
be the last line of defense for customer
service. In California, any takeover of a
regulated utility would have to be ap-
proved by the state Public Utilities Com-
mission, which also has legal standing
to address service quality issues. To
what extent that authority will
translate into actual power is one
of the big unknowns in the post-
PUHCA world. Consumer advocates
often complain that state regulatory
commissions, in terms of staffing and re-
sources, are outmatched by the utilities
they regulate.
But today’s utilities are shrimps com-
pared to the supersized holding compa-
nies expected to emerge from the com-
ing consolidation of the industry. How
will state commissioners stack up
against a huge holding company with
operations in dozens of states and coun-
tries? Schneider believes regulators will
have less influence over the highest lev-
els of executive management.
The staff of the CPUC knows where
to find executives of Pacific Gas & Elec-
tric, headquartered just a few blocks
away in downtown San Francisco. “But
what if the headquarters is in Texas, or
worse, Tokyo?” asks Schneider. “Where
are the big financial institutions —
Tokyo, London, Hong Kong.”
Some state regulators are growing
concerned. The California Public Utili-
ties Commission — one of four state
commissions examining the impact of
PUHCA repeal—started rulemaking in
November to reexamine the relationship
of the state’s major utilities with their
holding company parents and their affil-
iates.
“With the repeal of PUHCA the
commission’s responsibility to protect
the ratepayers becomes even more para-
mount,” the CPUC said.
One model that state commissions
could consider is the Wisconsin Public
Utility Holding Company Act, or
WUHCA. Enacted in 1985, WUHCA
limits the amount a Wisconsin holding
company may invest in non-utility ven-
tures, protecting utility customers from
risky investments that go bad. WUHCA
also requires that the state’s Public Ser-
vice Commission approve any sale of
more than 10 percent of the holding
company.
“WUHCA trumps PUHCA,” says
Dave Poklinkoski, business manager of
IBEW Local 2304, which represents
employees at Madison Gas & Electric
and has actively battled against utility
deregulation. He’s confident that Wis-
consin’s law will prevent Exxon Mobil
or some investor group from taking over
that state’s utilities.
Unions like IBEW Local 1245 can
play a role in keeping the focus on serv-
ice reliability in the states where its
members work. The union can explain
to employers, to regulators, to legislators
and to the public what it takes to keep the
lights on today, and the investments in
manpower that are needed to make sure
the lights are on 10 years from now.
But the storm gathering on the hori-
zon is of a size and character it has not
faced before. The Enron fiasco was bad
enough, but Enron was limited by
PUHCA to owning just a single regu-
lated utility. Now PUHCA is gone. Just
as Enron’s bright young hot-shots felt
compelled to exploit every conceivable
chink in the regulatory armor, an army
of corporate takeover artists is now cir-
cling the utility industry with one
thought in mind.
You can be pretty sure it’s not “serv-
ice reliability.”
(Editor’s Note: Eric Wolfe is commu-
nications director of IBEW Local 1245
in California. This article was posted for
re-publication by the International La-
bor Communications Association.)
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PAGE 12
NORTHWEST LABOR PRESS
MARCH 3, 2006