Power Outage Traced to Dim Bulb in White
House
The Tale of The Brits Who
Swiped 800 Jobs From New York,
Carted Off
$90 Million, Then Tonight, Turned Off Our Lights
Greg Palast
ZNet
Friday 15 August 2003
I can tell you all about the ne're-do-wells
that put out our lights tonight. I came up against these characters --
the Niagara Mohawk Power Company -- some years back. You see, before I
was a journalist, I worked for a living, as an investigator of corporate
racketeers. In the 1980s, "NiMo" built a nuclear plant, Nine Mile Point,
a brutally costly piece of hot junk for which NiMo and its partner
companies charged billions to New York State's electricity ratepayers.
To pull off this grand theft by kilowatt,
the NiMo-led consortium fabricated cost and schedule reports, then
performed a Harry Potter job on the account books. In 1988, I showed a
jury a memo from an executive from one partner, Long Island Lighting,
giving a lesson to a NiMo honcho on how to lie to government regulators.
The jury ordered LILCO to pay $4.3 billion and, ultimately, put them out
of business.
And that's why, if you're in the Northeast,
you're reading this by candlelight tonight. Here's what happened. After
LILCO was hammered by the law, after government regulators slammed
Niagara Mohawk and dozens of other book-cooking, document-doctoring
utility companies all over America with fines and penalties totaling in
the tens of billions of dollars, the industry leaders got together to
swear never to break the regulations again. Their plan was not to follow
the rules, but to ELIMINATE the rules. They called it "deregulation."
It was like a committee of bank robbers
figuring out how to make safecracking legal.
But they dare not launch the scheme in the
USA. Rather, in 1990, one devious little bunch of operators out of
Texas, Houston Natural Gas, operating under the alias "Enron," talked an
over-the-edge free-market fanatic, Britain's Prime Minister Margaret
Thatcher, into licensing the first completely deregulated power plant in
the hemisphere.
And so began an economic disease called
"regulatory reform" that spread faster than SARS. Notably, Enron
rewarded Thatcher's Energy Minister, one Lord Wakeham, with a bushel of
dollar bills for 'consulting' services and a seat on Enron's board of
directors. The English experiment proved the viability of Enron's new
industrial formula: that the enthusiasm of politicians for deregulation
was in direct proportion to the payola provided by power companies.
The power elite first moved on England
because they knew Americans wouldn't swallow the deregulation snake oil
easily. The USA had gotten used to cheap power available at the flick of
switch. This was the legacy of Franklin Roosevelt who, in 1933, caged
the man he thought to be the last of the power pirates, Samuel Insull.
Wall Street wheeler-dealer Insull created the Power Trust, and six
decades before Ken Lay, faked account books and ripped off consumers. To
frustrate Insull and his ilk, FDR gave us the Federal Power Commission
and the Public Utilities Holding Company Act which told electricity
companies where to stand and salute. Detailed regulations limited
charges to real expenditures plus a government-set profit. The laws
banned power "trading" and required companies to keep the lights on
under threat of arrest -- no blackout blackmail to hike rates.
Of particular significance as I write here
in the dark, regulators told utilities exactly how much they had to
spend to insure the system stayed in repair and the lights stayed on.
Bureaucrats crawled along the wire and, like me, crawled through the
account books, to make sure the power execs spent customers' money on
parts and labor. If they didn't, we'd whack'm over the head with our
thick rule books. Did we get in the way of these businessmen's
entrepreneurial spirit? Damn right we did.
Most important, FDR banned political
contributions from utility companies -- no 'soft' money, no 'hard'
money, no money PERIOD.
But then came George the First. In 1992,
just prior to his departure from the White House, President Bush Senior
gave the power industry one long deep-through-the-teeth kiss good-bye:
federal deregulation of electricity. It was a legacy he wanted to leave
for his son, the gratitude of power companies which ponied up $16
million for the Republican campaign of 2000, seven times the sum they
gave Democrats.
But Poppy Bush's gift of deregulating of
wholesale prices set by the feds only got the power pirates halfway to
the plunder of Joe Ratepayer. For the big payday they needed
deregulation at the state level. There were only two states, California
and Texas, big enough and Republican enough to put the electricity
market con into operation.
California fell first. The power companies
spent $39 million to defeat a 1998 referendum pushed by Ralph Nadar
which would have blocked the de-reg scam. Another $37 million was spent
on lobbying and lubricating the campaign coffers of the state's
politicians to write a lie into law: in the deregulation act's preamble,
the Legislature promised that deregulation would reduce electricity
bills by 20%. In fact, when in the first California city to go
"lawless," San Diego, the 20% savings became a 300% jump in surcharges.
Enron circled California and licked its
lips. As the number one contributor to the George W. Bush campaigns, it
was confident about the future. With just a half dozen other companies
it controlled at times 100% of the available power capacity needed to
keep the Golden State lit. Their motto, "your money or your lights."
Enron and its comrades played the system
like a broken ATM machine, yanking out the bills. For example, in the
shamelessly fixed "auctions" for electricity held by the state, Enron
bid, in one instance, to supply 500 megawatts of electricity over a 15
megawatt line. That's like pouring a gallon of gasoline into a thimble
-- the lines would burn up if they attempted it. Faced with blackout
because of Enron's destructive bid, the state was willing to pay
anything to keep the lights on.
And the state did. According to Dr. Anjali
Sheffrin, economist with the California state Independent System
Operator which directs power deliveries, between May and November 2000,
three power giants physically or "economically" withheld power from the
state and concocted enough false bids to cost the California customers
over $6.2 billion in excess charges.
It took until December 20, 2000, with the
lights going out on the Golden Gate, for President Bill Clinton, once a
deregulation booster, to find his lost Democratic soul and impose price
caps in California and ban Enron from the market.
But the light-bulb buccaneers didn't have to
wait long to put their hooks back into the treasure chest. Within
seventy-two hours of moving into the White House, while he was still
sweeping out the inaugural champagne bottles, George Bush the Second
reversed Clinton's executive order and put the power pirates back in
business in California. Enron, Reliant (aka Houston Industries), TXU
(aka Texas Utilities) and the others who had economically snipped
California's wires knew they could count on Dubya, who as governor of
the Lone Star state cut them the richest deregulation deal in America.
Meanwhile, the deregulation bug made it to
New York where Republican Governor George Pataki and his industry-picked
utility commissioners ripped the lid off electric bills and relieved my
old friends at Niagara Mohawk of the expensive obligation to properly
fund the maintenance of the grid system.
And the Pataki-Bush Axis of Weasels
permitted something that must have former New York governor Roosevelt
spinning in his wheelchair in Heaven: They allowed a foreign company,
the notoriously incompetent National Grid of England, to buy up NiMo,
get rid of 800 workers and pocket most of their wages - producing a
bonus for NiMo stockholders approaching $90 million.
Is tonight's black-out a surprise? Heck, no,
not to us in the field who've watched Bush's buddies flick the switches
across the globe. In Brazil, Houston Industries seized ownership of Rio
de Janeiro's electric company. The Texans (aided by their French
partners) fired workers, raised prices, cut maintenance expenditures
and, CLICK! the juice went out so often the locals now call it, "Rio
Dark."
So too the free-market British buckaroos
controlling Niagara Mohawk raised prices, slashed staff, cut maintenance
and CLICK! -- New York joins Brazil in the Dark Ages.
Californians have found the solution to the
deregulation disaster: re-call the only governor in the nation with the
cojones to stand up to the electricity price fixers. And unlike Arnold
Schwarzenegger, Gov. Gray Davis stood alone against the bad guys without
using a body double. Davis called Reliant Corp of Houston a pack of
"pirates" --and now he'll walk the plank for daring to stand up to the
Texas marauders.
So where's the President? Just before he
landed on the deck of the Abe Lincoln, the White House was so concerned
about our brave troops facing the foe that they used the cover of war
for a new push in Congress for yet more electricity deregulation. This
has a certain logic: there's no sense defeating Iraq if a hostile regime
remains in California.
Sitting in the dark, as my laptop battery
runs low, I don't know if the truth about deregulation will ever see the
light --until we change the dim bulb in the White House.
See Greg Palast's award-winning reports for
BBC Television and the Guardian papers of Britain at www.GregPalast.com.
Contact Palast at his New York office: [EMAIL PROTECTED]
Greg Palast is the author of the New York
Times bestseller, "The Best Democracy Money Can Buy" (Penguin USA) and
the worstseller, "Democracy and Regulation," a guide to electricity
deregulation published by the United Nations (written with T. MacGregor
and J. Oppenheim).
