September 2003

Views expressed are those of the authors, not necessarily of the AFSC.

Megawatts and Mega-Mergers -- Neo-liberalism Comes Home to Roost

Ben Wisner is Research Fellow, Development Studies Institute, London School of Economics and visiting researcher, Environmental Studies Program, Oberlin College. A member of Oberlin Friends Meeting, he is advisor to AFSC's Emergency and Material Aid Program.

As I am sitting at the moment in northeast Ohio, which appears to have been the site of the original triggering event, let me offer some reflections on the recent huge power failure in North America. 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.

What's missing since deregulation
Privatization of energy utilities and deregulation are deeply involved. Formerly cooperative entitites which were joined into the North American Electricity Reliability Council (NAERC) after the 1965 blackout have now become competitors. It is more difficult to get them to cooperate. In addition, the reliability practices and standards developed by this council are voluntary. 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 not affected, nor was New England. Studies by NAERC show an increase in the number of lapses in voluntary compliance with rules since deregulation.

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 US Congress member from Ohio, Dennis Kucinich, was quoted in the Cleveland Plain Dealer (17 August) 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. A short may have resulted when an overhead wire carrying extra voltage (due to an earlier surge) sagged, due to the expansion of its metal when heated, and made contact with a tree. In the crazy-quilt world of deregulation it is unclear whose responsibility tree maintenance along the electrical transmission corridor is.

David Freeman, chairman of the California Power Authority, has commented (New York Times, 16 August), "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."

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), "... 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."

New York Times reporters Mathew Wald, Richard Pérez-Reóa, and Neela Banerjee add (16 August): "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."

When government steps back
The neo-liberal beliefs in shrinking the size and limiting the role of government are involved here as well. Public infrastructure has suffered from lack of maintenance from the Nixon-Reagan presidencies 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, citing a statement by the US 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." New York State Assemblyman Paul Tonko, chairman of the New York State Assembly's Energy Committee stated "...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 its 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 which states and cities cannot carry out, especially with state taxes capped as they have been in California since 1978.

All this raises some questions about complexity and vulnerabiltiy:

•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 is required?

• What forms of accountability are required?

• Where will the political will for necessary changes come from?

Is Another World 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 Oberlin, Ohio, a town of 8000 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.

Oberlin City Council member Ken Sloan, who is the liaison with the power utility, 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 collar 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 lessons that has been learned by experience with privatization of water and other utilities in many countries is that at a minimum there has to 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, Bechtel, 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: "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."

For further discussion of complexity and vulnerability in such events, see http://online.northumbria.ac.uk/geography_research/radix/lifelines.htm

Previous Article    Next Article