Cronyism at Any Speed

California utilities, in search of taxpayer windfall, lobby for high speed rail
EdStock/iStock

EdStock/iStock

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California’s high-speed rail initiative has its fair share of detractors, but the state’s two largest utility companies—Pacific Gas & Electric Co. (PG&E) and Southern California Edison—are not among them.

Both companies stand to make millions, if not billions, providing electricity to the new high-speed rail lines if the controversial project is approved.

“Of course they support it,” Kenneth Button, a transportation policy expert at George Mason University, tells the Washington Free Beacon. “They’re going to make a lot of money.”

A 2008 report commissioned by the California High-Speed Rail Authority (CHSRA) described why utility companies should support the high-speed rail project: “The [high-speed rail system’s] relatively stable and large demand for energy…should make it an excellent customer for the utilities or retail sellers of renewable energy.”

According to a 2011 analysis prepared for the California High-Speed Rail Management Team, total electricity usage for the proposed rail system would be—“conservatively” speaking—about 8.32 million kilowatt-hours (KWh) per day. That works out to a little over 3 billion KWh per year.

According to the California Public Utilities Commission (CPUC), customers of PG&E, Southern Edison California, and San Diego Gas & Electric, the state’s third largest utility, paid an average rate of about 15.2 cents per KWh.

At those rates, the total utility bill for the project would amount to about $1.26 million per day, or more than $460 million per year.

That figure would increase as more renewable energy sources are used to power the system. The Fresno Bee reported last year that the CHSRA expected to purchase renewable energy, at a substantial premium, for about 17.5 cents per kilowatt-hour. At that rate, the annual cost would rise to about $550 million.

PG&E and Southern California Edison, through its parent company Edison International, have heavily invested in renewable energy in recent years as they strive to meet statutory requirements under California’s Renewable Portfolio Standard, which mandate that 20 percent of the utilities’ electricity come from renewable sources by 2010—and 33 percent by 2020.

High-speed rail projects often create windfalls for utility companies, Button said, which is why they are one of several interest groups that have consistently lobbied for high-speed rail throughout the country and in other parts of the world.

PG&E, for instance, spent $20,000 in support of California Proposition 1A in 2008, the passage of which authorized the sale of $10 billion in bonds for the construction of high-speed rail.

Both companies have also given considerable amounts of money to the political proponents of high-speed rail. California governor Jerry Brown (D), who actively campaigned on the issue in 2010, received $31,580 from PG&E and $25,000 from Southern California Edison that year.

Despite a number of setbacks, including a January 2012 report from the California High-Speed Rail Peer Review Group that warned the project, as currently conceived, could be “an immense financial risk” to the state, Brown has not budged in his support for high-speed rail.

“Critics of the high-speed rail project abound as they often do when something of this magnitude is proposed,” Brown said during his State of the State address in January 2012. “The Panama Canal was for years thought to be impractical and Benjamin Disraeli himself said of the Suez Canal: ‘totally impossible to be carried out.’ The critics were wrong then and they’re wrong now.”

Both companies are supporters of Senate Majority Leader Harry Reid (D., Nev.), who has described himself as “a big, big fan of high speed rail.” Their PACs have given Reid a combined $10,000 since 2010.

Peter Darbee, PG&E’s former chairman and CEO, hosted at least one fundraiser for Reid in 2010, and personally contributed $2,000 to his reelection campaign that year. Days before that fundraiser, in August 2010, Reid hosted Darbee at a clean energy summit in Nevada. The event was co-hosted by the Center for American Progress, a controversial left-wing think tank and proponent of high-speed rail.

PG&E and Southern California Edison have both given generously to Rep. Jim Costa (D., Calif.), a former state legislator who co-authored a bill in 1996 that led to the establishment of the California High-Speed Rail Authority.

Costa is co-chairman of the California High-Speed Rail Caucus, which recently urged the Government Accountability Office to review the state’s high-speed rail project and consult witnesses “whose views were left out of previous reviews.”  The group recommended witnesses such as the author of Proposition 1A, and other proponents of the project.

No politician has received more money from the two companies than Sen. Dianne Feinstein (D., Calif.). PG&E and Edison are Feinstein’s first- and second-biggest donors, respectively, over the course of her three terms in office. PG&E has given Feinstein more than $154,000 since 1992. Edison has given her $125,000 during that same period.

Feinstein is a long-time supporter of high-speed rail and has written to Transportation Sec. Ray LaHood seeking billions of dollars in additional federal funding for the California project.

Earlier this year, Feinstein wrote a letter to Brown urging him to address concerns over the state’s high-speed rail project or risk losing billions of dollars in federal funding.

“I encourage you to act swiftly to address the high speed rail project’s problems, which I fear will put more than $3.5 billion in Federal funding at risk if not addressed,” Feinstein wrote on Jan. 9, 2012. “I am concerned that our state’s future would be greatly hindered if this project either failed to get off the ground, or failed to be completed.”

In September 2011, after the Senate Appropriations subcommittee on Transportation drafted a bill that cut all funding for high-speed rail, Feinstein offered a last-minute amendment to restore that funding to $100 million.

The California High-Speed Rail Authority spent $160,000 last year lobbying for such funding. Most of that went to Kadesh & Associates, a lobbying firm founded by Mark Kadesh, Feinstein’s former chief of staff.

Kadesh also represents Edison International, and has collected $180,000 a year from the utility company—more than half a million dollars in total—since 2008.

PG&E, meanwhile, has a number of connections to the movement supporting high-speed rail. Brown recently appointed Dan Richard, former senior vice president of public policy and governmental relations at PG&E, to chair the CHSRA.

As the Free Beacon noted on Wednesday, two former PG&E employees currently hold senior positions in the Brown administration. Dana Williamson, former public affairs director for PG&E, was recently hired as Brown’s top lobbyist in Washington, D.C. The state of California has spent more than $1 million lobbying since 2009 on a host of issues, including high-speed rail.

Nancy McFadden, who also worked in public affairs for PG&E, is Brown’s executive secretary for legislation, appointments and policy. She previously served as general counsel to the U.S. Department of Transportation and was deputy chief of staff to former vice president and high-speed rail enthusiast Al Gore.

McFadden is also a former member of the Apollo Alliance, an influential conglomerate of labor groups and green energy proponents that boasts connections to Van Jones, the former White House green jobs czar, and John Podesta, former president of the Center for American Progress and co-chairman of the Obama-Biden transition team.

In 2010, the Apollo Alliance drafted the “Apollo Transportation Manufacturing Action Plan,” which called for “$10 billion per year for inter-city and high-speed rail.”

The “Apollo Economic Recovery Act,” a collection of policy recommendations authored by the group in December 2008, shared a number of similarities with the Obama administration’s stimulus package, signed into law several months later.

The 2009 stimulus allocated $8 billion for high-speed rail, including a $2.55 billion grant to the California High-Speed Rail Authority, the largest single recipient of stimulus funds in the state of California. Since then, and at the request of Feinstein, the federal government has approved an additional $1.64 billion for the state, for a total of $4.2 billion.

The Apollo Alliance is currently chaired by Phil Angelides, a former California state lawmaker and unsuccessful Democratic nominee for governor. In the early 2000s, Angelides laid groundwork for California high-speed rail as state treasurer, and proposed a $6 billion bond-issue in 2002 for the project with Costa.