While reporters this week wasted their papers’ budgets in Los Angeles covering the shadow puppetry called the Democratic Convention, America’s political future was being decided 80 miles south, in San Diego.
Here, where a bilious tumble of freeways, McDonald’s and Wal-Marts smashes up against the Mexican border, San Diego’s 2.6 million residents have been involuntarily enrolled as laboratory rats in a scary economic experiment. Just weeks ago, San Diego became the first city in America to end the regulation of electricity prices.
When California’s state senate voted to bring the miracle of market competition to electricity, they wrote right into the law that domestic prices would fall by ‘at least 20 per cent’. No points for guessing what happened. The price for energy rose by 379 per cent compared with last year.
Actually, Californians were lucky. I located Beth Emory, former counsel for the agency that runs the daily power auction. She said that on the first hot summer day, when California needed every bit of juice it could find, generating companies bid in their electricity at $9,999 per unit. This was 1,000 times the formerly controlled price of $10.
But San Diegans were fortunate. In their greed-crazed rush, the sellers assumed the system’s computers could only handle four-digit bids. In fact, the computers would have accepted seven figures, taking bids high enough to bankrupt half the families in the state in one day.
I have been able to trace San Diego’s economic plague to the original carrier: one Daniel Fessler. Fessler, the Golden State’s former chief utility regulator, flew to England some years ago and carried back with him an infatuation with Margaret Thatcher’s economic theorems and an unnatural affection for her troubled offspring, the England and Wales Power Pool.
The Pool, at around 4pm or so each day, is seized by a clique of electricity companies which crank up prices by as much as 2,000 per cent. Even Britain’s somnolent regulators have twigged to the fact that this supposed free-market auction house is, as Ofgem recently reported, a playground for price-fixing and collusion.
One suspects California’s politicos knew this. After all, the majority of Britain’s electricity system is owned by the same US operators that have San Diego by the bulbs, including Enron (Houston), Edison International (Los Angeles), PPL and Southern Company (Atlanta). This week, the last pair took over Hyder, Wales’s water and power utility.
But something extraordinary has happened in San Diego. Laid-back Californians have leapt off their surfboards and are waving two fingers in the air and chanting ‘Boycott!’
The electricity companies can send out their bloated bills, but the tanned masses are not going to pay. By the thousands and now, apparently, by the tens of thousands, customers have simply continued to pay only the old, lower, prices.
Joining the boycott this week: the city’s school system, the Council of Churches and even, without a hint of shame, the state senator who sponsored the original deregulation law.
In Bolivia, when British-American, owner of the city of Cochabamba’s utility, hiked prices and customers boycotted bill payments, the government confronted protesters with bullets and martial law.
But in California, protesters were met by panicked politicians. The leftish governor of California, Democrat Gray Davis, drafted an emergency law to knock back prices retroactively by 60 per cent. The state’s utility regulators effectively endorsed the revolt by barring San Diego Gas and Electric from cutting off service to customers who refuse payments through October (up to election day).
The Governor has launched an investigation into market manipulation. According to consumer advocate Mike Florio, a member of the power system’s oversight panel, the governor won’t have far to look. There is ‘stacking and cramming’ (tricks learned in the UK) plus false scheduling and transmission line games that have cost San Diego about $304 million this summer.
On one day, for example, an Enron trader sold the state about 500 megawatts of power to go over a 15 mw line, which is like pouring a gallon of gasoline into a thimble. This forced the system operators to make costly emergency purchases, blowing market prices through the roof.
The power pirates are stunned by the public revolt. After all, though San Diego prices have skyrocketed to about 10p per kilowatt hour, this is no more than US power companies typically charge their British customers – who endure the fleecing with a stoic shrug.
So what has got the beach bunnies up in arms? Amer ica’s little secret is that the New World Order of free markets and deregulation is for export only. America has always expected that, within its borders, the public, through state power, should squeeze down the prices and profits of monopoly service companies.
The city of Los Angeles owns its own electricity and water system and virtually gives the stuff away. Good. We don’t have to put up with World Bank dicta for privatisation and market pricing designed, as we Angelenos say, for the rest of you schmucks.
And there’s something else. Deep in its commercialised, Disneyfied heart, America still throbs with a certain democratic spirit. Not, as Jonathan Freedland would have it, the spirit of Thomas Jefferson and the Bill of Rights, of toleration and public discourse; I’m talking about the spirit of Charles Bronson and Death Wish, the coiled snake on the Revolutionary Flag: Don’t tread on me!
Since long before the recent price hike, 46,000 San Diegans have voluntarily paid $15 a year to belong to the Utility Consumers Action Network (Ucan), the sole work of which is to harass, challenge, sue and otherwise drive electricity and phone companies up against the wall.
Ucan sponsored the can’t-pay-won’t-pay radio adverts. And there are other utility-bashing groups. It is the American genius for public vengeance.
The San Diego power rebellion, blessed by the state’s Democrats, should be one hell of an election platform for Al Gore. After all, it was Fessler and his fellow Republicans, when they controlled the state’s government, who passed the deregulation law. But Gore has consumer blood on his hands.
Though not something they would put on their campaign posters, Clinton and Gore have promoted California-style deregulation as the model for the entire US.
(Let’s just note that a big winner in the deregulation game is Entergy of Little Rock, Hillary’s former client. On the other hand, another electricity profiteer is Sam Wyly, a man who made wealthy George W Bush even wealthier.)
This week, while Al practiced his platitudes to salarymen and retainers inside the convention hall, Ralph Nader came to town to remind Californians that he was a founding father of Ucan.
Polls show fed-up Californians giving Nader 10 per cent of the state’s votes. If Nader’s support holds, Bush will win all of California’s electoral votes, and thereby, the White House.
It seems unfair that Gore should pay the price for his complicity in the electricity shake-down, especially as George W’s buddies joined in the rip-off.
But then, given that Gore has also entered the ghoulish contest over who is the strongest supporter for capital punishment, it is only just that his campaign may come to an end in California’s electric chair.
Gregory Palast writes the award-winning column “Inside Corporate America” fortnightly in Britain’s Sunday newspaper, The Observer, part of the Guardian Media Group, where this first appeared.
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