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.”
The same day that Markey apologized to Sokol, Barton and 19 other Republicans sent a letter to Markey and Henry Waxman (D-CA), the chairman of the Energy Committee, stating that such intimidation was unacceptable. “If a pattern of intimidation and bullying is being created by the majority party it is a sad thing,” the letter said. “As members of the minority party we will do everything possible to stop this emerging pattern.” They demanded that Waxman “take whatever actions necessary to make sure that witnesses are not subjected to sanction, retribution and vengeance simply because the facts and opinions they offer do not square with those of the Committee’s members.”
The Republican letter also cited an incident in which staff for Senator Max Baucus (D-MT) warned Democratic lobbyists not to let their clients meet with Republicans about health care legislation.
A spokesman for Minority Leader John Boehner (R-OH) said, “This is another indication that Democrats on Capitol Hill are creating a culture of intimidation to pass bills that are unpopular with the American people.”
Markey claims that there was no effort being made to intimidate witnesses hostile to his cap-and-trade bill and publicly apologized at a June 12 subcommittee hearing. “I would never seek to intimidate or retaliate against a person from having to come in and having to testify before this subcommittee.”
However, Republicans were not satisfied with Markey’s “mea culpa.” GOP lawmakers are mulling over the option of charging Markey with violating House ethics rules for “intimidating a witness.” Republicans said they would try to avoid calling for an ethics investigation if Democrats were able to satisfy the concerns they laid out in their letter to Markey and Waxman. Republicans are requesting a meeting with Waxman to air their grievances. If Waxman agrees to the meeting and Republicans still aren’t satisfied, then they may file an ethics complaint.
The heavy-handed tactics used by Markey and other advocates for the cap-and-trade bill showed just how desperate they were in the closing stretch of the House debate. The Waxman-Markey bill would drastically increase what Americans pay for electricity, gas and other energy-intensive products and services. The more that fact is revealed, the more unpopular the legislation will be. And it is not just Republicans. At least 50 House Democrats representing districts with substantial agricultural, rural and manufacturing refused to commit to supporting the legislation down to the final week before the vote. In the end, 44 Democrats voted against the Waxman-Markey national energy tax.
While the House vote represents a victory, it was so narrow that Obama and the Democratic congressional leadership do not have time to rejoice. There is every indication that the Senate battle over cap-and-trade, expected to take place in the fall, will be even more brutal.
Given public distrust and congressional discomfort over the political implications of Waxman-Markey’s tax increases, the only way its backers can seem to build support is through bribery or intimidation.