The 2003 Power Blackout—An Excuse to Raise Rates

Aug 25, 2003

Two Ohio utility companies have been accused of triggering the big 2003 blackout which affected 50 million people in seven states and Canada. Certainly these two have atrocious records.

The Ohio Public Utilities Commission had already criticized American Electric for maintenance in a report that came out this May. For example, rather than cutting back tree limbs on a regular four to six year schedule, they cut out old tree limb maintenance except for removing limbs after they cause an outage. Two out of every five of American Electric’s utility poles need replacement or maintenance.

The company cut back maintenance by 88 million dollars between 1992 and 2001, claiming they could do so through "process improvements and more efficient use of manpower." Not only did they fail to do the necessary maintenance, they cut spending on new equipment by almost 120 million dollars. What they spent money on was buying up other utilities in eleven states and overseas, becoming the largest utility-holding company in the U.S.

But the Ohio Public Utilities Commission is hardly blameless in what American Electric did. The commission gave the company permission to do all these things–while raising its rates!

The other Ohio utility company, FirstEnergy, which had three of its transmission lines go out just before the blackout, had been warned months earlier about possible problems along its transmission lines. It had been cited by a federal judge for violating the Clean Air Act. And FirstEnergy is the owner of the now shut-down Davis-Besse nuclear power plant in Ohio. Lack of maintenance there caused a leak that burned a hole through a steel lid. Had the lid been destroyed, Ohio residents around Toledo could have experienced all the joys of a massive nuclear reactor melt-down.

Said a former manager at Davis-Besse now suing the company with other employees, "With FirstEnergy, it is profits and production over safety. I see no change today from when I worked there."

FirstEnergy claims not to have the money for maintenance. Yet they could afford to buy six other utility companies. Its management says "we still feel we are an attractive stock," showing exactly what matters to these corporations–and to the government bodies which oversee them.

These Ohio-based utility companies are not small time operators. They are among the ten biggest power companies in he country.

And they are hardly alone in their concern for profit at the expense of safety or even convenience. As the California energy crisis showed, blackouts can lead to ... profits. The energy companies involved in the California fiasco, and not just Enron, sold and re-sold energy contracts, driving up prices and profits–leaving the cost to be paid by California residents (six billion dollars between May and November of 2000.)

All of this was allowed under the deregulation of the power industry begun by Jimmy Carter in 1978 and completed by George H.W. Bush in 1992. And because the deregulation of power allows electricity and gas to travel freely all over the country, especially to where the highest profits can be made, utility customers everywhere have been paying higher prices.

They would have been paying much higher rates everywhere if it hadn’t been for the scandal the Enron affair turned out to be. For a period, even though rates went up everywhere, the energy companies stopped pushing so ferociously for enormous rate increases. It seems, however, they are lining up to get those giant increases now–and using the recent blackout to justify them. The 2003 blackout certainly couldn’t have come at a more convenient time–the week before Congress is to take up an energy bill giving the power companies much more latitude to do what they want. One might almost believe the blackout was staged.

They tell us that the power grid is in a deplorable situation. It’s true, it is. But why?

Even as power usage has soared in today’s economy, investment in the grid has fallen. According to an industry association (cited in Newsweek) investment fell from about five billion dollars per year in 1975 to about two billion today. Some of the technology used on the grid remains from the 1950s, although more sophisticated digital devices now existing could be used to control flows of electricity throughout the country. Just like the two Ohio companies, utilities everywhere have been buying and selling companies, getting bigger and bigger, instead of maintaining their system. Having let the system go to waste, the utility companies and their friends in Congress are now preparing to raise the rates catastrophically.

Many solutions exist to solve this particular problem. What’s lacking is not money, but a system whose functioning would put human needs before profits.