March, 2001

Dear Friend of Radio Liberty,

. . .California's botched electricity-deregulation scheme has combined with general power shortages to drive average wholesale prices 10 times as high as a year ago." [1]

In an unprecedented move, federal energy regulators ordered 13 power suppliers to make $69 million in refunds for power sold in California during January at prices the regulators said weren't "just and reasonable." [2]

California's electricity-grid operator says power suppliers may have charged $6.2 billion more for power, from May through February, than they would have been able to collect if the state's deregulated market were truly competitive. [3]

Who is responsible for the shortage of electricity in California? Before our state deregulated electricity there was always plenty of power, and even after the new system was introduced, it worked well until last year. We began to run short of electricity last fall, and the situation became worse in November and December. California ordinarily sells power to the Northwest during the winter and buys power from that region during the summer. There has never been a shortage of electricity in the winter before. Who is responsible for California's energy problem? [4]

On rare occasions a motion picture imparts an important message to society. The film that helps us understand what is happening today is The Sting. It was chosen as best picture of the year in 1973, and it received 5 Academy Awards. Everyone who watched the film was captivated by its haunting theme song, its convoluted plot, and the superb acting of Paul Newman, Robert Redford, and Robert Shaw. It was a story about two confidence men who set out to scam a gangster, played by Robert Shaw. Paul Newman portrayed an old con man who had run scams for years; Robert Redford was a young street hustler who wanted to learn The Big Con. They knew the gangster would kill them if he realized he had been robbed, so they implemented their plan in three stages. First they got the gangster angry by cheating him in a poker game. Then they got a "hook" into him. They convinced the gangster he could cheat Paul Newman out of a great deal of money, and there was no way he could lose. Finally they staged The Big Con. It was an elaborate delusion designed to keep the gangster from realizing he had been cheated. The lesson to be learned from the movie is that most people can be deceived by promising them a reward, and assuring them they can't lose. In the end, the victim always loses, the con artist always wins. That approach has been used in California. A group of clever men have swindled the public out of almost $18 billion, and most people don't realize they've been cheated. [5] The Big Con is only part of the story. Behind the men who perpetrated the energy scam is another force. You can't grasp what is happening without an understanding of that entity, and the powerful men who pursue its agenda. [6]

California is spending $45 million a day for electricity, and most of the money will never be recovered. Governor Davis initially refused to allow the public utilities to raise their rates because he feared people would hold him responsible, but recently he secretly agreed to a rate increase while publicly pretending to oppose it. Is he responsible for the energy crisis? He's taken large financial contributions from both the public utility companies and the energy producers in the past, and refused to do what needs to be done. [7] Instead of abandoning deregulation and ending the energy crisis, he purchased aging power lines from the public utility companies and paid them two to three times what they were worth. [8] He ordered Water Board officials to buy electricity on the open market and sell it to the utilities at a fraction of its cost. The Water Board has been paying up to $300 a mwh (megawatt hour) for electricity that should have cost $20 to $30 a mwh. On at least one occasion, officials tried to pay the Bonneville Power Administration more than they asked for their power. [9]

Governor Davis's representatives on the Public Utilities Commission wouldn't allow the utilities to buy future contracts at $30-$35 a mwh, but Governor Davis signed ten-year future contracts for $78 a mwh, almost three times what the price should have been. He is spending tens of millions of dollars to convince the public they should conserve energy; he is taking money from state agencies that was appropriated for other purposes; he is depleting California's budget surplus, and he is raising $10 billion from bonds to finance his folly. Wall Street brokers are watching what is happening because they're concerned about the solvency of our state. [10]

Is Governor Davis responsible for the energy crisis? When a reporter raised that question recently, Governor Davis's press secretary reminded him that the legislation that deregulated electricity was signed by a Republican governor, and every Republican in the state legislature voted for it. [11]

If the truth be known, every Democrat and every Republican voted for the legislation. Why? Senator Ray Haynes' administrative assistant, Bobbi Soltz, chronicled the events that led up to the energy crisis. He explained:

AB1890 was the Deregulation bill. It went through all the policy committees and cleared both houses as a two page bill. Then on August 28, 1996, it was gutted and amended to 70 pages. It passed both floors house and went to the Governor on August 31. [12]

Who amended AB1890 and created the energy crisis? Many people believe the environmentalists are responsible because they've been trying to destroy the public utilities for over four decades. They blocked the utility company's effort to build nuclear power plants and prevented them from building conventional power plants. They want the government to regulate our air and water, and they support ridiculous laws that limit people's ability to use their own property. They support the EPA's closure of coal-fired power plants that exceed their air pollution levels, and the EPA's policy that forced energy producers to convert their coal-burning power plants to natural gas. That led to a shortage of natural gas and skyrocketing energy prices. Since the environmentalists support Governor Davis, and he does their bidding, are they responsible for what is happening? [13]

Although there is a great deal of evidence to suggest that is the case, other qualified observers believe the energy producers are responsible for the crisis.

On August 2, 2000, Michael Kahn, Chairman, Electricity Oversight Board, sent a report to Governor Davis in which he noted that some energy producers may be withholding power from the grid and manipulating the price of electricity. He wrote:

Since June, wholesale prices for electrical power in California have increased on average 270% over the same period in 1999, resulting in over $1 billion in excess payments for electricity. During the week of June 14, purchasers of California power spent $1.2 billion on electricity, 300% more than they paid during the same period in 1999 and 1/8th of their cost of power for all of 1999. . . . we believe enough evidence of questionable behavior exists that the Attorney General should conduct an investigation into these statewide market practices. . . . We have been precluded from obtaining the data necessary to know if the ISO and PX failed to detect manipulation and gaming on several fronts. (Italics added) [14]

On January 8, 2001, in his State of the State Address, Governor Davis stated:

. . .there's evidence that some generators may be purposely withholding electricity from the California grid to create artificial scarcity which in turn drives up the price astronomically.

. . .if they're illegally gaming or manipulating the market, the Attorney General will track them down. (Italics added) [15]

In February Gregory Palast wrote an article for The Washington Post in which he noted that the same companies that "gamed" the power auctions in Great Britain are "gaming" the power auctions in California.

Then something called a "power pool" is established. Every day, generators bid the price at which they will supply electricity to the pool at a certain hour of the next day. . . . In Britain, it didn't take long . . . to learn how to "game" the pool, essentially turning the daily auction into a fixed casino. . . . And this is the system . . . foisted on California. Notably three of the four biggest power generators controlling the California market - AES, Southern, and Dynergy - and the biggest U.S. power trader, Enron, are also big players in Britain. [16]

On March 15, 2001, Senator John Burton stated that:

He suspected electricity wholesalers shut down plants to create an artificial shortage and boost prices. [17]

On November 16, 2000, The Wall Street Journal reported that 30% of California's power plants were closed for maintenance.

On December 7, 2000, the Associated Press reported that 25% of California's power plants were closed for maintenance.

On March 16, 2001, the Associated Press reported that California was "down 10,000 megawatts because of power plant maintenance." 25% of California's power plants were closed that day.

On March 20, 2001, The Wall Street Journal reported that plants that produce 12,000 mwh of electricity were closed for maintenance. That's almost 30% of California's major power plants. [18]

Governor Davis asked the State Attorney General to investigate the power industry and determine if it is withholding power and "gaming" the energy market. So far nothing has come of the investigation.

Who is responsible for the energy crisis? The answer to that question is elusive because the con men who created the problem have fashioned an elaborate delusion to cover their misdeeds, and part of the over-all picture is missing. In February Insight magazine published an article that provides us with the missing piece of the picture. It was a story about a meeting that was held over a quarter century ago. William R. Gould was the CEO of Southern California Edison Company at the time. He wanted to provide electricity to everyone, and his programs led to the power grid that spans our nation today. Mr. Gould wanted to find out if there were other sources of electricity, so he asked his engineers and scientists to:

. . .carefully examine every emerging technology for producing, transmitting and distributing power, including those of nontraditional methods. [19]

After evaluating their reports, he set out to develop new sources of electricity, and:

In 1982 Southern California Edison was awarded the John and Alice Tyler Ecology-Energy Prize for its commitment to developing alternative energy sources. One might think it was a match made in heaven: Gould and the environmental movement.

The environmentalists launched their initial attack against nuclear energy, and coal and oil-fired power plants in the late 1960s. Mr. Gould hoped he could work with them and understand their concerns, so he contacted the leaders of the Sierra Club and arranged a meeting. Insight magazine reports:

That meeting has become somewhat legendary in conservative circles for what it revealed about the San Francisco-based Sierra Club. . . .

. . . a Sierra Club leader told Gould the group was "not interested in accommodation." They were not even interested in what is perceived to be conventional conservationist concerns, the welfare of wildlife and so on. It was at this point that the Sierra Club leader perhaps went further than he intended, going beyond disdainful rejection to reveal an agenda far beyond the club's public image as a purveyor of pretty books and calendars. As one source put it: "They said that what they were interested in was creating a society restructured along the lines recommended by the Club of Rome."

The article continued:

So when the Sierra Club says it is following in the footsteps of the Club of Rome, it is talking about a no-growth, one-world, collectivist agenda. As many observers have pointed out, the environmental movement is the new refuge of Marxists and socialists who have found them- selves homeless with the fall of the Soviet Union and communism. [20]

That statement is confusing unless you're familiar with the Club of Rome and its objectives. Most Club members have no love for communism or its failed policies, but they have financed communist groups and environmental organizations so they could direct their programs and use them to advance their own agenda. One of the most carefully kept secrets today is that the apparent power of the environmental movement, the communists, the socialists, the radical left, and the homosexuals has never been their own. Rather it has been the power of the tax-exempt foundations, large corporations, the media, and the men of great wealth who control them. [21] What is the Club of Rome's agenda? Maurice Strong is their best-known spokesman. During an interview with Daniel Wood in May 1990, he presented the idea that:

The only way to save the planet from destruction is to see to it that the industrialized civilizations collapse. [22]

If you read the Club of Rome report, Limits of Growth, you will find they intend to create artificial shortages. Other publications such as The Unfinished Agenda and the 1992 Rio Report To The Club of Rome confirm that objective. They believe shortages are better than abundance, and low living standards are better than high living standards. I suggest you reread my January letter, evaluate the information cited there, and then read the summary of the Global Biodiversity Assessment contained in my Sustainable Development Syllabus. When you grasp the significance of the concepts discussed there you will understand why there is an energy shortage in California, and why the price of natural gas is rising across the nation. The "Elite" groups that rule the world want to create artificial shortages, force people to limit their consumption, and undermine our way of life. [23]

As I noted in a previous letter, the Diablo Canyon nuclear power plant should have been built in two years at a cost of a little over $350 million dollars. Instead it took 17 years to bring the plant on-line at a cost of $5.8 billion dollars, 18 times what it should have been. [24] By 1996 California's public utility companies welcomed energy deregulation because it allowed them to recapture their stranded asset costs, sell power plants the public had paid for, and keep the profits for themselves. Deregulation seemed too good to be true, and that was the "hook" that brought the utility companies into the scam. Initially they made between $17 and $20 billion dollars, paid off their debts, and transferred billions of dollars to their parent companies. Everything went well until The Big Con began to unfold. [25]

The public was guaranteed a 10% rate reduction, and told deregulation would probably force electricity prices even lower. That was the "hook" that got them into the scam. They weren't told they would have to pay the utility company's stranded costs, or that their utility bills would increase to cover those costs. In the end, utility bills remained about the same until The Big Con began. [26]

Businesses were offered low rates if they agreed to reduce their energy consumption if there was a shortage of electricity, but they were assured that almost never happened. That was the "hook" that got them into the scam. Initially they saved hundreds of thousands of dollars, but when The Big Con came, many businesses were forced to shut down and incur disastrous losses. [27]

Senator Steve Peace shepherded AB1890 through the state legislature, and brought energy deregulation to California. He was responsible for amending the legislation, and changing the content of the Bill. According to The Los Angeles Times, the Public Utilities gave him $170,000 for his 1998 re-election campaign, and in 2000 he received $21,000 from PG&E and its parent company, $37,000 from Southern California Edison and its parent company, and $36,000 from San Diego Gas and Electric Company and its parent company. [28] Steve Peace betrayed the people of California; he is one of the finest politicians money can buy. He is also independently wealthy. He owns 29% of Four Square Productions, a video production company that is best known for its cult films Attack of the Killer Tomatoes, Killer Tomatoes Strike Back, and Killer Tomatoes Eat France. Less well-known is the fact that Sempra Corporation, the parent company of San Diego Gas and Electric Company, paid Senator Peace's production company to produce a film for them. I suspect it was a very expensive undertaking. [29] Tragically, Steve Peace's story isn't unusual. The public utilities spent almost $4 million financing politicians in 1998, and in 2000, PG&E and its affiliates spent $1.34 million on political campaigns, Southern California Edison and its parent company spent $979,830 on political campaigns, and San Diego Gas and Electric Company and its parent company spent $499,967 on political campaigns. Thus, there are only a handful of politicians in Sacramento who are willing to criticize the public utility companies for the part they played in creating the energy crisis. [30]

Who is responsible for The Big Con? It was an elaborate delusion. The energy producers embezzled almost $18 billion by creating artificial shortages and "gaming" the auctions, but the public utilities share part of the blame for what has happened. Most people don't realize that some of their executives are environmentalists. John Bryson, the CEO of Southern California Electric Company, was a founding member of the Natural Resources Defense Council, and Governor Jerry Brown appointed him chairman of the California State Water Board in 1976. Three years later Jerry Brown named him president of the commission. In addition, Pacific Gas and Electric is collaborating with the Sierra Club and the Environmental Defense Fund to acquire 5.4 million acres of land for a nature reserve. On February 9, 2001, The Wall Street Journal reported:

Hewlett Packard, PG&E, Lockheed Martin and BP Amoco think the best use of their time and money is to team up with the Sierra Club and Environmental Defense Fund to form something called the California Environmental Dialogue, aimed at locking up 5.4 million acres of private land to make it "safe" from development. [31]

Since PG&E claims it can't afford to buy power, where is it getting the money to buy 5.4 million acres of land?

The EPA, the Environmental Movement, the Federal Energy Resource Commission, the Independent System Operators, the Power Exchange, the PUC, the Water Board, the public utility companies, the power companies, and many state officials are part of the delusion. Behind them are the men of great wealth from the Club of Rome, the Bilderbergers, the Trilateral Commission, the CFR, the Bohemian Club, and the other covert groups that rule the world. It's time to expose their scam.

What should be done? The public utilities should buy back their power plants; we should insist on responsible utility management and keep electricity regulated until we have an Attorney General who is willing to prosecute crooked executives, a legislature that is willing to stand up to the corporate elite, and citizens who care about their freedom. We can't have free markets without free people. It's time to take America back, and the energy crisis can help us awaken the public. Let's look at the crisis as an opportunity rather than as a problem.

My book, Brotherhood of Darkness, is in its second printing. If you don't have a copy, it can be purchased for $12.95, or as part of a special which includes the book, a video and an audiotape for $29.95.

We have a new 4-tape set on Pearl Harbor. We also have a new syllabus, four-tape set, and a video on the energy crisis. These items can be ordered by calling 800-544-8927.

Last month I attributed the phrase ". . .your lying eyes" to Groucho Marx. My thanks to Howard Phillips for letting me know that it was Joey Bishop who made that remark in the movie, A Guide For The Married Man.

Radio Liberty had some unexpected expenses this month. If you can send additional support, it will be appreciated.

Remember, the battle we are fighting is the Lord's. We are called to do our best, and trust in Him.

Thank you for your help and your continued support.

Yours in Christ,

Stanley Monteith, M.D.




REFERENCES

1. Robert Gavin, "Some Utilities Rake in Revenue Amid Crisis," The Wall Street Journal, Feb. 23, 2001, p. A-2
2. Rebecca Smith, "FERC Orders Power Suppliers to Pay Refunds for Electricity in California," The Wall Street Journal, Mar. 12, 2001, p. A-3.
3. Rebecca Smith, "Market Permitted Power Overcharges, Grid Operator Says," The Wall Street Journal, Mar. 23, 2001, p. A-2
4. Radio Liberty Interview, E. Robert Sibley, March 12, 2001, 8:00-9:00 p.m.
5. Governor Davis, State of the State Speech, January 8, 2001. See Also: Jennifer Coleman, "Legislators Worried $10 Billion May Not Buy Enough Power, AP, Santa Cruz Sentinel, Mar. 17, 2001, p. A-4.
6. Michael Sanera and James S. Shaw, Facts Not Fear, Regnery Publishing, Inc. Washington, D.C., 1996, p. 28.
7. Steve Lawrence, "Cash Strapped Utilities Gave Millions to Politicians," Santa Cruz Sentinel, Feb. 2, 2001, p. A-6.
8. Leslie Gornstein, "Davis Strikes Power Deal: PG&E Still Negotiating," Santa Cruz Sentinel, Feb. 24, 2001, p. A-1: See Also: Jennifer Coleman, "Governor Proposes Power-lines Purchase," Santa Cruz Sentinel, Feb.17, 2001. p. A-1.
9. "Major Kinks Emerge in Gov. Davis's Plan To Power California," The Wall Street Journal, Mar. 8, 2001, pp. A-1& A-4.
10. Don Thompson, "State Signs 10-year Contracts with Power Companies," Santa Cruz Sentinel, Mar. 6, 2001, p. A-4: See Also: Mar. 11, 2001, "Taxes," Santa Cruz Sentinel, p. A-4.
11. Bobbi Soltz, Brief Synopsis of The Energy Crisis, March 7, 2001. Available by calling 800-544-8927.
12. Ibid.
13. Michael Coffman, Saviors Of The Earth?, Northfield Publishing, Chicago, 1944: See Also: John Elvin, "Electricity Crisis Shocks California," Insight, Feb. 26, 2001, pp. 14-17.
14. Michael Kahn, California's Electricity Options and Challenges- Report to Gray Davis, Aug. 2000, pp. i to iv.
15. State of the State Speech, op cit,, pp. 2 and 3.
16. Gregory Palast, "Utilities Need Regulation," The Washington Post Weekly Edition, Feb. 5-11, 2001, p. 22.
17. Jennifer Coleman, "Probe Launched Into Possible Electricity Price-gouging," Santa Cruz Sentinel, Mar. 15, 2001, p. A-7.
18. Rebecca Smith, "Natural-Gas Cuts Hurt California Power Plants," The Wall Street Journal, Nov. 16, 2000, p. A-4: See Also: John Howard, "Off-line Power Plants Under Scrutiny Amid Unusual Alert," Santa Cruz Sentinel, Dec. 7. 2000, p. A-5: See Also: "State Forbids Mass Lay-offs at PG&E," Santa Cruz Sentinel, Mar. 16, 2001, p. A-7: See Also: John Emshwiller, "Rolling Blackouts Hit Almost All Parts of California," The Wall Street Journal, Mar. 20, 2001, p. A-2.
19. Insight , op cit., p. 15.
20. Ibid., pp. 15-17.
21. Carroll Quigley, Tragedy and Hope: A History Of The World In Our Time, Macmillan Co, 1966, pp. 950-956.
22. Larry Abraham, The Greening, Soundview Publications, Atlanta, Georgia, 1993, p. 100.
23. Limits of Growth, published by the Club of Rome, 1972: See Also: Gerald O. Barney, The Unfinished Agenda, Thomas Y. Crowell Company, 1977: Sustainable Development Syllabus, available from Radio Liberty, 800-544- 8927: See Also: V.H. Heywood et al, Global Biodiversity Assessment, Cambridge University Press, 1995, p. 773.
24. Rebecca Smith, "California Law Shows How Not To Structure Utility Deregulation," The Wall Street Journal, Dec. 27, 2000, p. A-1.
25. Ibid., See Also: Gregory Palast, op cit., See Also: Gail Collins, "Power Politics," The New York Times, Feb. 2, 2001, A-21.
26. Bobbi Soltz, op cit.
27. Ibid.
28. Tony Perry, "Prospects Dark For Deregulation Architect," Los Angeles Times, Jan. 3, 2001: See Also: Steve Lawrence, "Cash-strapped Utilities Gave Millions to Politicians," op cit.,
29. Tony Perry, op cit.
30. "Cash-strapped Utilities Give Millions," op cit.
31. Michael Janofsky, "Trying Times for a California Utility Executive," The New York Times, Dec. 30, 2000, p. A-8: See Also: "How Green Was Their Valley," The Wall Street Journal, Feb. 9, 2001, Editorial Page.


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