Secretary Richardson, basically, what was the Clinton Administration's
policy on electricity and deregulation?
Richardson, the Secretary of Energy from 1998-2001 during the Clinton
Administration, is now teaching at Harvard University's John F. Kennedy School
of Government. Regulated monopoly utilities, says Richardson, have left the
U.S. with a "third world power grid" and he believes that deregulated
electricity markets can work. He criticizes the Bush Administration's plans to
increase power supply sources without focusing equal attention on conservation
efforts and trying to mitigate demand. FRONTLINE interviewed Richardson on April 10, 2001.
We wanted to foster competition. So, for three years--unsuccessfully with
Congress--we tried to persuade them to do a competition bill that brought more
investment. ... But the Congress, talking free market, said no. ...
For two years I went around the country. I held 11 electricity
summits--including in California--a year before this crisis, and I said, "You
guys, because of the way you constructed your electricity competition bill,
you're going to have a problem, and you need to address it." I said it in New
York. I said it in New Orleans. Nobody listened, because the Republican
Congress didn't want to give President Clinton a victory on an electricity
But this really wasn't a high priority for the president. He never spoke
out about this issue since 1993, when he made a remark about it.
No, the president did speak out on this. But [it's true that] it was not a
high priority issue in the Congress and in the administration. It was
something that I was pushing very hard, that the Energy Department for three
years had been pushing. ...
When did you first realize that there was, if you will, an energy crisis or
an electricity crisis in the country?
I realized it when a lot of the grids that I visited were not, in my judgment,
functioning properly. When we did the Y2K exercise, I saw that a lot of our
grids were antiquated, that they had not gotten proper maintenance, proper
investment. ... I saw the fact that we've got coal- fired plants, and we don't
have new power plants that are clean, that are gas-fired, that are natural gas.
And I said to myself, "We're going to have a crisis here unless we have more
[You said that the U.S. has a] "Third World power grid." What do you
The United States has a first-rate economy. We're the superpower of the
world--the best military, a booming technological economy--but we've got a grid
that is antiquated, that is Third World, that needs beefing up. We've got very
weak power transmission lines and generation capacity. That's because there
hasn't been investment in our electricity grid because there's been no
competition, because there's been a lot of monopoly control of utilities in
What appears ironic to us is those monopoly utilities--Southern Company is
usually given as the example--are at odds with Enron Corporation, which wants
to have more competition nationally. Enron, which is thought of as a Bush
administration ally, appears to be allied with Democrats on this issue, versus
the Southern Company, which is aligned with Republicans. It doesn't seem to
There were several monopolies--including Southern Company--that fought very
hard to kill any electricity competition legislation, because they had a
monopoly in the South, in the Southeast, and they didn't want that to change.
Enron and the Clinton administration and many Democrats, too, wanted to see
competition. We wanted to see consumers be able to pick their electricity
utility. It was a strange coalition. ...
So the power issue is not a Democrat or a Republican issue. It seems to me
like it crosses party lines.
There are a lot of special interests involved. ... You had consumer groups, the
Clinton administration, Enron [wanting competition]. And then on the other
side, you had the Southern Company, the Edison Electric Institute. ... The
Republican talk of deregulation and restructuring only goes so far when a lot
of special interests--special utilities that are very strong in the utility
industry--don't want to see any change.
And can even overrule, in a sense, people who are described as George W.
Bush's closest friends and biggest supporters?
Well, there were some utilities that wanted deregulation that were supporters
of President Bush and supporters of our bill. So you can't say, "This is the
Republican component. This is the Democratic component." What I wanted to see
was a bill in Congress that allowed more investments, more renewable energy, a
public benefits fund, green power--[something that would] be able to permeate
the electricity industry that basically was a monopoly power dominated by a
So when the crisis hit in California, what was your reaction?
We said, "We told you so. You should have acted sooner. We warned you."
Nonetheless, we felt it was our obligation, as a federal government, as the
Energy Department, to try to help California. [It] is the sixth largest
economy in the world. It was a terrible, botched deregulation effort, but that
doesn't mean you let the lights go out in California or you have rolling
blackouts. ... This is why I issued some of the emergency orders on electricity
and natural gas--to basically keep the lights on when a bunch of power
marketeers didn't want to send power into California.
But that's the free and open market--these power marketeers, and their
ability to buy and sell based upon the marketplace.
I think those power marketeers didn't cheat, but they took advantage of the
price situation. The fact that there were wholesale price caps and a very
botched market destroying legislation in the deregulation effort caused these
huge price increases.
So you don't believe that ... this was a manufactured crisis?
No. I believe that the deregulation plan was botched. Did the power
marketeers take advantage of the situation? Yes. To make more money? Yes.
But the rules of the game were created badly by those that passed that flawed
deregulation plan in 1996--[former California Governor Pete] Wilson and a
legislature that, basically, made market power contingent on a lot of caps and
special dispensations for San Diego. It was a typical deal that blew up in
their faces. ...
But then, as I understand it, the Federal Energy Regulatory Commission has
real power in this area in terms of regulating the market, investigating the
One of my big disappointments as energy secretary was, number one, that I
didn't control FERC, that it was an independent agency that I had little power
to tell them what to do. And, secondly, I had thought since it was a
Democratic dominated FERC--three [Democrats] to two [Republicans, with] a
Democratic chairman--that they would do their job, that they would enforce the
laws of making sure that market competition was respected, that they would make
sure that consumers were not harmed.
They didn't do that. They adopted, "Let the free market dictate every policy.
Let's not intervene." I think it's desperately needed that we have temporary
price caps in California, in the West, for about a year, until the markets are
calm, until we get more capacity. I pushed for that my last six months as
energy secretary--and I didn't come close. ...
Wait a second, now. Three Democrats, a Democratic president. ... You're the
secretary of energy and you can't talk to the Democrats on the commission and
say, "Look, this is what we need to do," and they fall in line?
Statutorily, I am prevented from talking to them about rates. ... This is what
my lawyer is telling me. That doesn't mean that I can't publicly advocate and
they read what I say in the press, but I pushed very hard for those temporary
rate caps. I felt that they were critically important, and late last year, had
we had those rate caps; had we had the state of California raise rates
modestly, I believe that we could have had an overall deal then, avoiding the
problems of today.
You know, it's going to be a little hard for people out there to really
believe that the Clinton administration couldn't have done something with this
commission that no one had ever heard of.
... This is not a political hack agency. This is a very serious agency that,
in my judgment, has not done its job. They've got very qualified people.
They've got oversight powers. They just didn't exercise it, because there were
members of the commission that felt, sincerely, that market forces should
dictate prices. ...
What I was frustrated [by] is that we always had 2-2 votes, [and] we couldn't
get the third vote for some temporary rate caps. We couldn't do that, and you
can not directly instruct the commissioner. It's the law. ... So it's not a
case where the White House and the secretary of energy can dictate this.
I still think that FERC should have been more aggressive. They should have
gone out and looked at the disruptions in the market. They should have found
ways to promote wholesale competition more effectively that they did. They
were timid. They were weak. They should have been doing this job. ...
This little old commission that's out of the way, that no one had ever heard
of, all of a sudden stood in the way of the government of the United States
coming to the rescue of California?
They're not the only villains. They're not. I don't want to paint them as the
villains. They should have done more. Everybody should have done more. But
the problem in California was their own creation. It wasn't a national fault.
It wasn't because the Congress or the Clinton administration did something.
Their own legislature, their own governor in 1996 crafted a very flawed
deregulation plan that they're now paying for. ... They are to blame, but there
are outside forces that could help them get out of that mess--and this is where
the problem was. ...
We interviewed one of [FERC's] veteran staff members yesterday who said,
basically, that they don't have the tools. They don't have the budget. They
don't have the people. They have no way of being the real cop on the
If that's the case, they should get a beefed-up staff. The problem though, is
their five commissioners that have votes. Those five commissioners, in my
judgment should have been more aggressive. ... Somehow it was very hard for
them to get a majority. It was very frustrating because I'm an activist energy
secretary and I wanted to fix the problems in California, and I wanted to help.
I used every power I could use: emergency power to bring in electricity;
emergency power to bring in natural gas; dictating to power marketeers that
they directly intervene in the market for emergency services. I couldn't tell
FERC to do a rate cap. ...
It's our understanding that [former Secretary of State] Warren Christopher
and [former Secretary of the Treasury] Larry Summers ... talked with the
[California Governor Gray Davis] in pretty blunt terms about, "You've got to
take charge of this situation. You've got to do something." And they got
Yes. Well, it was frustrating. I think Governor Davis has done everything he
can. This was not his fault. But, raising rates, taking stronger action--we
were hoping he would do it in December, do it a lot sooner. He didn't do it.
Well, what we've got now is a near-disaster. We've got the largest utility
bankruptcy in history. We've got blackouts predicted for California for this
summer and also blackouts predicted for parts of the Northeast. ... Is that
really the legacy of this deregulation effort?
This was a flawed deregulation in California.
Nationally, deregulation in many other states has worked, and worked well.
Deregulation in California has not worked. But in Pennsylvania, in New Mexico
and many other states, deregulation has worked. ... In the Northeast,
deregulation has worked--in Massachusetts, in Vermont. ... In the Midwest, it's
been reasonably successful. ...
We should not pin the blame on deregulation on a national basis on what
happened in California. In California, it was called deregulation, but it was
really not deregulation. It was a few fixes for certain areas and certain
utilities that, in the end, collapsed, because you didn't let the market
Do you think that deregulation is working?
I think nationally, deregulation across the board, generally, is working.
In the electricity market?
In the electricity market. But the right deregulation--that does not bar
long-term contracts, that enforces having green power, that has energy
renewable as an option. Deregulation is not bad if it allows the consumer to
get competition and to pick their electricity unit and to break up monopoly
We haven't been able to document yet any real rate reductions anywhere for
any sustained period of time--and we've been looking. But in addition,
engineers and others that we've spoken with say that electricity is just a
different kind of commodity. You can not deregulate this commodity. It's like
air or oxygen for an industrial society. When you play in the marketplace with
this, you're playing with disaster.
The counter that I say to that is, if you don't deregulate and restructure,
you're going to let monopoly utilities control the market. That's what
happens. That's what's happening now. And what you want is, for real rate
reduction and better competition to happen, to break open the control of
several utilities and allow consumers and states to pick competition.
So the utilities were not performing correctly? Is that your perspective?
I mean, they were reliable...
Their rates were relatively low.
I don't believe so.
Compared to today.
I think if we leave the system the way it is and not deregulate it, and not
open it up for competition, you're going to have monopoly power. And you're
going to have what is the biggest potential failure for American energy, and
that's the ability for new investments in new power sources, in new
transmission, in new generation, in new capacity sources.
That's the biggest problem we face with increased demand, increased population,
and increased economic development. Unless you bring more competition to the
system and more investment and more green power, and say to the coal people and
the big oil people, "You're not going to be the only ones. There's going to be
solar and wind and green power and fuel cells," then we're going to be hurting
as a country with our energy capacity.
It sounds great, but the Bush administration is now in power. They're
saying, apparently, "Bring back more nuclear power." They're going back on
various regulations that were put in place when you were still in office on
conservation and on the environment. So that's not exactly what we see
I'm very concerned about the direction the Bush administration is going.
They're concentrating on oil [and] nuclear ... production only. You've got to
have conservation also, energy efficiency, fuel efficient vehicles. You've got
to make air conditioners, which are the biggest cause of electricity, become
The worry I have is that industry friends of the Bush administration are going
to roll back all our conservation and energy efficiency measures that we
started, and that in the end, are going to be almost twice as important in
making us less dependent on OPEC and other foreign sources that are providing
most of our energy.
The Bush administration says that your administration did not have an energy
policy. You had an environmental policy, and that's why we're in the hole
we're in; that's why we don't have capacity; that's why we don't have enough
The Bush administration's energy policy is [to] criticize the last one. ...
They're not intervening in California to help California and the West. They
say, "Let the market dictate what happens there." ... The Bush administration
is using the panic, "It's a crisis," theory to energy also, as they did with
the economy and their tax cut rationale. On energy, the Bush people are
saying, "We've got an energy crisis, so let's drill in the Arctic,"--a fragile
ecosystem. Or, "Let's drill anywhere and the heck with all environmental
regulations." That is wrong. They're not emphasizing conservation, energy
efficiency--the demand side. It's all production. It's all drill, drill,
There has to be a balance. In the Clinton administration, we promoted that
balance. But the Republican Congress would only approve a little bit on the
production side, and nothing on the conservation and energy efficiency side.
So we have the stalemate. This is what worries me about, in the end, producing
a viable energy policy. ...
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