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August 21, 2005

Actual Journalism

The Los Angeles Times has been running some actual journalism, thanks to their reporter Steven Bodzin.

One of Bodzin's most interesting recent stories is about the repeal of an obscure but genuinely important law regulating utilities:

What enabled the regulators to shield Portland General Electric from the Enron debacle was the Public Utility Holding Company Act, a New Deal-era federal law requiring companies that owned electric utilities either to incorporate in the state where they sell power or to accept tight regulation by the federal Securities and Exchange Commission...

But after more than 20 years of agitation from industry financiers and free-market advocates, the 1935 law will be repealed when President Bush signs the energy bill, which he is expected to do Monday at a ceremony in Albuquerque.

Wall Street analysts and energy industry observers expect the repeal to accelerate the industry's consolidation, with more utilities being bought by national — and even foreign — electricity companies and by oil, construction and service companies.

Basic utilities like electricity aren't commodities like apples or DVD players. People can choose to buy oranges instead of apples, or choose not to buy a DVD player. But hospitals can't choose not light their operating rooms, and grocery stores can't chose not to refrigerate meat.

That's why, left to their own devices, corporations will use their leverage to gouge their customers as hard and long as they can. That's just good business. If you read any books about the early 20th century before the New Deal, you'll see this type of good business happened regularly.

Sadly, after the New Deal's regulation of utilities, the rape and pillage dropped off dramatically. But Wall Street never forgot how much fun the raping and pillaging had been. So they've patiently waited seventy years until everyone else forgot why utilities were regulated in the first place.

Enron was one of the first great achievements of deregulation, but there are certain to be many more. Eventually, once enough billions have been stolen and enough people have died, we'll reregulate everything. Then we'll slowly forgot why we did it and deregulate everything again around 2075.

Yes: I am an old, grumpy man. But you should still read all of Steven Bodzin's article.

Also on the Bodzin front, Tom Dispatch picked up a Bodzin article about whether Bush administration has ever actually articulated what "victory" in the "Global" "War" "on" "Terror" would be. Guess what the answer was?

I wanted to know the administration's vision of victory in the GWOT. So I dug up tens of thousands of pages of strategy objectives from government agencies and think tanks filled with negative goals like "disrupt and destroy terrorist organizations," "conquer this enemy," and "defeat the forces of evil wherever they are."

But a definition of victory was nowhere to be found. Even the word "victory" was surprisingly rare in documents from the National Security Council (NSC), the CIA, the State Department, and the FBI. Dozens of on-line databases, articles, and speeches brought me no closer to discovering the war's goal.

Posted at August 21, 2005 08:27 AM | TrackBack

Bad link to Bodzin article.

Posted by: Guest at August 21, 2005 01:37 PM

Ah yes, I was once involved in a project of creating a computer model for deregulation of electric power generation. It used the game theory to predict behavior of individual players - power generating companies. Theoretically spot-market deregulation model should work, providing there is sufficient excess of capacity and - obviously - individual players are small enough so that they can't exercise 'market power'. So much for that.

Posted by: abb1 at August 21, 2005 01:43 PM

People make sub-optimal choices, Jonathan, but with market-based incentivization protocols in place, they can eventually learn to take a little personal responsibility and assume ownership of their electrical needs. It's immoral and heartless to deny them this growth opportunity.

Posted by: Harry at August 21, 2005 03:31 PM


Thanks; now corrected.


Can you provide more details?

I like to imagine that this computer simulation was performed in California by an economics professor at Stanford, who was trembling with pride and about to run it for his grantmakers from the Olin Foundation when suddenly the power went out.


What you forgot to mention is that, besides being immoral and heartless, my position is essentially racist.

But should this really be a surprise, given the endless hypocrisy of the Left?

Posted by: Jonathan Schwarz at August 21, 2005 06:46 PM

No, this was for a small energy consulting company, nothing to do with California, few years before they had their fiasco in 2000. At that time a number of states were considering deregulating.

Posted by: abb1 at August 22, 2005 08:39 AM

Oh, Jon, you may be grumpy, but you are certainly not old. An old man might have the long memory to point out the flaws in a deregulation scheme, but probably not the energy to care. Also, he would probably have trouble with the whole "internet" thing.

Posted by: inkywretch at August 22, 2005 12:00 PM

Huh? I thought it was "internets". Dear Leader told me so.

Posted by: Ted at August 22, 2005 12:15 PM

Jonathan forgot to mention that we have entered into a contract for an undisclosed sum in which we have agreed to slip mentions of one another's work into otherwise innocent-sounding e-mails, conversations, and live interviews on ABC news. He will evaluate my work by whether all Americans begin to quote John Ralston Saul -- or at least as many Americans as Canadians have heard the name. I will judge his work by -- well, sorry, those criteria are confidential.

Posted by: bodzin at August 23, 2005 08:10 PM

I’m always amused when people start talking about electricity deregulation. One side points to California as an example of howitdoesn’t work. Yet very few ever point to the UK, where it has worked. The grid is a natural monopoly which needs to be regulated. Power generation is not and can therefore be deregulated.
That’s what the UK did. Works very well.

Posted by: Tim Worstall at August 24, 2005 04:46 AM

It's been a while since I've left there, but if I remember correctly, Lubbock has two power companies, Lubbock Power & Light and Southwestern Public Service. There is also a co-op in the rural areas ouside of town.
LP&L has lower prices and better service.
It is not necessary that electrical power should be a monopoly. Consider the current scheme of local telephone service, the Nixon price fixing of old wells vs new wells.
It comes down to metering and measurement.

Posted by: Progressive Traditionalist at August 31, 2005 03:35 AM