August 15, 2003
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
By Greg Palast
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
It was like a committee of bank robbers figuring out how to
make safecracking legal.
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
Of 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
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 gave
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 operation.
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.
Enron 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
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.
Meanwhile, 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
And 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 $90
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.
Californians 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
So 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.
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.
See Greg 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: [log in to unmask]
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).
Copyright (c) 2003 Greg Palast. All Rights Reserved.