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.

And it hasn't just been Democrats who've been appalled at state policies. As quiet as the tabloids have been since the blackout, a Daily News editorial in 2000 blasted the governor's deregulation as "dopey," accusing it of "electrocuting the state's economy," and the Post said the governor "crowed it would lead to more competition and lower prices, but the opposite proved true." Even an upstate utility, NYSEG (New York State Electric & Gas), issued an unusual policy paper in 2001, warning that our energy market, "like a train without brakes," was "on a volatile, high-priced track leading to derailment." The NYSEG report charged that "no significant transmission expansion" had occurred here in a decade, "there was no policy to encourage construction of new transmission," and that New York had to link up with regional partners.

Of course, nothing happened. Even the NYISO, the official voice of Pataki's deregulated system, concluded in May that ours had some of the"worst" transmission bottlenecks in America, susceptible to blackouts, warning that, "lack of transmission investment could well result in reliability problems in the not-too-distant future." The ISO, which declared as far back as 2001 that New York was in a state of persistent crisis," says now that transmission development here has slowed "to a glacial crawl," making it the only one of the three Northeast combines to not even have "a planning process for infrastructure improvements."

But as damning as all these multiple warnings have been, nothing unveils Pataki energy policies more than the tawdry appointments he's made to oversee them at the PSC. His first chair was John O'Mara, the scandal-a-day friend of Al D'Amato who wound up his lobbying partner and the registered lobbyist for Niagara Mohawk, one of the state's biggest utilities, shortly after launching the deregulation deal that so benefited NiMo. Another D'Amato lobbying company represented Energy East, also a beneficiary of O'Mara's deregulation, as well as one of the merchant generators building a new plant here. O'Mara is known to swing through the governor's office even today, wearing so many hats he's stooped—Pataki's casino negotiator with the Indians, chair of his judicial screening panel, a member of the commission that approves capital improvements for the courts, and a peddler for any state interest with the money to hire him.

One of O'Mara's more intriguing clients was a pipe company in his hometown of Elmira that faced possible manslaughter charges a few years ago due to the bizarre, on-the-job death of a workman. He lobbied the office of the then state attorney general, Dennis Vacco, and Vacco, to the consternation of federal law enforcement agencies, The New York Times, and PBS, dropped the case, until he was finally forced to reach a widely denounced plea deal with the company. In his meetings with the AG's office, O'Mara was interfacing with Vacco chief of staff, Bill Flynn, a champion of the settlement, who strong-armed the feds into backing out of the case. Flynn is the new PSC chair, named by Pataki this February, though he'd flunked the bar exam seven times, an awkward commentary on the quality of the governor's power plutocrats.

In between O'Mara and Flynn was Maureen Helmer, a career Albany Republican patronage appointee with at least some energy credentials, who went to work, after leaving the PSC, for Couch & White, Albany's top energy lobbying firm.

With this kind of baggage, it's no wonder the deflecting governor was so quick to tell the Times on Saturday—confronted with Assembly Speaker Shelly Silver's call for September hearings—that he hoped those who might "try to politicize" the calamity would "end up marginalized." His histrionics when the lights went out were all part of the same load-shedding scheme, just like the amnesia he invoked over the broken budget, a crass attempt to turn crisis into self-protective camouflage.

He ran all those years ago as the blank-slate candidate, with no record and three lines of mantra-like program. He has even managed to get re-elected twice running as the still-new kid on the block with the crooked smile. But he can no longer get away with winsome irresponsibility. He is the governor, and has been for longer than all but a couple of his predecessors. He has no business proudly announcing that he doesn't even know what the North American Reliability Council is, or offering free passes to Jones Beach while the mayor is shutting nearby beaches due to sewage. He can't just point fingers in the wind at a moment of crisis and vow to ask the tough questions. It's time, after nearly a decade of vacuous evasions, that he came up with the tough answers.

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