Democracy And Regulation
Democracy And Regulation

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Jerrold Oppenheim
Theo MacGregor

57 Middle Street
Gloucester, Mass.
01930 USA

Other Works
By Greg Palast

Utility deregulation in the US has, by many measures, failed to meet the public interest. Some of the failures have been catastrophic.
The Bergen Conference, Bergen, Norway
Mar 11, 2002
The experience of electricity competition in America has been failure. Very few of the industrial customers who lobbied for it are happy with the results. Indeed, the fall of Enron in an ocean of lies is symbolic of the deceptive promise of the marketplace. Promises of price savings turned into harsh realities of sharply higher and more volatile prices, blackouts, and job losses. However, the catastrophic failure of competition in California, and the state's recovery efforts, demonstrate the strength of democracy to correct even the most egregious mistakes.

Includes section on rising residential prices in the UK after deregulation (at about p. 21).

European Federation of Public Service Unions Future of the European Union and Public Services
Dec 12, 2001
To date, there have been almost no benefits to consumers from retail electricity competition in the US; rather, serious detriments to consumers include high and volatile prices, decreased reliability and increasing blackouts, lost jobs, and new consumer problems, such as slamming, invasions of privacy, and lack of information.

The Santa Fe Conference (New Mexico State University Cengter for Public Utilities)
Mar 19, 2007
Consumers are already burdened with utility bills that have as much as doubled at a time when most incomes have barely risen. Utility proposals to as much as double infrastructure investment must be reconciled with the need for affordable utility service. Key strategies include efficiency and reduction of risk. Special consideration is needed for low-income consumers.

The Santa Fe Conference
Mar 22, 2004
Slides presented by Jerrold Oppenheim at a conference sponsored by the New Mexico State University Center for Public Utilities.

The objective of electric utility policy should include reliable service and affordable, stable prices for residential customers. Retail (and even wholesale) competition has not accomplished this objective anyplace in the world. Instead, it has brought higher and more volatile rates, along with catastrophic failures in customer service, redlining, and sharp increases in low-income arrearages. In addition, the merchant generation business model has failed, which threatens reliability. Future policy directions for residential electric service should include portfolio management that requires least-cost resource choices consistent with a portfolio mix that achieves rate stability. There also needs to be a mechanism that assures there will be a builder of last resort to assure supply at a reasonable price.

International Labour Office, Sectoral Activities Programme, Geneva - WP.213
Mar 1, 2004
Public-private partnerships require strong regulation, transparency, and tenacious NGOs with resources. A successful example is the Low-income Energy Affordability Network (LEAN) in Massachusetts, but what the World Bank calls "state capture" is much more common.

Word document is presentation to Tripartite Meeting. Acrobat document is later, expanded ILO Working Paper.

Massachusetts Roundtable, Boston
Jan 30, 2004
Proponents of deregulation point to success in the UK (residential rates up 25%, industrial rates down 13%), Texas (residential rates up 15%), and Ohio (residential customers are charged $3.21 for every $1.00 they "save"). Further, separating customer service functions from utilities to new marketing companies has brought slamming, redlining, mass disconnections of service, and other abuses. Instead of replicating these failures in an effort to rescue deregulation for marketers, focus should be on solutions to real customer problems: price volatility, impending shortages of power (with accompanying price spikes), and an affordability crisis for low-income families.

Jan 28, 2004
We are deeply grateful for the consideration you have shown our low-income clients as you have taken on the difficult task of restructuring the electricity industry. This has been particularly important in the current days of skyrocketing utility prices, deep freeze, and federal assistance cuts. We now write you out of concern about the proposal circulating to amend the 1997 electricity restructuring act. We are especially concerned that it could threaten the nation-leading low-income and consumer protections you sponsored to enactment in the 1997 act; and that it would be likely to result in redlining of low-income families.

Boston Globe
Aug 23, 2003
GREG PALAST Who's to blame for blackout? Dim bulbs in D.C. By Greg Palast, Boston Globe 8/23/2003

TOO MUCH NEWS ink has been spent already on trying to guess which of the Three Stooges of the power industry -- First Energy (in Ohio), First Energy (in Pennsylvania), or the Niagara-Mohawk Power Corp. -- started the most recent blackout. Ultimately, the cause of this blackout can be traced to the dim bulbs in the White House. When the lights went out, Spencer Abraham, the secretary of energy, issued a statement that, "We need to [give] the Federal Energy Regulatory Commission the authority to impose mandatory reliability standards." This can't be the same guy who, as a senator from Michigan, supported elimination of the department and boosted "deregulation" of the electricity system. In the '80s, I investigated the Blackout Three utilities for state regulators on charges ranging from incompetence to racketeering. But they need not fear that now because the laws have been changed. Deregulation, signed into law in 1992 by George Bush the First, means that what was once against the rules or even criminal statutes is now OK. What exactly does "deregulation" mean for the power plants? Let's break it down into four parts: Decriminalizing payments to politicians: Twenty years ago, a unit of Southern Company was convicted of making illegal campaign contributions in Florida. Under the Public Utility Holding Company Act of 1933, our legacy from Franklin Roosevelt, no big power combine could give a dime to a politician -- no "hard" money, no "soft" money, no money period. Today, the same payoffs would earn these folks a ticket to a barbeque at President's Bush's ranch. FDR's law has been shot full of loopholes. Enron, formed in 1985, led the rush into this new free market. The Houston operator became the No. 1 contributor to George W. Bush's campaigns, followed by Exxon and Southern. Decriminalizing price gouging: In the days before deregulation, government dictated the price of electricity. It was a simple formula. The companies got back their costs and a set profit. If they tried to charge more, they went to prison. But the California Legislature, well lubricated with campaign contributions, pulled the lid off prices and covered it with a lie. The lie was written into the law's preamble -- that a free market in electricity would cut home power bills by 20 percent. In 1999, electricity surcharges jumped 327 percent in a single year in California. The free market in electricity was -- and is -- a fixed casino. Power tricksters use such game-tilting techniques as "false scheduling" and "megawatt laundering," which, in 2000, cost California consumers $6.2 billion. That calculation comes from Dr. Anjali Sheffrin of the California engineering group assigned to keep the lights on. She documents how three companies locked up the market with false power bids every day for the last three months of the year. But under our new regime, Abraham's power commission has informed California that the public won't get back one dime. Decriminalizing service cuts. In 1989, I joined a government and consumer racketeering investigation of power companies that had falsely charged about $61 million for spare parts they did not use. Before the rules were swept away, government would hold private utilities to detailed budgets: how much to spend and how to spend it. The lights stayed on. No more. Under deregulation, Niagara-Mohawk Power cut its workforce by 800 over the past two years and its new British owners pocketed nearly $90 million. Decriminalizing Accounting Flim-Flams. In that 1989 investigation, we threw the "Uniform System of Accounts," a thick set of rules that tracked the nuts and bolts, at the utility companies. A grand jury was about to indict the companies but, under the rules of our federal racketeering laws, Bush Sr.'s Justice Department stepped in and quashed the prosecution. The company had kept two sets of account books, but only one was shown to the IRS and power regulators. While the grand jury thought this suspect, the Bush administration found the procedure acceptable as it had been approved by the auditors at Arthur Andersen and Co. Letting the bad guys off the hook in 1989 was the signal that Harry Potter bookkeeping was fine with them. Now the administration has prescribed a cure for the ills caused by deregulation: more deregulation. Don't look to the guys who took us back to the Dark Ages for answers; ask the ones who kept the lights on. Greenport and Rockville Center in New York just flickered and kept the juice flowing. Both are publicly owned power systems. While the Niagara-Mohawk lines went dead, the neighboring public system, NYPA, never blinked. The first big operator back up was Long Island Power Authority, the publicly owned system that replaced the Long Island Lighting Company. LILCO lost its franchise when voters had enough of its profit-driven incompetence. Deregulation and decriminalization have put out our lights. It's time for some law and order.

Greg Palast is author of "The Best Democracy Money Can Buy" and, with Theo MacGregor and Jerrold Oppenheim, "Democracy and Regulation."

Massachusetts Electric Restructuring Roundtable #75, Boston
May 2, 2003
Low-income bills doubled and home energy burdens tripled this winter, as benefits dropped. Low-income heating utility bill arrears consequently tripled. Both electricity and natural gas retail prices have become unaffordably volatile. Department orders recognize that exposing residential customers to spot prices is unacceptable and that risk management can stabilize retail prices, but it has yet to fully act on these findings.

Includes graphs and data.

Presentation to the International Association for Energy Economics, New England Chapter, Cambridge, Mass.
Mar 26, 2003
US electricity industry deregulation has had significant adverse impacts on price, price stability, risk, reliability, service quality, employment, low-income protection, and environmental emissions. Recent market manipulations are reminiscent of those which caused the evolution of democratic regulation of railroads and utilities over the last 134 years.

Boston Globe
Jan 26, 2003
Consumers do not care whether they can choose among competitive retail electricity or gas suppliers. Most find the choice about as welcome as a dinner interrupted by dueling long distance carriers. What matters to consumers is the long-term reasonableness and stability of the price they pay for electricity and gas. Opinion piece that ran on page D8 of the Boston Globe.

Presentation to the Harvard Electricity Policy Group, Cambridge, Mass.
Sep 27, 2002
From the viewpoiint of residential consumers, the US state experiments in retail competition in the electricity industry have failed on the important measures of price, price stability, and reliability. Very few residential consumers are served by competitors in any state. Price volatility has weakened the industry financially, which further threatens bulk reliability. Recommendatitons include supervision of utility purchase of generation (portfolio management), a permanent regulated residential rate (as in Oregon), and increased low-income protections.

Transfer, the Quarterly of the European Trade Union Institute, Summer 2002
Jul 1, 2002
The system of democratic regulation of privately-owned utilities that has evolved in the United States over the past century includes five main elements: participation; transparency; a standard of justice and reasonableness; protection against confiscation of utility assets; and prices that are related to costs. After setting these elements forth and explaining how they are balanced, we describe how the system failed in a series of relatively small but highly visible experiments with deregulation in California and elsewhere in the US. Finally, we outline the history of how democratic regulation evolved in the US and how democracy is reversing the failed experiment with deregulation in California.

BSRB (Public Service Labor Union) - Reykjavic, Iceland (published in Icelandic)
May 1, 2002
English transcript of talk presented in Reykjavic, Iceland, in March 2001 detailing the failures of deregulation in the US, a brief history of US regulation, consumer protections in the US, and the importance of transparency and participation in regulating monopoly services.

FTC Docket V010003 - Regarding Retail Competition
Apr 23, 2001
Comments of the Utility Workers Union of America (UWUA) and the Massachusetts Union of Public Housing Tenants (MUPHT) on serious detriments to consumers of retail electricity competition.

Boston Globe Op-Ed, pg. D7
Feb 18, 2001
Price gougers have taken advantage of shortages to inflate wholesale energy prices. Low-income families are particularly vulnerable to price increases for essentials. Government can help.

West Virginia Public Service Commission, Case No. 98-0452-E-GI
Jun 15, 1999
A study prepared by Synapse Energy Economics with the assistance of Theo MacGregor for the West Virginia Consumer Advocate Division of the following consumer protection measures: divestiture of generation, codes of conduct, licensing standards, reliability of distribution services, consumer education, and disclosure of information in a restructured electricity industry. The report was presented in the testimony of Tim Woolf of Synapse before the West Virginia Public Service Commission, Case No. 98-0452-E-GI.

Jan 1, 1999
By Nancy Brockway and Jerrold Oppenheim. For states restructuring their electricity industry, this model provides a guide to consumer protections that must be incorporated in any restructuring statute and regulations. More fully explained in the AARP Handbook. Please use this with caution -- while most of the suggestions remain useful whether or not a state is restructuring its electricity industry, some are out of date. For example, the wisdom of the divestiture option has been disproven by events and states that have enacted divestiture now need rules for power acquisition (see POLR section of this web site). Note also that this Model was written on the now-outdated assumption that enactment of retail competition is unavoidable. However, most of the suggestions remain useful in both restructured and conventional states, For example: "Cap The Gap," consumer protections, and low-income rates and protections.

National Consumer Law Center
Sep 1, 1998
This Handbook for a model bill is written as if a state has decided to introduce retail competition into the sale of electricity, but it contains strategies for consumer protections that are valid for any utility industry structure. The Handbook is to be used with the AARP Model Statute.

Massachusetts 220 C.M.R. 12.00
Mar 1, 1998
This Code of Conduct sets forth the Standards of Conduct governing the relationship between an electric or natural gas distribution company and its affiliates transacting business in Massachusetts.