Utility unions warn country: Deregulation led to blackout

For Bob Fronek, the worst moment on Aug. 14 came when the spigots ran dry. “The scary part of the whole thing was when the water went out,” says Fronek, President of Utility Workers Local 270 in Cleveland.

“It was taken away from the Cleveland area, because our water pumps are electric-powered, for almost a day. It was pitch dark, there was no electricity and there was no water. It was like living in Iraq.”

Fronek knows something about electric power. Local 270 represents 1,200 workers at Cleveland Electric Illuminating Company and in the Cleveland-Akron area. Failures in that region apparently led to the rolling cascade of energy collapses that produced the mid-August Northeast blackout.

But interviews show mechanical failures aren’t the key reason for the blackout. Deregulation is.

The blackout hit tens of millions of people in the continent’s industrial heartland, ranging from Detroit on the west to Cleveland-Akron and much of Pennsylvania on the south, New York City, the Berkshires and western Connecticut on the east, and Toronto and Ottawa on the north.

It also put Cleveland Electric and nearby firms–notably Ohio Edison, now FirstEnergy Corp., and Niagara Mohawk of New York–at the center of the failure.

Fronek and other union leaders interviewed say 15 years of deregulation produced a rush for profits, cuts in the number of utility workers, a lack of maintenance, and failure to construct new facilities that could have prevented the blackout.

Deregulation also destroyed the mechanical independence of local power companies, making them part of a national grid that became vulnerable to a rolling cascade of failures.

That also means, they note, that greed and blackouts can occur elsewhere, if deregulation advances nationwide, as the Bush administration wants. Some states are resisting, however.

“By selling a free market ideology,” deregulation advocates “for a little while managed to pry open California and suck money out,” warns Eric Wolfe, Communications Director for IBEW Local 1245 in southern California.

His local’s retired business manager, Jack McNally, testified against electric utility deregulation in federal hearings–three and a half years ago.

“There are a lot of problems with deregulation,” Wolfe adds. “Its premise is that efficiency of the marketplace” will provide electricity to consumers “but California gives the lie to that.”

There, he explained, deregulation let energy firms, including traders such as Enron, manipulate the market to earn large profits, while consumers have few alternatives.

That’s because electricity can be transmitted–at a loss of power over long distances, notes Utility Workers deregulation specialist Brian McCarthy–but can’t be stored. Consumers must buy it when it gets to them.

The market also doesn’t work in the electric power industry, both Wolfe and McCarthy say, because utilities, large or small, cannot immediately add power plants to respond to surges in demand, either from increased consumption or from electric grid problems. It takes years of planning and investment.

In the Cleveland area, Fronek explained, power lines were originally built, as elsewhere, to carry electricity from local utilities to local homes and businesses. That’s a light load of power, and that’s all they were required to handle in the days when electricity was regulated.

But deregulation means “utilities in New Jersey may buy power from Montana and ship it through us. The power grid wasn’t designed to handle such surges.” When the local Cleveland grid tripped out, it set off cascades of outages on Aug. 14.

Deregulation also pushed utilities to cut costs by cutting maintenance and workers. In 1995, before deregulation, Local 270 had 1,800-2,000 members, compared to 1,200 now. It’s not alone.

The local Cleveland story is repeated elsewhere. Fronek ticked off the states where the power went out–New York, Connecticut, New Jersey, Pennsylvania, Ohio, Michigan–and said all deregulated their utilities.

Other union officials noted Michigan only partially deregulated its system, and that unions beat back full deregulation, pushed by former GOP Gov. John Engler.

But their point remains: Deregulation brings problems–so much so that California re-regulated its utilities, but not before Enron and others messed up its power system.

The Utility Workers forecast the blackout problem in a 1995 position paper, after the deregulation drive was under way for several years. “Great care must be taken in any restructuring of the industry to make certain that reliability is not impaired,” the union said.

“The concern here is not just outages…A potential tempta-tion will be to cut costs by eliminating increments of mainte-nance or equipment. Society may not face the consequences… until just at the time the system is under the greatest strain.”

Wolfe, viewing the blackout from California and its deregulation-then-reregulation sequence, agrees failures in transmission lines are implicated in the blackout and that upgrades are necessary to prevent future outages.

“The question is: ‘Upgrade to what end?’ If it’s to continue to facilitate market activity, we’ll continue to have” outages, lack of planning “and corporate greed,” he says.

“But if upgrades are seen as necessary to the sharing and free flow of electric power, then they ought to be done according to rational calculations of where the need is and with equitable sharing of costs.

“And they ought to be done with some decentralizing of power systems” to prevent a blackout in one area–such as Cleveland-Akron–from spreading elsewhere.

Ironically, the unionists pointed out, the U.S. had a decentralized electric power system, thanks to President Franklin Roosevelt, from 1935 until deregulation started. The Public Utility Holding Company Act, part of the New Deal, broke up power trusts and left electric regulation in the hands of the states.

,p>Several states, notably in the South, saw the high prices and manipulation in California and pulled back from deregulation, Wolfe says. Others have not. Other results include power company bankruptcies–another danger to consumers. McCarthy notes every new, and now non-utility, owner of a Massachusetts power plant is bankrupt.

So what can unions do to prevent future blackouts? McCarthy and the others say one answer is to return to the prior system, where states regulated rates for local power companies and guaranteed them reasonable returns. In turn, companies could invest in new plants. That gives consumers reliable power.

“You need strong reliability standards to get us back to the way that served us well since FDR put it into place,” McCarthy said. “It’s obvious now, with the bankruptcies and everything else, that the free market doesn’t work.”

And Fronek, whose local’s members found themselves at the heart of the August outage, used that same phrase: “This is a problem across America. We had the best electrical system at one time and now it just doesn’t work.”

Mark Gruenberg writes for Press Associates, Inc., news service. Used by permission.