August 15, 2003


You do not have to indulge in conspiracy theory to
connect some dots between the _resident's illegitmate,
incompetent and corrupt regime and yesterday's
unprecedented power outage in major metropolitan areas
of the US and Canada. And, of course, the great Greg
Palast has provided some essential background. (But do
not be surprised if there is even more to the

Tale of The Brits Who Swiped 800 Jobs From New York,
Carted Off $90 Million, Then Tonight, Turned Off Our
Friday, August 15, 2003
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

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.

See Greg Palast's award-winning reports for BBC
Television and the Guardian papers of Britain at Contact Palast at his New York

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).

Posted by richard at August 15, 2003 11:49 AM