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Subject: Megawatts and Mega-Mergers -- Neoliberalism, the
State, and Life-line Infrastructure
Date: Sun, 17 Aug 2003 15:21:35 -0700
From: Ben Wisner <bwisner@igc.org>
To: radix@ecie.org
Dear RADIX readers,
I am grateful for the thoughtful comments of Ilan Kelman and Philip Buckle on
the recent huge power
failure in North America. As I am sitting at the moment in northeast Ohio, which appears to have
been the site of the original triggering event, may I amplify some of the points they made?
Neo-liberalism Comes Home to Roost
There are two aspects of neo-liberal dogma that have done great damage in much of the world that
are apparent in this case: privatization and withdrawal of the state.
Firstly, privatization of energy utilities and deregulation are deeply involved. Formerly cooperative
entities what were joined into the North American Electricity Reliability Council (NAERC) after the
1965 blackout have now become competitors (statement of NEARC vice president, David Nevisa to
U.S. Congress, 1999, cited in Wall Street Journal, 15 August, p. A10). It is more difficult to get them
to cooperate. In addition, the reliability practices and standards developed by this council are voluntary
not mandatory. There are rules and procedures for allowing parts of the grid to cut itself off in order
to limit the extent of system failures. However, being only voluntary, they are followed to different
degrees and in various ways by diverse private operators. Thus Quebec was unaffected, nor was
New England. Studies by NAERC show an increase in the number of lapses in voluntary compliance
with rules since deregulation (such as the failures in compliance by FirstEnergy Corporation discussed
below) (Michael Gent, president of NAERC, interviewed on National Public Radio,
Science Friday, 15 August).
Under market pressures to cut costs, the newly-privatized utilities have been cutting back on
maintenance and repair. Here in northeast Ohio, FirstEnergy Corporation, the private utility that may
have been responsible for the trigger event, has admitted that an alarm system was not functioning (a
lapse in voluntary compliance with NAERC rules and procedures). This same corporation had
become infamous for allowing corrosion to produce a large hole in the carbon-steel containment vessel
of the Davis-Besse nuclear power station to the Northwest of me, on lake Erie. A U.S. Congress
member from Ohio, Dennis Kucinich, was quoted in today's Cleveland Plain Dealer (17 August, p. 1)
saying, "Why in the world would anyone think that poor maintenance is limited to Davis-Besse?" One
early account suggests that the trigger for this entire cascading failure may have been lack of tree
pruning along high tension transmission wires that resulted in a short when an overheated wire
carrying extra voltage (due to an earlier surge) sagged, due to the expansion of its metal when heated,
and made contract with a tree. In the crazy-quilt world of deregulation it is unclear whose
responsibility tree maintenance along the electrical transmission corridor is (at least unclear in the
things I've read and heard so far).
David Freeman, chairman of the California Power Authority, has commented (New York Times, 16
August, p. B14), "What's lacking in this deregulated world is someone to take responsibility. No one is
responsible for beefing up the system or building power plants. We're talking about the lifeblood of our
economy, and there has to be a sense of legal responsibility for keeping the lights on, and that's what
we've lost with deregulation" [emphasis mine].
Robert Kuttner, whose book, Everything for Sale: The Virtues and Limits of Markets may be
familiar to some of you, also noted in a op-ed in the New York Times ('An Industry Trapped by
Theory', 16 August, p. A25), "... in the old days of regulation, a [public] utility like Con Ed [serving the
New York area] would be required to submit a resource plan to a state's public service commission.
The two organizations would forecast demand and decide how much money should be invested in
power plants and transmission lines. Rates would be adjusted to cover costs. Under deregulation,
however, nobody plays that crucial planning role" [emphasis mine].
New York Times reporters Mathew Wald, Richard Pérez-Reña, and Neela Banerjee add (16 August,
p. B4): "Under deregulation, the plants have been sold to other companies that often sell their power to
utilities hundreds of miles away, increasing traffic on the grid".
Secondly, the neo-liberal beliefs in shrinking the size and limiting the role of government are involved.
Public infrastructure has suffered from lack of maintenance form the Nixon-Reagan presidencies (late
1960s/ early 1970s) onwards. Thousands of dams are listed by the Federal Emergency Management
Agency as in danger of collapse. Maintenance of bridges has been deferred.
So also with the electricity transmission system. "While electricity demand shot up by 25% since 1990,
construction of transmission systems has declined by 30%" (David Freestone and Andrew
Revkin, New York Times, 16 August, p. B4, citing at statement by the U.S. Energy Department). Governor of
New Mexico and former Clinton administration Secretary of Energy, Bill Richardson,
remarked, "We are a major superpower with a third-world electrical grid" (David Firestone and Richard Pérez-Reña,
New York Times, 15 August, p. 1; see also Richardson's op-ed, 'Drunk on Power', New York Times,
16 August, p. A25). New York State Assemblyman Paul Tonko, chairman of the New York State
Assembly's Energy Committee stated yesterday (Associated Press via Morning Journal, Lorain,
Ohio, 16 August, p. A3), "...there hasn't been major spending to improve transmission lines by the state
[New York] since the 1970s and no major work by utilities since the 1960s".
In the 1970s there was a spate of academic writing about the 'fiscal crisis of the state', a classic
example of which was the near-bankruptcy of New York City around the time of it's last big energy
blackout, 1977. More recently Mike Davis wrote two compelling pieces for New Left Review under
the title, 'Who Killed Los Angeles?' (Nos. 197 & 199, Jan.-Feb. 1993 & May-June 1993). He
documented federal hostility toward cities during the Reagan administration and a continuing pattern of
unfunded mandates by the federal government that states and cities cannot carry out, especially with
state taxes capped as they have been in California since 1978.
Thus I would add to the excellent questions about complexity and vulnerability advanced by Kelman
and Buckle the following:
- Given complex, massively interconnected systems, what sort of institutional arrangement is best for coordinating, spreading risk,
and, above all, taking a long term planning perspective?
- Is 'the market' by itself the appropriate institution?
- If not, then what mix of public and private institutions are required?
- What forms of accountability are required?
- Where will the political will for necessary changes come from?
Another World Is Possible?
Finally, it may be of interest and relevance that the lights went out in my home town, just 40 minutes by
car West of Cleveland, for only 1.5 hours. I live in a town, Oberlin, Ohio, of 8,000 people that has its
own municipal power and light company. It is part of a consortium of municipal utilities, and these
days only uses its own generating capacity during peak demand. The Oberlin Power and Light plant
was already generating on Thursday because of summer peak demand, so it was relatively easy for
them to switch the flow into our local grid. Our town was blacked out for only about 1.5 hours.
Speaking to the Oberlin City Council member, Ken Sloan, who is the liaison with the power utility, he
explained that the city is engaged in a balancing act between providing services at lower prices (for
example, bulk energy purchases through the consortium) and maintaining redundancy, resilience, and
some local control. I spoke to Ken at the Saturday farmers' market on Main Street, where we had
both come on bicycles to pick up locally grown peaches, tomatoes, and squash, and locally-baked
bread. At the market you can get your change in Oberlin Dollars, one of many local currencies in
various parts of Europe and North America that encourage local spending and circulation in order to
protect small producers of goods and services against the encroachment of WalMart and its ilk. Not
everyone in Oberlin rides bikes and eats crunchy granola. We have our share of gas-guzzling SUVs
and burger restaurants in a town that is a peculiar mix of progressive college and conservative blue
color cultures. Yet the city government has managed so far to juggle local vs. global and seems aware
of the need for oversight and the hard study that policy issues require.
One the lessons that have been learned by experience with privatization of water and other utilities
in many countries is that at a minimum there has so be competence and political will on the part of the
local state in order to enforce regulations and accountability of the corporations involved. Bloody
rioting finally drove the multinational corporation, Bectel, out of Cochibamba, Bolivia, where it had
gained control of the municipal water supply in the absence of these pre-requisites -- competence and
political will to regulate.
Kuttner ends his op-ed with these words (op. cit.): "When the blackout hit Thursday, many of us
thought of terrorists. What hit us may be equally dangerous. We are hostage to a delusional view of
economics that allowed much of the Northeast to go dark without an enemy lifting a finger."