New York's Prince of Darkness

Pataki Policies Put Us at the Blackout Brink

The chickens came home to roost last Thursday and all George Pataki could do was squawk.

There he was on Larry King Live, the governor of a state that couldn't even watch him, promising to get to the bottom of the first 21st-century blackout, looking for any culprit but himself. After eight and a half years of the most disastrous energy policies in New York history, George Pataki spent the last few days frantically turning himself into a human floodlight, scanning an eight-state collapsed grid for a blameworthy glitch, when he needed only to shine the klieg on himself. "We have to have answers," tough-talking Pataki declared, determined to be a player in a televised national drama, using his status as a Ranger fundraiser for George Bush to get Energy Secretary Spencer Abraham to a pointless Albany press conference.

The post-blackout news analysis has treated the shutdown as if it was national or region-wide, but the fact is some state systems survived and others detonated. Detroit, Cleveland, and New York took the worst American hits. Five counties in New Jersey lost partial service, but that's where the cascading south of New York stopped. Pockets of Connecticut and Massachusetts trembled, but their transmission lines halted the swing to New England.

Blackout '03: After eight and a half years of radical deregulation and disinvestment, the governor is pointing an accusatory finger anywhere he can.
photo: Cary Conover
Blackout '03: After eight and a half years of radical deregulation and disinvestment, the governor is pointing an accusatory finger anywhere he can.

It's no coincidence that both the New England network and PJM—the Pennsylvania, New Jersey, and Maryland regional organization (93 percent of whose users were unaffected by the blackout)—expressly rejected New York merger overtures in recent years. As Assemblyman Paul Tonko, the Energy Committee chair, put it in a report issued last October, Pataki policies have turned New York into a "regional pariah," with manic deregulation, skyrocketing prices, and both transmission and capacity disinvestment driving other, sounder systems away. While the PJM combine found $700 million in two years to invest in transmission improvements, New York was spending $90 million, a third of what it did in the '80s, even though the technology-driven demand on our aging downstate lines was soaring.

Pataki was too busy collecting energy industry contributions by the hundreds of thousands—both from the merchant generators steaming into New York to buy power plants under the state's dream deregulation plan and the old-line utilities making millions selling them. His administration was also too mesmerized by the insider lobbyists retained by the industry—including Al D'Amato, his brother Armand, Kiernan Mahoney, the consultant who ran all three Pataki gubernatorial campaigns, and Bill Plunkett, the managing partner of the governor's old law firm.

So the governor started his administration in 1995 by closing down the state energy office, against the recommendations of the U.S. Department of Energy and the National Conference of State Legislatures. Then, the Times reported, he "scaled back the state's energy conservation program, once the country's most aggressive, by more than 70 percent," another temporary bow to the industry, which foots the bill. Between 1996 and 1998, his Public Service Commission unilaterally installed, without any legislative review, a reckless "let-the-markets-rule" transformation of the state's power system that immediately resulted in a 43 percent price hike downstate.

Even the PSC began warning about blackouts by 2001, when scattered outages hit every borough but Staten Island. A Wall Street Journal article in 2001 assailed "the piecemeal, poorly thought-out deregulation process" that "planted time bombs across the nation," saying the "most vulnerable area outside of California" was New York. As recently as the eve of the 2002 gubernatorial election, prophets like Tonko were saying that "the reliability of the system was in jeopardy" and that Pataki was putting "consumers at greater risk than their counterparts in other states." With New Yorkers already charged the highest energy prices in America, Tonko observed that we were all paying more "for the privilege" of having our lights go out.

It was Tonko, a former PSC engineer, who saluted the PJM investment last year, praising it as the sort of "forward-thinking planning" that New Yorkers "have not witnessed from the Pataki administration," which "should have made more efforts to strengthen the transmission system" before going ahead with deregulation. By moving far more gradually to deregulate, and dovetailing deregulation with capacity and transmission improvements, states like Pennsylvania, Texas, and Wisconsin have become widely saluted models. For example, two years ago, then state comptroller Carl McCall pointed out that Wisconsin, unlike New York, was making investments "that will double its transmission grid."

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But McCall and Senator Charles Schumer warned that New York was instead taking on "disturbing similarities to California," with McCall citing federal ratings that put the state behind New England and PJM in transitioning to deregulation and market efficiencies.

Brooklyn assemblyman Jim Brennan, who once chaired an assembly energy task force, says that Pataki's deregulation "eliminated all incentive for the utilities to improve transmission," since they were merely "nominal owners" of transmission facilities "without any effective control" over them. Brennan says it's the Independent System Operator (ISO), an industry-selected coordinating council that makes all the distribution decisions, forcing Con Ed chair Eugene McGrath to declare that his colossus is now merely the "milkman," with others controlling the dairy.

"The more money they invest in transmission, the less money they make," contends Brennan. His point was reinforced by the WSJ article, which listed New York as one of the six states with the most "troublesome transmission logjams," and noted that under deregulation, "utility owners have less incentive to make long-term investments," uncertain even about who will eventually own the grids.

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