Without Shame

The tentacles of Bush and Cronies grow longer and more complex every day, as the article following demonstrates. There isn’t a newspaper you can read on any day that doesn’t carry some article or other exposing the corruption, illegality, and graft of the representatives of the richest 1%. This is just another example of the rich getting richer at the expense of the poor. There isn’t a newspaper you can read that doesn’t carry yet another example of recently exposed greed at the expense of the poor and disadvantaged being given new life by Congress. It seems that our "leaders" think that public exposure of corruption and criminal activity is just another process in the all-consuming drive to enact legislation that destroys the foundation of our country. The majority saying, “NO!” just doesn’t mean anything, and since these Mayberry Machiavellis have managed to sneak through changes in long-standing historical precedent in American law, they’re getting away with whatever private agenda they care to push forward.

We are just a few steps away from the long train rides of Nazi Germany in which vast sections of the populace who didn’t meet the expectations of the Nazi Party were taken to secret concentration camps in countries other than Germany and exterminated. What’s in store for the former citizens of New Orleans? The poorest and least educated members of Black America? The poorest and least educated members of White America? Our disabled? Our dissenters?

Prediction brings trepidation at this most dire of forecasts, yet what alternative do we have? Should we think these criminals masquerading as Neoconservatives and Democrats will automatically change their focus and find humanity? Don’t kid yourself: there isn’t time for it.
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November 23, 2005

Market Place

The Deal That Even Awed Them in Houston

By SIMON ROMERO
HOUSTON, Nov. 21 - Texas Genco might lack the flash and fame of Enron, but its low-profile owners have managed to accomplish something rare in this swaggering city: a deal so ambitious in its scale that it has caused jaws to drop in Houston's energy circles while angering and perplexing people who are feeling the sting of surging electricity prices.

The buzz in Houston these days is over the $4.9 billion in profit that four elite private equity firms - the Texas Pacific Group, the Blackstone Group, Kohlberg Kravis Roberts and Hellman & Friedman - stand to make from selling an electricity company for $5.8 billion.

Lured by deregulation of the electricity industry in Texas, the investors acquired the electricity company Texas Genco, which owns several power plants in the Houston area, just last year with $900 million in cash. Now, they are selling it to NRG Energy of Princeton, N.J., for a gain of $5 billion, a flip that will be one of the most lucrative private equity investments in recent memory.
"This part of the deregulation process has transferred billions from ratepayers to investors," said Clarence L. Johnson, director of regulatory analysis at the Office of Public Utility Counsel, a state agency in Texas created to represent the interests of homeowners and small businesses on utility issues. "It seems extraordinary, doesn't it?"

The investors profited largely by exploiting an obscure part of electricity deregulation here that pegs electricity prices to the price of natural gas. Because Texas Genco fuels some of its plants with relatively cheap coal and nuclear power, its operations become much more lucrative in times of high natural gas prices, like now. The profit from the deal is about half the $9.9 billion that Exxon Mobil, the nation's largest energy company, with 86,000 employees, made in the most recent quarter. Such an outcome from deregulation, which made it perfectly legal for a handful of investors to reap fortunes from their control of Texas Genco, a little-known electricity company with 1,200 employees, has stunned some people in Houston, which has some of the most expensive electricity prices in the country.

"The entire situation is terrible, but this one chapter is obscene," said Jayne Junkin, an organizer with Houston Acorn, a community group that has criticized the impact of rising electricity prices on low-income families.

Ms. Junkin's group recently held a protest at the downtown headquarters of Reliant Energy, Houston's largest electric utility, after the company announced it was raising prices by about 25 percent. Reliant buys its electricity from a statewide power grid supplied by Texas Genco and other generating companies.

Electricity prices in Houston, the largest city in Texas, have climbed about 86 percent since the deregulation of the state's electricity industry in 2002. In unusually cool or hot months, when air-conditioning or electric heating are heavily in use, that means monthly energy bills for a three-bedroom home in Houston can easily run $300 to $450.

Electricity cooperatives that are not part of the state's deregulated market have increased their rates only 18 percent over the same period, even though most of them also rely on expensive natural gas, according to the southwest regional office of Consumers Union in Austin, Tex.

"Electricity is a basic necessity," Ms. Junkin of Houston Acorn said. "This kind of profiteering off the misfortune of others should be illegal."

Advocates of deregulated electricity markets see things differently. Energy analysts say it is possible that the Texas Genco takeover might encourage similar deals in Texas and other deregulated electricity markets around the country.

Craig Shere, an analyst at Calyon Securities, attributed this excitement to the "dark spread," or the widening difference between coal and natural gas prices over the last year. Natural gas prices have doubled since September 2004, when the investors led by the Texas Pacific Group of Fort Worth bought Texas Genco from CenterPoint Energy.

A spokesman for NRG, the company that is buying Texas Genco from the private investors, left little doubt in a telephone interview as to why higher natural gas prices made Texas Genco an attractive asset. "This puts NRG in an even stronger position to thrive on this volatile natural gas environment," said Jay Mandel, director of media relations at NRG.

David Crane, the chief executive of NRG, also said the acquisition would enhance NRG's geographic reach.

Representatives of the four private equity firms involved in the deal declined to comment. Thad Miller, the executive vice president at Texas Genco, which has remained generally silent about the takeover, countered the deal's critics by claiming that deregulation in Texas had encouraged companies to build more power plants to meet growing demand for electricity.

Mr. Miller, a former commodities trader at Goldman Sachs who was brought into Texas Genco by Texas Pacific, also said that the size of the deal did not necessarily mean people in Texas would pay more for electricity. And the fact that four investors stand to make a fortune from Texas Genco, Mr. Miller said in a telephone interview, should not cause consumers in Texas to doubt the benefits of deregulation.

"If a baker sells his shop, that doesn't mean the price of bread will go up," Mr. Miller said.
The Texas Genco deal has its origins in the fall of Enron. It was Enron that aggressively pushed in the late 1990's, more than any other company, for Texas to deregulate its electricity industry. At the time, legislators and regulators accepted pegging electricity prices to the price of natural gas, since almost three-quarters of the state's electricity is produced from natural gas.

Yet when Enron collapsed three years ago, so did the fortunes of energy companies that had adopted similar strategies. Facing potential ruin and pressure from shareholders, these companies were forced to sell some assets for a song, which is why the investors were able to buy Texas Genco with ease a year ago. The fourfold surge in natural gas prices since deregulation in 2002 made the deal all the more attractive.

"The structure that made this possible is without shame," said Carol Biedrzycki, executive director of the Texas Ratepayers' Organization to Save Energy, a group that lobbies for less expensive electricity. "We're creating a new class of poor people who are energy-poor, while devastating prices allow powerful people to become even more powerful."

· Copyright 2005 The New York Times Company