An Award-winning Scam:
Energy "Shortages"

May 21, 2001

The Oscar of the Year award goes to those energy companies which produced, directed and starred in the Scam of the Year: "The Energy Crisis."

They managed to create the illusion that there were shortages of electricity in California, shortages of heating oil and natural gas along the East Coast and shortages of gasoline at the pump in the country as a whole.

When power blackouts rolled around the state of California last March, the news media around the country repeated the utilities’ claims that there had been too much demand for electricity and not enough supply of it.

In fact, there had been no significant increase in demand, that is use of electricity. The utilities and the power generating companies simply restricted the supply of power. The small number of producers of electricity who effectively monopolize the market decided to shut down too many plants for "routine maintenance." In fact, they shut down so many plants, all at the same time, that one third of their total production capacity was taken off line during those blackout days in March.

Bad planning? Coincidence? Not hardly. Simply a scheme to raise rates. Credit Suisse First Boston Corporation commented at the time that the blackouts were "intended to soften up the Legislature and the voters to the need for a rate increase." Credit Suisse, by the way, was the Wall Street firm which wrote the recent utility bailout bill for the California legislature, which raised consumer rates and handed over 15 to 20 billion dollars to the utilities.

Not to be outdone by the producers of electrical energy, the marketers of natural gas used their control over the pipelines to reduce the supply of that resource. Predictably, their rates went skyrocketing up also. At one point, the price of natural gas piped into California was selling for 10 times as much as what it cost at the wellhead.

Of course, the real experts at this scam, the companies which have been carrying it on year after year, are the oil companies. They blame OPEC, they blame pollution requirements, they blame refinery capacity. If they could, they would blame your grandmother. And they, too, decided to shut down what the Wall Street Journal called "an unusually high amount of refinery capacity for routine maintenance."

And the result of this "routine maintenance" shutdown was low capacity and–what else?–higher prices.