Congressman resorts to witness intimidation to silence critics of cap-and-trade bill.
Congressional advocates of the Waxman-Markey cap-and-trade bill that narrowly passed the House by a vote of 219-212 on June 26 employed bribery to build support for this legislation when they co-opted several corporations by giving them free carbon dioxide emission credits. However, many businesses still balked at lending support to a bill that will impose a crushing energy tax on the American people and cost the economy trillions of dollars. Since bribery didn’t work with these recalcitrant companies, Waxman-Markey supporters tried intimidation.
On June 9, the House Subcommittee on Energy and Environment of the Energy and Commerce Committee held a hearing to hear testimony on the Waxman-Markey bill, called the American Clean Energy and Security Act, which would increase the cost of emitting carbon dioxide through an onerous cap on emissions. One of the witnesses was David Sokol, CEO of MidAmerican Energy Holdings Company. Sokol criticized the Waxman-Markey bill because it would result in higher electricity rates for his customers. At the same time the hearing was taking place, Rep. Edward Markey (D-MA), the subcommittee chairman and bill co-sponsor, sent a letter to the Federal Energy Regulatory Commission (FERC) asking the agency to investigate the business dealings of MidAmerican. Sokol and committee Republicans charged Markey with trying to intimidate him. Markey apologized for the letter and said intimidation was not his intention.
MidAmerican is a $41 billion Iowa-based holding company of seven subsidiaries that own many coal-fired power plants and a growing fleet of wind generation. Warren Buffett is a major investor. Sokol actually endorses a cap on greenhouse gas emissions to combat the unproven global warming threat. However, he opposes the Waxman-Markey bill’s trading mechanism because it would impose “a huge and unacceptable double cost on customers.” He said consumers first will have to pay for emission allowances, “which will not reduce greenhouse gas emissions by one ounce.” Then, consumers will have to pay for new low- or zero-carbon power plants.
Under Waxman-Markey, the electricity sector will get 35 percent of the free emission allowances. Sokol says that even with those allowances, MidAmerican would still have to raise rates on customers by 12 to 28 percent for a cumulative cost of $800 million. And that is just the first year that the cap goes into effect. The caps will get increasingly stricter over time and the free emission allowances will be phased out. Sokol says the cost of compliance could possibly increase market prices by two to four times.
Prior to the hearing, Sokol also stated that a cap-and-trade system will add at least $120 per month to the average family’s electric bill.
Obviously, this is not the kind of information Markey wants to hear. Halfway through the question-and-answer period of the hearing, Markey’s office sent a letter to FERC Chairman Jon Wellinghoff asking FERC to investigate the business activities of MidAmerican. Specifically, the letter requested Wellinghoff to determine if MidAmerican followed up on promises to invest $15 billion in electric transmission expansion following the repeal of the Public Utility Holding Company Act (PUHCA) in 2005.
Sokol was one of the proponents of the repeal, arguing that regulations were preventing utilities from making needed investments in the power transmission infrastructure. In his letter, Markey, who opposed the repeal of PUHCA, included six general questions about how effective the repeal had been in boosting transmission investment and whether FERC was protecting consumers. In two of those questions, Markey singled out MidAmerican’s investments in California and what FERC has done to protect consumers against the company’s losses from non-utility investments, including MidAmerican’s real estate brokerage subsidiary that was seriously impacted by the financial crisis:
The repeal of PUHCA has also freed large multi-state public utility companies to diversify into other potentially risky business, to the potential detriment of utility investors and consumers. For example, MidAmerican Holdings has acquired the second largest real estate brokerage company in the country. What protections have been put in place to prevent utility shareholders, such as those of MidAmerican Holdings’ regulated utilities, to prevent them from rate increases, higher costs for borrowing, or other risks that might be associated with unsuccessful or failed diversifications?
Sokol was not aware of the letter until a reporter asked him about it after his testimony. He calls the letter a flagrant case of witness intimidation. “Anytime a congressman sends a letter to a regulator of your company it is obviously concerning. It is hard to believe it was done for any reason other than to intimidate,” said Sokol. He added that the letter did not intimidate him and will not change his negative views of the stiff energy taxes in the Waxman-Markey bill.
Republicans were furious when they learned that the letter was sent the same day that Sokol was testifying as a Republican witness before the subcommittee. Rep. Steve Buyer (R-IN) said, “There’s systematic intimidation going on, and bullying of individuals by a party that preaches tolerance and it must stop.”
According to GOP sources, Republicans on the Energy Committee, including ranking member Rep. Joe Barton (R-TX), confronted Markey about the letter. The results of that meeting could not be learned.
But the day after the hearing, June 10, Markey sent a second letter to Wellinghoff to “clarify questions contained in my June 9, 2009 letter.” Markey wrote, “[M]y intent was for the Commission to analyze the activities of all investor-owned utilities with respect to their investments in transmission lines since PUHCA was (sic) revealed, and their investments in enterprises outside their core business.” Markey said the two questions about MidAmerican were meant to be answered as it relates to the industry’s transmission investments “as a whole.”
Neither Republicans nor Sokol were mollified. Rep. John Shadegg (R-AZ) said, “I am deeply troubled by the message this sends, whether it was accidental or intentional. If I had gotten that letter, I would have gotten the message that it was sent to intimidate me.” Rep. Barton said, “How can that not be perceived as an attempt to intimidate.”
Markey called Sokol on Friday, June 12, to say he was unaware that the letter was being sent on the same day as the hearing. Sokol said Markey told him that once it was brought to his attention he “immediately recognized how inappropriate it was” and sent the clarification letter.
Sokol said that it was still disturbing because then it was a case of a committee staff member trying to intimidate a witness. Sokol said he asked for the name of the responsible staff member and if there would be consequences. Markey did not respond. Sokol says if no one is being held accountable then Markey’s “apology rings hollow.”