Power Play: The Biggest Game in Town

The little-noted push to deregulate utilities will drive up rates and jeopardize service--not to mention

"All the lobbyists in town are lining up to take a whack at the electricity deregulation bill. It's a piñata filled with billable hours."

--Rep. Ed Markey (D-Mass.)

It's a scandal the size of the savings and loan debacle of the late 1980s, which forced a bailout costing taxpayers $300 billion. We have unfolding before us now one of the most amazing pieces of corporate brigandage in the history of the Republic: the deregulation of the energy industry, notably the utilities that provide electricity to every business and household in the country. There is seldom much public interest in utilities coverage, because middle-class people don't regard utility bills as a big problem in their lives; as it happens, however, deregulation stands to cost the public upwards of $500 billion in the next decade.

For most people, the first intimation of the upheaval came on Super Bowl Sunday, Jan. 26. In the numerous intermissions in Fox's five-hour coverage, Whoopi Goldberg, Liz Taylor, and Sylvester Stallone look-alikes sang the praises of the largest natural gas company in the world: Enron. The Houston-based giant used this most costly of publicity venues to lobby the largest TV audience of the year in favor of federal deregulation of the electric utilities, which Enron ads claim could bring a 50 percent drop in electric bills. These Super Bowl spots were followed by a blitz of full-page ads touting the virtues of Enron in the Los Angeles Times, Washington Post, New York Times, and the Portland Oregonian.

And why is Enron, a natural gas company, devoting millions to the topic of electricity deregulation? Because Enron is in the process of buying up electrical utilities across the country. The most recent one it engulfed--the largest power merger to date--was Portland General Electric, a $3.2 billion deal announced in July 1996.

To get an idea of how easy life is for Enron today, consider what would have happened 25 years ago if such a takeover had been attempted. It was Richard Nixon, after all, who rallied to the cause of energy independence and began funding alternative-energy projects at the same moment he launched American environmentalism on its glory years. The Nixon White House would have deplored this unwelcome integration of separate energy enterprises, and the Democratic Congress would have shouted its agreement, with men like Wright Patman and Jim Abourezk holding savage hearings in which they pilloried Enron executives for their unwholesome eagerness to monopolize the energy industry and hike prices.

But today Enron has its bases nicely covered. There will be no uproar in Congress from liberal Democrats because there is no longer an appetite--or even the necessary knowledge--among Congressional staffers to organize vigorous hearings, and also because Enron has taken the precaution of hiring Robert Crandall, senior fellow at the Brookings Institute, to produce a study promoting the benefits of deregulation of the electric utilities. Crandall dutifully concludes that the past century's efforts to control the big utilities and provide universal service and affordable rates have been destructive. To promote the Enron line, Crandall will teach a seminar on the subject in February at a Baltimore retreat for congressional staffers from the Energy, Environment and Commerce committees.

Enron is not the only big player in the field. The big industrial power consumers--corporations such as Boeing, Raytheon, and Intel--and independent power producers have been pushing for utility deregulation for a decade. The reason is that the price of natural gas has sunk by as much as 75 percent since the mid-1980s due to new sources coming on stream. Also, new combustion-turbine technologies have enabled natural gas to be used in electricity-generating plants, with electric power produced at rates two to three times lower than was possible with old plants fired by coal or nuclear power.

The big utilities, such as Southern California Edison and New York's Con Ed, are stuck with these old plants. They were thus in a poor position when their major industrial users came to them demanding lower rates reflective of the cheaper new natural-gas technology. Having sunk billions into the big nuclear plants, these utilities couldn't shift over; nor could they afford to give the big industrial consumers basement rates. So the industrial users threatened to take their business to independent power producers such as Enron, or simply to build their own low-cost generating plants. But in order for this to happen both the industrial users and the independent power producers had to break the utilities' legal monopoly over the production, transmission, and sale of electricity.

Their hopes are now vested in deregulation bills promoted by Rep. Daniel Schaefer of Colorado and that friend of the rich and powerful, Sen. Al D'Amato of New York. Schaefer paints a glowing vista of virtually unlimited choice for the consumer, wherein selecting an electricity provider will be as simple as picking a long-distance carrier. He also promises an era of bargain-basement rates. To lend sinew to such rhetoric, armies of lobbyists have been unleashed on the Hill. Leading the battle for Enron is former Arkansas congressman Ed Bethune (now Newt Gingrich's legal adviser), handsomely backed by the lobbying might of Akin, Gump and Skadden, Arp. Independent power producers have enlisted the services of the lobbying and PR firm Powell and Tate--run by former Carter staffer Jody Powell and Sheila Tate, former press secretary for Nancy Reagan.

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