President Bush Should Investigate Connection Between Deregulation and Power Outages

Santa Monica, CA– President Bush should call for a moratorium on legislative and regulatory efforts to expand deregulation, a consumer group wrote in a letter to President Bush today. The nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR) noted that virtually all states affected in the Northeast power blackout have reduced regulatory oversight in recent years.

The group called for an investigation into the role deregulation played in the Northeast’s cascading blackouts. FTCR also urged President Bush to remove deregulation-oriented provisions from the federal energy bill (HR 6) that lawmakers will take up in a conference committee when they reconvene after Labor Day.

The letter to President Bush follows.
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August 18, 2003

President George Bush
The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500

Dear President Bush:

We are calling on you to place a moratorium on all proposals that would loosen public control over our fragile electricity system. Blackouts are the symptom of a strained system and it cannot be denied that deregulation has exacerbated the strain. You should ensure that America’s consumers and businesses will not be thrust any closer toward a national energy deregulation while we gather information about the underlying reasons for last week’s cascading blackouts.

Energy Secretary Abraham has indicated that there will be an investigation into the cause of the blackouts, but it is not enough to merely identify the technical problems that led to the outages. You should open a separate investigation to determine the role deregulation played in this costly disaster.

Further, you must call on Congress to remove the deregulation-oriented provisions contained in the federal energy legislation that will be considered in a conference committee when Congress reconvenes. The bill, HR 6, repeals a major consumer protection law known as the Public Utilities Holding Company Act and demands greater reliance on unregulated energy markets.

The recent blackouts in the Northeast are a powerful reminder of the perilous state of our deregulated energy systems — virtually all states affected by the outages have deregulated in recent years — reminding all Americans to look at our recent energy past before we leap further along toward a deregulated future. As the Wall Street Journal reported on Friday, “experts have been getting increasingly worried that under the strains of competition and deregulation, the reliability of the electric grid has been coming under pressures.”

When California fell into darkness consumers, businesses and taxpayers suffered devastating economic losses. The energy deregulation crisis of 2000-2001 will hang over the California economy for another decade. We do not know, yet, whether last week’s blackouts were the result of shortages, deficient coordination or a localized mistake that tripped a system that is too weakly regulated, but we must heed the warning of electricity deregulation’s dark legacy.

The incentives of an unregulated energy market contradict the mandates of public safety and the American economy. Without the discipline of regulation, these catastrophes are not surprising: why would a private corporation ensure reliability and maintain excess power, when scarcity drives prices higher? That is why electricity must be and historically has been treated differently than most products and services.

With so many questions about how and why a blackout as massive as last week’s could happen, it is incumbent upon you to put on hold such proposals as removing oversight of utility holding companies and developing an expanded, deregulation-oriented power grid. This transmission overhaul, though a cause celebre of the nation’s largest private power firms, could increase the likelihood of future disasters by placing more control of the grid in the hands of large power companies.

Doubtless, power companies see in these blackouts the prospect of higher prices, weakened plant-licensing and siting regulations and a consumer-funded transmission super-highway over which energy firms can ship their power to the highest bidder. Energy firms regard the breakdown as an opportunity to push for more deregulation. You should not.

Until we know exactly what went wrong and how to prevent it, there should be no discussion of expanding deregulation.

Sincerely,

Douglas Heller
Senior Consumer Advocate
Foundation for Taxpayer and Consumer Rights