May 26, 1999
Utility Holding Companies Threshing Ratepayers
Public Citizen Report Sheds Light on Utility Holding
WASHINGTON — Several utility holding companies are expanding their transnational empires and raking in profits while consumers pay higher rates for electricity, according to a study released today by Public Citizen.
Making matters worse, most of the electricity deregulation bills introduced in Congress would force ratepayers to bail out the bad investments, or so-called stranded costs, of electric utilities. Yet few bills would do anything about eliminating the abuses inflicted on ratepayers, shareholders, competitors and workers at the hands of utility holding companies. So far, H.R. 4798, a bill introduced last October by Rep. Dennis Kucinich (D-Ohio), is the only bill that addresses the problems created by utility holding companies. Kucinich is expected to reintroduce his bill within the next few months.
The report, Money Harvest: Utility Holding Companies Are Threshing Ratepayers, describes what utility holding companies are, how they work, and why they pose problems for ratepayers, shareholders, competitors and workers.
Money Harvest shows that utility holding companies are expanding their global empires through a massive wave of mergers and acquisitions, which increase electricity rates for consumers, eliminate potential competitors, result in the loss of thousands of jobs, and usually make shareholders worse off, while utility managers and Wall Street bankers become enriched by bonuses and commissions.
The report includes recommendations on ways to improve state and federal electricity laws to reduce or eliminate the evils caused by utility holding companies.
“Utility holding companies are notorious for ripping off ratepayers, hence the nickname ?combines.? Just like farmers that use combines to harvest grain, utility holding companies are ?corporate combines? that harvest money from ratepayers,” said Wenonah Hauter, director of Public Citizen?s Critical Mass Energy Project.
Money Harvest also includes a case study that shows how Texas-based utility holding companies have been using ratepayer money to acquire additional companies located throughout the world. Meanwhile, electricity rates for customers in Texas have gone up, while thousands of utility workers have lost their jobs.
“When Texas Utilities Company agreed to pay $10.4 billion for Britain?s Energy Group PLC, it was one of the largest foreign acquisitions ever,” said Tom Smith, state director of Public Citizen?s Texas office. “These are the same guys coming hat-in-hand to members of Congress and the Texas legislature saying they need a ratepayer-funded bailout to remain competitive.”
Ratepayers would pay lower electricity bills if their electric utilities were not owned by holding companies, the report said. It recommends that lawmakers should prohibit holding companies from owning electric utilities. The report also recommends that lawmakers should not force ratepayers to bail out the stranded costs of electric utilities.
“Ratepayer robbery was a common sport among the utility holding companies of the ?Roaring Twenties,? This report shows that the utility holding companies are back to their old tricks,” said Charlie Higley, policy analyst for Critical Mass Energy Project.
The report can be ordered by calling Public Citizen?s Publication Department at (202) 588-7780.