On Jan. 19, the U.S. House of Representatives passed an energy bill that removed tax breaks for Big Oil.
It also mandated the renegotiation of the 1998-1999 Gulf of Mexico oil and gas leases, some of which had mysteriously omitted a clause requiring leaseholders to pay royalties when oil prices exceeded $36 a barrel. Oil topped $36 in 2003.
The bill, if passed, would generate an additional $13-15 billion over five years, which could be used to develop renewable energy sources. Bush opposes the bill, preferring voluntary agreements over renegotiating, and has threatened to veto it, saying that corporate tax breaks for industry should not exclude Big Oil. American consumers, hit at both the pump and in their homes, disagree. A similar bill, H.R. 453, introduced a year ago, died on the floor for lack of cooperation.
The current economic stimulus package may suffer the same fate. The latest news from the Hill, however, indicates that Bush Republicans will try to railroad the Senate into passing an amended House bill simply because something must be done quickly to keep the economy from tanking. To do otherwise would brand reluctant Democratic senators as unfeeling. Hill-savvy observers note that proposed Republican amendments (to repeal the estate tax and lower corporate taxes) will effectively transform the stimulus package into a "Making the Bush Program Permanent" package.
In California, regulators have decided to let utilities earn about $89 million in customer-funded incentives for not achieving the savings goals set for them four months ago by the California Public Utilities Commission. The revised ruling, based largely on requests from utilities like Pacific Gas & Electric Co., Southern California Edison, and San Diego Gas & Electric Co., would reward utilities with about $89 million for achieving as little as 65% of the power savings goals laid out for them previously. Under the previous plan, this sort of non-achievement would have cost them $142 million. Coming from "green" California, this "reward-for-failure" approach to energy efficiency legislation is astonishing, and has utility customers seeing red.
Meanwhile, oil and gas giants like Exxon Mobil (XOM – $85.95) and Shell (RDS-B – $69.55) report record profits, and utilities like Xcel Energy Inc. (XEL – $21.19) record increased earnings of 37 percent – profits likely to soar again as the most recent cold front passes over the frigid Midwest. Xcel's subsidiary, Southwestern Public Service Company, is asking the New Mexico Public Regulation Commission to approve a 6-percent rate hike, and Xcel's Wisconsin company, Northern States Power Co., recently filed with the Public Service Commission of Wisconsin for a gas and electric rate increase of 14 percent. Xcel Energy Minnesota got a 7-percent increase in 2006.
PPL Corporation (PPL – $49.41), which delivers electricity to the Mid-Atlantic and Northeastern U.S, also posted record profits of 51 percent, only partly attributable to capital gains on the sale of its Latin American subsidiaries. In 2010, PPL rates will skyrocket 35 percent for residential customers and as much as 42 percent for some businesses.
Constellation Energy Group (CEG – $95.26), which owns Baltimore Gas & Electric (BG&E), also announced a 37-percent profit over 2006. Even in the face of these record profits, Constellation plans to sue the state of Maryland to prevent future collection of over $400 million in customer credits mandated by the Maryland General Assembly when BG&E put through its extended rate increase in 2006 (15 percent through 2006, up to 50 percent by June 2007).
Atlanta-based Southern Co. (SO – $37.30) also reported record 2007 earnings of $1.73 billion, 10.2 percent higher than 2006, due to a very hot summer in the Deep South. With global warming proceeding apace, Southern Co. can look to equally record-setting profits in the future.
American consumers, faced with a recession and the continued devaluation of the dollar – not to mention the likelihood of having to choose between food, gas and heat – find themselves slipping ever deeper into energy's "Black Hole", while energy companies continue to expand other universes of opportunity by exploiting overseas resources and their populations. Let's hope that the senate won't be rushed into signing an economic stimulus plan that gives needed tax breaks to working Americans with one hand and takes them away with the other. That isn't stimulus, it's chicanery.
Disclosure: I don't own stock in any of the above-mentioned companies.
Photo:fernando, Creative Commons, Flickr