Energy Industry Manipulating Prices

by Molly Ivins

I'm sure that all this will improve our characters, but in the meantime, we need to solve a few problems -- like the energy mess.

The Republican answer to energy problems is always: "Drill more! Open up the Arctic wilderness! Let us drill on the beaches! Give the oil companies more tax breaks! Free Saddam Hussein!" and other useful slogans.

The D's mutter about ratcheting up the mileage requirements on cars (a move stalled in Congress by auto lobbyists for the past five years) and gigging the auto companies to produce less pollution.

The environmentalists urge us to invest in renewable energy sources and ditch our SUVs.

None of this helps either electricity bills or the price of gas right now, though you'll never hear the pols admit it.

The New York Times reports the less-than-astounding news that high energy bills hit the poor hardest. "In 1998, a middle-class family spent 2.6 percent of its net income on heating bills, according to the federal heating assistance program, while a typical low-income family spent 10.1 percent."

If you've never cried or cursed over the total on an energy bill, you may not be able to identify with this, but the reality behind those numbers is a lot of bent, gnarled hands trembling when they open the electric bill.

Do I think the utility companies are ripping people off? I refer you to that bible of capitalism, The Wall Street Journal. Under the headline "Do Hogs Get Slaughtered?" the Journal says:

"It's a market ripe for manipulation: surging demand for an indispensable commodity, weak oversight and a chaotic new set of rules amid a transition from heavy regulation to open competition. This is the state of the U.S. electricity business in the summer of 2000. And sure enough, there's growing evidence that some power companies are finding lucrative ways to exploit the system -- at the consumers' expense.

"The tactics include manipulating wholesale electricity auctions, taking juice from transmission systems when suppliers aren't supposed to and denying weaker competitors access to transmission lines. None of this is illegal, and much of it might be considered basic competition. But as an electricity shortage plunges sweltering California into an energy crisis and fears of even worse shortages rattle the Northeast, the practices of power suppliers face more scrutiny than ever."

The Journal cited one instance in July 1999 when wholesale electricity prices in the Mid-Atlantic states hit $935 per megawatt hour -- seven times what it cost to generate power at the most expensive plant.

Consumers ended up paying millions of extra dollars for power that day. And that, my friends, suggests that we bring back an honorable old political word, "regulation," without the "de-" in front of it. Our friends who believe that the free market solves all problems seem to have forgotten why utilities were regulated in the first place -- because they're natural monopolies.

According to the Journal, Cinergy Corp., a utility holding company, surreptitiously took enough power from its grid over a three-day period last summer to light a small city for a month. The company had underestimated power demands; rather than buy more or cut service, it quietly borrowed power from the system when demand was peaking and later replaced it in the cool of the night when demand went down.

The company received a letter of rebuke but no fine for this because the company runs its own "control area" and is trusted to enforce the voluntary rules, even when it is violating those rules itself. Isn't that nice?

The feds say that average wholesale prices have more than doubled at 14 of 17 key pricing points across the country. (It's 89 percent in Florida and 294 percent in Texas.) To revive a George W. Bush slogan during the late, great battle over de-reg here, "Don't derail deregulation."

If we all have to grow up and be responsible under George W., couldn't we make the energy industry responsible as well?