Texas Pacific and Henry Kravis’ outfit, KKR, must have had hired the best press agents in the business to break the big news about their buyout of TXU, the giant Texas electric public utility. Not only was it hailed as the biggest deal in business history, but it was made to seem that it was a major step forward in preventing environmental disaster.
The event was presented as a benchmark accomplishment for all of us, not just for mega-capitalists, something above the mere making of money, something more like an act of disinterested statecraft. The $45 billion deal was made to seem like a rescue operation in which Mr. Kravis and his associates were taking over TXU to prevent the public utility from building 11 coal-fired generating plants, which would dump hundreds of thousands of tons of CO2 into the atmosphere.
The deal had been done, viewers of the PBS News Hour were led to believe, thanks to the major money interests finding common ground with two responsible, mainstream environmental organizations, the Natural Resources Defense Council and Environmental Defense. Sensible billionaires and rational environmentalists had teamed up to invent a way to help stop global warming, even as capital earned its just return. Thank God, the polar bears were going to be saved.
There was to be one of those 10-point plans in which the newly purchased TXU would spend $400 million on an energy-conservation program, and there was also a promise to roll back TXU’s carbon-dioxide emissions to their 1990 levels within the next 13 years. At the same time that the press releases were making their way around the world C. John Wilder, the present and future head of TXU, was being a lot less green in his statements. Those 11 carbon-dioxide-belching, coal-fired, climate-heating plants would not be built, he said, “unless our customers face reliability issues, shortages leading to higher prices, or our competitors propose plants that are expected to have a meaningful impact on market dynamics.”
As for the $400 million fund for energy conservation, TXU, under its new ownership, will be about $35 billion in debt. Since it has already promised its customers a rate cut, it will hardly be in a position to make good on this or many other of its promises.
It’s not exactly clear to whom these promises were made, although from what has been made public, it is obvious that they are not binding on the new management. You might call them a list of pious intentions. They are nothing that you can go into court with if you are, for example, a North Dakota farmer suffering from climate-warming-induced drought, and get an order forcing TXU to live up to its promises.
Another question of more than passing importance is: Who are these green organizations with whom Mr. Kravis and his fellow capitalists have made this agreement? The agreement is of significant value, we assume, because it carries with it the implication that environmentalist organizations will not try to stop TXU from doing whatever TXU may decide to do in the next few years, because TXU has been officially stamped “green” and therefore gets a pass.
They need that pass, too. The Kravis organization was rebuffed by the state of Arizona when it tried to buy Unisource Energy. Texas Pacific, Kravis’ partner in the TXU deal, was likewise rebuffed in Oregon when its push to gain control of Portland General hit a wall of opposition. In the changing climate of opinion about environmental questions, green front groups may be indispensable for getting deals though in which the generating, fueling or consuming of energy is an important element.
Doubtless there is much to come out about how KKR and Texas Pacific got its green endorsement, but we know a little. We know that a telephone call was made by one William K. Reilly, an employee of Texas Pacific and a former administrator for the Environmental Protection Agency under President George H. W. Bush.
We know the call went to one Fred Krupp, the top man at Environmental Defense, an organization with a $65 million budget. Mr. Krupp’s group takes no money directly from the corporations with which it works—but indirectly is another matter. The men and women who run the corporations are encouraged to make donations. Sam Walton of the Wal-Mart Waltons sits on the board, which should give an idea about what level of society Mr. Krupp likes to hang with.
The Natural Resources Defense Council (annual budget: $55 million) also put its stamp of approval on this deal. The NRDC maintains its place in the limelight with people such as Robert Redford and Leonardo DiCaprio on its board. As information about the TXU deal oozes into public view, it’s becoming obvious that a number of these well-known environmental organizations are full of rich people at the top.
For people who follow environmental politics closely, none of this can be news—but for those of us who do not, it comes as a bit of an eye-opener to learn that Texas Pacific’s co-founder, David Bonderman, is a World Wildlife Fund board member, and that Henry Paulson—ex-boss of Goldman Sachs, now the Secretary of the Treasury—was chairman of the Nature Conservancy. Goldman Sachs is one of the line-up of Wall Street honey bears getting ready to dip their paws into the TXU deal.
A clubby little green world these people would appear to have going for themselves, which must make it easier to come to terms on questions like TXU. It is a way of doing business, Mr. Krupp has been quoted as saying, which “recognizes the realities of the world and deals with them. It harnesses market forces and incentives so companies are rewarded in the court of public opinion or in the emissions-trading system.” Others might say this is corporate schmooze talk about activities which amount to a fancy form of old-fashioned self-dealing.
For a generation, big business interests scoffed at, laughed at and sabotaged the scientists who were trying to warn us that those slowly rising little red lines in our thermometers presaged doomsday for humanity—and now they are going to be making policy on global warming? Now they are going to be allowed to decide life-and-death environmental questions?
Permission to buy, sell or alter TXU must soon be reserved for a national governmental body acting on an overall timetable and plan best calculated to give our young people a shot at a sustainable life.
One more item: As if the TXU business were not thick enough with noxious particulates, the Securities and Exchange Commission is charging that persons unknown used inside information of the TXU deal to make a killing. Nothing big—only four or five million, or enough for a smallish Upper East Side co-op.