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The following is mirrored from its source at: http://columbusalive.com/2001/20010125/harvey.html
by Harvey Wasserman
January 25, 2001
Electric utility deregulation has become a spectacular catastrophe, starting in California and stretching deep into our economic and ecological future, here in Ohio and nationwide.
To keep it simple, we'll start with the top 10 truths about this unnatural disaster:
- There is no electric supply shortage threatening California (or the nation), only a series of complex, cynical manipulations that have ramped prices sky high, yielding enormous profits for a few distributors and generators.
- The deregulation bill at the root of this crisis was drafted by the California utilities now facing bankruptcy and was rammed through the California legislature (unanimously, in 1996) by the utilities' own lobbyists.
- The Natural Resources Defense Council, through its chief energy spokesperson Ralph Cavanagh, and with support from the Energy Foundation, played a key role in drafting, passing and then defending that bill.
- But the California bill's catastrophic outcome was accurately predicted in intricate detail by a wide range of grassroots, consumer and environmental groups that challenged the deregulatory scheme in a 1998 statewide referendum.
- The utilities now screaming for help spent at least $40 million to defeat the referendum that would have saved the state and nation from the current crisis.
- The utilities now screaming for help walked off with more than $20 billion in "stranded cost" bailouts as part of deregulation, but nobody seems to be able to account for where the money went, nor is there a concrete plan for getting that money back.
- The consuming public would gain, not lose, if the utilities now threatening to go bankrupt actually did go bankrupt, and the public then took over the utilities.
- The public-owned utilities that supply Los Angeles and Sacramento are prospering in the midst of this crisis, proving once again that public power is the answer to the nation's long-term energy needs.
- Those municipal utilities are deeply invested in energy efficiency and renewable sources (wind and solar), which has provided them with a stable supply in the midst of the crisis.
- Any new electricity production added to the state and national grid should come from wind, which is the cheapest and fastest-to-build new power source, and from solar power, which can be installed on rooftops and at industrial sites, freeing homeowners and businesses from the lethal fluctuation of monopoly manipulations.
The core of the California power crisis is simple: The utilities got greedy. They thought they were taking the electricity business into a brave and profitable new millennium. Instead, they threw it back to a chaotic old century.
In the 1880s, when Thomas Edison and others first made electricity a salable commodity, rampant competition created chaos. Wires were strung everywhere, power plants popped up in bad places, service was abominable.
But as the Morgans and Rockefellers inevitably swooped in to create stable monopolies, the public rebelled against price gouging and centralized private control. The barons who gobbled up the revolutionary new technology were confronted with the threat of being taken over by angry consumers.
So Samuel Insull, the godfather of the new industry, came up with a compromise -- regulation. From 1907 through 1920, virtually every state established its own regulatory commission to set rates and monitor growth and service in the electric power business. But the state commissions were rapidly taken over by the utilities themselves, and there were extensive flaws in the scheme, most notably its propensity to encourage the construction of massively expensive, inefficient and dirty power plants.
Along the way, massive abuses brought on the New Deal installation of the Federal Energy Regulatory Commission and other national controls. Since then, state and federal regulation has provided the nation with a relatively stable and reliable electric supply system. It has been stodgy and short on technical innovation. It has also stemmed the tide of public power, which still, where it's in place, provides cheaper and more reliable electricity than private investor-owned utilities, regulated or otherwise. And, in fact, regulation is still in place in 27 states. Though Texas has insisted on deregulating in the midst of the California debacle, the chaos in the Golden State has pretty much stopped what looked like a national avalanche of state deregulations.
In California, the disaster has taken the form of a mafia-style shakedown. As a price for ending regulation, the utilities demanded a $28.5 billion "stranded cost" bailout for their bad investments, most importantly their obsolete, super-expensive nuclear power plants (in Ohio the "stranded cost" tab has been more like $9 billion).
What happened to that money, nobody seems to know. Southern California Edison invested at least $5 billion in Asia; Pacific Gas & Electric bought up much of the power generation in New England and upstate New York. But in a huge shell game, the California utilities shifted those assets to their parent companies, while leaving their distribution companies to flirt with bankruptcy -- and to get hundreds of millions more dollars in public subsidies.
And, as usual, the state is just handing over this money while demanding nothing in return. The power generators, the allegedly bankrupt utilities and dozens of sharp operators manipulating the utility grid are all making out like bandits while blackouts roll through California.
They're also using the "power shortage" as an excuse to demand construction of more fossil fuel and nuclear generators, burning natural gas, oil and coal and trying to revive the atomic energy industry, all to the detriment of the public and the environment, but all certain to generate gigantic profits for the very people causing the crisis.
Here, instead, is what should happen:
- The public should take direct ownership of the utilities, which have clearly failed. The system should be controlled on a municipal basis, as in Sacramento and Los Angeles and, hopefully, soon in San Francisco and other cities, towns and counties across the state and nation.
- No new fossil fuel or nuke plants should be built. All new construction money should go to building windmills, solar panels and increasing efficiency. Wind is the cheapest and fastest to build form of new generating capacity in the world today. Solar photovoltaic panels should be generating electricity atop virtually every rooftop in the nation, starting with all new construction. All water should also be heated by the sun, again starting with new construction.
- All this work should be done with union labor, starting with the International Brotherhood of Electrical Workers, which has been training its labor force for just such a conversion.
The California crisis is not one of supply -- it's one of manipulation by an obsolete private utility industry and a fleet of cynical power generators. The solution is not to feed them still more warehouses full of money. The solution is to take them over, make them directly responsible to the public that owns them, and switch them over to wind, solar and increased efficiency.
They say electric deregulation will be different here in Ohio. But the basic structure for corporate theft has been put in place here as well -- and the solutions are ultimately also the same.
© 2001 Columbus Alive, Inc.