The Energy Crisis Scandal

by Molly Ivins

"A stupid bureaucratic decision," one Californian told The New York Times, which is really unfair.

"The idiots in the legislature," said another, which is only partly true.

The right wing already has a nominee for blame: the NIMBY forces -- folks who say "not in my backyard" when their friendly neighborhood power company wants to put a new plant next door. Of course, right-wingers don't like power plants in their neighborhoods either, so this is weak stuff. Their alternative is to blame "the environmentalists," apparently for having opposed building a nuclear power plant on the San Andreas Fault.

Actually, if you would like to get a firm grip on this issue, notice who spent millions and millions of dollars to lobby for utilities deregulation, not only through the California Legislature but around the country. It was -- tah-dah! -- the utilities themselves, of course.

As U.S. Rep. George Miller of California told the San Francisco Chronicle, "Now the utilities have tried to make out that they're the victims, when they designed the system."

There it is: But-the-emperor- isn't- wearing- any- clothes, so- obvious- it's- painful truth of the matter. And a great many people are going to a great deal of trouble to deny it.

Could the utilities have been that stupid? Of course. Why people assume that business never makes dumb decisions is beyond me.

In the first place, the California utilities calculated future demand for electricity based on the late '80s and early '90s, when the state was in a recession. When the state came out of recession, the demand was for multiples of what they had planned for.

If you subpoenaed enough corporate documents, you could probably prove that the companies deliberately postponed building new plants so they could jack up prices after deregulation. They made fantastic miscalculations about how they were going to generate profits. And now that the utilities are in deep doo-doo, they want us to bail them out, of course.

Maximize profits, socialize losses. Does this seem familiar to you?

Miller wrote in an op-ed piece, "The original deregulation deal was designed, as I see it, to keep competition out of California -- and to maximize the rates consumers would pay for every bad past business decision by PG&E and other California utilities."

And that brings us to the really interesting book that someone is going to write about the relationship between Pacific Gas & Electric and the state of California. For decades, the state has jumped when PG&E said jump.

Now, it should also be noted that the feds had a role in all this. Both the Bush pere administration and Clinton's pushed the idea that deregulation would solve everything, the magic of the marketplace was infallible, etc.

The reason that utilities were regulated in the first place is because they are natural monopolies. Monopolies are not subject to competition. So who's making money off all this?

The energy suppliers are making out like bandits. Companies like Enron of Houston (CEO Ken Lay is one of George W. Bush's largest financial backers) are raking it in, as is PG&E's parent company, which happens to own generating plants.

And guess what else? The utilities put millions of dollars into a secret slush fund to keep Congress from deregulating utilities because they can roll state legislatures far more easily.

That story was first reported in The Washington Post by John Mintz last May. The utilities spent $17 million over three and half years to bottle up legislation in the House Commerce Committee.

This snafu is so bad that aluminum plants in Washington state (aluminum manufacturing is a notorious energy-eater) have closed down entirely because they can sell the electricity they contracted for months ago for a far greater profit than they can make producing aluminum.

The $220 billion utilities industry is not a single bloc; it includes rural electric co-ops around the country and government-owned utilities, usually municipalities. They do not often side with the Edison Electric Institute, the giant trade association of investor-owned utilities.

According to Congressional Quarterly, the various associations have spent at least $50 million lobbying members of Congress. What they want from Congress is repeal of the 1935 Public Utility Holding Company Act, which gives each utility a monopoly in its area but prevents them from expanding.

So here comes Lucy and the football again. Now the industry claims that the law stands in the way of increased competition -- if only they were deregulated, it would increase competition, and that in turn would lower prices and improve services.

No, it wouldn't. It would lead to national monopolies. You will notice that one reason the smaller, municipally owned utilities oppose most deregulation is because they are afraid they'll be swallowed up in no time.

American Airlines, meet TWA.