Cash, Relationships Help Explain Bush Administration’s Hands-Off Policy in California Electricity Crisis

February 15, 2001

Cash, Relationships Help Explain Bush Administration’s Hands-Off Policy in California Electricity Crisis

Top Power Suppliers Gave Millions to Republicans; Two Key Power Companies Headed by Men With Close Ties to Bush

WASHINGTON, D.C. Nine power companies and a trade association that stand to gain the most from President Bush’s hands-off policy in California contributed more than $4 million to Republican candidates and party committees during the last election, and some of the company heads have close personal ties to Bush, according to a new Public Citizen report.

Three of the companies Enron, Reliant Energy and Dynegy are based in Texas and gave more than $1.5 million to Bush s campaign, his inauguration committee, and the Republican National Committee, which served, in effect, as an arm of the Bush presidential campaign. Two companies Enron and Reliant Energy are headed or steered by Kenneth Lay and James Baker III, both close Bush advisors.

According to the report, the contributions and personal relationships could explain why the Bush administration has refused requests by bipartisan groups of eight western governors and 20 members of the California congressional delegation to intervene in the California and regional power crisis, and cap wholesale electricity prices. The companies and the association more than doubled their contributions in 1999-2000 compared to the last presidential cycles, as they pushed for deregulation in Congress and across the nation.

“It seems clear that the Bush administration is trying to return the favors done by friends and donors,” Public Citizen President Joan Claybrook said. “Bush is helping out his buddies at the expense of every consumer in California, and his refusal to cap wholesale prices is threatening to wreak havoc on the entire western region of the United States.”

The Bush administration has the authority to intervene in the crisis through the Federal Energy Regulatory Commission (FERC), which can impose “just and reasonable” wholesale prices, according to federal law. However, Bush has declined to call on FERC to act in the face of price-gouging by and skyrocketing profits of wholesale power companies. Recently, FERC imposed such price caps in the Northeastern United States.

Public Citizen’s analysis shows that the trade association, the top nine power suppliers involved in California s market and their executives gave nearly $4.1 million to Republican candidates and party committees, including more than $1.5 million to Bush and the Republican National Committee. In addition, they gave $500,000 to the Bush-Cheney inaugural committee during the 1999-2000 election cycle.

“This once again shows why we so desperately need genuine, loophole-free campaign finance reform that removes the ability of big corporations to push their agendas onto the rest of the country,” said Wenonah Hauter, director of Public Citizen’s Critical Mass Energy and Environment Program. “Clearly, the money in this case is having a huge impact on the way the administration handles energy issues.”

The top three contributing companies were Enron, Southern Company and Reliant Energy. The remaining seven entities are the Edison Electric Institute (an industry association), Williams Companies, Duke Energy, Arizona Public Service, Dynegy, AES Corp. and Calpine.

Enron’s CEO is Kenneth Lay, a long-time Bush family friend and an architect of Bush s policies on electricity deregulation, taxes and tort reform while Bush was Texas governor. Baker, who serves on Reliant Energy s board of directors, is also a long-time Bush family adviser who oversaw Bush s legal efforts in the Florida election controversy. Baker Botts, the Houston law firm founded by Baker s great-grandfather and where Baker is a partner, was one of the largest contributors to the Bush campaign, contributing $113,621 in 1999-2000.

Further, two Reliant Energy top brass are members of the Bush “Pioneers,” an elite group of people who pledged to raise at least $100,000 each to help launch Bush’s presidential campaign. Bush Pioneer Don D. Jordan was CEO and chairman of Reliant Energy until June 1999 and December 1999 respectively. Pioneer Steve Letbetter, Reliant Energy s current CEO, is a long-time top corporate officer of the company. The company and its employees gave $47,000 to Bush’s gubernatorial campaigns in 1994 and 1998, and gave Bush and the RNC $289,000 for last year’s election.

Many have blamed California s energy crisis on a faulty deregulation plan in which the government could cap the rates utilities charged consumers but was not permitted to control the prices wholesalers charged the utilities. As a result, the utilities have been threatening to file for bankruptcy because they cannot charge customers enough to cover what they owe wholesalers.

Meanwhile, the price of wholesale electricity in California was 276 percent higher last year than in 1999, and the top 10 sellers and marketers posted profits that were 54 percent higher in 2000 than in 1999, according to the companies published financial reports.

Three of the Houston companies Enron, Reliant Energy and Dynegy reaped huge profits last year. According to company financial reports filed with the federal Securities and Exchange Commission, Enron posted a 42 percent increase in profits last year, while Reliant s profits rose 55 percent and Dynegy realized a whopping 210 percent profit. Profits for the other six companies ranged from 3 percent (Southern Company) to 240 percent (Calpine).

###