Kicking Assets

“What we are suggesting,” Freedman says, “is that the shareholders eat some of that. The utilities cannot walk away with their pockets bulging.”

What the massive influx of “stranded assets” money allowed the parent holding companies to do — apart from dole out dividends, buy stocks and dodge their mounting power-purchase liabilities by appearing to have no money — was go on a worldwide buying spree. With their stocks rising and their cash flow impeccable, Edison International and PG&E Corp. were in a position to borrow, and to acquire unregulated assets. According to a January 2001 analysis of SEC filings conducted by Public Citizen, Edison International spent more than $10 billion gobbling up power plants in England, New Zealand, Puerto Rico, Illinois and Massachusetts. Beginning in 1999, PG&E Corp. shelled out at least $9 billion on generating facilities nationwide.

One conduit for Edison International’s explosive growth into unregulated markets is the Mission Group, a wholly owned subsidiary. According to the KPMG audit, the Mission Group has approximately $895 million in cash — assets consumer advocates say were bootstrapped into existence through the transfer of money from the regulated utility — and, the audit concludes, the $40 billion holding corporation has the resources to borrow a minimum of $4 billion to cover its debts. The holding company, in other words, is far from broke.

Considering the real wealth of these companies, Harvey Rosenfield suggests Edison “bail itself out,” by slashing executive salaries and multimillion-dollar bonuses, eliminating its $2 million in campaign contributions and its lobbying of state officials, and divesting itself of $10 billion in post-“deregulation” acquisitions, including its $25 million logo at Edison Field, home of the Anaheim Angels.

Edison V.P. Foster rejects the notion that the PUC freeze might force the utilities to absorb losses. “When wholesale costs went wild, we were at risk of losing all our ‘headroom.’ But what we were not at risk for was the price of electricity piercing the frozen rate level, going to 18 or 20 cents, when all we could collect was 6.2 cents.” And now, Foster says, consumers must pay.

Thus far, Edison’s and PG&E’s pleas of insolvency have held sway in the state capital. When the Legislature fell three votes short of passing the governor’s $10 billion power-purchasing bond issue, the bill’s sponsor, Assemblyman Fred Keeley (D–Santa Cruz), warned, “If we don’t do this, the imminent bankruptcy of the utilities is so awful . . . it is almost unimaginable.”

Unfortunately, that may be the sentiment that guides the inevitable bailout to come.