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
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.
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."
was like a committee of bank robbers figuring
out how to make safecracking legal.
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.
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.
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 creator of 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 markets" and required companies to keep
the lights on under threat of arrest -- no blackout
blackmail to hike rates.
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
important, FDR banned political contributions
from utility companies -- no 'soft' money, no
'hard' money, no money PERIOD.
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.
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.
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 legislators 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
San Diegans in the first California city to go
"lawless" looked at their bills, the 20% savings
became a 300% jump in surcharges.
circled California and licked its lips. As the
number one life-time contributor to the George
W. Bush campaign, 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.
the state did. According to Dr. Anjali Sheffrin,
economist with the California state Independent
System Operator which directed power movements,
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
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.
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.
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.
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
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."
too the free-market cowboys of Niagara Mohawk
raised prices, slashed staff, cut maintenance
and CLICK! -- New York joins Brazil in the Dark
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.
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.
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.
August 18, 2003