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Unloved spin-off seeks corporate welfare

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The British company International Power has "offered" to solve California's energy crisis, by seeking to bid for new plants in the power-stricken hi-tech state, The Observer reports.

International Power, a fragment from the privatized British energy generator National Power, "wants to build 3000MW of generating capacity" in the state, according to the report. IP already has plants in Texas, Georgia, Massachusetts and New Jersey with more underway.

But the news is unlikely to bring gymnasium treadmills screeching to a halt in the state, as Californians throw their snowboards and take-out sushis skywards in celebration. For the corporate welfare now being tabled by California's Governer Gray Davis is guaranteed to bring such oafish, speculative offers from oversees flooding in.

Davis last week offered to bail out the two main distributors PG&E and Southern California Edison (a third, San Diego Gas & Electric covers a smaller area) on a long-term basis.

Claiming that they're on the verge of bankruptcy, the two grid companies, who must purchase their energy under the whacky deregulation scheme California introduced in 1996, have been subsidized by the state in the recent energy in recent weeks Now that's going to be made permanent, kinda, in the form of ten-year public bonds... and an 80 per cent hike in energy costs to the punter.

PG&E and SoCal Edison are forced to pay high wholesale market prices for energy while being prevented from passing the cost on to consumers, thanks to the regulation web.

And here our libertarian idealogues are quite correct. It is a "rigged" market. Only some markets are more obviously rigged than others...

PG&E and SoCal Edison are merely local subsidiaries of larger corporates, and have funnelled money back to their parents. PG&E's holding company has "nearly $30 billion" in assets, according to its web page . And Edison sits on assets of $36 billion, much of which has been invested oversees.

So their local "bankruptcy" is illusory. AP today reports that SoCalEdison has diverted $1.4 billion to parent company Edison International since deregulation, which "represented almost all the parent companies' net income in recent years." Little wonder that the majority of Californians now think the utilities are crying wolf, and favour re-regulation.

For the cost of this expensive, artificial market-making wheeze has been passed to the public. As Gregory Palast nicely characterises it in a history of the great free market energy caper - it amounts to "the brilliant method by which profits are privatised and losses socialised." ®

Note To help conserve energy, the heated jacuzzi here in The Register's Celestial Room Hospitality Wing will be turned off for two hours each morning between 8am and 10am. PRs please note.

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