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The Queens Blackouts: Kenneth Lay's Revenge?At first glance, the Queens blackouts don't resemble the Enron-engineered blackouts that struck California six years ago. But a closer look reveals a similar story of energy deregulation and corporate unaccountability.
NEW YORK--It's a neat little ironic juxtaposition of headlines that the July 5 passing of former Enron CEO Kenneth Lay -- while awaiting sentencing on securities fraud and a host of related charges -- came just days before several neighborhoods in the New York City borough of Queens were plunged into darkness and sweltering heat. Certainly the Queens blackouts are nothing so dramatic as those which plagued California in 2000-1, when Enron and its ilk were riding high. Nor are they likely as intentional -- although the degree to which Enron contrived the California crisis was never revealed until months after the fact. But the chaos and misery in Queens was likewise the bitter fruit of energy deregulation. On July 21, New York's WABC News reported that a check of New York State Public Service Commission (PSC) data showed continued under-spending on maintenance. In a three-year period in which Con Ed budgeted $32 million dollars for maintenance in Queens and Brooklyn, the utility actually only spent $27 million, the report found. Con Ed, of course, disputed the claims, insisting it has spent billions upgrading the system. But as early as January 2003, Con Ed and other New York utilities were petitioning the Federal Energy Regulatory Commission (FERC) for new rules that would reduce their legal liability for damages arising from blackouts or system failures. The bitter irony is that, having effectively gotten out of the energy generation business under New York state's deregulation plan, nearly all Con Ed has to do these days is to maintain the cables. The 2003 blackout -- although apparently originating from a power surge at Ohio's Toledo Edison -- was the first indication that New York's grid was seriously vulnerable. Under the deregulation regime, which took effect in New York in the summer of 1999, out-of-state companies are encouraged to purchase or build local power plants and sell the electricity to the local utility, which is to serve as a broker rather than a producer. So California's Pacific Gas and Electric was compelled to purchase from Texas-based Enron, and finally forced into bankruptcy by the power disruptions. This same PG&E was simultaneously building a natural gas plant at Athens, on New York's Hudson River -- to sell power to Northeast utilities, which are likewise getting out of the local generation biz. (After PG&E's bankruptcy, the Athens plant was taken over by a consortium led by Morgan Stanley.) Queens residents are especially miffed that their communities host a disproportionate share of the city's power plants, which have been the focus of local citizen campaigns around their health impacts. The three plants currently operating in the western Queens area have all been sold off by Con Ed. The largest is the 1,753-megawatt Ravenswood Generating Station, owned by KeySpan Energy. KeySpan is the successor company to the Long Island Lighting Company (LILCO), which was forced to relinquish control of the grid in Long Island's suburban Nassau and Suffolk counties by state regulators in 1998 as the price of a bailout of its debt-crippled Shoreham nuclear power plant. Relieved of its Shoreham debt, LILCO's new incarnation moved from suburban Long Island to inner-city Queens. KeySpan is now seeking approval from federal and state authorities for its pending $11.8-billion takeover by the British energy giant National Grid. Rather than progress toward accountability to the consumer, it looks more like an elaborate game of musical chairs. In June 2000, after a brief blackout on Manhattan's Upper East Side, Peter Vallone, then speaker of the City Council, publicly suggested that Con Ed, in connivance with its new deregulation partners, was using power disruptions to pressure the state PSC to approve new power plants. And the new plants were proposed, not surprisingly, for poor areas of the city. Despite a brief incident on the upscale Upper East Side, it was generally New York City's low-income areas that were hit with the blackouts. Manhattan's Dominican neighborhood of Washington Heights was without power for 18 hours in the midst of a heat wave in July 1999, just weeks before the state deregulation hit in -- again due to feeder cables burning out. There were certainly reasons for discontent with the status quo ante. Con Ed charged among the highest rates in the country. But in August 2000, in the first summer after deregulation, New York's consumers were shocked to find that rates were actually 40 percent higher over the previous summer. In the wake of the Queens blackouts, concerns were raised of Enron-type market manipulations under the deregulation regime. Assemblyman Paul Tonko, chair of the state Assembly's Energy Committee, told Newsday July 27 that KeySpan and the other generating companies had clearly "gamed" the market "at the expense of the consumers." Mayor Bloomberg has already played a blackout card in a bid to wear down public resistance to new plants and pylons. "Nobody wants to have a power line going through their backyard, but we have to face the issue that if you want to have electricity-and we really have no choice, we have to have electricity, our society depends on large amounts of electricity and it has to be reliable-that means building power plants, upgrading power plants and building transmission lines," Bloomberg said in the aftermath of the 2003 blackout. But the blackout was caused by a failure in the distribution network, not generation. Today we all understand (hopefully) that the California blackouts were not caused by a deficit of power any more than Stalin's bureaucratically induced Ukraine famine was caused by a deficit of grain. The California Independent System Operator's own records indicate that blackouts were happening when demand was considerably below peak -- indicating that supplies of electricity were being held back. Meanwhile, at the very height of the California crisis in early 2001, Kenneth Lay was meeting with Dick Cheney -- who then headed the White House energy task force. The task force report, explicitly invoking "electricity shortages and disruptions in California," called for opening the Arctic National Wildlife Refuge to oil drilling, harnessing the oil resources of post-Soviet Central Asia and a "renewal" of the nuclear industry. And although Cheney's task force was not so indiscrete as to mention it, the California crisis helped set the tone for a war for oil in the Persian Gulf. Despite growing public skepticism of the energy giants and deregulation, this dynamic still seems to be at work. On July 26, just as power was being restored to the last suffering residents of western Queens, blackouts hit Staten Island, leaving an estimated 16,000 consumers without power for several hours. Meanwhile, 80,000 households in Missouri and Illinois were without power after storms brought down pylons. Right on cue, the U.S. Senate began debate on an energy bill that would expand oil drilling in the Gulf of Mexico, and seems assured of passage. If Con Ed was a monolithic bureaucracy under the old regime, today it is the public face of a Kafkaesque labyrinth of often out-of-state companies with no roots in the communities they now serve. The California blackouts were the design of out-of-state firms like Enron to make a mint and (it seems) create a political climate conducive to war and corporate resource-grabs. The Queens blackout has similar roots in the erosion of public accountability under the deregulation dogma. More ominously, it may end up helping to serve similar aims.
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