"The Green Seal" or "The Scam You Never Knew Existed"

In 2001, Alexander Cockburn, in true muckraking style, exposed the “green seal” being used by Enron to pass deregulation. The “green seal,” of course, was Ralph Cavanagh and the NRDC. A snippet from the article (the full text of which you can get here):

“The fall of Enron sounds the death knell for one of the great rackets of the past decade: green seals of approval, whereby some outfit like the Natural Resources Defense Council (NRDC) or Environmental Defense (ED) would issue testimonials to the enviro-conscience and selfless devotion to the public weal of corporations like Enron.These green seals of approval were part of the neoliberal pitch: that fuddy-duddy regulation should yield to modern, "market-oriented solutions" to environmental problems, which essentially means bribing corporations in the hope they'll stop their polluting malpractices. Indeed, NRDC and ED were always the prime salesfolk of neoliberal remedies for environmental problems. In fact, NRDC was socked into the Enron lobby machine so deep you couldn't see the soles of its feet.”

Why, what do you mean?

In 1997, high-flying Enron found itself in a pitched battle in Oregon, where it planned to acquire Portland General Electric (PGE), Oregon's largest public utility. Warning that Enron's motives were of a highly predatory nature, the staff of the state's Public Utility Commission (PUC) opposed the merger. They warned that an Enron takeover would mean less ability to protect the environment, increased insecurity for PGE's workers and, in all likelihood, soaring prices. Other critics argued that Enron's actual plan was to cannibalize PGE, in particular its hydropower, which Enron would sell into California's energy market.


But at the very moment when such protests threatened to rob Enron of its prize, into town rode NRDC's top energy commissar, Ralph Cavanagh, Heinz environmental genius award pinned to his armor and flaunting ties to the Energy Foundation, a San Francisco-based outfit providing financial wattage for many citizen and environmental groups that work on utility and enviro issues.Cavanagh lost no time whipping the refractory Oregon greens into line. In concert with Enron, the NRDC man put together a memo of understanding, pledging that the company would lend financial support to some of these groups' pet projects.

Cavanagh also got the PUC to have a change of heart:

Addressing the three PUC commissioners, Cavanagh averred that this was "the first time I've ever spoken in support of a utility merger." If so, it was the quickest transition from virginity to seasoned service in the history of intellectual prostitution. Cavanagh flaunted the delights of an Enron embrace: "What we've put before you with this company is, we believe, a robust assortment of public benefits for the citizens of Oregon which would not emerge, Mr. Chairman, without the merger."With a warble in his throat, Cavanagh moved into rhetorical high gear: "The Oregonian asks the question, 'Can you trust Enron?' On stewardship issues and public benefit issues I've dealt with this company for a decade, often in the most contentious circumstances, and the answer is, yes."Cavanagh won the day for the Houston-based energy giant.

Oh dear, what happened then?

“…it wasn't long before the darkest suspicions of Enron's plans were vindicated. The company raised rates, tried to soak the ratepayers with the cost of its failed Trojan nuclear reactor, and moved to put some of PGE's most valuable assets on the block. Enron's motive had indeed been to get access to the hydropower of the Northwest, the cheapest in the country, and sell it into the California market, the priciest, and — in part because of Cavanagh's campaigning for deregulation — a ripe energy prize awaiting exploitation.”

Apparently blinded by his own sense of invincibility, Cavanagh actually wrote a letter to Cockburn accusing him of misrepresenting what happened in Oregon. Says our darling Ralph:

San Francisco

I'm still scratching my head after reading Alexander Cockburn's attack on my support for Enron's merger with the Portland General Electric Company (PGE) almost five years ago ["Beat the Devil," Jan. 7/14]. His baffling conclusion that "the role of that green seal of approval [in Enron's collapse] should not be forgotten" is a non sequitur of the highest order.
Natural Resources Defense Council was part of a coalition of environmental and consumer groups that negotiated an agreement with the merging companies on future investment in energy efficiency, renewable energy, watershed restoration and low-income energy services. Cockburn is indignant that I said I trusted Enron to execute the agreement. But Cockburn, who never called me before publishing his diatribe, evidently didn't check to find out what actually happened. Enron and PGE did indeed meet their merger obligations, and environmental and consumer interests were among the winners. Enron left in place a hometown management group with a commitment to improved performance on both environmental and equity issues. Its subsequent decision to leave the utility business, long before its collapse, had no adverse environmental consequences at PGE or elsewhere.
There is no connection between Enron's current calamity and the merger that NRDC and many others supported conditionally nearly five years ago. Only Cockburn's overactive imagination could suggest otherwise.

RALPH CAVANAGH Natural Resources Defense Council

Happily, Cockburn replies:

Petrolia, Calif.


Just to inject one tiny sliver of reality into Ralph Cavanagh's bland tissue of self-exculpation, which will be read with hilarity in Oregon. Portland General Electric sought and received $340 million in rate hikes on PGE customers for federal income taxes over the past three years. It shipped the money to Enron HQ in Houston. Over that period, Enron paid only $17 million in taxes in 1998, nothing in 1999 or in 2000. In fact, the company got a big tax rebate.

ALEXANDER COCKBURN


Now, Cavanagh is serving as the face and name for the Big Utility-funded campaign against Prop 7, which would require utilities to procure 50% of their electricity from renewable resources by 2025, increase penalties for non-compliance, make those penalties mandatory, and prohibit utilities from passing those fines onto the ratepayers. Just like Enron did in the 90’s, PG&E, Sempra and Edison are now using NRDC to get the green seal on opposing the Solar and Clean Energy Act so that they can keep ripping off consumers. Way to go, Ralph.

Freeman takes on Cavanagh

David Freeman and Ralph Cavanagh went toe-to-toe in a radio interview on 89.3 KPCC FM, and Freeman ran circles around Cavanagh. This campaign is getting good. Listen through KPCC’s website here and read my analysis below.

Host Larry Mantle asked Cavanagh “What is your opposition?” Cavanagh’s responses were:

“CA’s leading environmental groups all oppose Prop 7. If our good friend Dave Freeman had written the initiative, I am sure we would all be for it.”

Huh?? Isn’t David Freeman that other voice on the radio telling you you’re wrong on Prop 7?

“This initiative locks in two new pages of mandatory excuses for the utilities that will let them off the hook.”

WHAT? Then why are they spending 27½ million dollars to defeat it? Is Cavanagh actually saying with a straight face that the utilities would invest $27.5 million dollars to kill a measure that had no provisions to enforce its requirements? Or that the utilities want to scare people about an initiative that would actually make skirting the law legal for them?? In actuality, Prop 7 strengthens existing law by making FINES mandatory and prohibiting the utilities from passing them on to consumers. That's why the utilities are spending $27.5 million to defeat Prop 7.

“Can’t change it without a 2/3rds vote.”

This is a blatant manipulation of the law on Cavanagh’s part. CA election law already states that the ONLY WAY to amend an initiative is…..THROUGH ANOTHER INITIATIVE. That’s right, the default mechanism to changing any provisions of a successful ballot measure is to PUT UP ANOTHER INITIATIVE. True story, check it out for yourself, in the California Constitution (apparently not a very important part of Ralph Cavanagh’s analysis of Prop 7). What the authors of Prop 7 did, and I think this was pretty clever, was include a provision that allows it to be amended in the Legislature. The 2/3 vote requirement is key to protecting the integrity of the initiative (and thus the will of the voters), while giving the Legislature the flexibility to adjust the measure as needed. Most initiatives include just such a provision to make them easier to amend but not too easy so special interests can simply gut them. It’s a common sense, smart way to write an initiative. Cavanagh’s a Yale educated lawyer. He knows the law, but hopes you don’t. This is what his strategy actually is.

Highlights from David Freeman’s response:

“What Ralph is missing is the huge opportunity for California to stake out a leadership role. The problems Ralph has with this are nit picking. They are relatively minor.”

“The Legislators don’t like it because it points out their existing failures, the agencies don’t like it because it points out that they aren’t getting this done. It’s time for the people to speak.”

“This is a charge (the size restriction issue) that is being made that just doesn’t hold water. The last time Ralph, you and the PUC got together on something with the utilities, you brought deregulation to the state. The judgment of the PUC and the environmental organizations is not impeccable. The issue is, do we take a risk in staking out CA as the leader in renewable energy?”

Thank you David Freeman for bringing some common sense to the Prop 7 debate.

Listen to the whole thing here.

Wrong on Deregulation, Wrong on Prop 7

One of the fascinating aspects of unraveling the No on 7 campaign has been the recurring connection between the characters who fought for and then defended a deregulated electricity market in CA – that ultimately led to an energy crisis and rolling black outs - and the characters who oppose Prop 7 today.

I’ve detailed extensively on how the Natural Resources Defense Council played a critical role in getting environmentalists to support deregulation on behalf of Enron. Also in the crusade was one Jan Smutny-Jones. Jan has been at the vanguard of defeating Proposition 7, signing the ballot arguments, appearing before the joint senate/assembly hearing to testify against Prop 7, and even serving as the plaintiff’s (unsuccessful) lawyer to get certain language off the Prop 7 proponent’s ballot argument. Interestingly, Smutny-Jones was also the chairman of the board that oversaw the electricity grid when California’s rolling black outs were going on.

This might explain Smutny-Jones’ activities during the Big Utilities’ efforts to deregulate electricity in CA.While NRDC’s Ralph Cavanagh was expressing his admiration for Enron’s “environmental stewardship,” Jan Smutney-Jones had these things to say:

Defending deregulation:
“Edison spokesman Steve Hansen and trade-group executive Jan Smutny-Jones said the 1996 law can deliver the benefits promised, but not yet delivered, if it is given more time and state authorities fine-tune it -- for instance, by allowing for more long-term power contracting.”

Defending Enron:
While investigating this summer's stunning spike in electricity prices, state authorities have heard stories about a curious phenomenon: On days when the weather is hot, batches of power generated in California are sold to other states. A little later in the day, similar amounts of power are sold back to California -- but at much higher prices. The question is, is it the same power? If so, that could be "megawatt laundering" -- a multi-company conspiracy to evade California's wholesale price cap, which covers power generated in California but not power sold into California from elsewhere.

Worried that such transactions could be costing consumers millions of dollars, several energy specialists raised concerns about megawatt laundering during a Federal Energy Regulatory Commission hearing a month ago in San Diego. But an unconfirmed news report last week said the federal agency had concluded that generators had not abused the market. And others say concerns about megawatt laundering are exaggerated.

Among them is Jan Smutny-Jones, executive director of the Independent Energy Producers Association, a power-firm trade group, and chairman of the Independent System Operator, which oversees most of California's power grid.

Smutny-Jones dismisses the possibility of market manipulation:

"This is one of those things that's turning into an urban legend," he said. "I don't want to characterize this as a significant problem."

The “urban legend” of course, turned into a criminal trial and became the topic of a documentary called “The Smartest Guys in the Room.” Tapes of traders plotting to rip off Californians made its way both into Senate hearings and the documentary (warning – there is profanity):



Why would Smutny-Jones stick his neck out so far to defend electricity deregulation, even in the face of a crisis? Maybe it’s because

“During the depths of the energy crisis in 2000, California's electricity grid was controlled by a 26-member board composed of stakeholders, including representatives of power companies, utilities, businesses and consumers. The board was headed by Jan Smutny-Jones, executive director of the Independent Energy Producers Association, whose members, including Duke Energy Corp. and Dynegy Inc., piled up enormous profits during the state's energy crisis."

Oh now I see. Jan Smutny-Jones had to pretend there was no energy crisis because he was the chairman of the board that oversaw CA’s electric grid during the rolling black outs and, coincidentally, was profiting handsomely from it. Fascinating.

"Davis blamed that board for causing the energy crisis, saying its decision to lift price caps in December 2000 allowed energy companies to charge astronomical prices for energy, which devastated the state's major utilities and still led to blackouts."

Read the whole article here.

So, NRDC and Jan Smutny-Jones want you to trust them on energy policy, when they vigorously defended the deregulation scheme and played active rolls in causing it.

These guys were dead wrong before, and they are dead wrong again.

PG&E, Edison & Sempra Enabler Exposed

The only funding for the No on Prop 7 campaign is the jaw-dropping $27 million from PG&E, So Cal Edison, and Sempra. So I was of course interested in the revelation that Southern California Edison was fined $146 million for violations associated with rigged customer satisfaction surveys and falsified safety data. The Pasadena Star News reports that:

“Edison employees and management manipulated and submitted false customer satisfaction data that was used to determine Performance Based Ratemaking customer satisfaction rewards during the period from 1997 to 2003.

Edison was ordered to refund to its ratepayers all $28 million in rewards it has received and to forgo an additional $20 million in rewards the utility has requested. Thursday's decision also finds that Edison submitted false and misleading health and safety data - a move that likewise resulted in an order for the utility to refund to ratepayers all $20 million in PBR health and safety rewards it has received and to forgo another $15 million in rewards it has requested.

The commission additionally ordered Edison to refund to consumers $32,714,000, the portion of its 2003-2005 revenue requirement related to the utility's results-sharing program that was affected by fraudulent data.

Lastly, Edison was ordered to pay a fine of $30 million to the state's general fund for violations of the Public Utilities Code.”This is only the most recent time that California’s Big Utilities have been busted for ripping off consumers."

TURN, a utility watchdog, has provided a neatly detailed list of shenanigans by Big Utilities and their enablers. As I was perusing the press releases, however, I noted a recurring theme – that the California Public Utilities Commission often acts as a Big Utilities enabler.

Why is that relevant? The CPUC also made news this week when it came out with a less-than-positive review of Prop. 7. The CPUC is dominated by Schwarzenegger appointees who support deregulation of CA’s electricity market. According to TURN, the Big Utilities foremost enabler of ripping off Californians is the CPUC itself. Here are some highlights of the Big Utilities ripping off Californians, with and without the help of CPUC:

December 20, 2007: California Public Utilities Commission gives “Christmas gift” to Big Utilities: The California Public Utilities Commission today bucked a national trend toward lower profits for regulated utilities, guaranteeing inflated profits for PG&E, Edison and SDG&E. Instead of grabbing the opportunity to lower electric bills throughout California, under today's decision PG&E and Edison will continue to receive profits far above other utilities, and SDG&E will begin collecting inflated profits as well. Says TURN Executive Director Bob Finklestein: "There is no justification for awarding windfall profits that come out of the pockets of hard-working Californians. The CPUC is out of touch with the national trend toward lower guaranteed profits, and is also out of touch with the struggles many Californians already face to afford essentials like heat, light and hot water." Read the rest here.

April 18, 2007: PG&E ordered to return $23 million in illegal back bills to customers: A judge found that over 3,400 customers had their power shut-off for nonpayment of illegal back-bills. PG&E should pay reconnection fees and credits to customers shut off between 75 and 150 days of receiving illegal back-bills. Over 225,000 customers received illegal back bills during the time in question. All customers illegally back billed by PG&E suffered harm, and shareholders should pay illegally billed customers refunds of $23 million. Read the rest here.

March 15, 2007: $170 million from CPUC to PG&E shareholders: The California Public Utilities Commission (CPUC) today granted Pacific Gas and Electric Company (PG&E) a rate increase of $213 million per year, despite strenuous objections from consumer groups that believe PG&E rates are already much too high. "The CPUC could have reduced rates simply by saying PG&E shareholders don't need another $43 million per year on top of rates that are already among the highest in the nation," said Bob Finkelstein, TURN's executive director. "Instead they opted to let the utility siphon tens of millions more each year out of consumers' pockets, knowing these amounts flow directly to shareholders." Read the rest here.

October 31, 2005: Deregulated companies’ tricks cost Californians billions: Sempra Energy goes on trial for manipulating CA electricity prices to cause the energy crisis: Sempra, the parent company of Southern California Gas and SDG&E, is defending itself against anti-trust charges that could cost the company as much as $23 billion.Sempra is accused by California and a coalition of local governments of conspiring to manipulate the gas market in order to drive up prices. Read more here.

December 18, 2000: Backroom Utility Deal Between CPUC and PG&E: Published reports have revealed that state officials are negotiating rate increases with the utilities absent any notice to the public or opportunity for public comment. "This is a gross violation of basic concepts of due process and fair play. If not halted, these discussions could lead to a California Public Utilities Commission decision permitting rate increases as early as this Thursday," said Nettie Hoge, executive director of TURN, The Utility Reform Network. Hoge called on the governor and CPUC president Loretta Lynch to immediately halt private discussions with the utilities and comply with laws requiring public notice and comment. "Utility rates in this state are supposed to be determined via a public process, not through backroom deals between politicians and the utilities," Hoge stated. Read more here.

Apparently, CPUC has a documented history of giving the Big Utilities substantial leeway to force California consumers to fork over more of what’s in their wallet to PG&E, Sempra, and Edison. And while all this is going on, the Big Utilities honestly think (or desperately hope?) that if they greenwash their campaign against Proposition 7 by throwing the names and faces of environmentalists (that they fund) at voters, then CA will overlook the rate hikes, rip-offs, and the environmental degradation that the Big Utilities are most appropriately known for. But this really just harkens back to the point I made in my last post. When you have politically/financially interested parties vs. disinterested Nobel Laureate-winning physicists and scientists, who do you go with? Call me crazy, but I’m still going with the scientists.