News Archive 2003

Politics and Energy: the U.S. Record Is Dreary Indeed
The Wall Street Journal
George Melloan
August 19, 2003

Before the lights went out Thursday, a debate was raging in New York over nuclear power. Unreconstructed Naderites, under the banner of something called "Riverkeeper," had launched a scare campaign demanding shutdown of the big Indian Point nuclear power station on the Hudson. Senator Hillary Clinton was making sympathetic noises, although cagily withholding outright endorsement. Gov. George Pataki was trying to find a fence to straddle.

As New Yorkers tried to sleep on sidewalks Thursday night, or trudged 10 miles to outer Queens, or climbed 50 floors to a hot, blacked-out apartment, they might legitimately have asked: "What the hell is going on here? They're talking about closing down 20% to 40% of the greater New York power supply, and right now we don't have any power at all."

Welcome to the bizarre world of energy politics. Generating electricity is a simple technology, more than a century old. You figure out a way to spin a turbine generator, either with steam or flowing water. Then you wire the electricity out to users. The technology becomes a little more complex when you have to choose the optimal way of doing this. Hydro is great but requires big investments in dams. To make steam, you have a choice of coal, nuclear, natural gas, manufactured gas or oil. There are a few other complexities, but on the whole, it isn't rocket science. Any Third World country can do it.

The complicated part, for reasons not easily fathomed, is the politics. Every politician seems to want to get his mitts on power supply. Millions of Naderites are trying to peddle windmill farms, even though these inefficient H.G. Wells monsters already are destroying the scenic beauty of places like Palm Springs and the Dutch coast. Nuclear power, a clean, safe and potentially cost-effective way of making steam, was stalled by the protestors and lawsuit filers in the U.S. years ago, although it is showing renewed signs of life.

The energy wars date back at least to the battle between the public and private power interests in the 1920s. Herbert Hoover and FDR at least built some nice hydro dams that generated cheap power, if you didn't count the cost to taxpayers. There was a time-out for World War II, when every kilowatt anyone could produce was needed. The private utilities made peace with government in the 1950s, settled in to their familiar role as state-regulated public utilities, dotted big coal-fired plants around the country and ratepayers footed the cost-plus bills.

The 1970s brought energy madness, when Congress and Richard Nixon slapped price controls on oil to supplement those that already existed on natural gas. Predictably, supplies dried up and consumers shivered in the dark and spent hours in gasoline queues. Jimmy Carter gave tiresome speeches about the "moral equivalent of war," and made his exit after one term.

Cured, at least temporarily, of price controls, the political class submitted to substantial deregulation by Ronald Reagan. Deregulation took on a life of its own, as politicians began dismantling the bargain they had made with the regulated utilities. They encouraged more competition, opening up the market for "co-generation" so that small suppliers could hook into the power grid created by the large utilities.

But the deregulators forgot a few things. One important one, politically sensitive, of course, was to deregulate the rates paid by consumers. Thus, when the price of natural gas jumped sharply in the late 1990s in response to gas-fired electric power having become the jus du jour of the environmentalists, there was suddenly a problem, particularly in California. The ninnies in Sacramento had decreed that utilities buy their electricity in the spot market, where prices were going through the roof. But these providers still had to sell at controlled prices. Naderites chortled as California utilities started going bankrupt. They covered their mouths when Golden Staters became very annoyed at brown-outs and business flight. Gov. Gray Davis, now subject to a possible October recall, certainly isn't laughing.

The deregulators also forgot something else: transmission. The only way you can get electricity from a generator to someone's air conditioner is with wires, until someone invents radio transmission of electricity (which probably would carry some serious dangers of electric shock). So while producers were designing ways to wheel-and-deal electricity to buyers through computerized exchanges, no one wanted to confront the fact that the old-fashioned copper wires were getting overloaded. Transmission, always a nuisance for utilities, was still regulated, so the incentive to invest in more wire was minimal. While use of electricity was expanding by 30% over the last decade, the transmission grid only grew by 10%.

Judging from the TV interviews over the weekend, the big blackout is getting political attention. Michigan Democrat John Dingell, who has played energy politics in Congress for years on end, vowed on Fox News Sunday to support quick passage of a stripped-down version of the administration energy bill that has been languishing in Congress for two years. Perhaps contentious issues such as oil drilling in the Alaskan Wildlife Refuge could be bypassed, he thought. Whether the Senate, where Democrats have been the big bottleneck, will be equally cooperative (if that in fact was what Mr. Dingell was signaling), remains to be seen. But surely even Hillary must be sensing that the voters in New York could someday become as mulish as Californians if subjected to sufficient abuse from those who rule them.

As for the Naderites, it will be hard for them to give up their campaign to demonize the public utilities and turn us all into users of pure "renewable" energy generated by windmills and solar panels. They will continue no doubt to argue that it will be relatively easy to replace the 2,000 megawatts Indian Point produces if you just turn Westchester County into a windmill farm. They, after all, succeeded in killing off another New York state nuke, Shoreham, not long ago. So why give up while you're winning? They might want to ask themselves after Thursday night whether they are still winning

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