California: Energy refunds remain elusive - many companies low on cash

The San Francisco Chronicle ^ | August 20, 2002 | Mark Martin, Chronicle Staff Writer

[Ernest_at_the_Beach]

California continues to build its claim that the state was unfairly gouged by power companies last year, but but consumers paying record-high electricity rates shouldn't expect to see refund checks anytime soon.

While Gov. Gray Davis loudly maintains the state is owed $8.9 billion by the nation's generators, experts say the final tally will be nowhere near that high even if California wins its case.

[Ernest_at_the_Beach]

Additional Detail here!

[Ernest_at_the_Beach]

Calpowercrisis:

To find all articles tagged or indexed using Calpowercrisis, click below:
	click here >>>	Calpowercrisis	<<< click here
(To view all FR Bump Lists, click here)

[kellynla]

Ernest, you have mail.

[Mr. Jeeves]

This is how Davis plans to alleviate the budget deficit. If he gets a big settlement from the energy companies before the election, he can claim that there is no problem now and that he alone heroically reclaimed the money the enery companies "stole" from California.

And with a compliant media, he will probably get away with it.

[Ernest_at_the_Beach]

Meanwhile he is working the street so to speak:

[daviddennis]

Let us suppose that tomorrow, I go to the shiny new Apple computer retail store in my area and buy a PowerBook. I hand the nice folks about $3,500, and they hand me the new PowerBook(tm). I have the PowerBook. Apple has the money. Everyone gains.

So last year, Gray Davis effectively handed the power companies of our state a whole bucketload of money. Normally, this means the companies will have a lot of money and will be ensured of great success, just as Apple is if I buy my PowerBook.

Instead, most of these companies are dead or alarmingly close to dying.

What happened to the money? We got our power, the money flowed into those companies ... and, from what I can see, never went out.

What happened?

D

[Dog Gone]

Your question implies that the money received by these companies was a huge windfall, and to some extent it was. But part of the reason they were charging so much for power was because their fuel costs were soaring as well. They had rising expenses, so a lot of that money went to their fuel suppliers.

Keep in mind, too, that California hasn't paid those suppliers for all the power consumed. In many cases, California decided to pay only what it felt was legitimate, and many of these companies have money owed to them. This is a large part of the amount California wants "refunded." I haven't seen a recent figure on this amount, but it was over a billion dollars.

But the final answer to the missing billions is that the companies simply lost it. Take Dynegy, for example. They had some accounting irregularities which caused their credit costs to soar once they were revealed. They tried to bail out Enron and lost money on that effort. The pipeline they purchased from Enron was recently sold to Warren Buffett for a half-billion dollar loss. A similar story exists at Williams.

Most of the money vanished just like the value of many unrelated blue chip stocks. That money doesn't end up in anyone's pocket. It's wealth that simply disappears.