Public Needs in Private Hands


The obvious crisis of our creaky electric-power system is merely the endgame in a century-old pitched battle between public and private interests to determine who will control energy. Big business seems to have won hands down. In the United States, we have what amounts to public resources exploited for excessive private profit. Most of our oil and gas comes from publicly held lands beneath the ocean on the outer Continental Shelf and on public lands in the West. Coal comes increasingly from public lands in the West, as well. Nuclear power is an offshoot of the technologies developed at public expense by the military, and the uranium needed to run nuclear plants also comes from public land. But while in theory the American people own a vast stock of energy resources, we don’t control them. In practice, the government sells off or leases the public assets on the cheap and on terms set by private industry.

The one effort to wrest a fuel from industrial control was the 30-year fight to regulate the price of natural gas at the wellhead. Industry fought back, created an artificial shortage, and during Carter’s presidency, got its way. Overnight, as regulation went away, so did the phony gas shortage. The link between the gas and oil industries and electricity should not be understated. We already get most of our electricity by burning fossil fuels, and the natural gas industry, for one, would like to see this percentage increase.

Just as the regulatory system gave up on oil and gas, it gave up on electric power. When farmers and ranchers and small businessmen of the American myth went West over 100 years ago, they clamored for cheap electricity. Backed by the New Deal, the government built a public power system in the West and tried to carry it over in the East with the creation of the Tennessee Valley Authority. The TVA created the electric power to make the atomic bomb and its civilian industry, and in doing so, it reorganized the coal industry from a group of quarreling backward companies into a modern industry driven by a handful of large corporations.

One way private industry kept the public in thrall was to refuse to send inexpensive power generated on the big public systems in the West across the continent to the Midwest and East. Instead, it clung to its medieval fiefdoms, often protected by local regulatory agencies that were only too happy to do industry’s bidding. So-called “investor-owned” utilities fought to protect their little monopolies of captive audiences who were only too accustomed to paying higher rates. Huge amounts of money poured into the holding companies that owned the local utilities and from them to the New York financial institutions that controlled the lot.

In the electric business, an important means of control has always been in the transmission lines. That’s true of other segments of the energy business—for example, Rockefeller started building Standard Oil in the late 19th century by monopolizing oil pipelines and keeping them private.

In the late 20th century, electric utilities finally got their wish for deregulation. Federal laws were passed that brought back the concept of the old trust or holding company as the best mechanism for running a business. Behind the holding company is the financial industry—the securities dealers, insurance companies, banks, and mutual funds—the very same people who have been all over the papers in the Enron scandal. They run the show, setting terms of business and the prices we pay.

The name of the game here is not some thumb-sucking debate among free-market economists and their political yes men in Washington but a basic battle between private and public interests.

Additional reporting: Phoebe St John

More Blackout Coverage:

More Blackout Coverage:

Mondo Washington: Why the Public Is Powerless” by James Ridgeway

Pataki: New York’s Prince of Darkness” by Wayne Barrett

A Blackout Letter From an Absent Friend” by Michael Feingold

Press Clips: It’s Deregulation, Stupid” by Cynthia Cotts

Fly Life: How the Blackout Made New York Nightlife Fun Again” by Tricia Romano