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
Friday, August 15,
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
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 was like a committee of bank
robbers figuring out how to make safecracking
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.
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
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
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.
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.
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.
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.
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.
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.
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:
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).