The discussions about the power outages from Hurricane Sandy and how such outages can be prevented in the future have overlooked a major factor--the deregulation of electric utilities. In the 40 years before electricity generation, transmission and distribution were deregulated in March, 2000, there were two power outages that affected more than a few million people in the US--the North East Blackout of 1965 and the Quebec Hydro outage of 1989. Together they lasted a bit less than a day. In the 12 years since deregulation there has been five such outages: in 2003, 2005, two last year and then Sandy this year, lasting together 45 days. The large-scale reliability of the North American grid is one hundred and fifty times worse after deregulation than before. This is no coincidence, no fluke of the weather, but cause and effect.
Prior to deregulation, regulated utilities were allowed a certain amount of profit on every kilowatt-hour they produced. They had every incentive to produce as much power as they could, to prevent outages and to get power up and running as fast as possible. With deregulation, the incentives shifted because profit rates were no longer fixed. To maximize profit rates, utilities allowed maintenance workforces to decline by attrition and layoffs, dropping by about 50%. This means that trees and branches that should have been cut back were not--and in storms many more toppled onto power lines. Much-reduced work forces, even bolstered from other regions could not get power lines up and running as rapidly as before. But the deregulated utilities' owners did not suffer, as they could raise rates to cover any losses from the outages. Indeed, in states which chose to de-regulate, electricity rates are now a full 48% higher than rates in states that continued to regulate electric utilities. A fifty percent increase in price for 150 times as much time without power is no bargain for electric consumers.
It is past time to end the failed experiment in deregulation. States such as NJ and NY that deregulated must re-regulate electric power utilities.
But the tasks of maintaining and upgrading the electricity grid is too vital to leave in the hands of profit-driven corporations, even once re-regulated. The profit-driven tendency to cut corners is very difficult to eradicate from the culture of the little Enrons that emerged from de-regulation. Nor can the government contract out such jobs to a profit-driven company. The Long Island Power Authority's contracting-out to for-profit companies of power line operation, maintence and repair has proved a dismal failure, as the slow response to Sandy dramatically demonstrated.
What is needed right now is a National Power Authority that can immediately start hiring and training directly, not through contractors, the much-expanded line workforces needed to maintain the power system and to repair it after storms. Such authorities, funded by taxing away the excessive power rates jacked up by electric utilities, can also begin the big task of weather-proofing the power grid by burying the distribution wires underground in water-proof pipes, as is done today in many European countries. With modern horizontal-drilling technology, which avoids expensive trenching, European governments have buried lines for less than $150,000 per mile. In New Jersey, for example, burying all the distribution lines over a 10-year period would cost about $1.5 billion per year--about the same as the $1.8 billion per year NJ residents are now paying extra for de-regulated electric rates. Over the longer term, a National Power Authority could also finance the research needed to develop new sources of energy that are safe, clean, reliable and decentralized making both oil spills and gasoline shortages things of the past.
Can the government carry out such a job more effectively than for-profit utilities? Let's look at the record. In 1938 a far worse hurricane than Sandy struck Long Island and New England. Within days the Works Progress Administration, WPA, with direct government employment, mobilized 110,000 workers to repair power lines, bridges and roads. In 2012 the private utilities not mobilize from the whole country in two weeks a workforce one-fifth that large.
Today, in the fifth year of our new Depression, we need another WPA that can mobilize and train the millions of unemployed to rebuild not only our neglected and vital power infrastructures but as well our decaying roads and bridges, our overcrowded hospitals, schools and housing. Ending the failed de-regulation scam and setting up a National Power Authority could be steps towards that new WPA.