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
ZNet
Friday, August 15, 2003
by Greg Palast
gregpalast.com
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: media@gregpalast.com.
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). |
