Bad Policy, Big Bucks

How Pataki's Disastrous Energy Plan Fattened His Friends and Campaign Coffers

Con Ed and Energy East also formed partnerships with Telergy in 1998, with Energy East a 50 percent owner of one subsidiary, Telergy East. These arrangements occurred just as O'Mara was leaving the PSC on April 15—right before he was listed as a Telergy director. O'Mara was at the time perceived as a continuing power in Pataki circles, with his ex-aide Helmer at the PSC helm and the governor naming him to chair his judicial screening panel.

Indeed, when Con Ed eventually broke with Telergy, it paid a stiff price at the PSC, an apparent indication of O'Mara's and the company's influence there. The commission found against Con Ed in May 2000, agreeing that Telergy's allegations of Con Ed's discriminatory and anti-competitive actions against it "generally have merit," that Con Ed "likely engaged in activities that caused undue delays" in granting Telergy access to its transmission facilities and rights-of-way. Con Ed was forced to comply with a Telergy/PSC-determined work schedule.

In June 2001, just months before Telergy collapsed, the PSC again found against Con Ed, requiring it to give Telergy a million-dollar credit even though Telergy was $4 million in arrears to the company. "Con Ed bears a heavy burden of demonstrating that its policies are reasonable and it has failed to carry that burden," Helmer and the commission ruled. The rulings—which preceded Telergy stiffing Con Ed for $13.8 million—were seen by industry insiders as confirmation of Telergy's favored position within the administration, one reason why the utilities dumped money into it in the first place.

illustration: Patrick Arrasmith

Telergy, which also gave $2500 to the Pataki campaign, won contracts from the State Transportation Department to install fiber optics along the Thruway, the Northway, and other state highways, as well as a $1.3 million no-bid award from the State Office of Technology. It also had $4 million in contracts for high-speed service with the Office of Court Administration, $3 million with Parks, and a $304,000 deal with SUNY.

The Telergy intrigue may well be the invisible undergirding of the deregulation arrangements that have done so much damage to the state's energy market, a nest of interlocking relationships. NiMo was allowed from the outset to pass through increased power costs to industrial users, Con Ed to pass through all costs. NYSEG's initial deal allowed it to set profit records that hit 40 percent, and to hide all its earnings from plant sales in the coffers of its parent, Energy East.

One of the first official acts of the brand-new Pataki regime in 1995 was to shut down the state's energy office. The Times has reported that no state agency had the authority to issue environmental permits for new plants until 1999, and that the Pataki team "scaled back its energy conservation program, once the country's most aggressive, by more than 70 percent." The PSC under Pataki ended public rate hearings, and only does confidential pricing settlements with utilities.

The administration is so in league now with the new generating companies that John Cahill, the governor's secretary, helped install his own longtime deputy, Gavin Donohue, as the head of the Independent Power Producers, the lobbying group that represents them. Donohue, like O'Mara, had no prior energy experience before taking a key job, but he told the Voice there was "no undue pressure" on the IPP to pick him, and that his environmental background more than compensated.

The collusive contagion that has gripped state government since George Pataki took office has its costs—in nursing and adult homes, as the Times has shown in painful detail this year. It is also a threat to the vitality of the state's economy, which requires that its power be priced fairly and provided reliably, not jeopardized by the agendas of lobbyists and leeches. A governor who tells us every day how proud he is of what his administration has accomplished has in fact put the state on crisis watch, with its electric lifeline perilously uncertain.


Research: Sandy Amos, Yi Chen, Bobby Smiley, Will St. John, Clementine Wallace

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