The black-out story.

Here is a very informative, as well as entertaining, story of some of
the origins of the blackout situation.

(Note that one of the only people to stand up to the bureaucratic mess
that caused the troubles is now being kicked out of the governership of
California. Yeah, we're heading in the right direction . . . )

---

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 business.

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 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 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 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 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 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 surcharges.

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 marauders.

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.

-----

Palast is the author of the New York Times bestseller, "The Best
Democracy Money Can Buy" (Penguin USA 2003) and the worstseller,
"Democracy and Regulation," a guide to electricity deregulation
published by the United Nations (2003, written with T. MacGregor and J.
Oppenheim). 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: media@....

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