April 2001

Consumers get blackouts, energy giants get richer

Ronald Reagan, bless his perpetually wagging head, had a childlike devotion to the notion that “deregulation” was the castor oil of the American economy. From S&Ls to airlines, from telecommunications to energy, just give corporations a big dose of Dr. Reagan’s deregulation elixir and, by golly, the system would miraculously unclog. He liked to call it “the magic of the marketplace.”

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Apparently, no one ever told Ronnie that magicians don’t actually perform “magic”[– ] they perform illusions. Deregulation of the S&Ls cost us taxpayers a bailout of half a trillion bucks, deregulated airlines are a traveler’s nightmare, our phone bills are higher and the service worse as a result of dereg, and you can ask Californians about the joys of a deregulated electric-power industry.

The problem is not with deregulation per se, but with deregulation linked to corporate gigantism. In theory, deregulation brings new entrepreneurial competitors to the market to offer more consumer choice, drive down prices, provide service with a smile, and cause the bluebird of happiness to trill across the land.

In practice, however, de-reg has led not to competition, but to consolidation, leaving us at the mercy of huge monopolistic corporations that stomp on competitors, reduce choice, raise prices, snarl at customers, and throttle the bluebird of happiness.

The mess of energy deregulation in California has been widely reported—a crucial shortage of electrical power, rolling blackouts, the tripling of customers’ electric bills, billions of dollars in economic loss, layoffs, crisis management, emergency legislation, etc. Worse than the mess, however, are the “fixes” being pursued in a cabal of ignorance and arrogance between government and the privately held utilities.

California’s energy problems—now spreading into the upper plains, Midwest, and Northeast—are not the result of glitches in the system, but of the giant, cumbersome, inefficient, costly, anticompetitive system itself, which is operated not for the needs of people or the environment, but for the profits of a handful of utility behemoths.

The four faux fixes

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First came the “Bailout Fix.” California’s two biggest utilities, Pacific Gas & Electric and Southern California Edison, went running to the state legislature crying “save us” from the very deregulation plan they had written and gotten passed only three years earlier. “We’re going bankrupt,” they wailed, demanding massive rate hikes to stick consumers with the cost of the utilities’ own mismanagement and corporate chicanery. PG&E claimed at one point that it had only $500 million in the bank and debts of $2 billion. What it didn’t mention is that PG&E is not just a California utility, but a multinational conglomerate, and its other subsidiaries are rolling in money.

But last year, three days after Christmas, the conglomerate quietly got the Federal Energy “Regulatory” Commission (FERC) to allow it to alter its corporate structure to insulate the bulk of its revenues and assets from the possible bankruptcy of its California utility. Despite dodging its financial responsibilities, PG&E still got the rate hike it wanted from the legislature.

Next came the “Unchain Us Fix,” in which the very corporations that made the energy mess demanded to be free to make an environmental mess. If only we weren’t shackled by these damned antipollution laws, went the plea, then we could really crank up our old, belching power plants and “save” the people from this energy shortage.

Sure enough, state and federal officials loosened the rules, the plants are spewing more pollution, and both smog and air-pollution-related health problems are up in California.

Never one to miss a chance to kiss corporate butt, George W. Bush is using California’s plight to unchain some of his largest campaign contributors. To cope with the electric-power crunch, W. insists that his Big Oil pals need to be turned loose in the pristine Arctic National Wildlife Refuge to drill, pump, and pipe crude.

Hello? Oil is used to generate only 0.02% of California’s electricity, and only 3% of our nation’s electricity. Unleashing Exxon, BP, and the rest to pollute an irreplaceable wilderness will have zero impact on anyone’s electric bill.

Then comes the “Build More Fix,” which says that if the present system of mammoth utility companies owning huge, centralized power plants is failing, the state should loosen the rules for siting huge power plants so the utilities can build more of them. It’s like burning your hand on the stove and trying to ease the pain by burning your other hand.

Logic is not a friend of the lobbyists and legislators, who want to “expedite” the process for PG&E, Southern California Edison or others to locate big electric generating plants, even if local citizens object or the plants endanger sensitive environmental areas. “Expedite” is a euphemism for “railroad.”

To put a ribbon on this giveaway, some officials even want to provide taxpayer subsidies for building new power plants.

Finally comes the “Buy the Grid Fix,” which is the bright idea of Gov. Gray Davis. “The time has come to take control of our own energy destiny,” proclaimed Governor Gray as he pushed his plan for the state to pay billions of dollars to PG&E and Southern California Edison or others to locate big electric generating plants, even if local citizens object or the plants endanger sensitive environmental areas. “Expedite” is a euphemism for “railroad.”

To put a ribbon on this giveaway, some officials even want to provide taxpayer subsidies for building new power plants.

Finally comes the “Buy the Grid Fix,” which is the bright idea of Gov. Gray Davis. “The time has come to take control of our own energy destiny,” proclaimed Governor Gray as he pushed his plan for the state to pay billions of dollars to PG&E and Southern California Edison for their electrical grids—the extensive networks of towers, high-voltage power lines, transformers, substations, and such that move electricity across hundreds of miles.

Think of the grid as a giant electrical cord—but instead of a simple cord like the one that runs from your toaster to a wall socket, this is a very long complex of wires that runs from the power plants to your city, and ultimately into your home. Whoever owns this transmission grid can have a big say over price, since the utilities can’t get electricity to you without a wire.

Public ownership might seem like a good idea, except for one hickey: The California grid is old, inefficient, in disrepair, expensive to maintain, and even more costly to replace. It now costs more to maintain the grid than to generate the electricity. It’s a white elephant that the utilities seem pleased to unload, snookering Gov. Davis, who is lik a guy rushing home exulting “Honey, I bought the grid!”

A better way

It would certainly surprise Thomas Edison that his name is attached to companies such as Southern California Edison. About 120 years ago, not long after he invented the light bulb, Edison devised a distribution system that was the exact opposite of today’s centralized, conglomerated, Rube Goldberg grid.

His system relied on small, localized generators controlled by the users of electricity. Each factory and office building had its own generator, and neighborhoods had small power plants that the locals shared.

Edison’s first power generator was built into a building near Wall Street—which is ironic, since the Street’s speculators were the ones who later backed George Westinghouse’s model of huge,central generating plants delivering power via long- distance grids. Wall Street’s money prevailed, and Edison’s decentralized model was abandoned.

The good news is that today inventors, entrepreneurs, conservationists, and other people of common sense are taking us back to the future, resurrecting and updating Edison’s model with sophisticated new systems of “micropower” that are ultra- efficient, clean, reliable, and inexpensive. These systems are small power packs that generate less than 10 million watts of electricity (as opposed to 1.5 billion watts generated by the centralized plants of big utilities).

From fast-food restaurants to high-tech centers, businesses and some government entities are turning to the mighty micros that can be juiced not by coal, oil, nuclear power, or other dirty fuels, but by such abundant, cheap, and environmentally sane fuels as wind (the world’s fastest-growing energy source); solar energy (the second-fastest-growing source, with the price of solar cells having dropped four-fold in the past 20 years); natural gas (and soon, pure hydrogen, a component of natural gas that leaves nothing as a waste product except water); methane (piped out of landfills); and biogas (produced from food-processing wastes).

"The issue isn't just jobs. Even slaves had jobs. The issue is wages." --Jim Hightower


Just as important as these fuels, however, are such innovative micropower technologies as fuel cells, turbines, and flywheels.

Fuel cells, powered by hydrogen, are virtually soundless and can run everything from hospitals to cars to cell phones.

The First National Bank of Omaha is a believer in fuel cells, having experienced a costly computer crash at its data processing center in 1997. Computers require an uninterruptible power supply. Even a momentary blackout is disastrous, taking days for the computers to get back on line, losing millions in sales, and angering customers. The bank calculated that even a one-hour outage would cost it $6 million.

Statewide blackouts aside, these momentary power surges and declines are common on the grid system—but fuel cells deliver 99.9999% reliability, which is why Omaha National switched from the grid to the cells. “It’s meeting our expectations and we are very happy,” says Brenda Dooley, who oversees the bank’s tech center.

Next stop: Microturbines. You could have one in your home or small business (see box). Operating on the same principal as a jet engine, these small electric generators use a constant blast of natural gas or biogas to spin a shaft. That’s it; there’s only one moving part. Even though that part can spin at nearly 100,000 revolutions per minute, it requires no lubricants or coolants, has no gear box, requires no pollution-control devices, and is essentially maintenance-free.

These microturbines are small enough to fit into a kitchen cabinet, they operate with no vibration, they cost from only $1,000 to $30,000, and they can reach 85% percent efficiency. (Big power plants waste as much as two-thirds of the energy they consume.)

The flywheel is an old technology that has been dramatically updated and is causing a revolution in how electricity is stored. At present, we rely on batteries to store power—in our cars, factories, computers, and so forth.

The three dirty little secrets about today’s batteries, however, are: (1) They’re horrendously inefficient—they leak huge amounts of the energy stored in them and are unable to put out an even flow of power; (2) They are cumbersome—the main reason we don’t have electric cars yet is that even the highest-tech batteries don’t store enough juice, are too heavy for the vehicles, and take too long to recharge; and (3) They are filthy, containing toxic chemicals that cause health and environmental damage in the manufacturing process and create a disposal nightmare.

That’s why the flywheel is a gizmo of such genius. Say you have a windmill. On a windy day, the windmill spins like crazy. Connect that to a heavy wheel, and that wheel will spin really fast, too. Now, a week later, there’s no wind, but that wheel of yours is still spinning. Connect that flywheel to an electric generator and electricity will flow until the wheel grinds to a halt. Storing energy is that simple.

Today’s fly wheels are made of carbon fibers lighter and tougher than steel, and instead of spinning around a metal axis, they spin around magnetic bearings, which means the wheels touch nothing, can be perfectly balanced, and are not slowed by friction. The faster it spins (now topping 60,000 revolutions per minute), the more power it stores or produces.

Unlike batteries, the wheel will start right up in extreme heat or cold, and it’s a non-polluter. These systems now come as small as a coffee mug, and one flywheel developer says that putting four of these coffee-mug-sized power packs in a standard car would generate enough power to “scream the tires off.”

From crisis, opportunity

America’s current electrical-power system exists not because it’s the best we can do, but simply because it’s the system that a handful of profiteers demand (and get) from our elected officials—never mind that it’s grossly inefficient, a consumer rip-off, and a notorious polluter of our air, water, and bodies.

The first solution for us to push is a move to energy-efficiency programs. As old Ben Franklin would have put it: A watt saved is a watt earned. Prior to its deregulation adventure, California had been a leader in this efficiency approach— and it worked beautifully. Since 1975, thanks to better-insulated buildings, more efficient appliances and lights bulbs, and the efficiencies required of utility plants, California has cut electricity use enough to avoid building 20 large power plants.

With deregulation, utilities no longer had to push common-sense conservation and the use of more efficient renewable fuels. Indeed, the independent Energy Foundation reports that California’s present crunch would have been avoided had the state not slashed its utility-efficiency program by more than half.

In addition, research and development funding for clean energy was severely cut, and deregulated utilities no longer had to use more cost-efficient, cleaner fuels. State rules had required that utilities compare the long-term cost of various fuels and chose the “least-cost” option, even providing incentives for converting to low- polluting, low-cost renewables. These rules were cast aside with deregulation, leaving fuel choices to the “magic of the marketplace,” which means that Wall Street’s short-term focus on the stock price and profits of the utility conglomerates took precedence over the needs of ratepayers, the environment, and even the long-term prosperity of the utilities.

Lunging for the quick buck, utility execs abandoned energy sanity. Among those pushing for de-reg was Southern California Edison, which had gone whining to Washington, D.C., in 1995 to protest a state plan that required additional use of renewables to generate electricity.

Sure enough, the industry’s puppets at the FERC obediently overturned the state plan, and now Southern California Edison is whining to California’s legislature that it wants a bailout by ratepayers and taxpayers.

We the People are sovereign over utility lobbyists, and we can have the energy future we want. It’s time to rebel against the monopolists and deregulation ideologues who are demanding fixes that are worse than the mess they’ve already made.

Dereg by itself produces no competition (much less “magic”), and any deregulation should be grounded in the American people, who are the innovators of our brightest energy future—a future based on conservation, renewable fuels, and micropower.

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