By Matt Taibbi

Finding NiMo
George Pataki is shocked, shocked by the power outage.

Here’s a fun activity you New York blackout veterans might want to try: Go online and check out the website of Niagara Mohawk (www.niagaramohawk.com), the Western New York utility that has been fingered as the possible culprit in last week’s hilarious, ridiculous power outage. It’s a boring site, no question–not exactly farmsecrets.com. But the banner at the top of the page is interesting. It reads:

That’s what the site’s looked like for about three years now, or ever since the London-based National Grid Company bought Niagara Mohawk in September 2000. Some of you might be surprised to learn that an American utility–a thing indispensable to daily life and national security–can be owned by a foreign company. I know I was, when I first became a Niagara Mohawk customer in Buffalo last year. Niagara Mohawk, or NiMo, as it’s commonly known, is a popular villain in the press in Western New York (particularly in what passes for an alternative press there).

Among other things, it’s one of about a gazillion giant companies to announce major layoffs in the area in recent years. The NiMo layoffs came in the wake of the $8.9 billion buyout, which was announced on September 5, 2000. At the time of the buyout, National Grid USA announced plans to eliminate between 500 and 750 jobs, or somewhere between five and eight percent of its total workforce.

Wall Street liked that news. On September 1, 2000, before the National Grid rumors started, NiMo’s share price was $13.87. On the day of the announcement, it was $15.75. Ultimately, National Grid USA hopes to eliminate as many as 950 jobs. Meanwhile the NiMo corporate officers who signed off on the buyout deal rode into the sunset. CEO William Davis left with a golden-parachute payment of $2.7 million, and he and nine others were kept on staff at four times their annual salary. The NiMo deal, National Grid itself and the blackout all have a common ancestor: energy deregulation.

The whole absurd, smarmy story goes all the way back to 1990. It was back then that a young Texas company called Enron persuaded Margaret Thatcher and Britain’s Energy Minister, Lord Wakeham, to sign off on Britain’s first fully private power plant, the Teesside power plant. Wakeham, incidentally, later served as a non-executive board director at Enron and was showered with consultancy fees and thousands of shares in the corporation. He would eventually be investigated for his relationship with Enron. But before that fate befell him, he had plenty of time to organize the widespread privatization of Britain’s power grids, selling off plants, wires and distribution systems. The victorious companies were generally very enthusiastic campaign contributors.

One of those was National Grid. By the time National Grid bought NiMo, the deregulation process was already well underway in the U.S. In 1992, George Bush Sr. pushed through laws that weakened the Public Utilities Holding Company Act (PUCHA), enacted by FDR in 1935. PUCHA was partially rolled back by the Bush legislation, which eliminated price controls. Bush’s laws later allowed campaign contributions from utilities, through a series of loopholes (which had been banned absolutely by PUCHA) and weakened measures designed to ensure that utilities allocated enough resources to maintenance and personnel. Bush’s federal measures were followed by deregulatory state measures. The admirable effects of those initiatives in California are well-known, but of course we had similar measures passed here in New York in 1999 as well.

That year, Gov. Pataki–who received hundreds of thousands of dollars in campaign contributions from utilities, including significant contributions from Niagara Mohawk–pushed through legislation that removed caps on prices, promising that the increased competition would lower prices. It did not, and in the years immediately following the reform, the measure was generally considered a failure. Obviously we had blackouts in 1965 and 1977 before deregulation, and no one is really to blame for a freak accident. But some things just seem wrong on their face: foreigners who are unaffected by the safety of their own plants controlling our power supply, Wall Street cheering layoffs in a sector where layoffs can’t possibly have a positive effect on safety and reliability, politicians receiving massive campaign contributions from the public utilities they’re supposed to be regulating.

Are blackouts in deregulated power grids inevitable? Here’s what the Japanese Daily Yomiuri thought about the subject in its blackout postmortem, which asked whether it was possible for such a thing to ever happen in Japan:

"With the deregulation of the power industry, U.S. electric power companies are fiercely competing in the retail market. Under the circumstances, these companies are reluctant to build new plants because of the high cost of installing auxiliary equipment… In Japan, each electric power company has auxiliary transmission equipment that can be put into use if a malfunction occurs in the electric grid. This served to minimize the damage when a Self-Defense Forces plane sliced through a high-voltage power line in Saitama Prefecture, as well as when an accident occurred at a substation in Kyoto Prefecture."

It doesn’t take a genius to figure this one out. If companies are constantly slashing costs to compete with other companies that are constantly slashing costs, who’s going to build additional safety equipment or modernize their grids? Who’s going to retain extra service personnel "just in case"? The people who run these utilities are creatures of the same mindset that always looks to avoid modernizing equipment to reduce emissions–pollution, environmental damage, pollution-related illnesses, increased health costs and other ancillary effects of energy production not being "their" costs.

George Bush is a great champion of this kind of thinking. His preposterously named Clear Skies Act actually enables companies to evade powerplant emission caps that were already law under the Clean Air Act. Clear Skies even weakens already-mandated reductions on mercury emissions, at a time when eight percent of child-bearing women have unsafe levels of mercury in their bodies.

That’s a different story, of course. People, I think, have an inalienable right to breathe mercury-free air, but it’s a stretch to say they have a right to limitless amounts of electricity. I spent most of the blackout in an apartment on the 14th floor in midtown, and found the whole thing–the heavy breathing up and down the blackened stairwell, the ubiquitous smell of fetid human secretions, the amazingly incongruous side-by-side stories of increased condom sales during the blackout and reports of widespread relief that life had "returned to normal" once it was over (people are "relieved" that they’ve gone back to having less sex?)–I found it more funny than anything else. Funniest of all was the great cheer that went up when Times Square got its lights back on, and instantly went back to looking like the King Kong of infomercials.

It was hard not to wonder what the hell we need all of that power for. All the same, what could be more ridiculous than the news reports of an "angry" George Pataki telling us he’d been assured that this couldn’t happen, and "demanding" to know the cause of this accident? Like he doesn’t know? Eight hundred technicians for one Republican governor isn’t a very good trade, safety-wise. But just ask NiMo and National Grid: As far as the bottom line goes, it makes a lot of sense.