blackout
homecaliforniamy billnew businessregulationthe future

photo collage
discussion: What are your views on California's power crisis?  Is the Bush/Cheney Energy Plan setting the right course for America's energy needs?

Dear FRONTLINE,

This message is in response to another fellow Californian's (Sugi Sorenson- La Canada, CA) opinions regarding the so-called 'facts' surrounding California's current situation.

Sugi wrote, "You would have discovered California taxpayers subsidized the creation of outrageously expensive renewable energy power plants (e.g. $200-$300 per megawatt-hour for photovoltaic produced electricity) that generate a paltry 12% of California's total energy consumption."

Where this comment falls off the mark is the assumption that Solar Powered plants are expensive to build. I think that it is dangerous to so quickly forget the perils of Nuclear Energy as the commentor also notes as being "Safe." More Nuclear Power plants were canceled than were completed during the latest surge in Nuclear Power Plant Production. The reasons for these aborted Nuclear Power plants were obvious, people were beginning to see the danger in taking relatively benign Uranium and bombarding it with radiation until it is 2,000,000 times more radioactive than before... to date there is still no safe way to dispose of this Nuclear Waste. The whole notion of Nuclear Energy being to cheap 'to meter' was continent upon the belief that by the time the Nuclear Waste stockpile reached critical level thee scientific community would have come up with a way to dispose of or re-use the 'spent' Nuclear Waste. Nuclear Power Plants are highly toxic, radioactive and incredibly expensive to maintain due to their inability to safely dispose of spent fuel rods and costly accidents like Chernobyl and Three Mile Island. Currently Russia is vying for the ill-concieved position of International Nuclear Dumping grounds. Let there be no mistake... Nuclear Energy is not safe...

Sugi also wrote, "You failed to mention that after Freeman moved to the LA Department of Water and Power, it and other municipal power generators were exempted from the 1996 deregulation scheme. You also failed to mention the dirty little secret that LADWP gets over half its power from coal fired plants in Utah, Nevada and Arizona."

The reason this argument is so false is that LADWP was exempt from the 'De-Regulation" scheme because it is a Municipal Utility that does not operate for profit and in fact also operates without taxes being levied on the citizens of to subsidiz the price of energy production. The latter is a common misconception of Publicly Owned Utilities. Their motive is to provide the cheapest energy for their customers at all costs, the real answer to this so-called energy crisis canned be summed up in three words, 'Public Power NOW!' There are numerous facts surrounding the phenomena that customers of not for profit utlities or Municipal Utilities have and will continue to pay lower rates due to the fact that when it comes to electricity, the free market idea does not work and the most streamlining comes from locally owned an operated utility companies hands down. Support CA State Senate Bill SBX23 to help make it easier to create Public Power Districts in California. Also support CA State Senate Bill SBX1 that will instill a windfall profits tax to help recoup some of the exorbitant profits made by the Energy Cartel in Texas.

Joshua English
davis, ca


Dear FRONTLINE,

It was more than obvious where Curt Hebert stood on the issue of fair and reasonable power rates and it was not with the American public. If he believes that just letting the free market find it's level and corporate leaders will provide us with "just and reasonable" utility rates, then he is an extremely naive person.

All through our nation's history there have been examples of greedy and unscrupulous people who when left unchecked, gouged and defrauded the public. In the Civil War there were suppliers who sold worthless goods to the US Army... In the early part of the twentieth century, President Theodore Roosevelt pushed through legislation to break up the "Trusts" that the Robber Barons were using to monopolizing US industry. More recently, laws have been passed to protect the public in the wake of the Junk Bonds fiasco of the 1980's....

Regulating energy, to protect the public from price gouging does not jeopardize democracy, it enhances it.

The State of California probably does deserve a lot of the blame for the current crisis by not planning for increased demands and enacting poor poor legislation. However, it also appears that the FERC and it's chairman are doing nothing to bring runaway prices in check. Moreover, they appear to be a rubber stamp for the nation's utilities.

lawernceville, ga.


Dear FRONTLINE,

Franklin Roosevelt was right. There are such things as natural monopolies. They worked for over 50 years and provided the United States one of the most stable and capable utility infrastructures in the world. The one scene in BLACKOUT that really summed up what is happening is when the economist described the meeting between the PGE engineers and and the Enron managers. The only thing the managers wanted was to milk every penny from the deal. Who got screwed was not their concern.

The problem goes beyond electric power. In Georgia we had similar problems, albeit on a much smaller scale, with natural gas this past winter.

Thanks for an excellent program.

Tom Roderick
atlanta, georgia


Dear FRONTLINE,

Overall, a mediocre job at covering this highly complex issue.

Why does the nation have to swing on the whim of the two coasts? Anytime they have a hiccup, the rest of the country is expected to rush to their aid and fix the problem. I can tell you that just a few years ago when natural gas was selling at under a dollar an MMBtu, no one from California or New York was rushing to provide subsidies to the oil patch. In those days, the PG&Es and SoCals of the world were pocketing the money as they cut unwanted supplies at the California border forcing prices down and producers to shut-in production (by the way, when you shut-in a well, you dont get those dollars back until the well has depleted 20 years out). No one screamed collusion then!

I would be interested to see the way the infamous El Paso graph of unutilized capacity was calculated. El Paso has two lines that deliver into California a north and a south system. The south system delivers to SoCal at Ehrenburg and the north system delivers to So Cal, PG&E and Mojave at Topock. This latter point Topock is the more liquid point (desirable to the marketplace) and so everyone tries to get their gas to Topock rather than Ehrenburg. This may explain why El Paso shows unutilized capacity during periods of rising prices, but the reason is the market is not there pulling the gas from the Ehrenburg point, not producer or pipeline collusion.

California need not play the innocent victim role in this anyway. The CA Regulator who lamented how out gunned they were relative to those big bad energy marketing companies was laughable. California, and all other states for that matter, can surely higher professional traders just as the marketers do.

The California lifestyle appeals to many, but it came at a cost no development of the infrastructure. Its sad to have to say it, but California made its own bed . . .

Michael Jensen
broken arrow, oklahoma


Dear FRONTLINE,

I may have missed something since I caught only the last portion of the program, but I never heard the concept that the problem is mostly of California's own making.

I moved from the state in the mid-1980s and by then it had stopped all power generation plant construction and planned to rely on "imported" power. Even then, it was clear to me that CA was courting disaster. It took much longer than I anticipated for the "chickens to come home to roost", but come home they have.

Yes, the energy companies are making large profits, but CA created the problem and can only solve it by building more power generation and transmisison capacity. The energy companies took the risk and invested capital in electicity infrastructure when CA was choosing not to do so.

I am sure that the situation is more complex than I state, but CA still has to take much of the heat for its problems and I do not see anyone in that state "stepping up to the plate."

Thanks for an insightful program.

jackson, ms


Dear FRONTLINE,

Energy is only one area in which deregulation/privatization is being pushed. Here are some broad considerations to think about, whenever someone promotes deregulation/privatization.

1. I challenge any and all readers to name one competitive sport that does not require rules and referees, to prevent everything from minor cheating to major mayhem by the players. Our business model ("capitalism") is competitive. Saying that its players don't need regulation (governing) is as foolish as claiming that high-stakes professional football could be played safely with no penalties or referees, and the rules being made up by the players as the game progressed. 2. Competitors don't try to compete, they try to win. In business, "winning" is market dominance, high profits, etc.-- i.e. winning sustained over time, not just for one moment of glory. In business, then, success equals dominance--not just of markets, but also dominance over people and governments, because that's what markets are made of.

3. If you want to blame somebody, think of this: We as a culture give lip service to democracy, but richly reward and glorify dominators. The fault, and the blame, is shared by all of us, not just that part of us we call "them".

4. Level playing fields do not give everybody an equal chance. Level playing fields favor the biggest, best equipped, and baddest players. If you have players of many sizes, get a clue from Mother Nature. The "playing field" needs to include rough terrain, with trees and bushes and rocks, etc., so there are places for the littler guys to survive in. 5. If you didn't understand 4, immediately above, compare Viet Nam and the Desert Storm. Desert Storm was a classic example of battle on a level playing field. It wasn't a war, it was a massacre by the larger, better equipped competitor. . . In short, deregulation is fine if you don't mind being ruled by the corporate bottom line instead of the Constitution, and buying your necessities (such as electricity) at the national equivalent of the company store.

Alan James
escondido, ca


Dear FRONTLINE,

Your report reached new lows in journalistic integrity and is a disgrace to Frontline and PBS. In his eagerness to vilify Texas energy companies and the Bush administration Lowell Bergman failed to answer the most important question about the crisis -- why did California's power supplies become so inadequate in the first place?

The only answer offered during the show was by an environmentalist who claimed power producers wanted to increase their profits by limiting their supplies and raising prices. Among dozens of economic fallacies uttered on the show, this was the most ludicrous. Companies can increase profits by shutting down factories and jacking up prices? Eureka! If this were true you deserve a Nobel prize in economics and every business in American now has the formula to success -- shut down the factory line!

Questions that should have been asked never were. Why did California have to buy power from Texas energy companies in the first place? Why did California turn to natural gas plants instead of other sources such as coal and nuclear? What about all the renewable energy sources such as wind, geothermal, biomass, and solar that were supposed to rescue California from the evils of fossil fuels and nuclear power? Why did the California PUC require all power purchases to be made on the spot market? Why were the utilities forced to sell their generation plants?

These questions and others were never asked, probably to save embarrassment and shame due the state regulators, politicians, and environmentalists who got us into this mess to begin with. If you had done the research, you would have discovered that regulatory costs and delays in creating new power plants in California are greater than in any other state. You would have discovered clean air standards, ushered in by environmentalists and implemented by receptive politicians, effectively eliminated cheaper and safer energy sources such as coal and nuclear. You would have discovered California taxpayers subsidized the creation of outrageously expensive renewable energy power plants (e.g. $200-$300 per megawatt-hour for photovoltaic produced electricity) that generate a paltry 12% of California's total energy consumption.

You would have learned the CPUC forced utilities (and therefore California consumers) to buy power from these renewable energy plants and pay inflated prices. You would have discovered that California central planners vastly underestimated grow rates in electricity consumption. You would have discovered overzealous state regulators forced perfectly good nuclear power plants to shut down under pressure from environmentalists.

Your portrayal of S. David Freeman as the voice of sage wisdom from the enlightened municipal power companies was completely off the mark. You failed to mention that Freeman was one of the architects of President Jimmy Carter's disastrous energy policy and Governor Jerry Brown's disastrous energy policy that put California on the road to doom in the 1970s. You failed to mention that after Freeman moved to the LA Department of Water and Power, it and other municipal power generators were exempted from the 1996 deregulation scheme. You also failed to mention the dirty little secret that LADWP gets over half its power from coal fired plants in Utah, Nevada and Arizona.

All in all this was disgraceful journalism at its worst.

Sugi Sorensen
la canada, california


Dear FRONTLINE,

Grey Davis and the rest of the politicians in this state made it LEGAL for these energy companies to do what they do. Don't blame them when they do it!!

The fact is the politicians (BOTH PARTIES) in Sacremento were in the pocket of "Big Environmentalists". While our economy AND population grew in the last ten years, not one power plant, not one refinery or natural gas plant was built in this state due to environmentalist objections. This is NOT rocket science. Get on with the job of building more power plants IN STATE. Increase supply, drops prices. Again simply economics.

Vince Shahayda
san diego, california


Dear FRONTLINE,

How can a federal agency such as the FERC act like so many police officals in the south acted during the civil rights era?

Congress should be able to demand that the FERC act and regulate wholesale prices, especially since gouging has been running rampant. if necessary, congress should interpet, for the FERC, the meaning of fair and reasonable.

cheryl c.
los angeles, california


Dear FRONTLINE,

There's a lot of finger-pointing, but in my humble opinion, they've overlooked the real culprits.

Who were the lawmakers behind the changes leading to this mess? i.e., who proposed the changes first? who pushed the legislation through? where did their campaign funds come from at that time? etc, etc.

lenoir, nc


Dear FRONTLINE,

Before I watched the program, I thought that an interstate power grid would be good for consumers. Now I think it could make the situation even worse.

Once the power grid is established, Enron goes to the generators, and says "You have more generating capacity than your customers can consume. We can sell your excess capacity. But.... either we sell all your energy, or none of it." They will use reasons like "We need to know how much we can sell, and if multiple brokers are selling your power, they could over commit."

Once Enron does this with enough generators, they will control the market, and you will have to pay them whatever they want.

The other problem is that if power can be moved easily, then it opens the market for blackmail by brokers. If you have adequate capacity, but you do not have the option to sell it in other places, the brokers cannot say "Pay what I want, or I will sell it to someone else." When power cannot be moved, this threat does not exist. Once the grid is built, do you really believe that they will not do this? If they can make a 700% or even 900% profit, why not more?

And what about the people who are retired, and on fixed incomes? What will deregulation do for them?

Bill S.
san jose, ca


Dear FRONTLINE,

I have always admired Frontline for its lack of bias in its reports. However, I, as many other viewers, braced for the worst when I saw that the New York Times contributed to the report. It is sad that my worst fears were correct.

There certainly was a great deal of blame to go around. Most, in the blame game, put the onus on former Governor Wilson. When the deregulation scheme was set in motion the wholesale vs. retail market spread was very favorable to the utilities. They (PG&E et al) lobbied and received from the state a freeze on the retail side as they anticipated a reduction in wholesale rates. They thought the extra profit would be a slam-dunk. Then two things happened. The country and the state of California in particular went into super-boom status, their economies growing at unprecedented rates. At the same time drought swept the Northwest. The snow pack was 60% of normal. Surplus power disappeared.

The Japanese saying "Fix the problem, not the blame" seems to have been lacking in the report. Clearly the return to long term contracts would have made an immediate and significant impact.

Mistakes were made by all involved parties. Why was there no discussion on what could be done immediately? Congressional remedies were not even mentioned.

Richard Gallant
durham, nh


Dear FRONTLINE,

I found "Blackout" a thoroughly entertaining and informative piece.

It seems the crux of PG&E's recent financial shortfall is the inexplicable policy of purchasing energy in the spot market, resulting in a catastrophic exposure to the market's inherent price volatility. Why has the CPUC's regulation regarding long term contracts not been clarified? Furthermore, why was Governor Gray Davis not asked to explain this point in detail?

State utilities should be authorized to hedge their exposure to short term price volitilities. Their resposibility as advocate includes this mitigation of risk, surely a choice the consumer would make if given the freedom to purchase on their own behalf.

I noticed that the environmentalists are allowed to lob accusations against big business and politicians, without proposing viable solutions to the long term energy needs of California's growing economy.

Office buildings in downtown San Francisco are currently reducing energy consumption by shutting lights and computer terminals during off hours. Isn't this a good thing for the environment? Are glittering skylines and neon billboards our birthright? Free market forces will encourage conservation and promote competition from alternative sources. The tree huggers' real agenda is collectivism, not conservation.

Joe Harte
brooklyn, ny


Dear FRONTLINE,

Frontline does a great job investigating into the problem of the power crisis in California. I must admit when I heard it was the New York Times helping out I knew right away that the current adminstration and all corporate executives in the energy business will be targeted. I watched the whole program and I was right. The media is getting so perdictable!

Frontline never went ahead and investigated the demand side of the issue. What about the refineries that are not being built? What about the fines California is paying so states like Texas can put their older powerplants online that are illegal to operate because they pollute? There was not enough about the free market. Every business in America that is making money is somehow evil. Yes it is a shame that California needs help with energy. It's a shame that the strongest nation in the world is in an energy shortage. Nothing in the program offered advice on how to increase supply. There is oil and gas all over America and we can get get to it without damaging the enviroment.

troy, mi


Dear FRONTLINE,

As many others have already observed, California's electricity shortage results from years of increasing demand that was not offset by investments in new generating facilities. Instead, California allowed itself to place increasing reliance on electricity imports from other western states. Now increased customer demands in those states, combined with a drought in the Northwest, have reduced imports to California. The resulting shortage is clearly a failure of the traditional regulatory approach to manage the industry in California. Enron and the other energy marketers played no part in causing the shortage.

That said, these energy marketers unquestionably make the financial consequences of the shortage much more dire. Absent any real elasticity in customer demand, the only force restraining a supplier's asking price is the fear that his/her plants will sit idle because others agree to produce for less. Of course when there is no excess in supply, there is no fear of sitting idle and asking prices soar.

California was bound to have "rolling black-outs" this year regardless of the decision they made on "deregulation". If they had stayed with traditional regulation, however, they would not be paying billions of dollars more for the electricity they are getting.

Contrary to the impression they wish to leave us with, a truly open, well ordered electricity market does not best serve these energy marketers. They make much more money in dysfunctional markets like California's where slowly growing, inelastic demand can be counted on to produce shortages, and where their level of sophistication gives them great advantage over their less knowledgeable trading partners.

And this brings us closer to the real point of your program. These energy marketers are using their clout with government officials to push their style of "deregulation" across the country. If the energy marketers can set the rules to their liking, then it is only a matter of time (and increasing customer demands for electricity) before we all have our own turn at the "California Experience".

Keep up the good work!

vancouver, washington

more



home - california - my bill - new business - regulation - the future - new york times reports
video - interviews - glossary - discussion - press - tapes & transcripts - credits
FRONTLINE - wgbh - pbs online

power lines photo ©2001 entropy media/images
web site copyright 1995-2014 WGBH educational foundation

SUPPORT PROVIDED BY

NEXT ON FRONTLINE

Losing IraqJuly 29th

FRONTLINE on

ShopPBS