JUSTICE LONG DELAYED IN FEDS’ ENERGY CHEATING

CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JUNE 14, 2013, OR THEREAFTER

BY THOMAS D. ELIAS

“JUSTICE LONG DELAYED IN FEDS’ ENERGY CHEATING”

          It’s taken almost 13 years, but justice may finally be coming to California consumers victimized by the federal government during California’s energy crunch of 2000 and 2001.

          Yes, by the federal government.

           

          For folks who weren’t in California or don’t remember, that was the time when power prices here soared as electricity-trading companies like Enron, Reliant Energy, the Williams Cos. and several others conspired illegally to take advantage of this state’s abortive deregulation plan.

          “Buccaneers from out-of-state” caused the problem, then-Gov. Gray Davis complained at the time. Few took his charge seriously, least of all the Federal Energy Regulatory Commission (FERC), which could instantly have stopped the illegal practice of making fake, phantom shipments of power out of California and then selling the same power back to California utilities at vastly inflated prices.

          One result was that Davis’ public approval ratings dropped severely, leaving him vulnerable to the recall election of 2003.

          So this energy crunch had political consequences. At the same time, politics had major consequences for consumers. When Republican George W. Bush won the presidency in 2000 without help from California, the state no longer got much sympathy from presidential appointees of most sorts.

          No matter how often Davis and other state officials protested the power profiteering, FERC did nothing, and eventually Californians were bilked of more than $10 billion in excessive electricity prices. Super-high prices continued for years after the crunch, as Californians paid for the long-term power supply contracts forced on the state’s Independent System Operator during the crisis.

          It wasn’t just through FERC that the federal government persecuted and cheated every residential and commercial electricity customer in this state.

          California also bought power at that time from two federal agencies operating dams on major Western rivers. Those were the Bonneville Power Administration based in Portland, Ore., and the Western Area Power Administration in Lakewood, Colo.

          Davis at the time charged these federal agencies with profiteering similarly to Enron and other private companies whose executives were later convicted of illegal market manipulation.

          The criminal trials of Enron chieftains and others proved Davis correct about those “out of state buccaneers,” and now he’s been proven right about the federal agencies, too.

          This happened when, in what may have been the most under-reported story of the spring, the U.S. Court of Federal Claims in Washington, D.C., ruled that both the Bonneville and Western Area power administrations bilked Californians of more than $2 billion during and after the electricity crunch. In a separate ruling about the same time, a FERC administrative law judge found that private companies cheated Californians out of at least $1 billion more than they’ve already been forced to refund.

          Even after the end of rolling blackouts deliberately created by market manipulators to sow public panic and desperation that left Californians susceptible to gouging, both the federal and private outfits continued to take advantage, the judges ruled. The exact amounts of their liability will be determined in separate, early June, court proceedings.

          After that, the state Public Utilities Commission (PUC) will decide how to return the money to consumers. Only part of past settlements with private companies has been returned directly to customers who were cheated, with portions going to fund new generating capacity.

          Because every region of the state now possesses power plants with the potential to produce at least 15 percent more power than projected maximum demands, all of the new refunds ought to go straight to consumers, applied to their monthly bills.

          But the PUC, which was a big supporter of deregulation before the energy crunch despite warnings from consumer groups that large-scale market manipulation would surely follow, has never before given much back to consumers.

          The bottom line on all this is an old lesson: Eternal viligance is the price of freedom.

Because of the complexity of the energy regulatory process, power companies and the federal and state agencies that regulate them get little public attention. Operating out of the news-coverage spotlight, they sometimes try to take advantage. The only way to avoid future crises and cheating, then, is to shine that spotlight on them continually.

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      Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net

ARCO TAKEOVER BY TESORO: HIGHER GAS PRICES INEVITABLE

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, JUNE 11, 2013, OR THEREAFTER

BY THOMAS D. ELIAS
     “ARCO TAKEOVER BY TESORO: HIGHER GAS PRICES INEVITABLE”

          Californians may have been doomed years ago to pay higher and higher gasoline prices for the foreseeable future because of the state’s steadily diminishing refinery capacity.

          That fate became far more certain in mid-May, when both the Federal Trade Commission and California Atty. Gen. Kamala Harris signed off on the acquisition of Arco by Texas-based Tesoro Corp.

          As average gasoline prices in this state rose above $4 per gallon, with levels topping $4.65 in some regions, both so-called regulators threw up their hands and said they could not stop this plainly anti-competitive deal.

          In the days immediately after the proposed acquisition was announced last winter, it seemed the anti-trust implications of Tesoro operating both its existing refineries in Martinez (formerly the Ultramar/Beacon refinery) and Wilmington (a former Shell facility) would force Tesoro to sell off the Wilmington facility in order to make its Arco deal go through. The Arco refinery Tesoro takes over in Carson is considerably larger than the Wilmington plant.

          Noting that this deal gives two companies – Tesoro and Chevron – 54 percent of the California gasoline market, consumer advocates early on urged Harris and the FTC to insist that if Arco parent BP wanted to sell it, the buyer be a company other than Tesoro. Suggestions included Exxon-Mobil, Valero or Pilot Flying J, all of which also have refineries here, but none as large as those owned by Chevron and Tesoro.

          That didn’t happen, in part because Tesoro could have closed the Wilmington facility rather than selling it. Regulators cannot force any company to keep a plant open, and since 1980, 13 California refineries have been shuttered.

          No one had much problem with Tesoro taking over Arco’s retail operations, including its large chain of AM-PM convenience stores, or even with Tesoro acquiring Arco’s pipelines. The sale price for everything Arco, including the inventory at stores and gas stations, came to $2.4 billion, money BP desperately needs for payments it must make in the wake of its Gulf Coast oil drilling disasters.

          The significant problem is that this deal leaves San Antonio-based Tesoro in a commanding position in California.

          Harris did manage to extract a few token commitments before approving the deal. Tesoro will preserve more than 1,000 jobs in Wilmington for at least two years. The attorney general and the state Energy Commission will monitor gas pricing, volume and refinery capacity at all Tesoro facilities. Tesoro will supposedly protect against price spiking when outages occur at any one refinery, by increasing production at its other refineries. And Tesoro assures that Arco will remain a low-cost fuel provider. The company has long offered slightly lower prices than some other chains.

          Tesoro will continue to use the Arco name, just as it has long marketed its products under the USA Gasoline and Shell labels, besides supplying hundreds of unbranded stations. Altogether, Tesoro will have more than 1,300 retail outlets in the West. Its Southern California refineries will process more than 363,000 barrels of oil, along with another 166,000 at Martinez in the East Bay area.

          But a Tesoro agreement as part of this deal to add to production of California blends of relatively low-polluting gasoline will mean only about 16,800 gallons more per day, about what one big gas station can sell, complains the Consumer Watchdog advocacy group.

          “Big deal,” said Liza Tucker, an oil industry analyst at Consumer Watchdog. “We are essentially hostages on a big gasoline island. Don’t be surprised if over the long run gasoline goes over $5 a gallon.”

          For the fact that state officials can monitor Tesoro production and prices does not give them any power to lower prices. Nor does it assure that refineries will always produce to capacity and keep supplies at levels where prices might remain fairly stable.

          Tesoro, meanwhile, has said in its news releases that its move will have “competitive advantages” for California drivers. The company, however, would not specify even one such advantage.

          Tesoro Chairman Greg Goff called his Arco acquisition “transformational,” and it may be – for the company. But it’s hard to see how that will be good for drivers. For it creates a dominant supplier of a vital commodity, and if history is any precedent, that will almost certainly mean steadily rising prices, at least until some new form of energy comes along to compete.

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Elias is author of the current book “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It,” now available in an updated third edition. His email address is tdelias@aol.com

BIG CHANGES COMING TO CALIFORNIA’S CONGRESSIONAL DELEGATION

CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, JUNE 7, 2013, OR THEREAFTER

BY THOMAS D. ELIAS
          “BIG CHANGES COMING TO CALIFORNIA’S CONGRESSIONAL DELEGATION”

          California saw plenty of change to its congressional delegation last year, with the long-serving likes of Fortney “Pete” Stark (East Bay area), David Dreier (San Dimas), Jerry Lewis (Redlands), Joe Baca (San Bernardino County), Elton Gallegly (Simi Valley), Mary Bono Mack (Palm Springs) and more either retiring or getting turned out.

For most of their veteran colleagues remaining, reelection seems all but certain. Nancy Pelosi, the former Speaker of the House and current Democratic minority leader, hasn’t had a serious challenger since essentially inheriting her San Francisco-based seat in 1987 on the death of Sala Burton, who had taken it over from her husband, Phil Burton, a liberal lion and legendary master of gerrymandering.

          But Pelosi is now 73 and her age will probably see her out of Congress before another decade goes by.

          In that way,Pelosi is pretty typical of the state’s 53-member delegation, replete with sexagenarians and septuagenarians.

          Just look at the solidly Democratic districts stretching hundreds of miles south from Pelosi’s turf: Jackie Speier, 63, of San Mateo; Anna Eshoo, 70, of Palo Alto; Zoe Lofgren, 65, whose district reaches from San Jose to Gilroy; Mike Honda, 71, of San Jose, Sam Farr, 71, of Monterey County and Lois Capps, 75, of Santa Barbara County.

          Of that aging group, only Capps had a serious challenge last year, but still pretty easily fended off Republican Abel Maldonado, the former appointive lieutenant governor.

          Any of them could draw a challenge at any time, as did Stark, a 40-year congressional veteran from Alameda County who at 80 was the dean of California’s delegation until he was surprised by a primary challenge from 31-year-old Eric Swalwell, a Dublin city councilman who 10 years earlier was an intern for ex-Congresswoman Ellen Tauscher. Swalwell won the all-Democrat November runoff by a narrow 52-48 percent margin.

          Already, Honda is being challenged by a former deputy national trade representative, Rho Khanna, 37, who drew a crowd of major Silicon Valley players to one recent $2,600-per-person fund-raiser.

        No one can be sure what other upstarts may be lurking in the weeds to take on senior-citizen incumbents south of Pelosi or elsewhere, like Doris Matsui of Sacramento, 68, or Howard (Buck) McKeon, a 74-year-old Santa Clarita Republican who chairs the House Armed Services Committee, or San Diego Democrat Susan Davis, 69, or 73-year-old Henry Waxman of West Los Angeles and the South Bay suburbs or 68-year-old former Lt. Gov. John Garamendi, who won by only about eight percent last year over a previously-obscure Republican challenger.

          One thing all these folks should have learned last year is that the state’s three-year-old top-two primary election system makes seats that once could be considered safe for decades quite a bit shakier.

          Stark, for example, would most likely still be in Congress, but for that system, which puts the top two finishers in the primary election into the November runoff election, regardless of party. No Republican could have beaten him in his district, but a fellow Democrat did.

          If that didn’t put other incumbents on notice, what happened to Baca surely did. He also lost to a fellow Democrat, Gloria Negrete McLeod of Chino, herself 71.

          That race illustrated that state legislators subject to term limits won’t always be content to leave office and retire or look for a real-world job when they are termed out: Some will try for Congress. Which means few in Congress can be sanguine, almost all having to look over their shoulders as long as they serve.

          Which means the still-pretty-new primary system is achieving one unanticipated benefit: It is keeping incumbent politicians on their toes more than they ever before needed to be. It's too soon, of course, to know whether than means they’ll accomplish more than previously.

          Chances are congressional shakeups won’t be as striking in any one election year over the next decade as they were last year, when top-two’s debut combined with newly-drawn district lines to create unprecedented instability and 14 new members of Congress.

          But Democrats are already eyeing the districts of Republican Congressmen Jeff Denham of Modesto and Gary Miller of Rancho Cucamonga.

          “The party apparatus will begin to focus on these races in earnest very shortly,” said Eric Bauman, the Democrats’ state vice chairman.

          But the most change is likely to come from districts already occupied by Democratic veterans, none of whom has voiced any intentions of stepping down. Not to worry, when they do, plenty of younger folk will be waiting to replace them.

          And if the old-timers don’t get out of the way on their own, at least some of those ambitious potential replacements are sure not to simply wait their turns, but – like Swalwell – pounce on their own where they see an opening.

        

 

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Elias is author of the current book “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It,” now available in an updated third edition. His email address is tdelias@aol.com

NEW QUESTIONS ON HYDROGEN HIGHWAY

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, JUNE 4, 2013, OR THEREAFTER

BY THOMAS D. ELIAS

“NEW QUESTIONS ON HYDROGEN HIGHWAY”

          Significant new questions are cropping up about a California Energy Commission (CEC) program designed to assure there will be enough hydrogen refueling stations to make buying hydrogen fuel cell cars practical when they debut commercially between 2015 and 2017.

          One year ago, the commission pulled back more than $28 million in grants it had tentatively awarded, mostly for installing service station hydrogen pumps in areas where previous innovative cars like gas-electric hybrids were initially most popular.

          Now it plans to give millions of state license plate dollars to a company which filed an application last year to put pumps in a station that never agreed to host them.

Last year’s grants were canceled and reforms promised just two weeks after this column disclosed that the commission required any site have approval from at least one large automaking company before it could get state grant money. Carmakers, then, were deciding who could get public money. That didn’t last long once the arrangement was disclosed, the commission promising new rules.

Most of the canceled grants were earmarked for two billion-dollar industrial fuel companies – the German-based Linde AG and Pennsylvania-based Air Products and Chemicals Corp. The eight carmakers and both fuel companies, along with the CEC, belonged to the California Fuel Cell Partnership. Membership runs $87,500 per year and CEC staffers and company executives gather at meetings, meals and other events. That led to charges of collusion and/or cronyism in the grant process.

          The CEC now demands any outfit applying for a hydrogen station grant show some form of agreement with owners of service stations where it proposes to use the money, but said in an emailed statement there was no such requirement in the rules for its 2012 funding.

          Among grants approved last year and then pulled back was one for $1.58 million to Air Products for use at a 76 station on busy Wilshire Boulevard in Beverly Hills. Air Products had not pre-arranged to install pumps there, which was, remarkably, OK under the rules at the time. Previous CEC rules did demand such agreements and the CEC had not responded at this column's deadline to a request that it explain why the requirement was not in last year’s rules.

          “We never had any agreement with anyone to install anything here,” said Nick W. Miller, operator of the station.

          So commissioners approved at least one grant with no assurance hydrogen pumps could ever be installed. The CEC says no money would have been spent if no work was done at the site. “No one is paid for work that has not been performed,” its statement said.

          One industry expert maintains he informed CEC chairman Robert Weisenmiller of the lack of an agreement in the Wilshire Boulevard case 21 days before the commission in April released its latest list of grants, the first under the new rules. Air Products was then approved for two new grants totaling more than $2.99 million. The commission says the expert’s voicemails did not mention that firm’s lack of an agreement in its prior application, but the caller insists it was the focus of his messages.

          “Of course that was the message I left," the industry expert said. “Why else call? And if that’s what their system was, you could write down any gas station’s name and address, add some technical stuff and the state would say ‘We have a million bucks for you.’”

          Despite the commission’s strong denial in January that new rules taking automakers out of the decision process still favor grants to the same companies that were in line to get most of last year’s funding, the majority of newly-approved grant money in fact is earmarked for them. Besides the almost $3 million set aside for Air Products, Linde is to get $4.5 million of the $11.99 million awarded, with a smaller firm getting another $3 million to build on property owned by Hyundai Corp., a member of the Fuel Cell Partnership.

Weisenmiller declined to say anything about the hydrogen program.

          “The Energy Commission is not doing its due diligence,” said energy consultant Woodrow Clark, renewable energy advisor to former Gov. Gray Davis and a former longtime scientist at Lawrence Livermore Laboratory.

          It adds up to highly questionable grant-giving practices that can only increase public skepticism of how California government passes out tax dollars.

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Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net