USA - Massive Blackout of 2003 Caused by Deregulation: Power Privatisation Creates Dangerous Problems both in the US and Abroad

Washington's Fondness for Privatisation and Deregulation is Creating Dangerous Problems at Home and Abroad

The electrical forensics are still under way, but the big picture emerging from last week's unprecedented blackout is already clear: it was nature's warning against Washington's worship at the altar of privatisation.

Privatisation and deregulation are at the roots of both Thursday's north-eastern meltdown and the 2001 California crisis. Both events have been lessons in the dangers of taking an exclusively private route into far from perfect markets.

California was taken to the cleaners by private energy suppliers such as Enron, which found that it was easy for big sellers to manipulate prices.

In the north-east last week, the problem arose from the fact that, while the power grid works as an integrated whole, not all parts of it offer profitable opportunities for private investment.

There was plenty of supply from private companies at the time of the crash, but not enough transmission lines to take the power where it was needed. When a line became entangled in a tree in Ohio, the power it was carrying was diverted to other lines, which then overheated, sagged, hit trees and failed as well.

As the problems gathered momentum, there was not enough spare capacity in the regional transmission system to take the strain. It quickly reached full capacity.

Power stations did what they are programmed to do when the grid cannot absorb the electricity they produce: shut down. Within ten seconds, the citizens of New York, Cleveland, Detroit and Toronto were being given first-hand experience of what it was like to live in the nineteenth century.

In the process of deregulating the industry, no one has found a way of making investment in transmission lines pay. That is true politically, as well as financially.

Before the blackout, it was much easier to get elected on a programme of high defence spending than to go to the voters on a record of generous expenditure on transmission. Pylons and relay stations are not that sexy.

That is why there is a gargantuan defence budget, even though most of it will go towards traditional pork-barrel projects that have little to do with the war on terror and a lot to do with the clout of big defence contractors.

And that is why investment in the transmission system has lagged so far behind both the supply of power and the demand for it.

President George Bush described last week's power cuts, which affected up to 100 million people, as a "wake-up call". Arguably, though, the alarm first went off in the California emergy crisis of 2001, and the president simply hit the snooze button.

At the time, several members of Congress put suggested a $350m (220m) repair package to improve the transmission system. The White House opposed it, and congressional Republicans, taking their cue, killed the measure.

In the wake of the recent devastating blackout, the administration blamed Congress for failing to agree on Vice-President Dick Cheney's energy plan, but that plan was more about oil (and where it might be found in Alaska) than about power lines.

Of course, the power grid's problems predate the Bush administration, and the problem is highly complex. One element of it is that transmission lines have fallen between state and federal power.
Individual states cannot resolve who should pay for lines that run between them, yet they are often too jealous of their own powers to allow the federal government to take over.

The issue is so touchy for the states that, despite the fact that the annual meeting of the National Governors Association was interrupted by the blackout, the subject was still not put on the agenda.
However, this administration has hardly provided a useful environment in which to deal with the problem.

The idea of public investment does not fit into the Bush-Cheney mission, with the patriotic exception of defence. But even there, the cult of privatisation has had a powerful and damaging influence.

The administration had to be coerced into nationalising airport security screening services long after it was apparent that private companies were failing at the task. Lip-service security is profitable. Real security is not.

The privatisation of defence contracting has also left soldiers in Iraq, supposedly the ultimate heroes in the Bush pantheon, without proper supplies, living quarters or even enough water in the desert heat. All these things were supposed to be provided by private companies, according to reams of contracts signed before the war.

The trouble is that contractors fall over themselves to sign multi-million dollar deals in peacetime but, when the shooting starts, their employees frequently refuse to drive their trucks towards the action.
In any case their corporate insurance rates go through the roof, making the original contract appear considerably less lucrative.

"You cannot order civilians into a war zone," Linda Theis, an official at the army's field support command, told the Newhouse News Service. "People can sign up to that, but they can also back out."

The problems are so severe that the Army Times - not the first place you would look for freely-worded dissent - has turned against the administration, running a series of bitter editorials.

In one, entitled Nothing but Lip Service, the paper argued: "In recent months, President Bush and the Republican-controlled Congress have missed no opportunity to heap richly deserved praise on the military.

"But talk is cheap - and getting cheaper by the day, judging from the nickel and dime treatment the troops are getting lately."

The same goes for the civil reconstruction of both Afghanistan and Iraq, where many tasks that would have been performed by perfectly adequate local government bodies or aid agencies had been contracted out to US firms with close ties to the administration.

But those contractors are not getting the job done and, consequently, the security outlook in both countries is all the bleaker.

That is as potentially devastating for US security as the dilapidated power grid - perhaps even more so - but there is no sign of a radical change in administration thinking.

It is impossible to say whether the cult of privatisation owes its grip more to an ideological commitment by the White House, or the close personal ties between its inhabitants and the businesses they used to work in.

As in most regimes built on crony capitalism, the two have become indistinguishable.
[Source: The Guardian. August 20, 2003]