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The Return of the Screw 

PG&E is doing to New England what greedy, polluting, out-of-state energy suppliers have done to PG&E and California

Wednesday, Apr 25 2001
Reporting to shareholders 10 days after putting its utility subsidiary under bankruptcy protection, PG&E said it absorbed a $4.12 billion loss in the last three months of the year, turning what had been a profitable year into a complete nightmare.

The dismal report stood in stark contrast to the robust report posted by one of the utility's many electricity suppliers, Houston-based Reliant Energy Inc., which said profits doubled in the first quarter of this year thanks in large part to sales to California.

-- Sacramento Bee, April 17

The headlines surrounding PG&E Corp.'s announcement last week that it lost $4.1 billion last quarter as a result of California's energy mess seemed to contain a hint of sympathy for the gored utility. After all, the losses were attributed to the skyrocketing prices being charged by those now-notorious out-of-state energy merchants such as Enron, Duke, and Reliant, which Gov. Gray Davis called "the biggest snakes on the planet" the other day.

And who wouldn't agree with that description? By all accounts, those companies are: 1) endlessly greedy (one after another has announced record profits this tax season), 2) currying favor with local pols through bottomless donations (including $385,000 in the past two years to Davis and $175,000 to Senate Pro Tem John Burton, who has been screaming for the state to seize plants of late), and 3) making a mockery of state pollution laws in the process.

Yes, it would be easy to accept almost any company -- even PG&E -- as a victim of greedy, influence-buying, shamelessly polluting firms like that. That is, if only PG&E weren't behaving exactly the same way -- if not worse -- in its own capacity as an out-of-state energy provider. Just look at New England, where PG&E owns the heaviest-polluting (and most profitable) plant in the region.

"Jesus, the soot," says Jim McIntyre, a retired cop in Somerset, Mass., which is the site of PG&E's monstrous coal-burning Brayton Point plant. "I've got a white-trimmed house I can't keep clean." If it were just a matter of washing the house every now and then, McIntyre confesses in his thick New England accent, he could probably live with it.

Unfortunately for McIntyre and the other residents of the Four Rivers area, swapping soot for morning dew is the least of their problems with the power plant responsible for about 8 percent of New England's electricity: A recent study by the Harvard University School of Public Health attributed 28,900 asthma attacks, 1,140 emergency room visits, and 106 premature deaths a year to Brayton Point, which is credited with producing about 20 percent of the air pollution in Massachusetts. Environmental Protection Agency statistics show that the plant produces more than 14,000 tons of smog-causing nitrous oxide (nearly twice that of any other plant in the state) and more than 46,000 tons of sulfur dioxide (about 25 percent more than any other state plant), which is the major component in soot.

What is most striking about this prolific polluting is that it is legal. When PG&E sold off most of its California plants as deregulation dawned, its generating arm -- a separate company from the regulated California utility under the same parent corporation -- invested $1.59 billion in New England facilities, including the two most infamous of what Massachusetts environmentalists had dubbed the "filthy five." (PG&E's other "filthy" plant is in Salem, Mass., where environmentalists like to mention that two-thirds of the high school girls' soccer team has asthma.) As part of the deal, PG&E also acquired the grandfathered emissions standards the 30-year-old plants were held to, which were far more lax than current standards.

Last spring, local environmental groups thought they were well on their way to cleaning up the plants. Then-Gov. Paul Cellucci proposed holding the state's oldest plants to its newest emissions standards, and it appeared that new restrictions were forthcoming. But then, two days before the governor's staff issued the new rules, the lieutenant governor, Jane Swift, picked up more than $10,000 at an energy industry-sponsored fund-raiser at a country club in Wellesley, a posh suburb of Boston. As the Boston Globe reported on its front page, the emissions rules that emerged shortly afterward contained enormous loopholes for Brayton Point. Swift, who became governor after Cellucci was appointed ambassador to Canada by President Bush, still hasn't acted.

"We were supposed to have final regulations sometime in October, but we never got them," recalls Cindy Luppi of Clean Water Action. "And now you can't go anywhere in the Statehouse without running into one of [PG&E's] lobbyists. In our opinion, that's not a coincidence."

Swift is expected to issue those final regulations sometime in the next few weeks (unless, of course, she gives birth before then to the twins she's been carrying for more than eight months). In the meantime, PG&E -- backed by the clout of organized labor -- has found a useful example in its public case against imposing regulations immediately: California.

Because PG&E's two affected plants handle about 15 percent of New England's electric needs, company spokeswoman Lisa Franklin says, taking them offline could pose system reliability issues. The company wants until 2007 to cut its emissions levels. "They had a little more foresight here [in New England] than they did in California," Franklin says. "But certainly, if you're taking those big plants down, you could have a similar problem."

In a truly remarkable demonstration of spinning, PG&E chief executive Robert Glynn Jr. pointed out the upside to his company's $4.1 billion fourth-quarter loss last week. "While overshadowed by the extraordinary impacts of the California energy crisis, we demonstrated continued solid performance on an operating basis," Glynn said in a written statement. He was pointing, specifically, to the parent company's 13 percent increase in earnings outside of the hit taken by the California utility. And, clearly, the star of that performance was PG&E's unregulated generating arm -- with all those plants in New England and elsewhere. Its National Energy Group, which -- like its parent corporation -- is currently excluded from the bankruptcy proceedings of the regulated California utility, posted a $162 million profit last year, compared with $63 million in 1999.

Brightening the National Energy Group's prospects even further is the current construction of two large Southern California plants. When completed sometime in the next two or three years, these new, unregulated plants will get to participate in the feeding frenzy that has gouged the NEG's regulated cousin. Franklin, the Boston-based spokeswoman, is careful to point out the distinction between the regulated and unregulated companies. It's crucial to understand, she says, that the National Energy Group and the California utility are separate entities.

"So, basically, those new plants will be run just like they were owned by Enron or Reliant or someone like that?"


About The Author

Jeremy Mullman


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