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'er-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 "deregulation."

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

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 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

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 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 gave Democrats.

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 Nader 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

Enron 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.

And 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 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.

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 system.

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 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 cowboys of 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

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. 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).