Power Broker

The big private energy lobby warms up to a senator

In January of last year, Sen. Frank Murkowski (R-Alaska) escaped the Capitol's frigid winter to address an energy conference in Arizona sponsored by the Edison Electric Institute (EEI), which picked up his $5,000 tab. That might have been small as far as junkets go, but it marked the start of something big for EEI.

As chairman of the Energy and Natural Resources Committee, Murkowski is the Senate's point man on utility deregulation, which will let consumers choose between energy providers the way they now choose between telephone companies. As public (government-subsidized) and private utilities prepare to compete head-to-head, private companies—led by EEI, whose 180 members provide 75 percent of the nation's electricity—are trying hard to keep hold of their lion's share of the market.

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In the last year, Murkowski has been a huge help, and it doesn't look like that's good news for consumers. Mother Jones obtained a private energy lobbyist's confidential strategy memo—which warmly refers to Murkowski as "our friend"—that includes an analysis showing how private utility rates are almost always higher than those charged by public utilities.

Murkowski's relationship with private energy seems to have been cemented in Arizona, where energy executives hosted a Murkowski fundraiser at the Phoenix home of Richard Snell. Snell heads EEI member Pinnacle West, which owns Arizona Public Service (APS), a private utility (despite its name) and the largest electric utility in Arizona.

The affair brought in $17,250 for Murkowski's 1998 re-election campaign, $11,000 of which came from contributors linked to Pinnacle West or APS (including $1,500 from Snell and his wife). It was a huge increase over the previous two years, when APS gave Murkowski a total of $1,500. The fundraiser was co-sponsored by the public Salt River Project, whose representatives gave only $1,000.

A week later, APS's political action committee added another $3,500. And through the first six months of 1997, Murkowski received a total of $43,000 from private utility companies—the most from any single industry and 25 percent of his total receipts.

In March, less than two months after the fundraiser, Murkowski invited Snell to testify before his committee. There, Snell attacked public utilities for being able to issue tax-exempt bonds, claiming that such bonds "seriously compromise free and open competition." He then proposed that public utilities be barred from marketing such bonds unless they agree to only sell electricity to customers within their current boundaries. That would seriously weaken their ability to compete with their far more powerful private cousins as deregulation gets under way.

Snell also expressed concern that the Internal Revenue Service was reviewing the bond issue, saying that "it is Congress that should be making policy at this level."

Within a month, Murkowski sent a sharply worded letter to Treasury Secretary Robert Rubin complaining about the IRS review. Echoing Snell, Murkowski wrote: "That is a matter for the Congress to decide, not the IRS." He sent Rubin three more letters on the topic during the next seven months. (At press time, the IRS still had issued no regulations on the matter, though it had been expected to do so by the end of 1997.)

Then, on September 9, Murkowski issued an internal memo to the energy committee stating that after "extensive review" he had decided that the tax-exempt bonds were "competitively unfair."

Shortly after, Robert Aiken, a Pinnacle West lobbyist, sent a confidential memo to 12 private energy lobbyists lauding the senator for his efforts on the industry's behalf. "Our friend Senator Frank Murkowski has put the issue of public power tax-exempt debt on the front burner," Aiken wrote in the memo, obtained by Mother Jones. Aiken added that Murkowski "seems to be willing to take this issue on" for the industry, and he urged the lobbyists—eight of whom represent companies that had already made donations to Murkowski—to "do all we can to support him." An industry source confirms that the memo was circulated in late October.

The memo suggests Pinnacle West helped Murkowski draft legislation on the bond issue. Aiken reported that Pinnacle had sought "to support Senator Murkowski's effort on this issue" by conducting research into public utilities' debt loads.

The memo also reveals that, on average, the private energy industry charges far more than public utilities. Aiken attached a study to the memo showing that in Arizona, APS's average retail rates are 21 percent higher than those charged by the Salt River Project; Florida Power & Light charges 12 percent more than the Jacksonville Electric Authority; and the Southern Company, which serves parts of Georgia, Alabama, Florida, and Mississippi, charges 55 percent more than its public rivals.

On October 22, E. Linn Draper, chairman of American Electric Power, an EEI member, testified in the House, urging, as Snell had, that tax-exempt bonds be dropped.

Finally, on November 8, Murkowski introduced in the finance committee Senate bill 1483, which would bar public utilities from selling tax-exempt bonds, and would also force them to buy back all of their outstanding bonds (a total of $70 billion) before they could compete against private companies. The bill is expected to be taken up by the committee early this session.

Snell denies a link between Pinnacle West's contributions and Murkowski's bill. Murkowski declined to be interviewed for this story, but his spokesman, Chuck Kleeschulte, disputes that any relationship with the private utilities influenced the senator's actions. "There were good public policy reasons for the legislation," he says.

Not everyone agrees. "Public power is cheaper than private power and the difference in price between the two does not solely result from public power's use of tax-exempt bonds," says Eugene Coyle, a San Francisco-based natural resources economist and utilities specialist. "Public power needs to be protected, especially in this time of deregulation, as a yardstick against the newly deregulated power companies."

The bill is just one of many boons for private energy pushed by Murkowski—though only 10 percent of his constituents are served by private power. Murkowski also co-sponsored a bill that would allow private electric companies to purchase utilities not adjacent to their current areas of service, a step the public utilities say would open the door for monopolization.

He also has been one of the nuclear industry's most avid supporters in Congress. Eighteen of the 21 private utilities that made contributions to Murkowski last year have substantial investments in nuclear power. A large part of Murkowski's September memo to his committee members was devoted to ways Congress can "retain the nuclear power option," by imposing a "non-bypassable 'wires' charge"—meaning a taxpayer surcharge on electric bills that would bail out private energy companies, which owe billions of dollars in debts because of their failed investments in nuclear energy (see "Look Who's Buying Nukes Now," January/February).

A week after Murkowski introduced his bill, Aiken began circulating a memo inviting selected congressional staffers to a February 19-21 retreat and seminar at the Wigwam, a resort near Phoenix managed by Pinnacle West's real estate arm.

Rooms at the Wigwam range from $320 to $465 per night, and the resort offers tennis courts, golf courses, swimming pools, a health club, horseback riding, and hot-air balloon rides. "Sunshine, gentle breezes and sparkling water," reads the brochure. "All the simple pleasures that make for magic times. Venture into the desert atop a trusty steed. Find time for dozing in the sun. Here, the escape is yours for the making."

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