Seize the Power! The California Energy Rip Off and the Fightback

BY:Juan Lopez| September 21, 2001

Political Affairs Magazine – August, 2001

After a year of price gouging and record profits by the energy monopolies, the wholesale rates of natural gas and electricity recently dropped sharply in California.

They attribute this to everything under the sun, including milder weather. But this sudden change was not magic. It was caused by a powerful people’s movement, with street heat at its core. The shift in the political balance in Washington and the nation since Senator Jeffords left the Republican Party was also a factor.

Even Federal Reserve Chairman Alan Greenspan, the guru of high finance and Wall Street, cautioned that California’s energy problems are ‘worrisome’ because they contribute to the downturn in the nation’s economy and the drop in overall corporate profit margins. He then called for price restraint in the market.

As the political pressure mounted, including from some Republicans who backed a Senate bill establishing tough wholesale electricity rate controls, the Republican-controlled Federal Energy Regulatory Commission (FERC) moved to institute somewhat broader wholesale electricity price controls throughout the West. At the same time they also began to look into expanding refunds for overcharges in California.

While the right wing continues to press for greater deregulation, and energy monopoly profit margins continue to exceed pre-crisis levels, they are worried about the short and long range consequences of a political and economic firestorm they are having a hard time containing.

One of Bush’s new appointees to the federal regulatory agency recently proposed penalties for any power generating companies proven to be manipulating the market. But later he added, ‘I think the rhetoric is still pretty hot out there. Talking about a windfall profits tax and expropriation of property it’s not a great climate’ for investing in new plants in California.

But, it is more than rhetoric ‘out there.’ In the California legislature, a bill is under consideration establishing a windfall profits tax on wholesale electricity rates. Also, a measure just signed into law creates a state power authority that helps finance new privately owned power plants under state supervision. But, more importantly, the new law authorizes the state to build, buy and run power plants under the public ownership and control of the state of California, including taking over profiteering power generators through the use of eminent domain.

The windfall profits tax bill and the public ownership/eminent domain aspects of the new state law emerged from a broad people’s front that, at this time, generally sees these measures as left pressure points on the Bush administration and the energy monopolies. They are seen as political weapons coming into active play if all else fails in moderating natural gas and electricity wholesale rates and the FERC fails to order the billions of dollars in refunds for overcharges being demanded by California.

At this time, the main political focus in California is on two things. First is the demand for a full refund of the .9 billion in overcharges. Second, on whether the newly imposed FERC price control measures will work. If the FERC price controls fail to keep wholesale prices down, it will likely rekindle a full blown Congressional battle centered on a tough wholesale electricity price control bill currently in the House, which could also be re-introduced in the Senate.

The Bush administration is blaming the Democratic governor and state legislative leadership for policies leading to the high consumer utility rates and the drain on the California budget in order to prepare the political climate for a Republican comeback in California in the 2002 elections. But a recent Los Angeles Times poll showed California voters believe the governor is doing a better job than Bush on the power problem by an almost 4 to 1 ratio.

In the broad front on the energy fightback, the organized labor movement is the clearest voice. Starting in June the California AFL-CIO has come out swinging. The California Labor Federation (CLF) has turned around the experience of rolling blackouts to backfire against the energy corporations. Working closely with local labor councils, union retiree groups and other social movements, the federation has organized a series of six ‘rolling demonstrations.’ Starting with Oakland last month and concluding with Los Angeles at a yet to be determined date, the main demand is ‘Stop Rolling Blackmail.’

The Oakland demonstration began at the federal building where the head of the California labor movement blasted the energy monopolies and the Bush administration, charging them with collusion. CLF Executive Secretary-Treasurer Art Pulaski called for federal energy price controls; takeover of the pirate power generators that continue the profiteering and price gouging, using the power of eminent domain and excess profits tax now.

The large march and protest in Oakland ended at the Duke power plant where, in a mock eminent domain takeover, the demonstrators put up a proclamation declaring the plant the property of the people of the state of California.

Clearly, the see-saw character of this fierce fight is far from over. Power generators in early July withheld electricity during a heat wave in California and Nevada, resulting in blackouts in Las Vegas, because they claim the FERC order (limited as it is) forces them to sell below market rates during periods of high demand. A FERC representative said the commission would look into the matter without agreeing to a specific timetable.

A few days later, the chief administrative law judge for the FERC ended talks between California’s governor and the power generators saying the state is owed far less than the .9 billion in overcharges it claims. The judge also suggested that, when the final numbers are calculated, the state may end up having to pay more in debts to the generators than it will get back in refunds for overcharges.

On July 11, as part of the statewide actions, the CLF led a large, broadly based demonstration in San Jose demanding, ‘We want our money back!’ At the same time, the head of the state federation was leading a delegation to Washington, D.C., to lobby for a full refund. Pulaski, warned in a prepared statement the day before, ‘If FERC doesn’t order full and fair refunds, we will move our campaign to pass a windfall profits tax to recover California’s money.’

In the San Jose demonstration the federation opened up a new political front targeting the ‘Banks and Big Oil’ with interlocking ties to the ‘energy pirate’ companies fleecing Californians. After marching from the local federal building, the protesters held the rally before a nearby branch of the Bank of America to highlight the federation’s new campaign, singling out the bank and the energy monopoly Chevron. Both are major stockholders in several of the energy companies responsible for profiteering and price gouging. Additionally, in the first quarter of this year Chevron out-matched its own record profits made last year from not only gas at the pump but also natural gas.

The CLF is calling on its local affiliates and their allies to single out these two convenient targets for actions in every community, as a way of sending its message to the Bush administration, the FERC and the energy companies. ‘Our members will have little difficulty understanding the Banks and Big Oil are in this energy crisis up to their eyeballs,’ Pulaski said.

The call for an excess profits tax and public ownership/eminent domain, as well as for a full refund of overcharges to the state are advanced mass demands in California. They fit into the framework of an expanding and increasingly heated national battle for tough wholesale electricity and natural gas price controls and stronger regulation at the national level, and throughout the nation.

Of the 24 states that have deregulated their electricity market, 17 are reconsidering deregulation. Nevada has already repealed it. Even some Republican politicians, worried about their political fortunes in the 2002 elections, are being forced into the anti-Bush, anti-ultra right camp on this or that issue, including some aspects of the energy fightback. Flexible and broad tactics, based on the united action of millions, is needed more than ever. Unity of the movements in the energy fightback together with other movements, nationally and internationally is critical to the formation of a mighty all-people’s front that brings about defeats for the Bush administration and the ultra right up to the 2002 elections and beyond. This is the prerequisite for moving to higher levels of struggle, such as the anti-monopoly fight for nationalization of energy under democratic control.

From Political Affairs Magazine – August, 2001



    Juan Lopez is chairman of the Communist Party in northern California and statewide coordinator. He has been a labor and community activist during the nearly forty years he's lived in Oakland, where he and his wife raised three children. He was formerly a member of the Teamsters union and a shop steward.

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