deregulation was supposed to lower costs and make service
more efficient—but it didn’t
Here’s what energy deregulation was supposed to do: By letting
the big utilities sell their power-generation plants, they
would be able to concentrate on efficient delivery of electricity.
Giant corporations like Niagara Mohawk would be able to buy
electricity on an open market at the best price, and pass
that savings on to customers.
It didn’t happen that way.
Most spectacularly, it didn’t happen that way in California,
where Enron was able to bring the Golden State to its knees
by manipulating energy costs.
Less ostentatiously, it can be convincingly argued that energy
deregulation failed everywhere it was implemented, including
New York state. Costs didn’t go down; they went up in many
cases. Service didn’t improve; downsizing led to a worsening
According to Public Service Commission data, the number of
power outages experienced by New York state customers of National
Grid declined from 15,398 in 2001 to 13,680 in 2005. However,
the number of customer hours without electricity actually
increased, from 2,783,316 in 2001 to 3,598,884 in 2005.
National Grid couldn’t quite explain why or how this happened.
Joe Quinlan, a National Grid line foreman in Syracuse, recently
told WSTM-TV (also in Syracuse) what he thinks the problem
is: “It’s [taking] us longer because we don’t have the help,
don’t have the physical help.” National Grid, he explained,
now has about 700 line workers—half the number they employed
two decades ago, before energy deregulation.
Anjan Bose, a distinguished professor in power engineering
at Washington State University in Pullman, Wash., explains
how this happened: “In the 1990s, many of the big power companies
went on a cost-cutting spree.” They not only fired crew workers,
but also engineers. This has made it harder for utilities
to respond to emergencies.
a big weather storm comes,” Bose explains, “there are agreements
between power companies” to pool their workers and restore
service. The problem is that, now, every utility has many
fewer workers than they did even 10 years ago, the result
being that a widespread problem really taxes the ability of
the companies to compensate.
The PSC made some recommendations after a review of the way
National Grid handled a severe windstorm that disrupted service
across upstate New York in February 2006. This was a storm
that caused 211,000 National Grid customers to suffer service
interruptions; it took five full days to restore power. (This
was a storm during which winds of 98 mph were recorded at
the Saratoga County Airport.)
Most of these proposals, issued in Aug. 2006, were designed
to deal with what the PSC saw as management-related problems,
like offering additional training for employees, refining
the ways initial damage assessments are conducted (so as to
more effectively deploy line crews), and test the “outage
management system” once in a while to see if it was actually
The company’s own assessment of their performance, the PSC
suggested, “inadequately addressed workforce deployment and
communication issues.” National Grid, the PSC suggested, was
also too slow to call in crews from outside areas when major
storms hit: “National Grid needs to be more aggressive in
the future when requesting mutual aid resources during emergency
The first test for the utility—following the PSC recommendations—came
on Oct. 12, 2006, when a freakish lake-effect snow storm,
complete with thunder and lightning, hit a large region of
western New York, including the city of Buffalo. The snowiest
October day in 137 years (according to the National Oceanographic
and Atmospheric Administration) dumped over 2 feet of heavy,
wet snow, damaging, literally, almost every tree in Buffalo,
as well as closing a 100-plus mile section of the New York
State Thruway from Buffalo to the Pennsylvania border.
The day after the storm hit, some 400,000 people in the greater
Buffalo region were without power. Altogether, according to
the utility, “over 265,000 homes and businesses were affected
by the storm and without power.”
A National Grid vice president for business affairs, Dennis
Elsenbeck, told Transmission and Distribution World
that the utility was “amazed at the extent of the destruction
that was wrought by this storm. . . . Our survey crews estimate
that the storm left 9,000 neighborhood blocks with tree damage,
10,000 individual services to be reconnected and more than
1.5 million feet of wire in need of repair, replacement or
Perhaps having taken the PSC recommendations to their corporate
heart, National Grid quickly brought in their own out-of-town
utility workers, linemen from other utility companies and
assorted private contractors—as per the industry policy detailed
above—from Massachusetts, Rhode Island, New Hampshire, Pennsylvania,
New Jersey, Ohio, Michigan, Indiana, Virginia, West Virginia,
Kentucky and a trio of Canadian provinces. (As a company spokesman
told the Niagara Gazette, National Grid had 2,600 people
in motels from Rochester to Buffalo.)
The result? Eighty percent of customers had their power restored
a week after the storm first hit; all customers were back
on line two days after that.
This was enough of an improvement that, last month, a utility
trade group, the Edison Electric Institute, gave National
Grid an “Emergency Recovery Award” for this effort.
four days later, on Jan. 15, the ice storm hit which knocked
out power to thousands of customers in the Capital Region—over
40,000 customers in Saratoga County alone. Again, National
Grid crews were brought in from New England; the Binghamton
Press & Sun-Bulletin reported (on Jan. 16) that
New York State Electric and Gas (NYSEG) line crews from the
Southern Tier were on their way north to join the effort.
Con Edison crews from the metro New York City region helped
This time, there were complaints.
am astonished at how this was handled,” Essex County Manager
Clifford Donaldson, Jr., told the Plattsburgh Press-Republican.
“There is no need for people to be out of power that long.
We have a life-threatening crisis.”
What Donaldson was specifically complaining about was National
Grid’s restoration plan, which concentrated on getting power
to Saratoga Springs and other “population centers” first.
This left small towns like Westport and the surrounding rural
areas—which have a significant senior citizen population—to
wait . . . and wait.
was still out of power Sunday. . . . That’s completely unacceptable.
Water lines will be freezing, people are in shelters.”
National Grid recently said that they have been adding staff.
This reflects, Prof. Bose explains, a national trend: The
utilities “now realize that many people are retiring,” and
are making recruiting efforts a priority.
Traditionally, Bose says, utilities liked to hire young people
with some technical background, and then spend a lot of time
and money training them. This was de-emphasized at the beginning
of the era of deregulation.
don’t think people paid enough attention to the pipeline,”
Bose says, referring to the process of bringing new people
into the industry. Now, he notes, there is “concern across
the board, from the utility companies and their trade associations.”
a big interest in hiring new people,” Bose says, but adds
a cautionary note: “Hopefully, things will get better. Deregulation,
however, leads to a constant pressure to keep costs down.”
Deregulation—as has been proven in both the energy and media
industries—also leads to mergers and mega-mergers. Thus, there
is National Grid’s proposed acquisition of KeySpan Corporation.
(The PSC has been holding public-comment meetings on the merger
over the last month.) KeySpan owns a number of smaller utilities,
including the Brooklyn Union Gas Company (which serves Brooklyn,
Staten Island and Queens), KeySpan Energy Delivery Long Island,
and, as the PSC describes it, “other companies that provide
assistance to the Long Island Power Authority.” Of course,
this is promised to lead to “synergy savings” of $1.6 billion
over the next decade.
Not everyone is convinced. Writing about this proposed merger
a year ago in the Boston Globe, Robert Kuttner (editor
of The American Prospect) argued that “public utility
deregulation has been mainly an invitation to price-gouging
and greater risks to the system’s reliability.”
Just as critics predicted before the energy deregulation boom.
In his essay, Kuttner put forward a pretty straightforward
argument against energy deregulation: “The states that kept
integrated public utilities, which both produce power and
sell it to retail customers, have enjoyed much lower consumer
electricity prices. In a number of states in the southeast
and in Michigan, for example, recent rate hikes have been
in single digits.”
Unlike, say, in deregulated Massachusetts where, Kuttner noted,
“prices have risen about 50 percent.”
Energy deregulation is certainly losing its appeal. The Associated
Press reported this week on a Montana lawmaker’s proposal
to get rid of his state’s decade-old deregulation laws. In
Connecticut, the Journal Inquirer reported last week,
“sharply rising electric rates have prodded [Gov. M. Jodi]
Rell and state lawmakers to seek ways to modify deregulation
enacted . . . in 1998.” For some Connecticut customers, electric
rates increased 22 percent last year. (The New Haven Independent
noted this week that the city of New Haven actually considered,
at one point, taking utility facilities by eminent domain
and setting up their own public power company—only the legal
fight would have been too costly.)
The Washington Post has reported that “rate increases
have been higher in states that deregulated than in those
that kept the old regulated framework.” There is widespread
dissatisfaction with deregulation in Maryland and Washington,
D.C.; one D.C. official told the Post that “everyone
is just looking at Maryland,” where many residents faced a
72-percent rate increase last year, “and getting sick to their
Then there are the surprises in store for some customers lured
to alternative suppliers; you make not like Con Ed or National
Grid, but consider the fate of Brooklyn restaurant owner Changsheng
Yang. The New York Daily News reported on Feb. 12 that
Yang switched to a company called U.S. Energy Savings earlier
this year, ostensibly to take advantage of a “fixed” rate,
and then was shocked when his bill fluctuated wildly. (Turns
out that only part of his bill was “fixed.”)
Still there are still plenty of folks singing the praises
of deregulation. A Florida-based energy company founded by
a couple of ex-Enron employees put out a press release last
week giving New York and Texas high grades for “the ability
of small businesses to shop for power.” The Binghamton Press
& Sun-Bulletin dutifully reported this in a brief
story Feb. 12, but smartly pointed out: “While New York and
Texas were awarded highest grades, Montana and Nevada, two
states boasting relatively low electric rates, were given
Even the press is having trouble taking the apologists seriously.