Take it public

The failure of energy deregulation should make us reconsider blind faith in the market -- and take a second look at public power systems like the one that lights up Hollywood.


Joe Conason
June 20, 2001 2:46AM (UTC)

Whenever a conservative ideologue starts preaching about the miraculous benefits of the unregulated "free market," it is only prudent to make sure you still have your wallet -- because while you're distracted by that seductive pitch, somebody's invisible hand is probably picking your pocket.

Such is the lesson lately provided by California, whose citizens were promised cheap and plentiful power if only they would rid themselves of the archaic laws that regulated electric utilities. Like a mark plucked by grifters, the Golden State bought into deregulation, a foolish decision likely to cost them billions over the coming decades. They noticed a bit too late that the energy sector is neither "free" nor a "market" in any meaningful sense of those terms, and that the only dividend from deregulation has been the disruption and manipulation of supply by remote holding companies.

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Growing public fury over this swindle has forced some of the nation's most ardently right-wing Republicans to demand federal price caps on electric power. Bill Thomas, the chairman of the House Ways and Means Committee, along with 14 other top congressional Republicans, signed a letter on June 12 urging the Federal Energy Regulatory Commission to "ensure that rates for all wholesale electricity sales are just and reasonable in all markets" and to strictly enforce a "price mitigation" plan for the nation's Western region.

And now the Bush administration has responded with temporary measures to restrain prices, if only to save the hides of its political allies. So much for the magic of the free market.

But don't expect Republicans in Washington or anywhere else to admit that deregulation is a disaster. Motivated by either ideology or greed or both, they continue to insist that there is no alternative to unrestrained corporate rapacity. According to the president, who doubles as chief spokesman for the energy industry, renewed regulation will only lead to worse shortages. "Price controls won't increase supply or reduce demand," he says. "Price controls will only hurt California consumers."

As always with President Bush, it is difficult to determine whether that statement represents ignorance or deception. Perhaps he simply didn't notice that for his entire adult life, and long before he was born, the growth of the American economy was powered by regulated utilities whose prices and profits were entirely subject to government control. Remarkably, many otherwise intelligent people appear to have forgotten that same simple fact.

It wasn't a perfect system in any respect, but the regulatory regime that busted the original power trusts in the early decades of the last century made possible plentiful electricity at affordable prices. Power was sufficiently available and cheap to create the largest, most affluent economy in world history.

Consumers complained about prices, investors griped about profits and utility executives often succeeded in compromising the integrity of their regulators. But whatever abuses may have existed under the regulated monopolies seem mild and transparent when compared with the scams currently perpetrated in the name of competition.

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Only after a long and determined propaganda campaign by conservatives to fetishize the market and denigrate the public sector did such notions as deregulating electricity become plausible. What could possibly be worse, they argued, than "big government"? What turned out to be much worse, of course, is what California is experiencing now that those arguments have prevailed.

What has proved to be a better way of supplying and purchasing electricity is how nearly 1.5 million residents of Los Angeles do it. Although their good fortune is rarely mentioned in media coverage of the California crisis, those lucky enough to be customers of the city's Department of Water and Power are exempt from brownouts and extortion. As beneficiaries of the nation's largest public power system, they enjoy rates considerably lower than their neighbors under the corporate yoke do. And the city has enough surplus power to sell electricity to the state.

If that sounds suspiciously like socialism, it doesn't seem to have injured the capitalistic spirit of L.A. or any of the hundreds of other American municipalities, including all of Long Island, that operate some kind of public power system. And let's not even discuss the rest of the industrialized world, where public power is taken for granted.

The average public power customer pays considerably less per kilowatt-hour than consumers at the mercy of the private cartels. When Long Island residents switched to public power two years ago, after a private company went bankrupt, their rates dropped by 16 percent. (Perhaps that's why investor-owned utilities are known by the acronym IOU.)

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Public power utilities are also more likely to promote serious conservation and environmental measures than those in the private sector. While California's private utilities maneuver to avoid bankruptcy, the Los Angeles Department of Water and Power is paying cash bonuses to customers who buy efficient new air conditioners or retrofit old ones. And the department recently completed a program of rebuilding its gas-fired power plants to reduce pollution.

So don't trust the hucksters who promoted deregulation when they insist there's no alternative to jacked-up prices and environmental destruction. There are better choices, and this may be the moment to reconsider one that is both the most radical -- and the most successful.


Joe Conason

Joe Conason is the editor in chief of NationalMemo.com. To find out more about Joe Conason, visit the Creators Syndicate website at www.creators.com.

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