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March 25, 2005

Energy Corporations With Record of Cheating Consumers Form New Lobbying Group to Influence Energy Policy

Four of the Six Corporations Have Paid Nearly $1 Billion to Settle Allegations of Market Manipulation

WASHINGTON, D.C. – A lobbying group formed by six energy companies is lobbying the federal government in an effort to convince lawmakers and regulators that deregulation is good for consumers, despite the fact that these companies have paid nearly $1 billion over the past three years to settle allegations of Enron-style market manipulation for acts they were able to more easily commit because of deregulation. One company is under criminal indictment for its role in intentionally shutting down power plants in California – also an act it was able to commit more easily because of deregulation.

With the energy bill due to be introduced in the U.S. House of Representatives on April 5, this group is likely working behind the scenes to convince Congress that electricity deregulation is a benefit for the public. Instead, recent history proves just the opposite: Deregulation has led to price-gouging of consumers and California’s brush with bankruptcy, while the energy marketers have been raking in higher profits.

“It is disingenuous for this lobby group to push deregulation policies that they claim are good for consumers when history shows that their own companies used these very policies to profit from the biggest consumer rip-off in history,” said Joan Claybrook, president of Public Citizen. “The last people Congress should listen to for advice on energy policy are the companies that have succeeded in gouging ratepayers in some of the biggest corporate scandals we’ve seen in the past century.”

Among other provisions in the energy bill that the group is likely targeting is the repeal of the Public Utility Holding Company Act (PUHCA), a consumer protection law that limits the investment of utility profits in unrelated business ventures and prohibits expansion-minded corporations from siphoning off profits for risky investment schemes that do nothing to improve service reliability or keep electricity rates low. PUHCA is the key reason America has such stable and reliable utility companies.

Corporate opponents of PUHCA claim it stands in the way of a deregulated electricity market, but deregulation has been a demonstrated failure, with prices for this essential commodity rising faster in the 15 deregulated states than in the 35 states that remain regulated. That’s because companies in deregulated markets can – and do – charge much higher prices than companies in regulated states. While proponents of deregulation were once common, they now are largely limited to those corporations profiting from under‑regulated energy markets and the politicians receiving generous financial support from these companies. Consumer groups such as Public Citizen have long said that the economic characteristics unique to electricity – such as inelastic supply and demand – preclude effective competition from occurring, making it easy for a handful of unregulated energy companies to control the market and gouge consumers.

The companies—Calpine, Constellation Energy, Exelon, Mirant, PSEG and Reliant Energy—have hired a bi-partisan group of six lobbyists that includes recently retired powerful government officials who will do the bulk of the organizing for the new coalition:

William Massey, Democrat, commissioner for the Federal Energy Regulatory Commission from 1993-2004 and now a lobbyist with Covington & Burling.
Don Nickles, a former GOP senator from Oklahoma and Senate majority whip, now the founding partner of the lobbying firm the Nickles Group.
Robert S. Walker, former Pennsylvania GOP representative from 1976 to1996 and a founder of the lobbying firm Wexler & Walker.
Jack Howard, former deputy assistant for legislative affairs to President George W. Bush and a former senior aide to House Speakers Dennis Hastert, Newt Gingrich and former Senate Majority Leader Trent Lott. Howard now is president of the Wexler & Walker lobbying firm.
Hazen Marshall, former top aide to Don Nickles, now a lobbyist with the Nickles Group.
Joel Malina, Democrat, a lobbyist with Wexler & Walker.
“This is a classic revolving door scenario in Washington, D.C.,” said Tyson Slocum, research director of Public Citizen’s energy program. “These lobbyists are exploiting the government connections they’ve ‘earned’ while on the public payroll. They are also helped by the nearly $4.6 million in contributions they and their companies’ political action committees have given to federal political candidates over the years.”

As veterans of past deregulation fiascos, these companies already have paid nearly $1 billion to settle allegations of market manipulation. Houston-based Reliant Energy has paid nearly $125 million to federal and state governments for its role in intentionally shutting down power plants in California to drive up prices, which gave them bigger profits. The company also has been criminally indicted by the Bush administration for its price-gouging. Atlanta-based Mirant has agreed to pay $780 million to settle allegations of market manipulation. California-based Calpine also agreed to pay $7.5 million to settle allegations that it manipulated natural gas and power markets. And Baltimore-based Constellation Energy paid the California Attorney General’s office $2.5 million to settle allegations that it manipulated that state’s electricity market.

All of the actions that led to the payments were committed in deregulated markets.

“Public Citizen urges Congress to see through this lobbying group’s thinly veiled disguise,” said Slocum. “These companies have promised consumers lower prices and better service before but then participated in the largest consumer fraud in history. Congress should realize that their claims to represent consumers’ best interests are a sham.”

To view a chart detailing the companies’ campaign contributions to federal candidates since 2001, click here.

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