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katty Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jun-30-05 03:45 PM
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When China Owns Our Utilities
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When China Owns Our Utilities
By Lynn N. Hargis
t r u t h o u t | Perspective

Thursday 30 June 2005

It is a great irony that on the day President Bush called for a thorough review of China's proposed acquisition of a California-based oil company, Unocal, the United States Senate voted 85-12 to send an energy bill to conference that would allow China to own local US public utilities, without a murmur from the administration, lawmakers or the media. Perhaps this is an example of the government and the press being unable to address something that is not literally exploding under their noses at the moment. Indeed, a reputable reporter and Enron veteran assured me that China wouldn't be interested in acquiring US utilities, because they couldn't ship the electricity to China! I gently suggested that the Chinese might want to buy utilities for the same reason that America's most famous investor, Warren Buffett, wants to buy utilities (or the reason he gives, anyway): to obtain steady, reasonable and reliable utility revenues (from captive utility customers).

Buffett denies that he, like so many others in the past, wants to simply use utilities as "cash cows" to fund other, more profitable business ventures. This was what led to the collapse of the utility holding companies during the Great Depression, and resulted in the passage of the Public Utility Holding Company Act of 1935 (PUHCA), the law that the Senate has just voted to repeal. Owning utilities just for profit was enough for the Power Trusts of the roaring 1920s and '30s, who invested the utility revenues in numerous non-utility schemes before they crashed, resulting in 53 utility holding company bankruptcies and 23 bank loan defaults pre-PUHCA. Owning merchant (PUHCA-exempt) power plants has also offered enough temptation for a number of modern utilities, including Enron, Mirant, NRG, NEG, and others, to invest in non-utility businesses that similarly crashed and burned, with the merchants declaring bankruptcy. Whatever side benefits might accrue to China from owning utilities (including nuclear power plants) within a country that could potentially become hostile towards them would just be gravy.

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