SocialismToday           Socialist Party magazine

Socialism Today 78 - October 2003

The great darkness

THE USA, supposedly the richest and most advanced country in the world, was brought to a grinding halt on 15 August by a power cut which blacked out New York and eight other major cities for 36 hours. An editorial in the 29 August edition of the British business journal, The Economist, commented: "Fears that Britain risked future power cuts at times of peak demand rose after the North American blackouts… But neither the distribution network nor generating capacity look vulnerable".

Unfortunately for them, on 28 August a power cut had blacked out the whole of central London causing chaos and gridlock into the evening (and another one hit the West Midlands a few days later). Were these events just one-off pieces of bad luck, or are there major lessons to learn about the control and use of electrical power?

There was no direct connection between the New York and London blackouts (except for the fact that both may have been caused by the unusually long, hot summer), but there is a link which has serious implications, especially when we look at New Labour’s present policies. The link comes from the idea of ‘deregulation’, pioneered by Thatcher’s Tories in the 1980s. Thatcherites trumpeted the idea that public service industries are inherently inefficient and that private ‘competition’ would produce a better service – hence the privatisation bonanza, including the breaking up and selling off of the electricity generating and transmission service to a number of private companies. The gospel of deregulation was taken up with relish by big business in the USA, and it is no accident that Thatcher’s Energy Minister, Lord Wakeham, was welcomed onto the board of one of the instant beneficiaries of deregulation, the electricity transmission firm ENRON, which was later caught perpetrating huge frauds before collapsing in 2001.

Back in 1931, one of the first actions of the reforming president Franklin D Roosevelt was to control the private power utility companies that, even then, were ripping off consumers. In 1933, the Public Utilities Holding Act was passed and the Federal Power Commission set up. This legislation allowed power to remain in the hands of private monopolies, but these monopolies were only allowed a ‘fair rate of return’, based on capital investment and costs. Prices were controlled and the power firms were prohibited from trading in power with one another. Most important, utility companies were banned from making any sort of political donations.

In 1992 George Bush (Snr) pushed through a bill to cancel these controls. Federal deregulation of electricity meant that public utilities could buy and sell power, set their own prices, and finance politicians sympathetic to them. In 2000, power companies donated $16 million to George Bush (Jnr)’s presidential campaign (and $2 million to Al Gore, just in case).

In California in 1998, power companies spent $39 million to defeat a referendum blocking deregulation and another £37 million on lobbying and buying politicians. The result was a disaster for consumers. Prices spiralled and periodic blackouts turned the richest state in the USA into a third world country. At the same time, fraudulent accounts were made up by ENRON and other firms to milk the California treasury. In 2000 Clinton (who had originally supported deregulation) passed an executive order putting a cap on prices and banning ENRON from the market.

Within 72 hours of moving into the White House, George Bush (Jnr) annulled Clinton’s order, leaving ENRON and other companies free to go back to their plundering… until ENRON crashed spectacularly in the same year. California Governor Gray Davies tried to stand up to the power corporations, so they engineered the re-election vote now taking place. Meanwhile, the Republican Governor of New York State had deregulated the state’s electricity supply industry. Electricity supply was in the hands of Niagara Mohawk, a firm which had just been bought up by Britain’s privatised National Grid, who immediately cut eight hundred jobs and cut investment in maintenance of its network.

There were, of course, technical reasons for the US blackout. A major problem with generating electrical power is the fact that it cannot easily be stored in the quantities used every day. But demand varies widely, so spare generators have to be built which lie idle much of the time, but can be switched on when demand increases. In Britain before privatisation, a surplus of 25% capacity over average power supply was considered necessary. But all that spare plant lying idle is anathema to a private company dedicated to maximising profits. Since privatisation, Britain’s surplus spare capacity has dropped to 16%. In the USA at the time of the power cut, the spare capacity was under half that, so that a very hot summer when air-conditioning is run at full blast, coupled with all the other requirements for electricity, can easily overload the system. In principle, if generators in one area cannot supply the extra power, it can be shipped in via a grid from other areas (in this case from Canada). But if these are already overloaded, something will snap and, as happened in August, a snowballing breakdown blacks out a huge area. In the last ten years, demand for power in the USA has increased by 30%. Transmission capacity has only increased by 15% and the annual investment in the US power grid has declined by a third. Sooner or later a collapse of power supplies on the east coast of the USA was inevitable.

In the aftermath of the blackout, Republican politicians rushed to defend themselves and demanded investment in the transmission grid. But Republican congressmen have consistently blocked measures to force power companies to invest in grid improvements. Given the amount of money that those companies provide in political donations, it is very unlikely that upgrading will take place in the short term, especially with the huge US budget deficit and the haemorrhaging of money caused by the occupation of Iraq. In one sense, this might be seen as being not too bad a thing. The whole drive of US capitalism is to emphasis a ‘god given’ right to consume more, to drive pathetically inefficient motor vehicles using dirt cheap petrol, to buy more and more electrical appliances and leave them switched on the whole time – basically to waste more electrical power in a day than a citizen of a third world country can afford in a year. The very greed of the power companies themselves and their refusal to invest might put a brake on this process – but unfortunately, it will be ordinary power consumers, commuters facing transport chaos, etc, who will suffer most.

In Britain some of the same processes are happening. ‘Deregulation’ and the drive by privatised utilities to ‘externalise’ costs (meaning hand them on to someone else – ultimately us) meant that, for example, London Underground shut down its own Lots Road power station and bought in electricity from one of the big utilities – resulting in 28 August’s blackout which left tens of thousands of frightened people stranded in pitch dark underground railway tunnels.

Thatcher’s ‘privatisation’ experiment has been tried and has failed.

Geoff Jones


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