September 4, 2003 Halifax Herald

Blackout: a case for strict regulation

IF YOU READ Bill Keane's cartoon The Family Circus, you've probably seen one showing a child standing by a broken item, with a halo around the child's head and these words circled: "NOT ME!" We had a real-life playing out of this Circus gem during the Aug. 14 blackout, and a little added frill: "Not us; it's their fault."

In a display of holier-than-thou childish pique, without supporting evidence, we had Ontario Premier Ernie Eves, Toronto Mayor Mel Lastman and Prime Minister Jean Chrétien pointing fingers at the U.S., saying it all began when lightning hit a generating facility in Niagara, N.Y.

On the American side, not to be outdone by imaginative Canadian officials and also without supporting evidence, we had New York Governor George Pataki, New York City Mayor Michael Bloomberg, etc., pointing fingers at Canada. Ironically, George Bush was the only politician of note who refrained from getting involved in the blame game. He simply stated the obvious: The transmission system is antiquated and needs to be upgraded to handle modern requirements.

In fact, almost nothing foolish was missing during the initial stages of the debacle. Figuratively speaking, we even had someone red in the face jumping up and down, shouting insults at the other side and asking others to wait in line while he went first. Lastman said on TV: "Who ever heard of the Americans taking blame for anything?" And later, he imperially told non-Torontonians that they should be good serfs and set aside their desires to have electricity fully restored to their communities until electricity in his "queen" city was completely restored.

Now, to the meat of the issue: public responsibility versus greed.

Saying this is difficult for a person who loathes excessive government interference in our lives, but we need strict government regulation of the cost and delivery of such essential public goods and services as electricity, home heating oil and gasoline. It's unfortunate, but the greed of many of the shareholders in these sectors has put responsibility to the public secondary to enhancing profits.

The following quotes, from a blurb written by Greg Palast, articulate the situation to a T. Palast is author of the New York Times bestseller The Best Democracy Money Can Buy (Penguin USA) and Democracy and Regulation, a guide to electricity deregulation published by the United Nations (with T. MacGregor and J. Oppenheim).

". . . In the 1980s, 'NiMo' (Niagara Mohawk Power Company) 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 business.

". . . 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 safe cracking legal.

"And so began an economic disease called 'regulatory reform' . . . 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. . . .

"(C)heap (U.S.) power (by extension, Canadian) . . . 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 rates.

"Of particular significance . . . regulators told utilities exactly how much they had to spend to insure the system stayed in repair and the lights stayed on . . . 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 goodbye: 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."

Need one say more? Regulation is a must.

Daniel N. Paul


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