FirstEnergy Woes: Why the White House Isn’t
Blaming the Company that Started the Blackout
by Wenonah Hunter
August 25, 2003
On mid-day Thursday, Aug. 14, a coal-fired power plant in northeastern Ohio stopped running. In response, FirstEnergy, which owns the plant, began to pull 20 percent of its electricity load out of Michigan. This transfer overloaded several transmission lines, causing them to trip. Non-FirstEnergy plants in Ontario, Canada, began supplying energy to the underpowered Michigan market, leading to an overload on those transmission lines. This movement of power in Canada sapped New York of power, within hours leading to the largest blackout in U.S. history.
Electricity deregulation was the catalyst, but FirstEnergy was the immediate culprit for the massive power blackout that shut down much of the Midwest and Northeast last week. FirstEnergy delivers electricity to more than 4 million people in Ohio, Pennsylvania and New Jersey. Although industry analysts blame the Ohio-based energy conglomerate for the power outage, the Bush administration is silent. FirstEnergy's strong ties to the president helps to explain why the Department of Energy (DOE) may downplay the company's role in the blackout.
Energy Secretary Spencer Abraham thinks consumers should cough up the $50 billion needed to upgrade the strained transmission system. “Ratepayers,” Abraham told CBS's Face the Nation,”will pay the bill because they're the ones who benefit.”
FirstEnergy started the problem, why shouldn't the company be held responsible? Because the Bush administration wants to absolve corporate America from responsibility.
And thanks to its cozy relationship with President Bush, FirstEnergy may get a free pass. The company is a big donor to the White House. In June, the company’s CEO hosted a fundraiser that brought in $600,000 for the Bush-Cheney re-election campaign. Another FirstEnergy executive, president Anthony J. Alexander, gained distinction in 2000 by raising $100,000 for the Bush-Cheney campaign and personally donating another $100,000. When Bush took office, Alexander was included on the Energy Department's transition team. In the electricity utility industry, FirstEnergy's PAC and its top executives are the sixth-largest contributors to political campaigns, giving more than $1 million to federal candidates in 2001-2002, with 70 percent of the money going to Republicans. FirstEnergy wields enormous lobbying influence in Congress as well. In 2001-2002, the company spent nearly $3.8 million lobbying Congress and the Bush administration.
FirstEnergy, Deregulation and the Bush Administration
FirstEnergy may have spurred the power outage, but deregulation deserves the overall blame. Long before the August blackout, the Bush administration pursued a policy of energy deregulation, and now that policy has come back to haunt us.
Bush's energy deregulation makes America vulnerable for two reasons. First, the United States' transmission system was designed to accommodate local electricity markets. Under deregulation, however, companies trade electricity and move power over much longer distances and wider areas. This freewheeling approach to sending power strains a transmission system designed to serve local utilities.
Second, deregulation leads to inadequate investment in infrastructure. Deregulation at the state level means that utilities are no longer required to reinvest ratepayer money back into the transmission system, as this orderly planning has been replaced with reliance on "the market." But the market has been unwilling to make the necessary investments in transmission.
In particular, the market has not functioned properly since lawmakers punched loopholes in the federal law intended to protect electricity consumers. Now, the Public Utility Holding Company Act(PUHCA) faces the likelihood of full repeal by Republicans in Congress. PUHCA regulates giant energy companies by requiring them to disclose crucial financial details and limiting the types of non-electricity investments they may make. If PUHCA is repealed, a wave of mergers will likely result, leaving a handful of companies (like Southern Co., ExxonMobil and FirstEnergy) in control of our electricity -- with no effective regulators looking over their shoulders.
In the case of the August blackouts, the deregulated wholesale markets of the Midwest and Northeast -- typically cited as models for national deregulation by the Federal Energy Regulatory Commission (FERC) -- failed in their ability to provide reliable and affordable power. As a result, wholesale prices remain higher than under regulation, and nearly 96 percent of the 40 million residential consumers in the remaining 15 deregulated states lack access to competitive electricity suppliers.
This is the world of energy the Bush administration and its financial supporters envisioned. Of course, no one wanted a regional blackout. But no one was there to prevent it, either.