Blackout Puts Privatizers and Deregulators on Hotseat

FirstEnergy fallout may have huge political implications for deregulation crusaders like George Bush and Ernie Eves

FirstEnergy, the Ohio company at the centre of last week's massive power blackout, has a long record of safety, operational and financial problems.

It also has close links to the Bush administration in Washington and a history of spending big on political lobbying while taking shortcuts with the public.

The company failed to report a shutdown two hours before the blackout last Thursday. The reason? It was not legally required to do so. Thus, other utilities remained blindsided when they might have taken action to prevent the biggest blackout in North American history.

Now FirstEnergy is scurrying for cover and so are politicians everywhere, not only those directly connected to it, like George Bush and Dick Cheney, but those indirectly associated with the blackout by virtue of their unbridled advocacy of privatization and deregulation.

In a single, dramatic stroke, the blackout switched off the power on 50 million North Americans and switched on a debate about the future of electricity and who should own and control it - government or private enterprise.

Ontario Tories vulnerable

Ontario's Tory government is especially vulnerable, after allowing the Ontario power system to deteriorate and playing politics with it all the way back to 1995, when Mike Harris was first elected.

During his final months as premier in late 2001, Harris announced plans to sell Hydro One, the transmission grid that delivers electricity across Ontario. It would have been been the largest privatization scheme in Canadian history.

But the Tories ran into a major problem when the courts, in a case filed by the labour movement, ruled that the province had no legal authority to sell off the utility.

Ernie Eves, who succeeded Harris, tried to salvage the deal for the government's private sector friends by introducing legislation permitting the sale of 49% of the utility.

But he was ultimately forced to call off the deal and Ontario's hydro crisis has continued to escalate while the government drifts, concentrating more on his own re-election plans than solving the province's urgent problems.

Finally, the issue exploded last week in Eves' face, and in the face of privatization hawks everywhere - up to and including those in the U.S. White House.

$1,044,807 in political donations

In 2002, FirstEnergy gave $1,044,807 to political parties 70% to Republicans and 29% to Democrats the 10th-largest amount contributed by an energy and natural resources company and the sixth-largest amount contributed by an electric utility, according to the Center for Responsive Politics. FirstEnergy spent another $2,259,975 on lobbying in 2002

In June, Peter Burg, the CEO of FirstEnergy, hosted a fund-raiser for Vice President Dick Cheney, raising $600,000 for the Bush re-election campaign.

(Anthony Alexander, president of FirstEnergy, was a member of the Bush administration's transition team when George Bush moved into the White House in January 2001.)

ABC News topped its national newscast Monday night with a report that FirstEnergy, based in Akron, cut back on workers who maintain its transmission lines and that its Ohio nuclear plant was shut down last year because of serious violations, including a hole the size of a football in in the top of the reactor vessel.

'Given a pass by regulators'

A petition to shut the reactor down was filed by Ohio Representative Dennis Kucinich, long a fierce critic of FirstEnergy and now a Democratic presidential candidate.

"In order to protect their stock position, they've made shortcuts on maintenance. They covered it up and they were given a pass by regulators," Kucinich says.

The same thing happened with the transmission lines that failed, he added. "They've got a transmission system that's long been in need of upgrading, and they haven't."

FirstEnergy owns seven subsidiary utilities in Ohio, Pennsylvania and New Jersey. It was formed in 1997 from the merger of Akron-based Ohio Edison, the Cleveland Electric Illuminating Co. and Toledo Edison. In 2001, it acquired General Public Utilities, which owned Pennsylvania Electric Co., Metropolitan Edison near Reading, Pa., and New Jersey Central Power and Light.

The company has more than four million customers and ranks as the fourth largest privately-owned utility in the United States with annual revenues of $12 billion.

Profit first, safety second

"The mentality of the FirstEnergy senior management [is that] they place a higher regard for profit and power production than the safety of the public," says consumer lawyer Howard Whitcomb, a former FirstEnergy senior manager and a longtime of critic of the utility.

FirstEnergy officials complained Monday that the blackout resulted from a "very complex situation far broader" than factors within its own facilities. But that did little to quell the rising furore. The company remained the central focus of an intensive investigation into the crisis.

"... on the shores of Lake Erie, hours before the blackout, a cloud of ash and a big whooshing sound spewed out of the three chimney stacks at FirstEnergy's Eastlake coal-fired power plant as it shut down," the Cleveland Pain Dealer reported.

"Why the 680-megawatt plant went off line is still not clear .... The ash blanketed cars, homes and picnic tables in the village of Timberlake."

One thing is certain: before the dust settles, FirstEnergy is going to have a lot of explaining to do, and so are a lot of politicians on both sides of the Canada-U.S. border.

More information:

National Union focus on privatization

Blackouts forecast for Ontario in 2003

Eves backs down on Harris privatization plan

Judge blocks sale of Ontario hydro grid

Web posted by NUPGE: 19 August 2003