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California Institute for Federal Policy Research
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California Capitol Hill Bulletin
Volume 8, Bulletin 29 — October 4, 2001
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Unanimous Delegation Urges SCAAP Funding
Matsui and Doolittle Circulating United Airlines Letter
Senate Banking Examines Trade Promotion
Deal Reached to Restore So Cal Edison’s Financial Health; Judge’s Ruling Expected Friday Morning
CBO Releases Report on California Energy Situation
Analysis of Senate Commerce Justice State Funding Bill for FY 2002
Unanimous Delegation Urges SCAAP Funding
All 52 members of the California Congressional Delegation signed a letter to House Appropriators urging them to retain the House-passed funding level for the State Criminal Alien Assistance Program (SCAAP). The letter to Commerce, Justice, State Appropriations Chair, Rep. Frank Wolf, and Ranking Member, Rep. Jose Serrano (NY), asks the House conferees on the spending bill to retain the $565 million approved in the House bill. The Senate Commerce, Justice, State appropriations contains only $265 million in funding.
SCAAP partially reimburses state and local governments for the costs of incarcerating undocumented criminal aliens. In 2000, California and its local governments received about 42 percent of the SCAAP funding: $240,784,042 out of a total of $573,747,216 disbursed by the Department of Justice. The next highest amount, $114.3 million, went to New York state and local governments.
Thirty-six members of the California Congressional Delegation sent a letter this week urging conferees on the VA-HUD appropriations bill to accept the language contained in the House report regarding FEMA actions on a public buildings insurance proposal. Over the last year, FEMA has considered a proposal to condition post-disaster assistance for public buildings on the purchase of disaster insurance. Californians have strongly opposed the measure, arguing that such a requirement would not be feasible for California public buildings, where earthquake insurance is extremely costly and often unavailable.
The letter urges the conferees to accept the House language in the appropriations bill. According to the letter, "Although the Senate VA-HUD report directs FEMA to conduct a cost-benefit analysis, it nonetheless contemplates a rulemaking. The House version, however, seeks to ensure that any insurance rule is conditioned upon a comprehensive study that indicates that insurance, including earthquake coverage, is both available and affordable. We strongly believe that any insurance rule should be predicated upon such a clear finding."
Matsui and Doolittle Circulating United Airlines Letter
Reps. Bob Matsui (Sacramento) and John Doolittle (Rocklin) have begun circulating among their bipartisan California Congressional delegation colleagues a letter calling on United Airlines to reverse their recently-announced decision to eliminate their daily service between Sacramento and Washington Dulles Airports. In addition to phasing out its shuttle services, which will also impact California significantly, United has stated that it plans to eliminate all routes which have only one flight per day, effective November 1, 2001. Instead of applying this across the board action, the letter urges that the airline "analyze this issue on a market-by-market basis."
The Californians’ letter, addressed to United CEO James E. Goodwin, notes compelling reasons for United to retain its Sacramento-Dulles route, including the fact that the flight has averaged 70% full, which is very solid performance by industry standards. The letter adds that, "it is critical to keep the capital of the nation’s most populous state linked to the nation’s capital. We cannot overemphasize how important it is to us both economically and politically to retain our Sacramento-Dulles connection."
For more information or to sign the letter, contact Steve Mastorakos with Rep. Matsui (x5-7163) or the office of Rep. Doolittle (x5-2511).
Senate Banking Examines Trade Promotion
On Tuesday, October 2, the Senate Banking Committee held a hearing on the Trade Promotion Coordinating Committee (TPCC). The TPCC was created to help American companies – especially small and medium-size businesses – to get export information quickly in order to increase U.S. exports.
Secretary of Commerce Donald Evans testified on the TPCC’s accomplishments to date. He also laid out a three-part strategy to use the TPCC as a management tool to reevaluate export promotion programs from the ground up through using comprehensive benchmarking exercise. The strategy will be to assess current consumer satisfaction; evaluate export promotion programs of other nations, and finally, complete a benchmarking study that will analyze and compare U.S. programs with other best practices. Secretary Evans expects to present the final study and recommendations to Congress in March of 2002, with the expectation that it can be fully implemented by 2004.
Other witnesses included: Export-Import https://calinst.org/files/archive/bank president john robson; Small Business Administrator Hector Barreto; Overseas Private Investment Corporation President Peter Watson; and, U.S. Trade and Development Agency Director Thelma Askey. Testimony of all the witnesses can be obtained through the Committee’s website at http://www.senate.gov/~banking .
Deal Reached to Restore So Cal Edison’s Financial Health; Judge’s Ruling Expected Friday Morning
On Tuesday, October 2, Southern California Edison and the State Public Utilities Commission announced a deal to restore financial stability to Southern California Edison, which had been at risk of joining PG&E in bankruptcy. The plan will allow the company to pay off creditors. Federal District Court Judge Ronald Lew is expected to rule Friday morning on the debt-recovery settlement and either approve the settlement agreement or order a hearing on the issue.
The deal with the California PUC settles a lawsuit brought by SCE and allows the utility to cover more than $6 billion in excess wholesale power costs that it was unable to recover from ratepayers. Settlement costs would be covered half by ratepayers, half by shareholders. In a statement, Edison CEO John Bryson said the settlement agreement "is a workable way for Edison to become creditworthy, to remove the state from the power business, and to allow Edison to return to its core mission of delivering reliable electricity service." Governor Gray Davis said that the settlement "has protected the public interest, and will allow the State’s second largest utility to return to financial health."
At the same time, however, the Governor was critical of the PUC’s failure to approve revenue bonds to repay the general fund for costs the State has incurred in keeping California’s electricity system operational. He stated "The Public Utilities Commission’s refusal today to adopt the rate agreement necessary for the bonds to be sold was an irresponsible act. It creates uncertainty about our ability to sell the bonds necessary to repay the General Fund when California can least afford additional fiscal uncertainty. In fact, preliminary financial estimates show that State revenues are $1.1 billion short of budget projections." Following the settlement, Davis rescinded his call for a special session of the State Legislature to respond to the SCE bankruptcy.
CBO Releases Report on California Energy Situation
The Congressional Budget Office (CBO) recently released an analysis of the state’s power crisis, entitled "Causes and Lessons of the California Electricity Crisis." The report, which provides CBO’s take on events leading up to the state’s problems and the dynamics of the market and policy environment surrounding it, is dated September 2001 but was not released publicly until this week. In addition, it attempts to draw conclusions for future policymaking based on the California experience.
CBO calls California’s new state role in electricity purchasing "a blunt solution to the problems of insecure supply and volatile prices–a solution that ultimately may present the state with many of the same problems that restructuring was intended to solve." It notes that, "since the rate hike of March 2001, some industrial customers have begun exercising their option to choose other suppliers. As a result, the state wants to rescind that option for all customers. The situation is similar to the one that prevailed before the crisis, when utilities with stranded costs opposed a rapid switch to a competitive system because it would leave them unable to recover those costs from ratepayers."
On the supply side, the report notes that "[I]n California, consumers have already responded over the years to high electricity prices by, among other things, adding thermal insulation to buildings, purchasing efficient appliances, and switching to natural gas. Those are long-term investments. Indeed, the state ranks among the lowest nationally in per capita use of electricity by households." CBO lamented the fact that California consumers have few opportunities to adjust demand in the short run, adding, " Successful restructuring may necessitate that residential and commercial customers acquire many of the same demand-management capabilities that industrial consumers have."
CBO concludes two lessons for the the supply side of the market. "First, restructuring is more likely to succeed when more of the power in a market is free to respond to price signals. As California attempted to restructure, regulatory constraints limited the flow of power to the state’s wholesale market from municipal utilities in California, from utilities in other states, and from federal power agencies." Secondly, the report concluded that "utilities should be free to manage the risks of adverse price movements in that competitive environment by entering into long-term contracts. One lesson not to take from the California experience relates to the size of the reserve margin: building enough generating capacity to meet the demand for electricity under any scenario may not be cost-effective."
The report is available on the CBO website, at http://www.cbo.gov/ .
Analysis of Senate Commerce Justice State Funding Bill for FY 2002
The California Institute has examined S. 1215, the FY 2002 appropriations bill for the Departments of Commerce, Justice and State as passed by the Senate on September 13. A California Institute report on California aspects of the bill is attached to this Bulletin, and is available on the Institute’s website in text format at http://www.calinst.org/pubs/cjs02s.htm or in Adobe Acrobat format at http://www.calinst.org/pubs/cjs02s.pdf .
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