Andrew Wheat

The New Nuke Scam

When Texas decided to deregulate its electricity markets in 1999, nuclear power couldn’t compete because it was so much pricier than fossil fuels. In an open market, somebody would have to eat the billions of dollars that utilities had spent on nuclear plants–and it wasn’t going to be the utilities. Texas’ two main nuke operators, Reliant Energy and TXU, blocked deregulation until legislators agreed to foist these “stranded nuclear costs” on consumers.

Now, one legislative session later, everything has changed. The cost of traditional fossil fuels has shot up so high that nuclear power can suddenly compete. Consequently, the “stranded costs” have vanished. Yet Reliant and TXU have already collected millions to defray those phantom costs, and fully intend to continue doing so.

In an effort to stop this fraud, three legislators introduced a bill to force the nuclear utilities to return any stranded-cost overcharges to their customers. At an April 24 press conference, Representatives Sylvester Turner and Kevin Bailey of Houston and John Longoria of San Antonio announced that their bill, H.B 2107, would return $481 to the average TXU customer and $590 to the average Reliant customer. (These rebates, they pointed out, would be roughly five times what the average household received from the 1999 state property tax break that helped propel George W. Bush into the White House.)

In an odd turn, representatives of energy giants Shell and Enron joined the three Democratic legislators at the press conference to demonstrate business support for the measure, according to Turner. It’s a sad day for Texas government when legislators worry about being labeled “anti-bidness” for trying to stop a $5 billion consumer fraud.

With less than two weeks left in the session, the outlook for the bill is bleak. A highly compromised version limped into the Senate with only a fraction of the original rebate (perhaps $50 per customer) still intact, only to be promptly “tagged” by Senator Tom Haywood, which effectively prevented Senate consideration. Though Turner still has a glimmer of hope, utility lobbyists have gleefully pronounced the bill dead. All in the name of consumers, of course. “Customers would be ill-served by any refund now,” TXU President Tom Baker told reporters, arguing that the proposed refunds are based on dubious cost projections. The utilities bring a lot of muscle to the fight. PACs affiliated with the owners of Comanche Peak Nuclear Power Plant (TXU) and the South Texas Nuclear Project (Reliant Energy and Central and South West Corp.) spent $1.8 million to influence Texas politicians during the 2000 election cycle.

They also hired an army of well-paid lobbyists to make sure their money talks. By April 2001, TXU, Reliant, American Electric Power (which recently bought Central and South West Corp.) and their trade group, the Association of Electric Companies of Texas, were paying 117 Texas lobbyists up to $4.8 million. These lobbyists include such heavyweights as: Randy DeLay, brother of House Republican Whip Tom DeLay; Diane Allbaugh, wife of Bush’s advisor and Federal Emergency Management Director Joe Allbaugh; ex-House Speaker Billy Clayton; and ex-legislators Kent Caperton, Buddy Jones, John Fainter, Jr. and Curtis Seidlits, Jr.

Enron’s backing of the bill is especially ironic. Ranked by the Center for Public Integrity as George W. Bush’s largest “career patron,” Enron had a big hand in shaping Texas’ deregulation laws, just as it now influences federal energy policies. And few companies are better positioned to profit from the aftermath of the deregulation debacle, particularly in California. Even as Enron endorsed customer rebates in Texas, officials in several other states were trying to determine if Enron, taking advantage of the deregulated market, had inflated electric bills in their markets. Washington, Oregon, and California officials are investigating allegations that Enron, Reliant, and other electricity wholesalers exacerbated the West Coast energy crisis by manipulating power supplies. The companies, which are rolling in record profits, say the prices just reflect a severe natural gas shortage.

Despite California’s recurring power outages and the nation’s skyrocketing electricity costs, the Bush Administra-tion has been reluctant to intervene in electricity markets, saying it prefers to stay the course with “market-based solutions.” Now might be a good time to invest in the candle and flashlight markets.

Andrew Wheat works for Austin-based Texans for Public Justice, a non-partisan, non-profit organization that follows money in Texas politics (www.tpj.org).

Andrew Wheat is the research director for Texans for Public Justice.

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