LIGHTS OUT ON DEREGULATION
By Dennis Kucinich
With an estimated 50 million Americans and Canadians left without power and
in some cases water, common sense requires us to reflect on the absurdity of
deregulation of public utilities. In the first case, the right of utility
franchise is vested in the people. We give utilities permission to operate, and
enable them to set up a profit making business in exchange for the promise of
affordable and reliable service. In 1992, investor owned utilities pushed the
Democratic House to pass HR776 which granted electric utilities broad powers.
The bill was supposed to restructure the electric utility industry to spur
competition.
Utilities used deregulation to effect a series of mergers limiting
competition. In order to accelerate profits, cost cutting ensued, involving the layoff
of thousands of utility company employees, including some who were responsible
for maintenance of generation, transmission, and distribution systems. A
number of investor-owned utilities stopped investing in the maintenance and repair
of their own equipment, and, instead, cut costs to enhance the value of their
stock rather than spending money to
enhance the value of their service.
A prime case in point is FirstEnergy Corp, late of Ohio. FirstEnergy formed
through a merger of utility companies which owned nuclear power plants which
often were neither used nor useful, and as a result incurred huge debt.
FirstEnergy´s predecessor, The Cleveland Electric Illuminating Company (CEI) in the
1950s and 60s was a high performing blue chip stock until they invested in
nuclear power. FirstEnergy has tried without success to keep online a very
troublesome nuclear power facility at Port Clinton, Ohio, the Davis-Besse plant.
Davis-Besse is currently shut down and has been for some time. FirstEnergy and
federal regulators failed to properly monitor the operations of the plant,
resulting in conditions where the plant´s reactor vessel was threatened with a breach
when boric acid ate into the head of the
reactor.
Millions of people in the Midwest and the water supply of our entire Great
Lakes region were at risk because of First Energy's negligence, improper
maintenance, and actual cover-up of the degradation of the reactor. Furthermore,
federal regulators determined that notwithstanding the peril which was presented
to one of the largest populated areas of the United States, FirstEnergy's
financial condition necessitated the continued operation of the flawed reactor.
The regulators put profit ahead of public
interest.
If there was ever an example of an unholy alliance between government and
industry, this is it. If there was ever an example of the failure of necessary
regulation by the government of an investor-owned utility, it is found in the
government's failure to regulate FirstEnergy, because now, according to
published reports by the Associated Press, CNN, and ABC News, the blackout which
affected an estimated 50 million people began in the FirstEnergy system.
I've been familiar with First Energy and the challenge of utility monopolies
for over 30 years. Early in my career, in the 1970s, I watched FirstEnergy's
predecessor, CEI, as they were hard at work trying to undermine the ability of
the City of Cleveland to operate its own municipal electric system. CEI
conducted a tireless crusade to attempt to put the city's publicly owned system,
Muny Light, out of business. Muny Light competed against CEI in a third of the
city and provided municipal power customers with savings on their electric bill
of 20-30 percent. It also provided cheaper electricity for 76 city facilities
and thousands of Cleveland street lights, saving
taxpayers millions of dollars each year. In the 1970s, CEI applied for a
license to operate a nuclear power plant. The license application triggered an
antitrust review. The antitrust review revealed that CEI had committed numerous
violations of federal antitrust law in its attempt to put Muny Light out of
business. The Atomic Safety and Licensing Board of the Nuclear Regulatory
Commission, in an extensive investigation, determined that CEI blocked Muny Light
from making repairs to its generator by lobbying the Cleveland City Council to
place special conditions on Muny Light Bonds which made the bonds more difficult
to sell, thereby depriving the city of revenue it needed to repair its
generators in order to provide its own power. The
delay in repairs to the generators caused Muny Light to have to purchase
power. CEI then worked behind the scenes to block Muny Light from purchasing power
from other power companies. CEI became the only power company Muny Light
could buy from. At that point, CEI sharply increased and sometimes tripled the
cost of purchase power to Muny Light. And, as a result, Muny Light began to lose
money. CEI used Muny Light's weakened operational and financial condition
(which they created) as evidence of the public system's lack of viability and as
proof that the only way the people of Cleveland could have reliable power was
for the city to sell its electric system to CEI. The antitrust review cited one
incident when during a period of
inclement weather, Muny Light asked CEI for a special transfer of emergency
power. The transfer of power was conducted in such a way so as to cause an
outage on the Muny Light system. CEI used the incident as further proof of
the city's inability to operate a municipal electric system. Throughout this
period, the Cleveland media, which received substantial advertising revenues
from CEI, crusaded against the city's ownership of a municipal electric system.
When the federal government came to review CEI's practices, CEI executives
appeared at a city council committee meeting to declare that they had no
interest in the acquisition of Muny Light even as they worked behind the scenes to
put Muny Light out of business.
In 1976, after years of work to undermine Muny Light, CEI finally succeeded
in getting the mayor and the council of Cleveland to agree to sell Muny Light,
giving CEI a monopoly on electric power in the Cleveland area and enabling CEI
to greatly expand its rate base to get more revenue to pay for its rapidly
mounting expenses associated with building nuclear power plants.
At that time, I was clerk of the Cleveland Municipal Court, a citywide
elected office. I organized a civic campaign to save Muny Light. People gathered
signatures in freezing rain to block the sale. I ran for mayor of Cleveland on a
promise that if elected, my first act would be to cancel the sale of Muny
Light. I won the election. I cancelled the sale. CEI immediately went to court to
demand that the city pay 15 million dollars for power which it had purchased
while CEI was running up charges to the city.
The previous mayor had intended to pay that light bill by selling the light
system and simultaneously disposing of a 325 million dollar antitrust damage
suit. My election not only stopped the sale, but kept the lawsuit alive. CEI
went to federal court to get an order attaching city equipment as a means of
trying to destabilize city services as still another desperate effort to try to
create a political climate to force the sale. I moved quickly topay the bill by
cutting city spending. The Muny Light issue came to a head on December 15,
1978, when Ohio's largest bank, Cleveland Trust, the 33rd
largest bank in America at that time, told me that they would not renew the
city's credit on 15 million dollars worth of loans taken out by the previous
administration unless I would agree to sell Cleveland's municipally owned
utility to CEI.
On that day, by that time, the sale of Muny Light was being promoted by both
Cleveland newspapers, virtually all of the radio and TV stations in town, the
entire business community, all the banks, both political parties, and several
unions, as well as a majority of the Cleveland City Council. All I had to do
was to sign my name to legislation and the system would have sold and the city
credit "protected." The chairman of Cleveland Trust even offered 50 million
dollars of new credit if I would agree to sell Muny Light.
Where I come from it matters how much people pay for electricity. I grew up
in the inner city of Cleveland. The oldest of 7 children. My parents never
owned a home, they lived in 21 different places by the time I was 17, including a
couple of cars. I remember when there were 5 children and my parents living in
a 3 room upstairs apartment on Cleveland's east side. My parents would
sometimes sit in the kitchen at one of those old white enamel top tables, which,
when the surface was chipped, was black underneath. When they counted their
pennies, I could hear them clicking on the enamel top table. Click, Click, Click.
When I was in the board room with the Chairman of Cleveland Trust Bank, I was
thinking about my parents counting their pennies and I could hear those
pennies hitting the enamel top table. So, I said no to the sale of Muny Light to
CEI. At Midnight, Cleveland Trust put the City of Cleveland into default. Later,
it was revealed, that Cleveland Trust and CEI had four interlocking
directors. Cleveland Trust was CEI's bank. Together with another bank, Cleveland Trust
owned a substantial share of CEI stock and had numerous other mutual
interests. Public power was saved in Cleveland. I lost the election in 1979 with
default as the major issue. Cleveland Trust
changed it name to AmeriTrust. The new mayor changed the name of Muny Light
to Cleveland Public Power.
In 1993, the City of Cleveland announced that it was expanding Muny Light. It
was the largest expansion of any municipal electric system in America. I had
been long gone from major elected office. In fact, after the default, most
political analysts considered my career over. I had been asked many times by
other politicians why I just didn't make the deal and sell the light system,
especially when my career was on the line. I believe that there are, in fact, some
things more important than the next election.
When a reporter from the Cleveland Plain Dealer reached me to tell me about
the expansion, I was on a beach in Malibu watching the dolphins play. Cleveland
was the farthest thing from my mind. After I left City Hall, I couldn't get a
job in Cleveland, I almost lost my home, and my marriage fell apart. But I
had no real complaints, because, according to a US Senate Subcommittee studying
organized crime in the Mid-Atlantic states, I had survived, through sheer
luck, an assassination plot. There was somethingcomforting looking out on the
Pacific and watching the waves glisten in the sun.
So when a reporter told me that people were saying that the expansion could
not have happened without my making a decision to save the system, I thought
"that's nice." People in Cleveland began to say that I was right not to sell
Muny Light and they asked me to come back. So I did. I ran for State Senate in
1994 on a slogan "because he was right" with little rays of yellow light shining
behind my name on my campaign signs. I was one of the few Democrats to unseat
a Republican incumbent that year in a state election.
Two years later, I was one of the few Democrats to unseat a Republican
incumbent to gain election to Congress. My campaign signs had a light bulb behind my
name with the words "Light up Congress." Today, I'm running for President of
the United States and I want to light up America, and a good place to start
will be to shed light on a deregulation process that has abandoned the public
interest.
Dennis J. Kucinich
On the road to Davenport, Iowa
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