Another "lesson" from the California energy crisis?

[AuntieEmma[$]]

Call me old-fashioned, but I think that if someone declares bankruptcy, that means that they're broke and need to do some belt-tightening. If a family goes bankrupt, I would expect they might have to cut down on the steaks and substitute some mac & cheese, at least some of the time. I certainly wouldn't expect them to be drinking top-of-the-line champagne and going out to eat every night in the most expensive restaurants in town.

Same thing for a company.

PG&E doesn't seem to agree. They have declared bankruptcy. This has provided lots of fodder for Bush to teach the country "lessons" (drill! drill! drill! or a California-style mess will come to haunt you too!), but it doesn't seem to have put a crimp in PG&E's budget.

So here's today's news: PG&E wants to give their top executives a raise. Not a pay cut, as you might expect from a bankrupt company, but a raise. And how much? Oh ... a modest little 100%.

That's right, 100%. And that's on top of the 50 million dollars in raises they handed out the day before they declared bankruptcy.

Oh, but they have justification. Their poor chairman didn't get any bonuses in the year 2000, just a measly raise of $100,000 and was forced to somehow make ends meet on his salary alone, a skimpy $900,000. The proposed raises would just bring him back up to the 2 million dollar mark, which is what he had made the previous year. And he needs the money ... look how expensive things are in California .... why just your utility bill alone ... oops, never mind.

What's wrong with this picture?

And for anyone who believes that the whole energy problem is due to lack of supply, and the whole solution lies in easing environmental regulations, what do you say to this?

http://www.sfgate.com/cgi-bin/articl...0/MN162885.DTL

[frazzledspice]

Marjorie, it's in these situations that it's good to give executives bigger stock options (I am assuming that PG&E is in Chapter 11 reorganization bankruptcy.)

That way you giving them an incentive to make those shares (probably worth about $1 now....) increase dramatically. On the other hand, if they don't increase, it doesn't cost the company a dime.

And if an executive didn't have enough faith in the company and his own abilities to turn it around, is he really the executive the company wants?

I agree that cash was not the best incentive to give.

[poseidon]

I'm in complete agreement. Paying them cash doesn't give them any incentive to pull the company out of bankruptcy. Giving them stock options encourages them to make smart business decisions because that will benefit them in the long run.

We have the same thing going in our company. They gave all of us stock options last year when our stock sank. It's not gone up since, but the industry as a whole has been hit pretty hard for the last year or so. But, the employees have a vested interest in seeing the company do well and think of innovative ways to turn it around.

[drmomentum[$]]

Don't get me started.

-JP

[AuntieEmma[$]]

The stock has certainly gone down a lot in the past year, but oddly enough it's not worthless. PG&E has this weird and very adventageous (to them) corporate structure. There's two parts to the company. There's the utility, which is what has declared bankruptcy. Then there's a "parent company," which is what issues the stocks and which is not bankrupt. Where it gets weird is that the utility alone is responsible for the debts. So the utility can send money to the parent, where it's protected from creditors, and then the utility can declare itself bankrupt and say that it can't pay its bills.

And all this has directly contributed to the blackouts we had this winter. PG&E -- the utility -- said they were broke and stopped paying the small generating companies, and the generating companies, in turn, stopped producing power, and then you have a hot day, and people turn on their air conditioners, and there's not enough supply, in part because these generators that were stiffed have taken their marbles and gone home (and also because other companies are gaming the system, but that's a whole other topic), and then, boom, the lights go out.

And then Bush looks straight in the camera and says "Environmental regulations are to blame! Pollute! You must pollute if you don't want your lights to go out!"

But anyway, the thing that struck me about these raises is the sheer greed. Don't you think they have a lot of nerve? And what does bankruptcy mean if a bankrupt company can shower itself with cash? If I declared bankruptcy, and got away with paying pennies on the dollars on all my bills, and then booked myelf a nice round-the-world cruise, wouldn't you think I was scamming the system? Isn't there something intrinsically wrong with that?

[poseidon]

And then Bush looks straight in the camera and says "Environmental regulations are to blame! Pollute! You must pollute if you don't want your lights to go out!"

You know, I don't claim to be a news junkie, and I know I've missed a snipet here and there, but I doubt very seriously if this statement is true.

Do you have a link to his speech where he said, "Pollute! You must pollute if you don't want your lights to go out!"?

[erik_kosberg]

I doubt that it’s a direct quote from Bush, but he did say “If there's any environmental regulations that's preventing California from having 100 percent max output, then we need to relax those regulations” which is basically the same thing.

(source)

[poseidon]

Well I'd agree with that statement. California is going to have to make some sort of sacrifice if having power is important enough to them.

[mnehr]

I believe I remember what Erik was saying.. It was in response to Governer Davis' request to look into lifting regulations. (something he should have started looking into a few years ago)

I don't get it.. if they really wanted more conservation and less pollution, why are they asking for price caps? The best way to encourage conservation is to have higher prices. (In Earth In The Balance, Al Gore called for gas prices to be raised to $5.00 per gallon to force public conservation.) Lower or capped prices mean more usage. People won't have any reason to conserve energy. With Governer Davis requesting price caps, it sounds like he is the one who really is wanting to set conservation aside.

Of course, if we are going to have price caps, why stop there, why not just make the energy free? Isn't that fair, after all, energy and gas are important, why should people have to pay for it? This does seem to be the line of thinking that Governer Davis is using, I am just taking it to the next logical step..

[CeeJay62]

Originally posted by erik_kosberg
I doubt that it’s a direct quote from Bush, but he did say “If there's any environmental regulations that's preventing California from having 100 percent max output, then we need to relax those regulations” which is basically the same thing.

(source)

There is a lot more to this story than originally meets the eye. I think it is safe to say there is NOT enough power in California, hence the black outs. If there were enough plants to provide all the power needed, they wouldn't be fast tracking and hustling trying to get more plants online. Poor deregulation and enviromental NIMBY's have both contributed to the problem.

These articles go into some issue's I wasn't aware of. The first one is a pretty dry read, but it does have some good facts in there. The last one is just for fun.
http://www.sfweekly.com/issues/2001-...tml/page1.html

http://www0.mercurycenter.com/local/...secret0531.htm

http://www.sfgate.com/cgi-bin/articl...20/ED58332.DTL

[AuntieEmma[$]]

Thanks, Erik, for the quote. Yeah, I didn't mean that Bush literally said "Please pollute more." (Although sometimes he does surprise me by coming out with something almost that blunt.)

CeeJay, I happened to have read that SF Weekly article a few days ago. Agree it's very dry. I also didn't understand every detail, but it was pretty clear that contract loopholes were one reason the power companies were able to charge as much as do. And that's very different from being a problem due to a genuine shortage of supply.

Re price caps: What Davis is asking for is that the companies charge a "fair and reasonable" price -- that's a phrase straight out of the FERC regulations. Gouging is when they take advantage of a looming crisis and charge something like ten times or a hundred times what they had the day before.

The whole thing reminds me sometimes of Epinions. Yeah, I know, that's sick -- a sign I'm spending WAY too much time online. But it does. At Epinions, you have a system where people get paid per click, but there's a glaring loophole. And people take advantage of that loophole by forming click cartels. It makes good economic sense for them -- by clicking on each other's opinions, they all maximize their gains. You could even say this is what they should be doing, if you believe in a totally free market system.

Of course the click circles are bad for Epinions, and if enough people joined the circles, they could even bring Epinions down entirely. So Epinions tries to limit their activity by various means, including "regulations" in the TOS.

And that is what's going on with the energy, except instead of playing for pennies, the players are playing for billions. Companies are gaming the system. They keep plants offline and they keep production down, and when the system gets to the point where it's about to collapse, the companies can ask for virtually any price, because at that point the distributor must either buy the power at the asking price or start ordering blackouts. The companies, like the click circlers, can -- and do -- say they're doing nothing wrong, that it's a good thing to take advantage of opportunities that exist to make as much money as you can.

Problem is, if this goes on long enough, it will bring the whole economy of the State crashing down. That's where the regulations come in ... or are supposed to come in, if they're being enforced ...

But with Bush on the side of the companies, it's like what would happen if the click circlers were friends with Epinions' venture capitalists ... if Epinions tried to crack down on the clickers, they could appeal to their friends the VCs to pressure Epinions to back off.

[AuntieEmma[$]]

This cracked me up -- and also hit the nail on the head:

Enron is my spiritual teacher by Jon Carroll, a local (and loopy) columnist:

http://www.sfgate.com/cgi-bin/articl...4/DD139381.DTL

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P.S. In today's news, the bonuses for the PG&E execs were approved by the creditors. They did put in one condition, though: that PG&E get the bankruptcy process moving according to a specified deadline. If PG&E doesn't meet the deadline, then the bonus for the Chairman will be slashed. Instead of a $900,000 bonus, if he misses the deadline he will get -- ah, such mean creditors, such harsh penalties -- a bonus of only $600,000 instead. (All on top of the $900,000 base salary he gets in any case).

[Patch3boys]

Hello all- I am new here! Just had to jump in . : ) My husband has been an electrician with PG&E for 16 years. I have heard it all.

Although I personaly don't agree with or understand the raise thing, the word around my husband's company is that the these top executives were being approached by other Utility Companies and offered jobs. For better pay, benefits, etc.... So, to not lose these people, they were given the raise. Appartently all these execs were out the door and this is what made them stay.

First off about going bankrupt. PG&E didn't file complete bankruptsy. Only to stop the creditors from being able to add on finance charges, etc... (Someone below listed what this was called, I can't remember the name off hand.) But whatever, it isn't COMPLETE bankruptsy.

Second.... I wouldn't always believe everything you read in the papers, half the time it is a FAR cry from the truth. As someone who holds or I should say "held" stock in PG&E (hubby's company) it is NOW worthless. My family alone lost over $20,000.

Third, PG&E does NOT make energy, they ONLY deliver it. THey have to buy it from the Power generators. Because of the deregulation, these power generators were able to sale energy to PG&E and other large utilities for over 200X's more that what they were ALLOWED to charge YOU for it. Thus... the reason they went bankrupt.

In the contract for the deregulation, PG&E was told they could not charge it's customers more than a certain amount, yet the gererators were open to sale it for whatever they want. So during this last year when PG&E was selling you power for only the certain amount per unit that they were allowed to, they had to buy it for 200% more. (I just asked my husband for exact numbers and during the last year, PG&E was only allowed to charge you 6.5 cents per kilowatt hour, they had to buy it for 80 cents per kilowatt- and just recently the market price of this energy has gone up to $1.50 per kilowatt and yet YOU are still only charged a small fraction of that.) Why does everyone keep blaming PG&E? Never understood that. It is like shooting the Pizza delivery boy for a cold and stale pizza. I guess people do this because one, they are misinformed and two, PG&E is where their bill comes from.

Fourth- Power gouging with gererators is the real problem. As a matter of fact, two of PG&E employees who worked under Duke last year, are now talking with the courts about how they were continually called up and told to ramp up and down the power to make more money. I can't really go into this, because hubby is working undercover with these people right now... but, it will come out.

And one last thing... the recent 40% rate increase that has been approved goes DIRECTLY and ENTIRELY to the state of California NOT PG&E.

Okay... I'm done. This was probaly not a good topic to start on when I just joined this group this morning. This is a difficult one for me that really hits home. My husband and his coworkers have been run off the road in their company vehicles, had rocks thrown at them, been physically assalted and even refused lunch in a local restraunt one day. And I just find that repulsive. My hubby risks his life EVERY day working on high voltage towers to bring electricity to the people of California and he has been nothing but shitted on during this. Now, not only do I have to worry about him making it home safely each night because of dangers on the job, but now I have to worry if someone is going to try to hurt him, all because they are misinformed and don't really understand the issues going on. It just saddens me.


Anyway... Hello all. Glad to have found Epinion Addicts, looks like a great board.
~Christine (Patch3boys)