Bringing flaws of electricity deregulation to light

Merle Rubin

Los Angeles Times 25 August 2003, Part 5, page 18.

Power Play: The Fight for Control of the World's Electricity, Sharon Beder, New Press, $25.95 (416p)

If you've ever suspected that most, if not all, of the deregulation that has been going on in the last few decades is a con job, Sharon Beder's eye-opening "Power Play" will more than confirm your suspicions. If you have put your faith in mantras like "deregulation," "privatization" and "the marketplace," Beder's account of the campaign to control the world's electricity may open your eyes or, at the very least, make you think twice about the gap between rosy promises and blackout-filled realities.
The story Beder tells couldn't be timelier, particularly for Californians. A chapter is devoted exclusively to deregulation in California and is followed by two chapters on the rise and fall of Enron. Not only does she provide a clear explanation of what she believes led to the state's infamous power crisis of January 2001, but she also describes a group called "the American Taxpayers Alliance, headed by a Republican campaign manager and with secret funding sources, said to be energy interests ... [that] spent some $2 million on television commercials blaming [Gov. Gray] Davis for the crisis."
Who was to blame? In Beder's considered opinion, the deregulation of the energy market, not only in California but all over the world, has led to the very conditions that regulations were designed to prevent: private power companies manipulating the supply of energy, causing artificial shortages, driving up prices.
The author of "Global Spin," "Selling the Work Ethic" and other books, Beder also examines what has been going on in Australia, Britain, India and Brazil, where, she concludes, privatization of public utilities has led to less reliable service, higher costs, increased pollution and cuts in the workforce.
Beder explains why the currently hallowed nostrums of market forces, competition and choice mean little when it comes to electricity, as distinct from products like automobiles, clothing, books or films. With electricity, there is "a physical need for supply and demand to be balanced at all times to prevent the electricity grid from being damaged. This means that supply and demand cannot be left automatically to the market...."
As for competition, Americans were already discovering in the latter part of the 19th century that what began as competition often ended in monopoly. By the early 20th century, publicly owned municipal utilities were a notable feature of American life, offering lower rates to customers and bringing revenue into the public coffers. In 1933, President Roosevelt established the Tennessee Valley Authority, building large-scale hydroelectric facilities to take electricity to rural areas.
A second viable route, favored by some shrewd power moguls, was to regulate private utilities, not only to prevent them from gouging the public but also to protect them from cutthroat competition that might force them to sacrifice safety to expediency.
Too often, Beder explains, the need to make short-term profits led private companies to delay or abandon expensive but necessary long-term projects like building new generators.
If publicly owned utilities have been such a boon, why a campaign to privatize? If regulation of private utilities has been an American success story, why a campaign to deregulate? And if privatization and deregulation have led to higher prices, shortages, pollution, layoffs and disregard for safety, why do so few members of the victimized public seem to be aware of the problem? This twofold question is at the heart of Beder's book.
What caused the change in public opinion that brought on this deregulatory revolution? From the start, in the last years of the 19th century, private companies fought to wrest control of electricity from municipal companies.
They organized a campaign to portray municipal companies as "socialistic," hence "Communistic," hence "un-American." This was a campaign of enormous scope, subtlety and sophistication, as Beder shows.
From 1928 to 1934, the Federal Trade Commission investigated the power companies' propaganda campaign and concluded that "no campaign approaching it in magnitude had ever been conducted except possibly by governments in wartime."
Along with the standard tactic of lobbying politicians, the energy industry launched a huge grass-roots campaign. Leaflets extolling the virtues of privately owned companies were churned out by the hundreds of thousands and distributed to schools.
Power companies regularly bought millions of dollars worth of advertising space in newspapers, not just to get their message across to the public but also to be able to threaten to pull their advertising if a newspaper endorsed public programs or criticized private ones.
The National Electric Light Assn., formed in 1885, had committees surveying school textbooks, targeting those that mentioned successful examples of public ownership. They also commissioned textbooks, which, naturally, sang the praises of private ownership.
Beder tells us how power companies got into the business of funding professorships and research at universities to promote the kind of thinking that favored their cause.
They also found ways of inserting their spokespersons into a broad spectrum of civic and social life.
Lucidly written, strongly argued, highly informative and deeply alarming, "Power Play" should serve as a wake-up call -- unless we've been too thoroughly brainwashed to smell the coffee.

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